UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of
1934
Date of Report
(Date of earliest event reported): March 4, 2005
FRANKLIN COVEY
CO.
(Exact name of
registrant as specified in its charter)
Utah
|
1-11107 |
87-0401551 |
(State or
other jurisdiction of incorporation) |
(Commission
File
Number) |
(IRS
Employer
Identification
No.) |
2200 West Parkway
Boulevard
Salt Lake City,
Utah 84119-2099
(Address of
principal executive offices including zip code)
(Registrant’s
telephone number, including area code) (801) 817-1776
(Former name or
former address, if changed since last report) Not Applicable
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
|
____ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
|
____ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Item
1.01 Entry into
a Material Definitive Agreement
As previously
disclosed, Franklin Covey Co. (the “Company”) entered into a Preferred Stock
Amendment and Warrant Issuance Agreement (the “Amendment Agreement”) with
Knowledge Capital Investment Group (“Knowledge Capital”) on November 29, 2004.
Under the terms of the Amendment Agreement, the Company and Knowledge Capital
agreed, subject to the satisfaction or waiver of certain conditions, including
receiving all required shareholder approvals, to recapitalize the outstanding
shares of Series A Preferred Stock by bifurcating the Series A Preferred Stock
into two separate securities: (1) new Series A Preferred Stock that, among other
things, is no longer convertible into shares of Common Stock and (2) new
eight-year warrants (the “Warrants”) to purchase shares of the Company’s Common
Stock (collectively, the “Recapitalization”).
On March 8, 2005,
upon satisfaction of all conditions set forth in the Amendment Agreement, the
Recapitalization closed. In connection with the closing, the Company and
Knowledge Capital entered into:
| · |
the Amended
and Restated Shareholders Agreement attached hereto as Exhibit 99.1 (the
“Restated Shareholders Agreement”); |
| · |
the Amended
and Restated Registration Rights Agreement attached hereto as Exhibit 99.2
(the “Restated Registration Rights Agreement”);
and |
| · |
the Amended
and Restated Monitoring Agreement attached hereto as Exhibit 99.3 (the
“Restated Monitoring Agreement”). |
Additionally, at
the closing, the Company issued to Knowledge Capital the Warrant attached hereto
as Exhibit 99.4 to purchase of 5,913,402 shares of the Company’s Common Stock.
In accordance with the Amendment Agreement, the Company will issue Warrants,
each substantially in the form attached hereto as Exhibit 99.5, to the holders
of Series A Preferred Stock other than Knowledge Capital as well. Each of
these agreements and instruments is described in more detail below in this Item
1.01 of this Current Report on Form 8-K. The Recapitalization, including
the issuance of the Warrants, was, and, for Warrants not yet issued, will be,
made pursuant to an exemption from registration under Section 3(a)(9) of the
Securities Act of 1933, as amended.
Further, as part
of the Recapitalization, the Company has filed with the Utah Division of
Corporations and Commercial Code Articles of Restatement amending and restating
its Articles of Incorporation (the “Restated Articles”) to, among other things,
eliminate the convertibility of the Series A Preferred Stock into Common Stock
and to otherwise amend the designations, voting powers, preferences and
relative, participating, optional and other special rights, qualifications,
limitations and restrictions of the Series A Preferred Stock and the Series B
Preferred Stock and to make other miscellaneous changes to the articles of
incorporation. Such amendments are described in more detail in Item 3.03 of this
Current Report on Form 8-K below. The Restated Articles are attached hereto as
Exhibit 99.6.
1. Restated
Shareholders Agreement
In addition to the
description of Knowledge Capital’s contractual rights under the Restated
Shareholders Agreement described in Item 3.03 of this Current Report on Form 8-K
below, which is incorporated herein by reference, any merger, consolidation,
combination, recapitalization or reorganization or any disposition of all or
substantially all the Company’s properties and assets would, with certain
exceptions, require the approval of Knowledge Capital so long as it owns 880,000
shares of Series A Preferred Stock. The Restated Shareholders Agreement
also contains provisions, comparable to the provisions of the previously
outstanding Series A Preferred Stock, requiring that as long as Knowledge
Capital is entitled to designate at least two directors of the Company, approval
by an 80 percent Board vote would be required for incurrence of certain
indebtedness, major divestitures or acquisitions by the Company, unless certain
financial tests are met. The Restated Shareholders Agreement continues to
provide that, subject to certain exceptions, Knowledge Capital may not acquire
more than 25 percent of the total voting power of the Company, unless the
acquisition is approved by the members of the Board who are not designees of
Knowledge Capital.
The foregoing
summary of the Restated Shareholders Agreement is subject to, and qualified in
its entirety by, the Restated Shareholders Agreement attached to this Current
Report on Form 8-K as Exhibit 99.1 and incorporated herein by
reference.
2. Restated
Registration Rights Agreement
The Restated
Registration Rights Agreement, among other registration obligations, requires
the Company to use its best efforts to register the resale of all shares of
Common Stock and shares of Series B Preferred Stock issuable upon the
transfer and conversion of the Series A Preferred Stock held by Knowledge
Capital and certain permitted transferees of Knowledge Capital within
240 days following the initial filing of the registration statement
covering such shares. Any failure by the Company to cause such registration
statement to be declared effective within the specified time period would
require the Company to pay to Knowledge Capital and such permitted transferees a
penalty amount for each share equal to two percent per annum of the $25 face
value of the outstanding Series A and Series B Preferred Stock calculated based
upon the number of days that such registration statement has not been declared
effective. Additionally, the Company would have the obligation to use its best
efforts to register the resale of the shares of Common Stock Knowledge Capital
and certain permitted transferees could receive pursuant to the exercise of the
Warrant issued to Knowledge Capital at the closing of the Recapitalization,
provided the obligation to register the resale of such shares would be
conditioned upon the weighted average sales price of the Common Stock over the
previous ten trading days being at least 80 percent of the Warrant exercise
price.
The foregoing
summary of the Restated Registration Rights Agreement is subject to, and
qualified in its entirety by, the Restated Registration Rights Agreement
attached to this Current Report on Form 8-K as Exhibit 99.2 and incorporated
herein by reference.
3. Restated
Monitoring Agreement
The Restated
Monitoring Agreement provides that Hampstead Interests, LP, an affiliate of
Knowledge Capital, will continue to provide certain services to the Company in
order to assist the Company with the development of its strategic plan,
including acquisitions, divestitures, new development and financial matters, for
a fee of $100,000 per quarter, subject to reduction if Knowledge Capital
disposes of shares of Series A Preferred Stock. Under the Restated
Shareholders Agreement, designees of Knowledge Capital serving on the Company’s
Board of Directors will not be entitled to receive compensation for Board
service at any time when Hampstead Interests, LP is paid monitoring fees.
The foregoing
summary of the Restated Monitoring Agreement is subject to, and qualified in its
entirety by, the Restated Monitoring Agreement attached to this Current Report
on Form 8-K as Exhibit 99.3 and incorporated herein by reference.
4. Warrants
At the closing of
the Recapitalization, as described above, the Company issued to Knowledge
Capital a Warrant to purchase 5,913,402 shares of Common Stock for $8.00 per
share. Within ten days
following the closing of the Recapitalization, the Company will deliver to each
holder of Series A Preferred Stock as of the closing date other than Knowledge
Capital a transmittal letter. Upon the receipt by the Company of a completed and
executed transmittal letter from any such holder, within 10 days thereafter, the
Company will deliver to such holder a Warrant to purchase 71.43 shares of Common
Stock for each $1,000 of aggregate liquidation value attributable to the shares
of Series A Preferred Stock held by such holder as of the closing of
Recapitalization. All Warrants issued in connection with the Amendment Agreement
will have an exercise price of $8.00 per share and will expire on the eighth
anniversary of its issuance date.
All Warrants will
be exercisable at any time, in whole or in part, after the first anniversary of
their issuance date, so long as, except with respect to Knowledge Capital, a
registration statement covering the issuance of the shares of Common Stock
issuable upon exercise of the Warrants has been declared effective by the
Commission and remains continuously effective thereafter. Upon exercise of a
Warrant, Warrant holders may choose, or the Company may elect to require, any
Warrant exercise to be a net exercise in which the exercising holder would
receive fewer shares of Common Stock, depending on the fair market value of the
Common Stock at the time of exercise, than otherwise could be received upon an
exercise for cash. Further, the Company, at its election, may choose, in the
place of issuing any shares of Common Stock to such holder, to pay to any
Warrant holder completing a net exercise of a Warrant a cash amount equal to the
fair market value of the shares of Common Stock that otherwise would be issuable
to such holder in connection with such net exercise as opposed to issuing shares
of Common Stock to the exercising holder.
The foregoing
summary of the Warrants is subject to, and qualified in its entirety by, the
Warrant attached as Exhibit 99.4 and the form of Warrant attached as Exhibit
99.5 to this Current Report on Form 8-K and incorporated herein by
reference.
Item
3.02 Unregistered
Sales of Equity Securities
The contents of
Item 1.01 above are incorporated herein by reference in their
entirety.
Item
3.03 Material
Modification to Rights of Security Holders
The following
table summarizes the rights, powers and limitations of the Common Stock, the
Series A Preferred Stock and the Series B Preferred Stock as modified by the
Restated Articles and, as it applies to Knowledge Capital and certain of its
permitted transferees, the Restated Shareholders Agreement as compared to the
Company’s Articles of Incorporation in effect prior to the filing of the
Restated Articles (the “Prior
Articles”) and in the
Stockholders Agreement dated June 2, 1999 between the Company and Knowledge
Capital (the “Stockholders
Agreement”). This summary
should be read in conjunction with, and is qualified in its entirety by
reference to, the complete text of the Restated Articles attached as Exhibit
99.6, as well as the Restated Shareholders Agreement attached as Exhibit 99.1,
and incorporated herein by reference.
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Description |
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Terms
Under the Prior Articles |
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Terms
Under the Restated Articles and
the
Restated Shareholders Agreement |
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Authorized
Capital Stock
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The
Company’s authorized capital stock consisted of 40,000,000 shares of
Common Stock, $0.05 par value per share, and 4,000,000 shares of Preferred
Stock, without par value, of which 1,500,000 shares were designated as
Series A Preferred Stock and 400,000 shares were designated as
Series B Preferred Stock.
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The number
of authorized shares of Preferred Stock have increased from 4,000,000 to
14,000,000, the number of authorized shares of Series A Preferred Stock
have increased from 1,500,000 to 4,000,000 and the number of authorized
shares of Series B Preferred Stock have increased from 400,000 to
4,000,000. The need for the increase in the authorized Preferred Stock and
the authorized Series A and Series B Preferred Stock arose
principally from the one-to-four forward split of the Series A
Preferred Stock described in more detail below and the Series A
Preferred Stock becoming convertible into shares of nonvoting
Series B Preferred Stock as described below.
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One-to-four
forward split of Series A Preferred Stock
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Prior to the
one-to-four forward split, there were 873,457.404 shares of Series A
Preferred Stock outstanding.
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The Restated
Articles provided for a one-to-four forward split of all outstanding
shares of Series A Preferred Stock. As a result of the one-to-four forward
split, there are now 3,493,783 shares of Series A Preferred Stock
outstanding (after elimination of all fractional shares).
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Voting
Rights
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Each holder
of Common Stock was entitled to one vote for each share of Common
Stock.
Each holder
of Series A Preferred Stock was entitled to eight votes for each whole
share of Series A Preferred Stock, with any fractional share of
Series A Preferred Stock held being entitled to fewer votes per share
depending upon the number of shares of Common Stock into which it could
have converted, on all matters submitted to a vote of shareholders,
including the election of directors.
Each share
of Series B Preferred Stock, although none was outstanding, was entitled
to no voting rights except as required by law.
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The holders
of Common Stock retain the same voting power they had prior to the
Recapitalization.
The voting
power of the shares of Series A Preferred Stock changed to two votes per
whole share as a result of the one-to-four forward split (with no
fractional shares of Series A Preferred Stock remaining outstanding
following the split), provided, that the voting power of any holder of
Series A Preferred Stock is offset by (x) the number of shares of Common
Stock acquired by such holder upon the exercise of any Warrant issued to
such holder under the Amendment Agreement and (y) the number of shares of
Common Stock purchasable upon exercise of a Warrant that such holder has
sold or transferred to another person. The net effect of such offsets is
to ensure that the aggregate Common Stock voting power of the holders of
Series A Preferred Stock and transferees of Warrants from such holders
does not increase beyond a number of votes equal to the number of votes
the holders of Series A Preferred Stock held prior to the
Recapitalization.
The holders
of Series B Preferred Stock have no Common Stock voting rights.
Additionally, upon any transfer of shares of Series A Preferred Stock,
except to a limited group of permitted transferees, such shares will
automatically convert into shares of Series B Preferred Stock without
Common Stock voting rights.
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Class
Voting on Certain Company Actions
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Neither the
holders of Common Stock nor the holders of Series B Preferred Stock were
entitled to class voting rights except as required by law. However, the
approval of a majority of the then-outstanding shares of Series A
Preferred Stock, voting as a separate class, was required for any proposed
Company action that would:
• amend, alter
or repeal the Prior Articles in a manner that would adversely affect the
powers, designations, preferences and relative rights of the Series A
Preferred Stock;
• issue any
shares of capital stock ranking prior or superior to, or on parity with,
the Series A Preferred Stock;
• subdivide or
otherwise change shares of Series A Preferred Stock into a different
number of shares, whether in a merger, consolidation, combination,
recapitalization, reorganization or otherwise;
• issue any
shares of Series A Preferred other than in accordance with the Prior
Articles;
• authorize or
effect any merger, consolidation, combination, recapitalization or
reorganization or any disposition of all or substantially all the
Company’s properties and assets (a “Business Combination”) unless the
holders of Series A Preferred Stock retain the same powers, preferences
and relative rights and limitations they had prior to such transaction;
or
• declare or
pay any dividend on, or repurchase any shares of, the Common Stock of the
Company to the extent the amount of such dividends or repurchases in the
last four full fiscal quarters completed exceeds ten percent of the
Company’s net income for such period, unless such action is approved by 80
percent of the members of the Board of Directors.
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None of the
holders of Common Stock, Series A Preferred Stock or Series B Preferred
Stock has any separate class voting rights, except as required by law.
However, the approval of a majority of the then-outstanding shares of the
Series A Preferred Stock and the Series B Preferred Stock, voting together
as one class, will be required for any proposed Company action described
in any of the first four bullets set forth in this table under “Terms
Under the Prior Articles—Class Voting on Certain Company Actions.” The
actions described in the fifth and sixth bullets no longer require such
class approval. However, under the Restated Shareholders Agreement, the
actions described in the fifth bullet concerning any Business Combination
will require the approval of Knowledge Capital so long as it owns 880,000
shares of Series A Preferred Stock.
Similarly,
under the Restated Shareholders Agreement, any dividends on and
repurchases of Common Stock for the last four full fiscal quarters by the
Company that collectively exceed ten percent of the Company’s net income
for such period, as described in the sixth bullet, will require the
approval of Knowledge Capital so long as it holds 880,000 shares of Series
A Preferred Stock. However, the Restated Shareholders Agreement will
include an exception to this requirement that may increase the Company’s
ability to pay dividends on or repurchase shares of Common Stock without
Knowledge Capital approval. The exception provides that if the Company
(i) has first redeemed at least $30 million of the face value of
shares of Series A Preferred Stock and (ii) maintains positive
net working capital and, for the last four full fiscal quarters, the
Company’s EBITDA, determined on a pro forma basis as set forth in the
Restated Shareholders Agreement, equals or exceeds at least two times the
Company’s fixed charges, also determined on a pro forma basis, as set
forth in the Restated Shareholders Agreement, then the Company may,
without Knowledge Capital’s consent, use cash in excess of 56.2 percent of
the liquidation value, including accrued and unpaid dividends,
attributable to the then-outstanding shares of Senior Preferred Stock to
pay dividends on or repurchase shares of Common Stock from persons who are
not affiliates of the Company, subject to the limitation that such
dividends (but not repurchases) do not exceed 25 percent of the Company’s
net income during the last 12 months.
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Dividends
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Holders of
Series A Preferred Stock were entitled to cumulative dividends accruing at
the annual rate of ten percent. These dividends were payable quarterly in
preference to dividends on all other classes of the Company’s capital
stock. If these dividends were in arrears for any six or more quarters,
the number of the Company’s directors would have been increased by two and
the holders of Series A Preferred Stock, voting together as a separate
class, would have been entitled to fill the vacancies thereby created,
until such dividends were paid. Additionally, the holders of Series A
Preferred Stock were entitled to participate in dividends payable to
holders of Common Stock pro rata based upon the number of shares of Common
Stock into which the Series A Preferred Stock was
convertible.
Similarly,
the holders of Series B Preferred Stock, if any such shares had been
outstanding, would have been entitled to participate in dividends payable
to holders of Common Stock pro rata based upon the number of shares of
Common Stock into which the Series B Preferred Stock would have been
convertible.
Holders of
Common Stock were entitled to receive dividends as they might have been
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the rights of any holders of the Preferred
Stock, including the right that the holders of a majority of the
then-outstanding shares of Series A Preferred Stock had to consent to the
payment of any Common Stock dividends if (i) the aggregate amount of all
Common Stock dividends and repurchases in the last 12 months exceeded ten
percent of the Company’s net income for the last 12 months, and (ii) such
Common Stock dividends had not been approved by 80 percent of the
members of the Board of Directors.
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Holders of
the Series A and Series B Preferred Stock are entitled to receive the same
quarterly dividends the holders of Series A Preferred Stock were entitled
to receive under the Prior Articles calculated at an annual rate of ten
percent. These dividends will be cumulative from the date such shares are
initially issued, except that for any shares of Series B Preferred Stock
issued upon the conversion of shares of Series A Preferred Stock, such
date shall be the initial issuance date of such converted shares of Series
A Preferred Stock. The holders of the Series A and Series B Preferred
Stock retain the right to elect two additional directors, voting together
as a single class, if such dividends are in arrears for any six or more
quarters, until they are paid. If Knowledge Capital owns a majority of the
outstanding Series A Preferred Stock, such two additional directors will
be deemed to be directors designated by Knowledge Capital pursuant to its
rights to designate nominees to stand for election as directors under the
Restated Shareholders Agreement as described in more detail
below.
The holders
of Common Stock are entitled to receive dividends on the same terms they
were entitled to receive them under the Prior Articles. However, in
contrast to the provisions of the Prior Articles, the holders of the
Series A and Series B Preferred Stock are not entitled to participate in
Common Stock dividends on an as-converted basis.
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Liquidation
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Upon any
liquidation, dissolution or winding up of the Company, no distribution
would have been made to the holders of Common Stock until the holders of
Series A Preferred Stock had received in cash $100 per share plus
accrued and unpaid dividends. Holders of the Series B Preferred
Stock, if any had been outstanding, would not have been entitled to any
preferential distributions but would have been entitled to participate in
liquidating distributions to holders of shares of Common Stock on an
as-converted basis. The holders of Common Stock were entitled to all
remaining assets and funds available for distribution after all
preferential distributions had been paid to holders of Preferred
Stock.
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Holders of
Common Stock have the same rights upon liquidation they had under the
Prior Articles.
The rights
of the holders of the Series A and Series B Preferred Stock have
substantially the same rights the holders of Series A Preferred Stock had
under the Prior Articles, except that they are entitled to receive $25 per
share upon a liquidation, dissolution or winding up of the Company, plus
accrued and unpaid dividends, as a result of one-to-four forward
split.
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Preemptive
Rights
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Holders of
Common Stock and Series A Preferred Stock did not have, and holders of
Series B Preferred Stock, if any such shares had been outstanding, would
not have had, preemptive rights to purchase or subscribe for any stock or
other securities.
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None of the
holders of Common Stock or the Series A or Series B Preferred Stock has
preemptive rights.
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Conversion
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The Common
Stock was not convertible into any other class of capital
stock.
Each share
of Series A Preferred Stock was convertible, at the option of the holder,
into approximately 7.14 of shares of Common Stock, which amount was
determined by dividing $100 by the conversion price of $14. Such number of
shares of Common Stock issuable upon conversion of the Series A Preferred
Stock would have increased to the extent there were any accrued and unpaid
dividends on the Series A Preferred Stock. The conversion price would have
been adjusted for a subdivision, recapitalization or combination of the
Common Stock or if a dividend was determined to be paid to the holders of
Common Stock in the form of additional shares of Common Stock or rights to
acquire additional shares of Common Stock. The conversion price might also
have been adjusted if the Company had issued rights or warrants to acquire
additional shares of Common Stock to all holders of Common Stock at a
price per share less than the volume weighted average sales price of the
Common Stock as of the record date for such rights issuance based on a
weighted average adjustment formula.
If any
shares of Series B Preferred Stock had been outstanding, such shares would
have been convertible, at the option of the holder, into ten shares of
Common Stock at any time after March 1, 2005. The Company would have had
the right to require conversion upon a change in control of the Company or
a merger, consolidation or sale of all or substantially all its assets or
a liquidation or dissolution of the Company or an underwritten public
offering of the Company’s capital stock. The number of shares of Common
Stock into which shares of Series B Preferred Stock could have been
converted would have been adjusted for any subdivision, recapitalization
or combination of the Company’s Common Stock.
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The Senior
Preferred Stock is not convertible into shares of Common Stock, and the
Common Stock is not convertible into any other class of capital stock.
However, the Series A Preferred Stock will be converted into shares of
Series B Preferred Stock upon any transfer of such shares by a holder
other than transfers to affiliates, five percent equity holders, immediate
family members and trusts for the benefit of such holder.
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Redemption
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Neither the
Common Stock nor the Series B Preferred Stock was redeemable.
The Series A
Preferred Stock was redeemable by the Company in two ways. First, had
there been less than 100,000 shares of Series A Preferred Stock
outstanding (prior to the one-to-four forward split) and the volume
weighted sales price of the Common Stock had exceeded 120 percent of the
then-applicable conversion price of the Series A Preferred Stock for
at least 30 consecutive trading days, then the Company could have
redeemed, upon 30 days prior notice to the holders of Series A
Preferred Stock, all then-outstanding shares of Series A Preferred
Stock at a price equal to 105 percent of the liquidation value of the
Series A Preferred Stock (including accrued and unpaid dividends).
Second, had the volume weighted sales price of the Common Stock exceeded
130 percent of the volume weighted sales price for at least
60 consecutive trading days, then the Company could have redeemed,
upon 15 business days prior notice to the holders of Series A
Preferred Stock, all then-outstanding shares of Series A Preferred
Stock at a price equal to 104 percent of the liquidation value of the
Series A Preferred Stock.
The Prior
Articles also provided that if certain transactions occurred that were
solely within the Company’s control, including a change in control or a
transaction that would lower the Company’s credit rating, the Company
would have offered, within 30 days after such transaction occurs, to
purchase each then-outstanding share of Series A Preferred Stock for the
amount equal to the greater of (i) the amount that the holders of shares
of Series A Preferred Stock would have received had they converted such
shares into Common Stock immediately before such transaction or (ii) 101
percent of the liquidation value of such shares (including 101 percent of
accrued and unpaid dividends to the date of payment).
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The Common
Stock continues to be non-redeemable.
The Senior
Preferred Stock is not redeemable at the election of the holders of shares
of Series A Preferred Stock and is only be redeemable by the Company at
its option at any time during the first year following the closing at a
price per share equal to the liquidation value plus accrued and unpaid
dividends and then again after the sixth anniversary of the closing at 101
percent of the liquidation value plus accrued and unpaid
dividends.
Under the
Restated Shareholders Agreement, the Company is entitled to repurchase
from Knowledge Capital (or its transferees who assume Knowledge Capital’s
obligations with respect to this redemption right) up to the number of
shares of Series A Preferred Stock (or Series B Preferred Stock held by
such transferees upon conversion of shares of Series A Preferred Stock)
having an aggregate liquidation value of $30 million at any time at a
price per share calculated based upon a percentage of the liquidation
value of such shares that increases annually in one percentage point
increments during the first four years following completion of the
Recapitalization from 100 percent of the liquidation value in the
first year to 103 percent of the liquidation value in the fourth
year.
Additionally,
under the Restated Shareholders Agreement, in the event of a change in
control of the Company, which is solely within the Company’s control, the
Company will, within 30 days after such change in control, offer to
purchase each then-outstanding share of Series A and Series B Preferred
Stock held by Knowledge Capital or any of certain permitted transferees
for a cash amount per share equal to 101 percent of the liquidation value
of such shares in addition to all accrued and unpaid dividends on the
Series A and Series B Preferred Stock to the date of payment.
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Right to
Designate Nominees to Stand for Election as Directors
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Under the
Stockholders Agreement, the Company was obligated to nominate three
designees of Knowledge Capital for election to the Board of Directors,
including the Chairman of the Board of Directors, and all such designees
had to be nominated to be elected in different classes. The Company was
obligated at each meeting of the shareholders of the Company at which
directors were elected to cause the Knowledge Capital designees to be
nominated for election and to solicit proxies in favor of such nominees
and vote all management proxies in favor of such nominees except for
proxies that specifically indicate to the contrary.
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Under the
Restated Shareholders Agreement, the Company is obligated to nominate for
election as directors up to three designees of Knowledge Capital described
as follows:
• two
designees so long as Knowledge Capital holds 1,760,000 shares of
Series A Preferred Stock;
• one designee
so long as Knowledge Capital holds at least 880,000 shares of Series A
Preferred Stock but less than 1,760,000 shares of Series A Preferred
Stock;
• one designee
so long as Knowledge Capital holds at least one share of Series A
Preferred Stock but less than 880,000 shares of Series A Preferred Stock
provided that such designee must be Donald J. McNamara, and Mr. McNamara,
who is currently a director designated by Knowledge Capital, must agree to
serve as such designee of Knowledge Capital; and
• in addition
to any directors Knowledge Capital may be entitled to designate as
described in the prior three bullets, one designee so long as Knowledge
Capital holds at least 1,000,000 shares of Common Stock.
All such
designees are required to be nominated for election as members of
different classes of directors. Additionally, so long as Knowledge Capital
owns a majority of the outstanding shares of Series A Preferred Stock, any
two persons elected as directors by the holders of shares of Series A and
Series B Preferred Stock if the Company is in arrears in the payment of
Series A Preferred Stock dividends for any six or more quarters (as
described above in more detail in this section) will be deemed to be
directors designated by Knowledge Capital pursuant to the Restated
Shareholders Agreement.
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Item
9.01 Financial
Statements and Exhibits
(c) Exhibits
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99.1 |
Restated
Shareholders Agreement, dated as of March 8, 2005, between the Company and
Knowledge Capital Investment Group. |
|
99.2 |
Restated
Registration Rights Agreement, dated as of March 8, 2005, between the
Company and Knowledge Capital Investment
Group. |
|
99.3 |
Restated
Monitoring Agreement, dated as of March 8, 2005, between the Company and
Hampstead Interests, LP. |
|
99.4 |
Warrant,
dated March 8, 2005, to purchase 5,913,402 shares of Common Stock issued
by the Company to Knowledge Capital Investment
Group. |
|
99.5 |
Form of
Warrant to purchase shares of Common Stock to be issued by the Company to
holders of shares of Series A Preferred Stock other than Knowledge Capital
Investment Group. |
|
99.6 |
Articles of
Restatement dated March 4, 2005 amending and restating the Company’s
Articles of Incorporation. |
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
| FRANKLIN COVEY CO. | |||
| Date: March 10, 2005 | |||
|
By: |
/s/ STEPHEN D. YOUNG | ||
|
Name: |
Stephen D. Young | ||
|
Title: |
Chief Financial Officer |
EXHIBIT
INDEX
|
99.1 |
Restated
Shareholders Agreement, dated as of March 8, 2005, between the Company and
Knowledge Capital Investment Group. |
|
99.2 |
Restated
Registration Rights Agreement, dated as of March 8, 2005, between the
Company and Knowledge Capital Investment
Group. |
|
99.3 |
Restated
Monitoring Agreement, dated as of March 8, 2005, between the Company and
Hampstead Interests, LP. |
|
99.4 |
Warrant,
dated March 8, 2005, to purchase 5,913,402 shares of Common Stock issued
by the Company to Knowledge Capital Investment
Group. |
|
99.5 |
Form of
Warrant to purchase shares of Common Stock to be issued by the Company to
holders of shares of Series A Preferred Stock other than Knowledge Capital
Investment Group. |
|
99.6 |
Articles of
Restatement dated March 4, 2005 amending and restating the Company’s
Articles of Incorporation. |
Exhibit
99.1
AMENDED
AND RESTATED SHAREHOLDERS AGREEMENT
THIS AMENDED AND
RESTATED SHAREHOLDERS AGREEMENT (this “Agreement”), dated as of
March 8, 2005 (the “Effective
Date”), between
Franklin Covey Co., a Utah corporation (the “Company”), and Knowledge
Capital Investment Group, a Texas general partnership (the “Purchaser” and, together
with its Permitted Transferees, the “Investor”).
WHEREAS, Purchaser is a
holder of shares of the Company’s outstanding Series A Preferred Stock (the
“Series A
Preferred”), and the
Company and Purchaser have previously entered into the Stockholders Agreement
dated June 2, 1999 (the “Prior
Shareholders Agreement”);
and
WHEREAS, The Company and
Purchaser entered into a Preferred Stock Amendment and Warrant Issuance
Agreement, dated November 29, 2004 (as amended from time to time, the
“Amendment
Agreement”), pursuant to
which, among other things, the Company and Purchaser, on the terms and subject
to the conditions thereof, agreed to amend and restate the Prior Shareholders
Agreement as set forth herein.
NOW,
THEREFORE, in consideration
of the mutual promises and covenants set forth herein, the Company and Purchaser
hereby agree that the Prior Shareholders Agreement is terminated and superceded
and replaced in its entirety by this Agreement, and the parties further agree as
follows:
I. DEFINITIONS
1.1 Definitions.
Capitalized terms used herein but not defined have the meaning assigned to them
in the Amendment Agreement. In addition to the terms defined elsewhere herein,
the following terms have the following meanings when used herein with initial
capital letters:
(a) “Affiliate” of any Person
means any other Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
such Person; and, for the purposes of this definition only, “control” (including the
terms “controlling,” “controlled
by” and
“under common
control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of
the management, policies or activities of a Person whether through the ownership
of securities, by contract or agency or otherwise.
(b) “Associate,” as used to
indicate a relationship with any Person, means:
(i) any corporation or
organization (other than the Company or a majority-owned subsidiary of the
Company) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of
securities;
(ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary capacity;
and
(iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person or who is a director or officer of the Company or any of its parents
or subsidiaries.
(c) “Assumption
Agreement” means a writing
in substantially the form of Exhibit A
hereto.
(d) A Person will be
deemed the “beneficial
owner” of, will be
deemed to “beneficially
own” and will be
deemed to have “beneficial
ownership” of:
(i) any securities
that such Person or any of such Person’s Affiliates is deemed to “beneficially
own” within the
meaning of Rule 13d-3 under the Exchange Act, as in effect on the date of
this Agreement; and
(ii) any securities
(the “underlying
securities”) that such
Person or any of such Person’s Affiliates or Associates has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (written or oral),
or upon the exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise (it being understood that such Person will also be deemed
to be the beneficial owner of the securities convertible into or exchangeable
for the underlying securities).
(e) “Board” means the Board
of Directors of the Company.
(f) “Board
Approval” means the
approval of a majority of the members of the Board who (i) are not officers
or employees of the Company or any of its Affiliates and (ii) are not
Purchaser Designees.
(g) “Business
Combination” has the meaning
set forth in Section 4.2(a).
(h) “Capital Lease
Obligations” of any Person
shall mean the obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
under GAAP and, for purposes hereof, the amount of such obligations at any time
shall be the capitalized amount thereof at such time determined in accordance
with GAAP.
(i) “Change in
Control” will be deemed
to occur (i) upon any “person” or “group” (within the meaning of Sections 13(d)
and 14(d) of the Exchange Act), becoming the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the
combined voting power of the Company’s then-outstanding Voting Securities,
whether directly by a stock purchase or indirectly through a Business
Combination of the Company or (ii) the sale by the Company of all or
substantially all of its assets to any such “person” or “group.”
(j) “Common
Stock” means the common
stock of the Company, par value $0.05 per share.
(k) “Common Stock
Dividends” means any
dividends or other distributions on or in respect of the Common Stock excluding
any Common Stock Repurchases.
(l) “Common Stock
Repurchases” means any
purchase or other acquisition by the Company or any direct or indirect
subsidiary thereof to purchase or otherwise acquire any Common Stock excluding
any Common Stock Dividends.
(m) “EBITDA” means, for any
period, the Net Income for such period plus (x) to the extent deducted in
computing such Net Income, without duplication, the sum of (i) income tax
expense or, if imposed by any relevant jurisdiction in lieu of an income tax,
franchise and/or gross receipts tax expense, (ii) Interest Expense,
(iii) depreciation and amortization expense, (iv) amortization of
intangibles (including but not limited to good will), (v) any special
charges and any extraordinary or nonrecurring losses or charges or loan loss
reserves, payments or accruals on loans from the Company to its current or
former employees or directors, non-cash impairments, restricted stock awards and
other similar non-cash items and (vi) other non-cash items reducing Net
Income, minus (y) to the extent added in computing such Net Income, without
duplication, the sum of (A) interest income, (B) extraordinary or
nonrecurring gains and (C) other non-cash items increasing Net Income
(excluding any items that represent the reversal of any accrual of, or cash
reserve for, anticipated cash charges in any prior period) and minus (z) if the
Company sells all or a portion of its corporate campus real estate (regardless
of accounting treatment), any rent amounts paid by the Company related to space
it is leasing or master leasing.
(n) “Excess
Debt” means any
Indebtedness other than Permitted Indebtedness.
(o) “Exchange
Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(p) “Financial
Test” will be
satisfied if, on a pro forma basis, after giving effect to the proposed
transaction (with respect to clauses (i) and (ii) below, as if such
transaction had occurred on the first day of the LTM), (i) the Net Worth
would be at least $275.0 million at the end of the most recent fiscal quarter,
(ii) the Fixed Charge Coverage Ratio for the LTM would be at least 3.5:1
and (iii) EBITDA for the LTM would be at least $65.0 million.
(q) “Fixed Charge
Coverage Ratio” means, with
respect to the Company and its subsidiaries for any period, on a consolidated
basis, the ratio of EBITDA for such period to the Fixed Charges for such
period.
(r) “Fixed
Charges” means, with
respect to the Company and its subsidiaries for any period, on a consolidated
basis, the sum of (i) Interest Expense for such period, (ii) income
tax expense of such period and (iii) all dividend payments on any series or
class of preferred stock paid or required to be paid in cash, but any rent
deducted from Net Income pursuant to clause (z) of the definition of EBITDA
shall be not be included as a Fixed Charge regardless of accounting treatment.
(s) “GAAP” means generally
accepted accounting principles in effect from time to time in the United States
of America applied on a consistent basis.
(t) “Guarantee” of or by any
Person (“guaranteeing
person”), means
(i) any obligation, contingent or otherwise, of such Person guaranteeing or
having the economic effect of guaranteeing any Indebtedness of any other Person
(the “primary
obligor”) in any manner,
whether directly or indirectly, and including any obligation of the guaranteeing
person, direct or indirect, (A) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness (whether arising by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay or otherwise) or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness (B) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (C) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or (D) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in part) or
(ii) any Lien on any assets of the guaranteeing person securing any
Indebtedness of any other Person, whether or not such Indebtedness is assumed by
the guaranteeing person.
(u) “Indebtedness” means, with
respect to any Person, without duplication, (i) all obligations of such
Person for borrowed money, whether short-term or long-term, and whether secured
or unsecured, or with respect to deposits or advances of any kind, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid (other than trade payables incurred in the ordinary
course of business), (iv) all obligations of such Person under conditional
sale or other title retention agreements relating to property or assets
purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business),
(vi) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vii) all Guarantees by such
Person of Indebtedness of others, (viii) all Capital Lease Obligations of
such Person, (ix) all payments that such Person would have to make in the event
of an early termination, on the date Indebtedness of such Person is being
determined, in respect of outstanding interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangement, (x) all obligations of such Person as an account party in
respect of letters of credit and bankers’ acceptances, (xi) obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock and (xii) renewals, extensions, refundings, deferrals,
restructurings, amendments and modifications of any such Indebtedness,
obligations or Guarantee. The Indebtedness of any Person shall include the
Indebtedness of any partnership in which such Person is a general partner, other
than to the extent that the instrument or agreement evidencing such Indebtedness
expressly limits the liability of such Person in respect thereof, provided, that, if the
sole asset of such Person is its general partnership interest in such
partnership, the amount of such Indebtedness shall be deemed equal to the value
of such general partnership interest and the amount of any indebtedness in
respect of any Guarantee of such partnership Indebtedness shall be limited to
the same extent as such Guarantee may be limited.
(v) “Initial
Purchaser Shares” means the
3,311,438 shares of Series A
Preferred held by Purchaser as of the Effective Date.
(w) “Interest
Expense” means, for any
period, the sum of (i) gross interest expense of the Company and its
subsidiaries for such period on a consolidated basis in accordance with GAAP, on
the aggregate principal amount of the Indebtedness of the Company and its
subsidiaries, including (A) the amortization of debt discounts,
(B) the amortization of all fees payable in connection with the incurrence
of Indebtedness to the extent included in interest expense and (C) the
portion of any payments or accruals with respect to Capital Lease Obligations
allocable to interest expense and (ii) capitalized interest of the Company
and its subsidiaries for such period on a consolidated basis in accordance with
GAAP.
(x) “Lien” means, with
respect to any asset, (i) any mortgage, deed of trust, lien, pledge,
encumbrance, assignment, charge or security interest in or on such asset,
(ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such
securities.
(y) “LTM” means the four
full fiscal quarters ended immediately prior to the relevant calculation date
for which financial statements are then available.
(z) “Major
Acquisition” means the
purchase for cash, securities, property or other consideration, whether by
merger, consolidation, acquisition of assets, contribution or any other form of
transaction, of any business or properties in a single transaction or series of
related transactions on which the purchase price paid (including any
Indebtedness assumed by the Company or any of its subsidiaries in connection
with such purchase by the Company or any of its subsidiaries) calculated in
accordance with GAAP (and prior to any write-downs or write-offs of tangible or
intangible assets whether or not defined or permitted by GAAP) (the
“Purchase
Price”), which Purchase
Price, when taken together with the Purchase Prices of all other such purchases
during the twelve months immediately preceding the date of the definitive
agreement for or, if there is no such agreement, the date of consummation,
exceeds $50.0 million.
(aa) “Major
Divestiture” means the
divestiture, whether by merger, consolidation, disposition of assets, spin-off,
contribution or any other form of transaction, in a single transaction or series
of related transactions, of any business or properties of the Company or any of
its subsidiaries that had Revenues in the LTM in excess of 25% of the Company’s
Revenues in the LTM and in which less than 80% of the total consideration paid
in such transaction consists of cash.
(bb) “Net
Income” means for any
period, the net income of the Company and its subsidiaries, determined on a
consolidated basis in accordance with GAAP.
(cc) “Net Working
Capital” means working
capital, excluding cash and all sales tax and income tax reserves that the
Company reasonably expects will not be paid in the 12-month period following the
date the Net Working Capital is calculated.
(dd) “Net
Worth” means, as of the
date of determination, the “shareholders equity” as shown on a consolidated
balance sheet for the Company and its subsidiaries at such date prepared in
accordance with GAAP.
(ee) “Permitted
Acquisition” means any
acquisition of Company securities pursuant to Section 2.1 of this Agreement
and any additional acquisition of Company securities that does not increase
Purchaser’s beneficial ownership of Common Stock by more than 10% in any 12
consecutive month period.
(ff) “Permitted
Indebtedness” means
(i) any Indebtedness up to $20,000,000 to be used for ordinary working
capital purposes only (excluding, without limitation, acquisitions, stock
repurchases or Common Stock dividends), (ii) any Indebtedness in excess of
$20,000,000 if, upon the incurrence of such Indebtedness, with respect to the
Company and its subsidiaries for the LTM, on a consolidated basis, (x) the ratio
of Pro Forma EBITDA for such period to the Pro Forma Fixed Charges for such
period and (y) the ratio of EBITDA for such period to the Fixed Charges for such
period would each be at least 3.5:1.
(gg) “Permitted
Transferees” means any Person
to whom Securities are Transferred in a Transfer not in violation of this
Agreement and who, if required by Section 5.1(a), enters into an Assumption
Agreement, and includes any Person to whom a Permitted Transferee of any
Investor (or a Permitted Transferee of a Permitted Transferee) who further
Transfers shares of Common Stock and who is required to, and does, become bound
by the terms of this Agreement.
(hh) “Person” means an
individual, a corporation, a partnership, an association, a trust or other
entity or organization, including without limitation a government or political
subdivision or an agency or instrumentality thereof.
(ii) “Pro Forma
EBITDA” means EBITDA
calculated by making the following pro forma adjustments (which shall be made in
compliance with SEC requirements): (A) any acquisitions or dispositions since
the beginning of the period for which Pro Forma EBITDA is being determined for
which, under Rule 11-01 of Regulation S-X promulgated by the SEC, pro forma
information would be required in filings with the SEC shall be reflected as if
such acquisitions or dispositions had occurred at the beginning of such period
and (B) rent amounts to be deducted from Net Income pursuant to clause (z) of
the definition of EBITDA if the sale of the corporate campus real estate
occurred after the beginning of the period for which Pro Forma EBITDA is being
calculated shall be determined as if such sale had occurred at the beginning of
such period.
(jj) “Pro Forma Fixed
Charges” means Fixed
Charges, with the following adjustment: Interest Expense shall be calculated by
assuming that the amount of Indebtedness and other obligations giving rise to
such Interest Expense on the most recent practical date on or prior to the
determination of Pro Forma Fixed Charges plus, in the case of a calculation of
Pro Forma Fixed Charges pursuant to Section 4.1(a) (and the calculation of
Permitted Indebtedness), the Indebtedness proposed to be incurred had been the
amount outstanding throughout the period for which Pro Forma Fixed Charges is
being calculated.
(kk) “Public
Offering” means the sale
of shares of any class of the Common Stock to the public pursuant to an
effective registration statement (other than a registration statement on
Form S-4 or S-8 or any similar or successor form) filed under the
Securities Act.
(ll) “Purchaser
Designees” has the meaning
set forth in Section 3.1(a).
(mm) “Restated
Articles” means the
Company’s Articles of Restatement amending and restating its Articles of
Incorporation dated March 4, 2005.
(nn) “Restricted
Securities” means any Voting
Securities and any other securities convertible into, exchangeable for or
exercisable for Voting Securities (whether immediately or otherwise), except any
securities acquired pursuant to a Permitted Acquisition.
(oo) “Revenues” means for any
Person for any period, the revenues of such Person and its subsidiaries
determined on a consolidated basis in accordance with GAAP.
(pp) “Securities” means the Series
A Preferred and the Common Stock held by the Purchaser as of the Effective
Date.
(qq) “Securities
Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
(rr) “SEC” means the
Securities and Exchange Commission.
(ss) “Senior
Preferred” means the Series
A Preferred and the Series B Preferred.
(tt) “Series B
Preferred” means the Series
B Preferred Stock of the Company.
(uu) “Special Board
Vote” means the
affirmative vote or written consent of not fewer than 80% of the total number of
directors of the Company.
(vv) “Surviving
Person” means the
continuing, surviving or resulting Person in a Business Combination, the Person
receiving a transfer of all or a substantial part of the properties and assets
of the Company, or the Person consolidating with or merging into the Company in
a Business Combination in which the Company is the continuing or surviving
Person, but in connection with which the Senior Preferred is exchanged or
converted into the securities of any other Person or the right to receive cash
or any other property.
(ww) “Total Voting
Power” means, at any
time, the aggregate number of votes which may then be cast by all holders of
outstanding Voting Securities in the election of directors of the
Company.
(xx) “Transfer” means a
transfer, sale, assignment, pledge, hypothecation or other disposition, whether
directly or indirectly pursuant to the creation of a derivative security, the
grant of an option or other right, the imposition of a restriction on
disposition or voting or transfer by operation of law. Notwithstanding the
foregoing, “Transfer” does not include
any change of control of Purchaser or a successor of Purchaser.
(yy) “Voting
Securities” means the Common
Stock and the Series A Preferred and all other securities of the Company
entitled to vote generally in the election of directors of the Company, except
to the extent such voting rights are dependent upon the non-payment of
dividends, events of default or bankruptcy or other events not in the ordinary
course of business.
(zz) “Warrant” means the
warrants to purchase Common Stock issued pursuant to the Amendment
Agreement.
II. STANDSTILL
2.1 Acquisition of
Restricted Securities. Without prior
Board Approval, no Investor will purchase or otherwise acquire beneficial
ownership of any Restricted Securities if after such acquisition the Investors
would have, in the aggregate, beneficial ownership of 25% or more of the Total
Voting Power (the “25%
Threshold”); provided, however, that the
foregoing restriction will not apply to (i) any acquisition of Restricted
Securities that is approved prior to such acquisition by a majority of the
members of the Board that are not Purchaser Designees or Affiliates or
Associates of any Investor or by the holders of a majority of the Total Voting
Power, (ii) purchases of Common Stock upon exercise of any Warrant,
(iii) the acquisition of beneficial ownership of additional Senior
Preferred pursuant to the terms thereof and (iv) a Permitted Acquisition or
any other transaction or series of transactions permitted or contemplated by
this Agreement or the Amendment Agreement.
2.2 Other
Restrictions. Without prior
Board Approval, except as otherwise permitted hereunder, no Investor will do any
of the following:
(a) solicit proxies
from other shareholders of the Company in opposition to a recommendation of the
Board for any matter to be considered at any meeting of the shareholders of the
Company, except matters on which a vote of Series A Preferred or the Senior
Preferred, in either case, as a separate voting group, is required or as
permitted by this Agreement;
(b) knowingly form,
join or participate in or encourage the formation of a “group” (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Voting
Securities of the Company, other than a group consisting solely of Affiliates of
Purchaser or the Company; or
(c) deposit any Voting
Securities of the Company into a voting trust or subject any such Voting
Securities to any arrangement or agreement with respect to the voting thereof,
other than any such trust, arrangement or agreement (i) the only parties
to, or beneficiaries of, which are Affiliates of an Investor; and (ii) the
terms of which do not require or expressly permit any party thereto to act in a
manner inconsistent with this Agreement.
2.3 No
Breach. No Investor will
be deemed to have breached the terms of Section 2.1 above if Voting
Securities beneficially owned by the Investors exceed the percentage limitation
set forth in Section 2.1 due to any reduction in Total Voting Power or
other action by the Company or due to any Investor’s acquisition of Company
securities pursuant to a Permitted Acquisition.
III. BOARD
REPRESENTATION; CONSULTATION
3.1 Nomination and
Voting.
(a) The Company will
nominate for election as directors of the Company up to the following numbers of
persons designated by Purchaser (the “Purchaser
Designees”): (i) if
Purchaser is the beneficial owner of 1,760,000 or more shares of Series A
Preferred, two Purchaser Designees; (ii) if Purchaser is the beneficial owner of
at least 880,000 but less than 1,760,000 shares of Series A Preferred, one
Purchaser Designee; (iii) if Purchaser is the beneficial owner of at least one
but less than 880,000 shares of Series A Preferred, one Purchaser Designee,
provided, that such
Purchaser Designee must be Donald J. McNamara, and Mr. McNamara must agree to
serve as such Purchaser Designee; and (iv) in addition to any Purchaser Designee
or Designees Purchaser is entitled to designate pursuant to clauses (i) through
(iii) above, if Purchaser is the beneficial owner of at least 1,000,000 shares
of Common Stock, one Purchaser Designee. If Purchaser is entitled to designate
more than one Purchaser Designee, each will be nominated to be elected to a
different class of directors to the extent the Board is divided into classes.
The share numbers set forth in this Section 5.1(a) are subject to adjustment for
any stock split, combination, stock dividend or similar event with respect to
such shares.
(b) As of the
effective date of this Agreement, Purchaser is entitled to designate three
Purchaser Designees, and currently Donald J. McNamara and Brian A. Krisak serve
on the Board as Purchaser Designees. The Company and Purchaser acknowledge that
Robert A. Whitman, who serves as Chairman of the Board, is not a Purchaser
Designee.
(c) The Company, at
each meeting of shareholders of the Company at which directors are elected,
will, to the extent requested by Purchaser, cause to be nominated for election
as directors of the Company the appropriate number of Purchaser Designees as
determined pursuant to Section 3.1(a), which in no event shall exceed
three, provided, that if a class
of only three or fewer directors stands for election at any meeting, no more
than one Purchaser Designee shall stand for election at such meeting to serve as
a member of such class. The Company will solicit proxies from its shareholders
for such nominees, vote all management proxies in favor of such nominees, except
for such proxies that specifically indicate to the contrary and otherwise use
its best efforts to cause such nominees to be elected to the Board as herein
contemplated.
(d) If any Purchaser
Designee ceases to be a director of the Company, the Company will promptly upon
the request of Purchaser cause a person designated by Purchaser to replace such
director. If Purchaser fails to designate for election at a meeting of
shareholders the full number of Purchaser Designees to which the Purchaser is
entitled pursuant to Section 3.1(a), Purchaser will thereafter be permitted to
designate additional Purchaser Designees, up to the additional number of
Purchaser Designees that would be permitted pursuant to Section 3.1(a), and the
Company will, promptly upon the request of Purchaser cause such additional
Purchaser Designees to be elected or appointed a director of the
Company.
(e) The Company
covenants that the total number of seats on the Board (including any vacant
seats) will in no event exceed 15 so long as Purchaser is entitled to designate
at least one Purchaser Designee.
(f) At all times after
the date hereof, if Purchaser is entitled to designate at least one Purchaser
Designee, and to the extent permitted by law and applicable rules of the New
York Stock Exchange, the Company shall ensure that at least one Purchaser
Designee is a member of any committee of the Board requested by Purchaser, other
than any special committee of directors formed as a result of any conflict of
interest arising from any Purchaser Designee’s relationship with
Purchaser.
(g) So long as
Purchaser beneficially owns a majority of the outstanding shares of Senior
Preferred, persons elected to the Board by holders of the Senior Preferred
pursuant to Article IV.C.4(d) of the Restated Articles (the “Default
Designees”) will be deemed
to be Purchaser Designees for purposes of Sections 3.1(d) through (g). If
Purchaser beneficially owns less than a majority of the outstanding shares of
Senior Preferred, then the Default Designees will not be deemed to be Purchaser
Designees for purposes of Section 3.1(d) through (g).
3.2 Director
Fees. Designees of
Purchaser will not be entitled to receive fees from the Company for their
service as directors for any period during which Hampstead Interests, LP
receives a fee pursuant to the Amended and Restated Monitoring Agreement, dated
as of the date hereof, between the Company and Hampstead Interests, LP (as
amended from time to time).
3.3 Consultation. So long as (i)
Purchaser is the beneficial owner of at least 880,000 shares of Series A
Preferred (subject to adjustment for any stock split, combination, stock
dividend or similar event with respect to the Series A Preferred) and (ii)
Donald J. McNamara retains substantially the same authority of a Managing
Partner of Purchaser (as CEO and President of Hampstead Associates, Inc. or
otherwise), Purchaser will have the right to consult with the Company, including
its principal officers, and to participate in the drawing up of any
recommendation or Company position, prior to its presentation to the Board of
Directors (if applicable) or implementation, regarding the following:
(a) the appointment
and/or termination of the chief executive officer, chief operating officer,
president and chief financial officer, or any person or persons fulfilling
similar duties;
(b) the remuneration,
both cash and non-cash, and other benefits of the officers and of any managers
of the Company with annual salaries in excess of $100,000;
(c) the appointment
and/or termination of the Company’s auditors and accountants;
(d) the annual
operating and capital budgets of the Company;
(e) any deviation from
the approved budgets referred to in paragraph (d) by more than 20 percent on any
line item or 10 percent of the total budget; and
(f) the Company’s
annual or long range strategic plans which incorporate specific business
strategies, operating agenda, investment and disposition objectives, or
capitalization and funding strategies.
The foregoing
rights are in addition to any voting or other rights granted to Purchaser by any
other document or agreement or by any law, rule or regulation.
3.4 Access. So long as (i)
Purchaser is the beneficial owner of at least 880,000 shares of Series A
Preferred (subject to any stock split, combination, stock dividend or similar
event with respect to the Series A Preferred) and (ii) Donald J. McNamara
retains substantially the same authority of a Managing Partner of Purchaser (as
CEO and President of Hampstead Associates, Inc. or otherwise), the Company will,
and will cause its subsidiaries and each of the Company’s and its subsidiaries’
officers, directors, employees, agents, representatives, accountants and counsel
to: (a) afford the members, officers, employees and authorized agents,
accountants, counsel, financing sources and representatives of Purchaser
reasonable access, during normal business hours and without unreasonable
interference with business operations, to the offices, properties, other
facilities, books and records of the Company and each subsidiary and to those
officers, directors, employees, agents, accountants and counsel of the Company
and of each subsidiary who have any knowledge relating to the Company or any
subsidiary and (b) furnish to the members, officers, employees and authorized
agents, accountants, counsel, financing sources and representatives of
Purchaser, such additional financial and operating data and other information
regarding the assets, properties and goodwill of the Company and its
subsidiaries (or legible copies thereof) as Purchaser may from time to time
reasonably request.
IV. PURCHASER
CONSENT RIGHTS
4.1 Extraordinary
Actions. So long as
Purchaser is entitled to designate at least two Purchaser Designees, the
approval of a Special Board Vote will be required for the Company to effect any
of the following transactions without first obtaining Purchaser’s prior written
consent:
(a) the incurrence of
Excess Debt;
(b) a Major
Divestiture with respect to which the Company does not satisfy the Financial
Test; and
(c) a Major
Acquisition, the Purchase Price of which exceeds seven times the acquired
entity’s or business’ EBITDA for the LTM.
4.2 Business
Combinations, Etc. So long as
Purchaser is the beneficial owner of at least 880,000 shares of Series A
Preferred (as adjusted for any stock dividends, combinations or splits with
respect to the Series A Preferred), the Company may not, without obtaining the
prior written consent of Purchaser:
(a) authorize or
effect any merger, consolidation, combination, recapitalization, reorganization
or other transaction (whether or not the Company is the Surviving Person) (any
such transaction, a “Business
Combination”) or sale,
assignment, transfer, conveyance or other disposal of all or substantially all
of its properties or assets in one or more related transactions to another
Person unless: (A) the Company is the Surviving Person or the Surviving Person
is a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia, (B) the Senior Preferred remains
outstanding (if the Surviving Person is the Company) or is converted into or
exchanged for and becomes shares of the Surviving Person (if other than the
Company), in each case such that the Senior Preferred or shares into which it is
converted or for which it is exchanged has in respect of the Surviving Person
the same powers, preferences and relative participating optional or other
special rights, and the qualifications, limitations or restrictions thereon,
that the Senior Preferred had immediately prior to such transaction, and such
Surviving Person has no class of shares either authorized or outstanding ranking
prior to or on a parity with the Senior Preferred except the same number of
shares ranking prior to or on a parity with the Senior Preferred and having the
same rights and preferences as the shares of the Company authorized and
outstanding immediately prior to any such transaction and (C) the Company
delivers to Purchaser prior to the consummation of the proposed transaction an
officers’ certificate and an opinion of counsel to the combined effect that such
transaction complies with the terms of this Section 4.2(a) and that all
conditions precedent to such transaction have been satisfied; or
(b) pay any Common
Stock Dividends or complete any Common Stock Repurchases in the amount (valued
in the good faith opinion of the Board), if any, by which the aggregate of all
Common Stock Dividends plus the gross amount expended by the Company or any
direct or indirect subsidiary thereof to complete Common Stock Repurchases for
the LTM, exceeds 10% of the Net Income for the LTM; provided, however, that if (i) the
Company previously has redeemed a sufficient number of shares of Senior
Preferred such that it has paid to holders of Senior Preferred at least $30
million in aggregate Liquidation Price (as such term is defined in the Restated
Articles), whether pursuant to the Restated Articles or the provisions of
Section 5.2 below, (ii) the Company has prior to and will have after the payment
of any such Common Stock Dividends or completion of any such Common Stock
Repurchases positive Net Working Capital and (iii) the Company’s Pro Forma
EBITDA for the LTM equals or exceeds at least two times the Company’s Pro Forma
Fixed Charges for the LTM, then the Company may utilize any or all of its cash
in excess of 56.2% of the aggregate Liquidation Price of, and all accrued and
unpaid dividends on, all then remaining outstanding shares of Senior Preferred
to pay any such Common Stock Dividends or complete any such Common Stock
Repurchases; provided, further, that (x) no such
Common Stock Dividend may be paid to, and no such Common Stock Repurchase may be
completed with, any Affiliate of the Company and (y) the aggregate amount of any
such Common Stock Dividends (without limiting the aggregate amount of any such
Common Stock Repurchases) may not exceed 25% of Net Income for the
LTM.
V. TRANSFER OF
SECURITIES
5.1 Transferability.
(a) Any Investor may
Transfer all or any part of the shares of Senior Preferred held by such Investor
to any Person provided one of the three following conditions is satisfied:
(i) the Person duly
executes and delivers an Assumption Agreement;
(ii) the Company has
fully exercised its Redemption Right pursuant to Section 5.2 or the Redemption
Right has otherwise expired; or
(iii) the aggregate
Liquidation Price of all Initial Purchaser Shares that remain in Purchaser’s
possession immediately following such Transfer will equal or exceed $30,000,000.
The foregoing
notwithstanding, no Transfer will be permitted (other than pursuant to a Public
Offering) pursuant to clause (i), (ii) or (iii) unless in connection therewith
the Company has been furnished an opinion of such Investor’s counsel (which
counsel shall be reasonably acceptable to the Company, provided, that any law
firm having at least 100 lawyers, including associates and partners, shall be
deemed acceptable, “Counsel”) to the effect
that such Transfer is exempt from or not subject to the registration
requirements of Section 5 of the Securities Act.
(b) In the event of
any purported Transfer by any Investor of any shares of Senior Preferred not
permitted by Section 5.1(a), such purported Transfer will be void and of no
effect and the Company will not give effect to such Transfer.
(c) Each certificate
representing shares of Senior Preferred issued to any Investor will bear a
legend on the face thereof substantially to the following effect (with such
additions thereto or changes therein as the Company may be advised by counsel
are required by law) (the “Legend”):
“THE SHARES OF
STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS AGREEMENT
BETWEEN THE COMPANY AND (INVESTOR), A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH SHAREHOLDERS
AGREEMENT.”
“THE SHARES OF
STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR ANY OTHER
APPLICABLE LAW OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.”
The Legend will be
removed by the Company by the delivery of substitute certificates without such
Legend in the event of (i) a Transfer permitted by Section 5.1(a) and
in which the Transferee is not required to enter into an Assumption Agreement or
(ii) the termination of this Article V pursuant to the terms of this
Agreement; provided, however, that the second
paragraph of such Legend will only be removed if at such time a legal opinion
from counsel to the Transferee shall have been obtained to the effect that such
legend is no longer required for purposes of applicable securities laws. In
connection with the foregoing, the Company agrees that, if the company is
required to file reports under the Exchange Act, for so long as and to the
extent necessary to permit any Investor to sell the Securities pursuant to Rule
144, the Company will use its reasonable best efforts to file, on a timely
basis, all reports required to be filed with the SEC by it pursuant to Section
13 of the Exchange Act, furnish to the Investors upon request a written
statement as to whether the Company has complied with such reporting
requirements during the 12 months preceding any proposed sale under Rule 144 and
otherwise use its reasonable best efforts to permit such sales pursuant to Rule
144.
5.2 Company Special
Redemption Right.
(a) The Company, at
any time, at it sole option, may, upon 15 business days prior notice to
Investors, redeem from Investors, on a pro-rata basis according to the number of
shares of Senior Preferred then held by them, up to an aggregate number of
shares of Senior Preferred held by such Investors having an aggregate
Liquidation Price of $30 million (the “Redemption
Right”). The purchase
price per share of Senior Preferred payable to Investors upon any exercise by
the Company of its Redemption Right (the “Redemption
Price”) shall be
determined as follows:
(i) until the first
anniversary of the Effective Date, the Redemption Price will be 100% of the
Liquidation Price plus accrued and unpaid dividends on the Senior Preferred to
the date of payment;
(ii) thereafter, until
the second anniversary of the Effective Date, the Redemption Price will be 101%
of the Liquidation Price plus accrued and unpaid dividends on the Senior
Preferred to the date of payment;
(iii) thereafter, until
the third anniversary of the Effective Date, the Redemption Price will be 102%
of the Liquidation Price plus accrued and unpaid dividends on the Senior
Preferred to the date of payment; and
(iv) thereafter, until
the fourth anniversary of the Effective Date, the Redemption Price will be 103%
of the Liquidation Price plus accrued and unpaid dividends on the Senior
Preferred to the date of payment.
(b) Any notice of
redemption given pursuant to Section 5.2(a) (“Redemption
Notice”) will be given
in writing by the Company by first class mail, postage prepaid, to the Investors
by the Board at each such Investor’s address as it appears on the stock books of
the Company, provided, that no failure
to give such notice nor any deficiency therein will affect the validity of the
procedure for redemption of any shares of Senior Preferred except as to the
Investor or Investors to whom the Company has failed to give such notice or
whose notice was defective. The Redemption Notice will state:
(i) the applicable
Redemption Price;
(ii) the total number
of shares of Senior Preferred being redeemed;
(iii) the date fixed for
redemption by the Board (the “Redemption
Date”);
(iv) the place or
places and manner in which each Investor is to surrender his or her
certificate(s) to the Company; and
(v) that dividends on
the shares of Senior Preferred to be redeemed will cease to accumulate on the
Redemption Date unless the Company defaults on the Redemption
Price.
(c) Upon surrender of
the certificate(s) representing shares of Senior Preferred that are the subject
of redemption pursuant to Section 5.2(a), duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice and on the Redemption Date, the
full Redemption Price for such shares will be paid in cash to the Person whose
name appears on such certificate(s) as the owner thereof, and each surrendered
certificate will be canceled and retired.
(d) In accordance with
the Restated Articles, on and after the Redemption Date, unless the Company
defaults in the payment in full of the applicable Redemption Price, dividends on
the Senior Preferred to be redeemed will cease to accumulate, and all rights of
the holders thereof will terminate with respect thereto on the Redemption Date,
other than the right to receive the Redemption Price.
5.3 Purchaser
Special Redemption Right. In the event of
a Change in Control or if the Company enters into a definitive agreement
providing for a Change in Control, the Company will, within 30 calendar days
after such Change in Control or the execution of such an agreement, offer to
purchase each then-outstanding share of Senior Preferred held by an Investor for
a cash amount per share equal to 101% of the Liquidation Price, plus all accrued
and unpaid dividends on the Senior Preferred to the date of payment. Within 10
calendar days after such Change in Control or the execution of such an
agreement, the Company will provide written notice to each Investor at such
Investor’s address as it appears on the stock books of the Company. The Company
will extend such offer for a period of 20 business days after commencing such
offer and will purchase any shares tendered to the Company pursuant to such
offer at the end of such 20-business day period. Dividends will cease to accrue
with respect to shares of Senior Preferred tendered and all rights of holders of
such tendered shares will terminate, except for the right to receive payment
therefor, on the date such shares are purchased and paid for by the
Company.
VI. TERMINATION
6.1 Termination. The provisions
of this Agreement specified below will terminate, and be of no further force or
effect (other than with respect to prior breaches), as follows:
(a) Articles II,
III and IV will terminate (but in the case of subparagraphs (ii) through (vi),
only as to the Investor that has given the notice contemplated thereby), upon
the earliest to occur of the following dates or events:
(i) ten years after
the date hereof;
(ii) notice that an
Investor has determined to terminate this Agreement effective as of a date
stated in such notice, at any time following the announcement by any Person or
group (other than an Investor) that it intends to commence a tender offer for or
otherwise acquire Voting Securities if, after the completion of such proposed
tender offer or acquisition, such Person or group, together with all persons and
entities controlling, controlled by or under common control (or in a group with
it), would own 20% or more of the Total Voting Power;
(iii) notice that an
Investor has determined to terminate this Agreement effective as of a date
stated in such notice, at any time following the acquisition by any Person or
group of 20% or more of the Total Voting Power or the filing by any Person or
group (other than an Investor) of any document with a governmental agency
(including without limitation a Schedule 13D with the SEC or a notification
under the Hart-Scott-Rodino Antitrust Improvement Act) to the effect that such
person, entity or group intends or contemplates acquiring Voting Securities if,
after the completion of such proposed acquisition, such person, entity or group,
together with all persons and entities controlling, controlled by or under
common control or in a group with it, would own 20% or more of the Total Voting
Power;
(iv) notice that an
Investor has determined to terminate this Agreement effective as of a date
stated in such notice, at any time following the execution, approval by the
Board or announcement of an agreement, agreement in principle or proposal
(whether or not subject to approval by the Board or other corporate action) that
provides for or involves (A) the merger of the Company with or into any
other entity, (B) the sale of all or any significant part of the assets of
the Company, (C) the reorganization or liquidation of the Company or (D)
any similar transaction or event that is subject to approval by the shareholders
of the Company;
(v) notice that an
Investor has determined to terminate this Agreement effective as of a date
stated in such notice at any time following the failure by the Board or the
Company to observe any of the provisions of this Agreement hereof which breach
has continued for at least five calendar days after notice thereof to the
Company from Purchaser; and
(vi) with respect to
Purchaser only, notice that Purchaser has determined to terminate this Agreement
following (A) the failure of the shareholders of the Company to elect any
Purchaser Designee as a director, (B) the removal of any Purchaser Designee
from the Board, (C) the failure of the Board to replace any Purchaser
Designee with a person designated by an Investor or (D) the failure of the
Board to effect without unreasonable delay and maintain the committee
appointments required under Section 3.1(f);
(b) Article V
will terminate on the fourth anniversary of the date of this
Agreement;
(c) Any portion or all
of this Agreement will terminate and be of no further force and effect upon a
written agreement of the parties to that effect; and
(d) All other sections
of this Agreement will terminate at such time as all other sections of this
Agreement have terminated.
VII. MISCELLANEOUS
7.1 Specific
Performance. The parties
agree that any breach by any of them of any provision of this Agreement would
irreparably injure the Company or Purchaser, as the case may be, and that money
damages would be an inadequate remedy therefor. Accordingly, the parties agree
that the other parties will be entitled to one or more injunctions enjoining any
such breach and requiring specific performance of this Agreement and consent to
the entry thereof, in addition to any other remedy to which such other parties
are entitled at law or in equity; provided, however, that in the
event the Company breaches or is unable to perform (even if legally excused
therefrom) Section 3.1, the obligations of Purchaser under Article II
hereof will terminate without further action but the Company will have no
liability for damages as a result thereof.
7.2 Notices. All notices,
requests and other communications to either party hereunder will be in writing
(including telecopy or similar writing) and will be given,
|
if to the Company, to: |
| Franklin Covey Co. |
| 2200 West Parkway Boulevard |
| Salt Lake City, Utah 84119-2331 |
| Attention: Val J. Christensen |
| Fax: (801) 817-8723 |
| with a copy to: |
| Joel C. Peterson |
| Chairman of the Special Committee of the Board of Directors |
| c/o Peterson Partners LP |
| 299 South Main Street, Suite 2250 |
| Salt Lake City, Utah 84111 |
| Fax: (801) 359-8840 |
|
with a copy to: |
| Dorsey & Whitney LLP |
| 170 South Main Street, Suite 900 |
| Salt Lake City, Utah 84101 |
| Attention: Nolan S. Taylor |
| Fax: (801) 933-7373 |
| If to any member of Purchaser, to: |
| Knowledge Capital Investment Group |
| c/o The Hampstead Group, LLC |
| 3232 McKinney Avenue |
| Suite 890 |
| Dallas, Texas 75201 |
| Attention: Donald J. McNamara |
| Fax: (214) 220-4924 |
| with a copy to: |
| Munsch Hardt Kopf & Harr, P.C. |
| 1445 Ross Avenue |
| Suite 4000 |
| Dallas, Texas 75202 |
| Attention: William T. Cavanaugh, Jr. |
| Fax: (214) 978-4371 |
or such other
address or telecopier number as such party may hereafter specify for the purpose
of notice to the other party hereto. Each such notice, request or other
communication shall be effective when delivered at the address specified in this
Section 7.2.
7.3 Amendments; No
Waivers.
(a) Any provision of
this Agreement may be amended or waived if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the parties
hereto, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or
delay by any party in exercising any right, power or privilege hereunder will
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies provided by
law.
7.4 Expenses. Except as
otherwise provided herein or in the Amendment Agreement, all costs and expenses
incurred in connection with this Agreement will be paid by the party incurring
such cost or expense.
7.5 Successors and
Assigns. The provisions
of this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that none of the
parties may assign, delegate or otherwise transfer any of their rights or
obligations under this Agreement without the written consent of the other
parties hereto, except that Purchaser may assign, delegate or otherwise transfer
any of its rights hereunder to any of its Affiliates which commits to the
Company in writing to be bound by the terms hereof (but no assignment or
transfer shall relieve Purchaser of its obligations hereunder) and, upon such
assignment or transfer, references to Purchaser herein will be deemed to include
any such Affiliate. Neither this Agreement nor any provision hereof is intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder.
7.6 Counterparts;
Effectiveness. This Agreement
may be signed in any number of counterparts, each of which will be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement will become effective when each party hereto will
have received a counterpart hereof signed by the other party
hereto.
7.7 Entire
Agreement. This Agreement,
the Amendment Agreement and the documents contemplated thereby (and all
schedules and exhibits thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect thereto. No representation, inducement, promise,
understanding, condition or warranty not set forth herein or therein has been
made or relied upon by any of the parties hereto.
7.8 Governing
Law. This Agreement
shall be construed in accordance with and governed by the laws of the State of
Utah, without giving effect to the principles of conflict of laws
thereof.
7.9 Registration
Rights. Upon
consummation of one or more Transfers of Securities by an Investor (other than a
Transfer in a Public Offering) to any Qualified Transferee (as such term is
defined in the Amended and Restated Registration Rights Agreement, dated as of
the date hereof, between Purchaser and the Company (the “Registration
Rights Agreement”)), the Company
and each such Qualified Transferee will enter into a registration rights
agreement substantially in the form of the Registration Rights Agreement (to the
extent of the registration rights such Qualified Transferee is entitled to
receive pursuant to the Registration Rights Agreement) with such modifications
thereto as are acceptable to such Qualified Transferee and the Transferring
Investor and do not materially increase the Company’s obligations thereunder
(excluding the effects of multiple parties).
[Signature page
follows.]
IN WITNESS
WHEREOF, the parties hereto have caused this Amended and Restated Shareholders
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
| FRANKLIN COVEY CO. | |
| By: | /s/ ROBERT A. WHITMAN |
| Name: | Robert A. Whitman |
| Title: | President and Chief Executive Officer |
| KNOWLEDGE CAPITAL INVESTMENT GROUP | |
| By: | Inspiration Investments Partners III, L.P. |
| Its: | Manager |
| By: | Inspiration Investments GenPar III, L.P. |
| Its: | General Partner |
| By: | Hampstead Associates, Inc. |
| Its: | Managing General Partner |
| By: | /s/ DONALD J. MCNAMARA |
| Name: | Donald J. McNamara |
| Title: | President |
EXHIBIT
A
FORM OF
ASSUMPTION AGREEMENT
ASSUMPTION
AGREEMENT (this “Agreement”), dated as of
___________________, by __________________ (“Transferee”) in favor of
Franklin Covey Co., a Utah corporation (the “Company”).
RECITALS
A. The Company and
Knowledge Capital Investment Group (“KC”) are parties to
an Amended and Restated Shareholders Agreement dated as of March 8, 2005 (the
“Shareholders
Agreement”);
and
B. As contemplated by
the Shareholders Agreement, certain transfers by KC of shares of the Company’s
Series A Preferred Stock, which, except in certain circumstances, automatically
convert into shares of the Company’s Series B Preferred Stock (the “Series B
Preferred”) immediately
prior to such transfer, require KC and the Transferee to enter into this
Agreement in favor of the Company.
NOW THEREFORE, in
consideration of the premises and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as
follows:
1. Transferee hereby
acknowledges receipt from KC of ___________________ shares of
Series B1 Replace with
Series A if the Transferee qualifies to receive shares of Series A Preferred
Stock pursuant to the Restated Articles. Preferred and
will, and hereby agrees to, become a party to, and be bound by, to the same
extent as KC, the terms of the Shareholders Agreement, including, without
limitation, the obligations set forth in Section 5.2; provided, however, that
Article III of the Shareholders Agreement will not be applicable to
Transferee, and Transferee will have no rights or obligations thereunder.
Capitalized terms used and not otherwise defined herein shall have the meaning
ascribed to them in the Shareholders Agreement.
2. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Utah, without giving effect to the principles of conflict of laws
hereto.
3. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and all of which together shall be deemed to be one and the same
instrument.
IN WITNESS
WHEREOF, each of the undersigned has executed this Agreement or caused this
Agreement to be executed on its behalf as of the date first written
above.
| [TRANSFEREE] | |
| By: | |
| Name: | |
| Title: | |
| KNOWLEDGE CAPITAL INVESTMENT GROUP | |
| By: | Inspiration Investments Partners III, L.P. |
| Its: | Manager |
| By: | Inspiration Investments GenPar III, L.P. |
| Its: | General Partner |
| By: | Hampstead Associates, Inc. |
| Its: | Managing General Partner |
| By: | |
| Name: | |
| Title: |
| Agreed and Accepted: | |
| FRANKLIN COVEY CO. | |
| By: | |
| Name: | |
| Title: |
Exhibit
99.2
AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of
March 8, 2005 between Franklin Covey Co., a Utah corporation (the “Company”), and Knowledge
Capital Investment Group, a Texas general partnership (the “Purchaser”).
RECITALS
WHEREAS, Purchaser is a
holder of 1,015,002 shares of the Company’s outstanding Common Stock and
3,311,438 shares of the Company’s outstanding Series A Preferred Stock, and the
Company and Purchaser have previously entered into the Registration Rights
Agreement dated June 2, 1999 (the “Prior Rights
Agreement”); and
WHEREAS, the Company and
Purchaser entered into a Preferred Stock Amendment and Warrant Issuance
Agreement, dated November 29, 2004 (as amended from time to time, the
“Amendment
Agreement”), pursuant to
which, among other things, the Company and Purchaser, on the terms and subject
to the conditions thereof, agreed to amend and restate the Prior Rights
Agreement as set forth herein.
NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth herein, the Company
and Purchaser hereby agree that the Prior Rights Agreement is hereby terminated
and shall be superceded and replaced in its entirety by this Agreement, and the
parties further agree as follows:
1. Definitions. For purposes of
this Agreement, the following terms have the following meanings when used herein
with initial capital letters:
(a) Advice: As defined in
Section 7
hereof.
(b) Affiliate: An Affiliate of
any Person means any other Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, such Person; and, for the purposes of this definition only, “control” (including the
terms “controlling,” “controlled
by” and
“under common
control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of
the management, policies or activities of a Person whether through the ownership
of securities, by contract or agency or otherwise.
(c) Amendment
Agreement: As defined in
the Recitals above.
(d) Common
Stock: The common
stock, par value $0.05, of the Company.
(e) Common
Registrable Securities: All shares of
Common Stock acquired by Purchaser or any Qualified Transferee (including any
shares of Common Stock or other securities that may be received by Purchaser or
such Qualified Transferee (x) as a result of a stock dividend or stock split of
the Common Stock or (y) on account of the Common Stock in a recapitalization or
other transaction involving the Company) upon the original issuance thereof, and
at all times subsequent thereto, including without limitation all shares of
Common Stock held by Purchaser on the date hereof.
(f) Demand
Notice: As defined in
Section 3
hereof.
(g) Demand
Registration: As defined in
Section 4
hereof.
(h) Losses: As defined in
Section 9
hereof.
(i) Piggyback
Registration: As defined in
Section 5
hereof.
(j) Prospectus: The prospectus
included in any Registration Statement (including without limitation a
prospectus that discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(k) Purchaser
Warrant: The warrant to
purchase shares of Common Stock issued to the Purchaser pursuant to the
Amendment Agreement.
(l) Qualified
Transferee: Up to, but not
more than, ten “Permitted Transferees” as such term is defined in the Amended
and Restated Shareholders Agreement, dated as of the date hereof, between the
Company and the Purchaser; provided, however, that (i) any
contemporaneous transfer to a group of Permitted Transferees comprised of
Affiliated Persons (such as, for example, a group of Affiliated investment
funds) shall be deemed to be a transfer to one Permitted Transferee for purposes
of calculating the number of Permitted Transferees that shall be Qualified
Transferees pursuant to this Agreement and (ii) any transfer of any Warrant
Shares by the Purchaser to any stockholder, partner or other equity holder of
the Purchaser shall be deemed to be a transfer to a Qualified Transferee, but
only for the sole purpose of such transferee receiving the rights set forth in
Section 3 regarding the resale of such Warrant Shares in the Warrant
Registration Statement.
(m) Registrable
Securities: The Common
Registrable Securities, the Series B Registrable Securities and the Warrant
Registrable Securities and all other securities of the Company of any class or
series that are otherwise publicly traded and are beneficially owned by
Purchaser or any Qualified Transferee, until, with respect to each holder of
such securities, the earlier of, (i) all such securities held by such holder
being effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering them, (ii) all such
securities held by such holder being immediately resaleable by such holder under
Rule 144 during any 90-day period or (iii) all such securities held by such
holder being resaleable by such holder pursuant to Rule 144(k).
(n) Registration
Expenses: As defined in
Section 8
hereof.
(o) Registration
Statement: Any registration
statement of the Company under the Securities Act that covers any of the
Registrable Securities pursuant to the provisions of this Agreement, including
the related Prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
(p) Rule 144: Rule 144
under the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
(q) Sales
Price: The volume times
the sales prices for each regular way trade during the measurement period
divided by the total volume during such period (referred to as the “volume
weighted average” on the Bloomberg News Service and derived therefrom, or, if
such service no longer publishes such information or ceases to exist, such
alternative service as the Company may select in good faith) or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system, quotation system or such other similar system of
any national securities exchange as reported on the Bloomberg News Service, or,
if such service no longer publishes such information or ceases to exist, such
alternative service as the Company may select in good faith, if on any such date
the Common Stock is not traded or quoted by any national securities exchange,
the average of the closing bid and asked prices furnished by a professional
market maker making a market in the Common Stock selected by the Company in good
faith, or if no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined by the Company in good
faith.
(r) SEC: The Securities
and Exchange Commission.
(s) Securities
Act: The Securities
Act of 1933, as amended.
(t) Senior
Preferred: The Series A
Preferred and the Series B Preferred.
(u) Series A
Preferred: Shares of the
Company’s Series A Preferred Stock with a liquidation preference of
$25.00 per
share.
(v) Series B
Preferred: Shares of
Series B Preferred Stock with a liquidation preference of
$25.00 per share, which
shares will be issued automatically upon the conversion of any outstanding
shares of Series A Preferred.
(w) Series B
Registrable Securities: All shares of
Series B Preferred acquired by any Qualified Transferee pursuant to the
transfer and related conversion of any shares of Series A Preferred held by the
Purchaser (including any shares of Series B Preferred or other securities
that may be received by the Purchaser or any such Qualified Transferee
(x) as a result of a stock dividend or stock split of Series B
Preferred or (y) on account of Series B Preferred in a
recapitalization or other transaction involving the Company), upon the
respective original issuance thereof, and at all times subsequent thereto.
(x) Special
Counsel: As defined in
Section 8(b)
hereof.
(y) Trading
Day: Any day on which
the New York Stock Exchange is open for trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, any day other
than a Saturday, Sunday or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order to
close.
(z) Underwritten
Registration or Underwritten Offering: A distribution,
registered pursuant to the Securities Act in which securities of the company are
sold to an underwriter for reoffering to the public.
(aa) Warrant
Registrable Securities: All Warrant
Shares acquired by the Purchaser or any Qualified Transferee upon the exercise
of the Purchaser Warrant (including any shares of Common Stock or other
securities that may be received by Purchaser or any such Qualified Transferee
(x) as a result of a stock dividend or stock split of Common Stock or
(y) on account of the Warrant Shares in a recapitalization or other
transaction involving the Company) upon the respective original issuance
thereof, and at all times subsequent thereto.
(bb) Warrant
Shares: All shares of
Common Stock issued or issuable upon the exercise of the Purchaser
Warrant.
2. Registration of
the Series B Registrable
Securities and the Common Registrable Securities.
(a) The Company shall
file with the SEC as soon as reasonably practicable, and in any event within 120
days from the date hereof, a registration statement covering the resale of the
Series B Registrable Securities and the Common Registrable Securities (and all
shares issuable thereon in connection with any stock splits, dividends,
recapitalizations, consolidations or other similar transactions) for an offering
to be made on a continuous basis pursuant to Rule 415 (the “Series B
Registration Statement”). The Series B
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Series B Preferred on a Form S-3, in which
case such registration shall be on a Form S-1, Form S-2 or another appropriate
form). The Company shall use its reasonable best efforts to (i) cause the Series
B Registration Statement to become or be declared effective by the SEC as soon
as reasonably practicable thereafter, and, in any event, within 240 calendar
days following its initial filing with the SEC (the “Effectiveness
Deadline Date”) and (ii) keep
the Series B Registration Statement continuously effective under the Securities
Act until all Series B Registrable Securities covered by such Registration
Statement have been sold or three years from the date it becomes effective,
whichever is sooner to occur.
(b) If, by the
Effectiveness Deadline Date, the Series B Registration Statement is not declared
effective by the Commission (a “Registration
Default”), then the
Company shall be required to pay to Purchaser or any Qualified Transferee on
each Dividend Payment Date (as such term is defined in the Company’s Articles of
Restatement amending and restating the Company’s Articles of Incorporation the
(“Restated
Articles”)) that any
Regular Dividend (as such term is defined in the Restated Articles) is due and
payable to holders of shares of Senior Preferred, a cash amount for each share
of Senior Preferred held by Purchaser or such Qualified Transferee equal to (x)
$0.125 (as such amount may be adjusted for any stock splits, dividends,
recapitalizations, consolidations or other similar transactions with respect to
the Senior Preferred) multiplied by (y) a fraction, the numerator of which is the
number of days elapsing during the period commencing on and including the later
of (1) the day following such Registration Default or (2) the day following the
most recent Dividend Payment Date following such Registration Default and ending
on the earlier of (1) such Dividend Payment Date if the Series B Registration
Statement has not been declared effective prior to such Dividend Payment Date or
(2) the date that the Series B Registration Statement is declared effective and
the denominator of which is 365
days.
3. Registration of
Warrant Registrable
Securities. At any time
after the date hereof, the Purchaser and/or any Qualified Transferees holding at
least two-thirds of the Warrant Shares issued or issuable upon exercise of the
Purchaser Warrant (including Warrant Shares that may be issued to the persons
making such demand upon exercise of the Purchaser Warrant (or any Warrants
issued to Qualified Transferees pursuant to transfers of the Purchaser Warrant)
held by them) will have the right by written notice delivered to the Company (a
“Demand Notice”) to require the Company to file with the SEC a registration
statement covering the resale of all Warrant Registrable Securities under and in
accordance with the provisions of the Securities Act on Form S-3 (except if the
Company is not then eligible to register for resale the Warrant Registrable
Securities on a Form S-3, then such registration shall be on a Form S-1, Form
S-2 or another appropriate form) (the “Warrant Registration Statement”);
provided, however, that no Demand Notice may be given if the weighted average
Sales Price of the Common Stock over the previous ten Trading Days is less than
80% of the Purchaser Warrant’s exercise price (the “Warrant Registration
Threshold”). The Company shall use its reasonable best efforts to (a) cause the
Warrant Registration Statement to become or be declared effective by the SEC as
soon as reasonably practicable following filing and (b) keep the Warrant
Registration Statement continuously effective under the Securities Act until (i)
all Warrant Registrable Securities covered by the Warrant Registration Statement
have been sold, (ii) the Warrant Registrable Securities are otherwise resaleable
pursuant to Rule 144 during any 90-day period or (iii) three years from the date
the Warrant Registration Statement becomes or is declared effective, whichever
is sooner to occur.
4. Special Demand
Registration.
(a) Requests for
Registration. If and only if
(i) the Company has failed to cause to become effective, or maintain the
effectiveness of, either the Series B Registration Statement or the Warrant
Registration Statement in accordance with the terms of this Agreement, (ii) the
holders of the Registrable Securities have requested to participate in a
Piggyback Registration, but such requested participation has been reduced to
zero pursuant to Section 5(b) (a “Full
Underwriter Cutback”) or (iii) either
the Series B Registration Statement or the Warrant Registration Statement is no
longer effective, then, in the case of clause (i) above, until the Series B
Registration Statement or the Warrant Registration Statement, as the case may
be, is declared effective, or, in the case of clause (ii) above, during the
60-day period following any Full Underwriter Cutback, or, in the case of clause
(iii) above, at any time, the holders of Registrable Securities constituting at
least 5% of the total number of Registrable Securities then outstanding will
have the right to deliver a Demand Notice to require the Company to register, in
accordance with Section 4(b) (a “Demand
Registration”), under and in
accordance with the provisions of the Securities Act the number of Registrable
Securities requested to be so registered (but not less than 5% of the total
number of Registrable Securities then outstanding).
The number of
Demand Registrations pursuant to this Section 4(a) shall not exceed
one; provided, however, that in
determining the number of Demand Registrations to which the holders of
Registrable Securities are entitled there shall be excluded (1) any Demand
Registration that is an underwritten registration if the managing underwriter or
underwriters have advised the holders of Registrable Securities that the total
number of Registrable Securities requested to be included therein exceeds the
number of Registrable Securities that can be sold in such offering in accordance
with the provisions of this Agreement without materially and adversely affecting
the success of such offering, (2) any Demand Registration that does not become
effective or is not maintained effective for the period required pursuant to
Section 4(b) hereof, unless in
the case of this clause (2) such Demand Registration does not become effective
after being filed by the Company solely by reason of the refusal to proceed by
the holders of Registrable Securities unless (i) the refusal to proceed is based
upon the advice of counsel relating to a matter with respect to the Company or
(ii) the holders of the Registrable Securities elect to pay all Registration
Expenses in connection with such Demand Registration and (3) any Demand
Registration in connection with which any other shareholder of the Company
exercises a right of first refusal which it may otherwise have and purchases all
the stock registered and to be sold pursuant to the Demand
Registration.
(b) Filing and
Effectiveness. The Company will
file a Registration Statement relating to any Demand Registration within 60
calendar days, and will use its reasonable best efforts to cause the same to be
declared effective by the SEC as soon as practicable thereafter, and in any
event, within 120 calendar days of the date on which the holders of Registrable
Securities first give the Demand Notice required by Section 4(a) hereof with
respect to such Demand Registration.
All requests made
pursuant to this Section 4 will specify the
number of Registrable Securities to be registered and will also specify the
intended methods of disposition thereof; provided, that if the
holder demanding such registration specifies one particular type of underwritten
offering, such method of disposition shall be such type of underwritten offering
or a series of such underwritten offerings (as such demanding holders of
Registrable Securities may elect) during the period during which the
Registration Statement is effective.
If any Demand
Registration is requested to be effected as a “shelf” registration by the
holders of Registrable Securities demanding such Demand Registration, the
Company will use its reasonable best efforts to keep the Registration Statement
filed in respect thereof effective for a period of up to 12 months from the date
on which the SEC declares such Registration Statement effective (subject to
extension pursuant to Sections 6 and 7 hereof) or such
shorter period that will terminate when all Registrable Securities covered by
such Registration Statement have been sold pursuant to such Registration
Statement.
Within ten
calendar days after receipt of such Demand Notice, the Company will serve
written notice thereof (the “Notice”) to all other
holders of Registrable Securities and will, subject to the provisions of Section
4(c) hereof, include
in such registration all Registrable Securities with respect to which the
Company receives written requests for inclusion therein within 20 calendar days
after the receipt of the Notice by the applicable holder.
The holders of
Registrable Securities will be permitted to withdraw Registrable Securities from
a Registration at any time prior to the effective date of such Registration,
provided, the remaining
number of Registrable Securities subject to a Demand Notice is at least 5% of
the total number of Registrable Securities then outstanding.
(c) Priority on
Demand Registration. If any of the
Registrable Securities registered pursuant to a Demand Registration are to be
sold in one or more firm commitment underwritten offerings, the Company may also
provide written notice to holders of its equity securities (other than
Registrable Securities), if any, who have piggyback registration rights with
respect thereto and will permit all such holders who request to be included in
the Demand Registration to include any or all equity securities held by such
holders in such Demand Registration on the same terms and conditions as the
Registrable Securities. Notwithstanding the foregoing, if the managing
underwriter or underwriters of the offering to which such Demand Registration
relates advise the holders of Registrable Securities that the total amount of
holders of Registrable Securities and securities that such equity security
holders intend to include in such Demand Registration is in the aggregate such
as to materially and adversely affect the success of such offering, then (i)
first, the amount of securities to be offered for the account of the holders of
such other equity securities will be reduced, to zero if necessary (pro rata
among such holders on the basis of the amount of such other securities to be
included therein by each such holder), and (ii) second, the number of
Registrable Securities included in such Demand Registration will, if necessary,
be reduced and there will be included in such firm commitment underwritten
offering only the number of Registrable Securities that, in the opinion of such
managing underwriter or underwriters, can be sold without materially and
adversely affecting the success of such offering, allocated pro rata among
the holders of Registrable Securities on the basis of the amount of Registrable
Securities to be included therein by each such holder.
(d) Postponement of
Demand Registration. The Company will
be entitled to postpone the filing period (or suspend the effectiveness) of any
Demand Registration for a reasonable period of time not in excess of 90 calendar
days in any 12-month period, if the Company determines, in the good faith
exercise of its reasonable business judgment, that such registration and
offering could materially interfere with bona fide financing plans of the
Company or would require disclosure of information, the premature disclosure of
which could materially and adversely affect the Company. If the Company
postpones the filing of a Registration Statement, it will promptly notify the
holders of Registrable Securities in writing when the events or circumstances
permitting such postponement have ended.
5. Piggyback
Registration.
(a) Right to
Piggyback. If at any time
the Company proposes to file a registration statement under the Securities Act
with respect to an offering of any class of equity securities (other than a
registration statement (i) on Form S-4, S-8 or any successor form thereto or
(ii) filed solely in connection with an offering made solely to employees of the
Company), whether or not for its own account, then the Company will give written
notice of such proposed filing to the holders of Registrable Securities at least
10 calendar days before the anticipated filing date. Such notice will offer such
holders the opportunity to register such amount of Registrable Securities as
each such holder may request (a “Piggyback
Registration”); provided, however, in no event
shall the amount of Registrable Securities included in any Piggyback
Registration exceed 20% of the total amount of securities included in such
offering. Subject to the limitations set forth in this Section 5(a) and the
provisions of Section 5(b) hereof, the
Company will include in each such Piggyback Registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein (other than (i) any Registrable Securities that are otherwise
covered by an effective Registration Statement (including, without limitation,
the Series B Registration Statement or the Warrant Registration Statement)
unless, with respect to such Registrable Securities, the holders of such
Registrable Securities agree to pay any incremental increase in the Registration
Expenses for such Piggyback Registration resulting from including such
Registrable Securities in such Piggyback Registration or (ii) any Warrant Share
Registrable Securities if the weighted average Sales Price of the Common Stock
has not reached the Warrant Registration Threshold). The holders of Registrable
Securities will be permitted to withdraw all or part of the Registrable
Securities from a Piggyback Registration at any time prior to the effective date
of such Piggyback Registration.
(b) Priority on
Piggyback Registrations. The Company will
cause the managing underwriter or underwriters of a proposed underwritten
offering to permit holders of Registrable Securities requested to be included in
the registration for such offering to include therein all such Registrable
Securities requested to be so included on the same terms and conditions as any
similar securities, if any, of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering deliver
an opinion to the holders of Registrable Securities to the effect that the total
amount of securities which such holders, the Company and any other persons
having rights to participate in such registration propose to include in such
offering is such as to materially and adversely affect the success of such
offering, then:
(i) if such
registration is a primary registration on behalf of the Company, the amount of
securities to be included therein (x) for the account of holders of Registrable
Securities on the one hand (allocated pro rata among such holders on the basis
of the Registrable Securities requested to be included therein by each such
holder), and (y) for the account of all such other persons (exclusive of the
Company), on the other hand, will be reduced (to zero if necessary) pro rata in
proportion to the respective amounts of securities requested to be included
therein to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing underwriter
or underwriters;
(ii) if such
registration is an underwritten secondary registration on behalf of holders of
securities of the Company other than Registrable Securities, the Company will
include therein: (x) first, up to the full number of securities of such persons
exercising “demand” registration rights that in the opinion of such managing
underwriter or underwriters can be sold or allocated among such holders as they
may otherwise so determine, and (y) second, the amount of Registrable Securities
and securities proposed to be sold by any other person in excess of the amount
of securities such persons exercising “demand” registration rights propose to
sell that, in the opinion of such managing underwriter or underwriters, can be
sold (allocated pro rata among the holders of such Registrable Securities and
such other persons on the basis of the dollar amount of securities requested to
be included therein).
(c) Registration of
Securities Other Than Registrable Securities. Without the
written consent of the holders of a majority of the then-outstanding Registrable
Securities, the Company will not grant to any person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject to the prior rights of the holders of
Registrable Securities set forth herein, and if exercised, would not otherwise
conflict or be inconsistent with the provisions of this Agreement.
6. Restrictions on
Sale by Holders of Registrable Securities. Each holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 2, 3, 4 or 5 hereof agrees and
will confirm such agreement in writing, if such holder is so requested (pursuant
to a timely written notice) by the managing underwriter or underwriters in an
underwritten offering, not to effect any public sale or distribution of any of
the Company’s equity securities (except as part of such underwritten offering),
including a sale pursuant to Rule 144, during the 10-calendar day period prior
to, and during the 90-calendar day period (or such longer period as any managing
underwriter or underwriters may reasonably request in connection with any
underwritten public offering) beginning on the closing date of each underwritten
offering made pursuant to such Registration Statement or such other shorter
period to which the executive officers may agree. If a request is made pursuant
to this Section 6, the time period
during which a Demand Registration (if a shelf registration) is required to
remain continuously effective pursuant to Section 2, 3 or 4(b) will be extended
by 100 calendar days or such shorter period that will terminate when all such
Registrable Securities not so included have been sold pursuant to such
Registration Statement.
7. Registration
Procedures. In
connection with the Company’s registration obligations pursuant to Sections
2, 3, 4 and 5 hereof, and
subject to the limitations on such registration obligations set forth in such
Sections, the Company will effect such registrations to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition hereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) Prepare and file
with the SEC a Registration Statement or Registration Statements on any
appropriate form under the Securities Act available for the sale of the
Registrable Securities by the holders thereof in accordance with the intended
method or methods of distribution thereof (including, without limitation,
distributions in connection with transactions with broker-dealers or others for
the purpose of hedging Registrable Securities, involving possible sales, short
sales, options, pledges or other transactions which may require delivery and
sale to broker-dealers or others of Registrable Securities), and cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto (including documents that would be incorporated or deemed to be
incorporated therein by reference), the Company will furnish to the holders of
the Registrable Securities covered by such Registration Statement, the Special
Counsel and the managing underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the review of such
holders, the Special Counsel and such underwriters, and the Company will not
file any such Registration Statement or amendment thereto or any Prospectus or
any supplement thereto (including such documents which, upon filing, would or
would be incorporated or deemed to be incorporated by reference therein) to
which the holders of a majority of the Registrable Securities covered by such
Registration Statement, the Special Counsel or the managing underwriter, if any,
shall reasonably object on a timely basis.
(b) Prepare and file
with the SEC such amendments and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration Statement continuously
effective for the applicable period specified in Section 2, 3 or 4; cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
Registration Statement as so amended or to such Prospectus as so
supplemented.
(c) Notify the selling
holders of Registrable Securities, the Special Counsel and the managing
underwriters, if any, promptly, and (if requested by any such person) confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other federal or state governmental
authority for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time the representations
and warranties of the Company contained in any agreement contemplated by
Section 7(n) hereof (including
any underwriting agreement) cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the occurrence of any event which
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in a
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and, in the case of the
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (vii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.
(d) Use every
reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If requested by
the managing underwriters, if any, or the holders of a majority of the
Registrable Securities being registered, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such holder agree should be included therein
as may be required by applicable law and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that the Company
will not be required to take any actions under this Section 7(e) that are not, in
the opinion of counsel for the Company, in compliance with applicable
law.
(f) Furnish to each
selling holder of Registrable Securities, the Special Counsel and each managing
underwriter, if any, without charge, at least one conformed copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements (but excluding schedules, all documents incorporated or
deemed incorporated therein by reference and all exhibits, unless requested in
writing by such holder, counsel or underwriter).
(g) Deliver to each
selling holder of Registrable Securities, the Special Counsel and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may request;
and the Company hereby consents to the use of such Prospectus or each amendment
or supplement thereto by each of the selling holders of Registrable Securities
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto.
(h) Prior to any
public offering of Registrable Securities, to register or qualify or cooperate
with the selling holders of Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any seller or underwriter
reasonably requests in writing; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdiction of the Registrable
Securities covered by the applicable Registration Statement; provided, however, that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction in which it is not then so qualified or (ii) take any action
that would subject it to general service of process in any such jurisdiction in
which it is not then so subject.
(i) Cooperate with the
selling holders of Registrable Securities and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates will not bear any
restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
shall request at least two business days prior to any sale of Registrable
securities to the underwriters.
(j) Cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
within the United States except as may be required solely as a consequence of
the nature of such selling holder’s business, in which case the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities.
(k) Upon the
occurrence of any event contemplated by Section 7(c)(vi) or
7(c)(vii) hereof,
prepare a supplement or post-effective amendment to each Registration Statement
or a supplement to the related Prospectus or any document incorporated therein
by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its best
efforts to cause all shares of Common Stock covered by any Registration
Statement to be, at the Company’s option (i) listed on each securities exchange,
if any, on which similar securities issued by the Company are then listed or, if
no similar securities issued by the Company are then so listed, on the New York
Stock Exchange or another national securities exchange if the securities qualify
to be so listed or (ii) authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System (“NASDAQ”) or the National
Market System of NASDAQ if the securities qualify to be so quoted; in each case,
if requested by the holders of a majority of the Registrable Securities covered
by such Registration Statement or the managing underwriters, if
any.
(m) Engage an
appropriate transfer agent and provide the transfer agent with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company and provide a CUSIP number for the Registrable
Securities.
(n) Enter into such
agreements (including, in the event of an underwritten offering, an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those requested by the holders of a majority of the Registrable Securities being
sold or, in the event of an underwritten offering, those requested by the
managing underwriters) in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration: (i) make such representations and warranties to
the holders of such Registrable Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and the holders of a majority of the Registrable Securities being sold)
addressed to such selling holder of Registrable Securities and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such holders and underwriters, including without limitation the
matters referred to in Section 7(n)(i) hereof;
(iii) use its best efforts to obtain “comfort” letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each selling holder of Registrable
Securities and each of the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in “comfort” letters
in connection with underwritten offerings; and (iv) deliver such documents
and certificates as may be requested by the holders of a majority of the
Registrable Securities being sold, the Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to
clause (i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or similar agreement entered into by the
Company. The foregoing actions will be taken in connection with each closing
under such underwriting or similar agreement as and to the extent required
thereunder.
(o) Make available for
inspection by a representative of the holders of Registrable Securities being
sold, any underwriter participating in any disposition of Registrable Securities
and any attorney or accountant retained by such selling holders or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement; provided, however, that any
records, information or documents that are designated by the Company in writing
as confidential at the time of delivery of such records, information or
documents will be kept confidential by such persons unless (i) such
records, information or documents are in the public domain or otherwise publicly
available, (ii) disclosure of such records, information or documents is
required by court or administrative order or is necessary to respond to inquires
of regulatory authorities or (iii) disclosure of such records, information
or documents, in the opinion of counsel to such person, is otherwise required by
law (including, without limitation, pursuant to the requirements of the
Securities Act).
(p) Comply with all
applicable rules and regulations of the SEC and make generally available to its
security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 45 calendar
days after the end of any 12-month period (or 90 calendar days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the
end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company, after the effective date
of a Registration Statement, which statements shall cover said 12-month
period.
(q) Cooperate with any
reasonable request by holders of a majority of the Registrable Securities
offered for sale pursuant to any Registration Statement, including by ensuring
participation by the executive management of the Company in road shows, so long
as such participation does not materially interfere with the operation of the
Company’s business.
The Company may
require each seller of Registrable Securities as to which any registration is
being effected to furnish to the Company such information regarding the
distribution of such Registrable Securities as the Company may, from time to
time, reasonably request in writing and the Company may exclude from such
registration the Registrable Securities of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
Each holder of
Registrable Securities will be deemed to have agreed by virtue of its
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in
Section 7(c)(ii), 7(c)(iii),
7(c)(v), 7(c)(vi) or
7(c)(vii) hereof, such
holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus (a “Black-Out”) until such
holder’s receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 7(k) hereof, or until
it is advised in writing (the “Advice”) by the Company
that the use of the applicable Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus; provided, however, that in no event
shall the aggregate number of days during which a Black-Out is effective during
any period of 24 consecutive months exceed 90. In the event the Company shall
give any such notice, the time period prescribed in Section 2, 3 or 4 hereof will be
extended by the number of days during the time period from and including the
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 7(k) hereof or
(y) the Advice.
The Purchaser (and
all other holders of Registrable Securities) hereby acknowledge and agree that
certain of the Company’s registration obligations set forth in Sections
2, 3, 4 and 5 hereof are
limited to the Company using its reasonable best efforts as specified in such
sections and that if the Company uses its reasonable best efforts but otherwise
fails to cause to be effective any registration statement contemplated in such
provisions or to keep such registration statement effective in accordance with
such provisions, the ability of the Purchaser (and all other holders of
Registrable Securities) to resell Registrable Securities may be limited by the
Securities Act and applicable state securities laws. This paragraph is an
acknowledgement of such reasonable best efforts limitations only and is not
intended to, and does not, modify the obligations of the Company hereunder or
modify or waive any rights of the Purchaser or any other holder of Registrable
Securities with respect to a breach by the Company of its obligations
hereunder.
8. Registration
Expenses.
(a) All Registration
Expenses will be borne by the Company whether or not any of the Registration
Statements become effective; provided, however, that all
Registration Expenses for a Demand Registration pursuant to clause (iii) of
Section 4(a), if requested by holders of Registrable Securities other than the
Purchaser, will be borne ratably by such holders of Registrable Securities
requesting such Demand Registration. “Registration
Expenses” will mean all
fees and expenses incident to the performance of or compliance with this
Agreement by the Company, including, without limitation, (i) all
registration and filing fees (including without limitation fees and expenses
(x) with respect to filings required to be made with the New York Stock
Exchange or the National Association of Securities Dealers, Inc. and (y) of
compliance with securities or “blue sky” laws (including without limitation fees
and disbursements of counsel for the underwriters or selling holders in
connection with “blue sky” qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
holders of a majority of the Registrable Securities being sold may designate)),
(ii) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in any Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the Company, the Special Counsel for the sellers of the Registrable Securities
and counsel for the underwriters, (v) fees and disbursements of all independent
certified public accountants referred to in Section 7(n)(iii) hereof
(including the expenses of any special audit and “comfort” letters required by
or incident to such performance), (vi) fees and expenses of any “qualified
independent underwriter” or other independent appraiser participating in an
offering pursuant to Section 3 of Schedule E to the By-laws of the
National Association of Securities Dealers, Inc., (vii) Securities Act liability
insurance if the Company so desires such insurance and (viii) fees and
expenses of all other persons retained by the Company; provided, however, that
Registration Expenses will not include fees and expenses of counsel for the
holders of Registrable Securities other than fees and expenses of the Special
Counsel and any local counsel nor shall it include underwriting discounts and
commissions relating to the offer and sale of Registrable Securities, all of
which shall be borne by such holders. In addition, the Company will pay its
internal expenses (including without limitation all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any person, including special experts, retained by the Company.
(b) In connection with
any registration hereunder other than a Demand Registration for which holders of
Registrable Securities other than the Purchaser are obligated to pay the
Registration Expenses, the Company will reimburse the holders of the Registrable
Securities being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (the “Special
Counsel”), together with
appropriate local counsel, chosen by the holders of a majority of the
Registrable Securities being registered.
9. Indemnification.
(a) Indemnification
by the Company. The Company
will, without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities registered
pursuant to this Agreement, the officers, directors and agents and employees of
each of them, each person who controls such holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of any such controlling
person, from and against all losses, claims, damages, liabilities, costs
(including without limitation the costs of investigation and attorneys’ fees)
and expenses (collectively, “Losses”), as incurred,
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or form of
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are based
solely upon information furnished in writing to the Company by such holder
expressly for use therein; provided, however, that the Company
will not be liable to any holder of Registrable Securities to the extent that
any such Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus if either (A) (i) such holder failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale by such holder of a Registrable Security to the person asserting the
claim from which such Losses arise and (ii) the Prospectus would have
completely corrected such untrue statement or alleged untrue statement or such
omission or alleged omission; or (B) such untrue statement or alleged
untrue statement, omission or alleged omission is completely corrected in an
amendment or supplement to the Prospectus previously furnished by or on behalf
of the Company with copies of the Prospectus as so amended or supplemented, and
such holder thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of a Registrable Security to
the person asserting the claim from which such Losses arise.
The rights of any
holder of Registrable Securities hereunder will not be exclusive of the rights
of any holder of Registrable Securities under any other agreement or instrument
of any holder of Registrable Securities to which the Company is a party. Nothing
in such other agreement or instrument will be interpreted as limiting or
otherwise adversely affecting a holder of Registrable Securities hereunder and
nothing in this Agreement will be interpreted as limiting or otherwise adversely
affecting the holder of Registrable Securities’ rights under any such other
agreement or instrument; provided, however, that no
Indemnified Party will be entitled hereunder to recover more than its
indemnified Losses.
(b) Indemnification
by Holders of Registrable Securities. In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, such holder of Registrable Securities will furnish to the Company
in writing such information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and will severally
indemnify, to the fullest extent permitted by law, the Company, its directors
and officers, agents and employees, each person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling persons, from and against all Losses arising out of or based upon
any untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus or arising out of or based upon any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such holder to the Company expressly for use in such
Registration Statement or Prospectus and was relied upon by the Company in the
preparation of such Registration Statement, Prospectus or preliminary
prospectus. In no event will the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
(net of payment of all expenses and underwriter’s discounts and commissions)
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of
Indemnification Proceedings. If any person
shall become entitled to indemnity hereunder (an “indemnified
party”), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the “indemnifying
party”) of any claim or
of the commencement of any action or proceeding with respect to which such
indemnified party seeks indemnification or contribution pursuant hereto;
provided, however, that the failure
to so notify the indemnifying party will not relieve the indemnifying party from
any obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such failure. All fees and expenses (including any
fees and expenses incurred in connection with investigating or preparing to
defend such action or proceeding) will be paid to the indemnified party, as
incurred, within five calendar days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder). The
indemnifying party will not consent to entry of any judgment or enter into any
settlement or otherwise seek to terminate any action or proceeding in which any
indemnified party is or could be a party and as to which indemnification or
contribution could be sought by such indemnified party under this
Section 9, unless such
judgment, settlement or other termination includes as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release, in form and substance satisfactory to the indemnified party, from all
liability in respect of such claim or litigation for which such indemnified
party would be entitled to indemnification hereunder.
(d) Contribution. If the
indemnification provided for in this Section 9 is unavailable to
an indemnified party under Section 9(a) or 9(b) hereof in respect
of any Losses or is insufficient to hold such indemnified party harmless, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, will, jointly and severally, contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such indemnifying party or indemnified party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses will be deemed to include any legal or other fees or expenses
incurred by such party in connection with any action or proceeding.
The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 9(d) were determined
by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 9(d), an indemnifying
party that is a selling holder of Registrable Securities will not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities sold by such indemnifying party and distributed to
the public exceeds the amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity,
contribution and expense reimbursement obligations of the Company hereunder will
be in addition to any liability the Company may otherwise have hereunder, under
any other agreement or otherwise. The provisions of this
Section 9 will survive so
long as Registrable Securities remain outstanding, notwithstanding any transfer
of the Registrable Securities by any holder thereof or any termination of this
Agreement.
10. Rules 144
and 144A. The Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner, and will cooperate with any holder of
Registrable Securities (including without limitation by making such
representations as any such holder may reasonably request), all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemptions provided by Rules 144 and 144A (including, without limitation,
the requirements of Rule 144A(d)(4)). Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this Section 10 will be deemed to
require the Company to register any of its securities under any section of the
Exchange Act.
11. Underwritten
Registrations. If any of the Registrable Securities are to be sold in an
underwritten offering pursuant to Section 2, 3 or 4, the investment
banker or investment bankers and manager or managers that will manage the
offering will be selected by (a) the Purchaser or its designee in the case of
Section 2 or (b) the holders of Registrable Securities that gave the notice
demanding such registration or offering in the case of Section 3 or 4; provided,
that such investment banker or manager shall be reasonably satisfactory to the
Company. If any Piggyback Registration pursuant to Section 5 is an
underwritten offering, the Company will have the right to select the investment
banker or investment bankers and managers to administer the
offering.
12. Miscellaneous.
(a) Remedies. In the event of
a breach by the Company of its obligations under this Agreement, each holder of
Registrable Securities, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, it will waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent
Agreements. The Company has
not, as of the date hereof, and will not, on or after the date hereof, enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. This Agreement will be deemed to
be an independent agreement and no limitation or restriction contained in this
Agreement will be deemed to conflict with, limit or restrict the rights of
Purchaser under this Agreement.
(c) Amendments and
Waivers. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of holders of at least a majority of the then-outstanding Senior
Preferred. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Registrable Securities may be given by
holders of at least a majority of the Registrable Securities being sold by such
holders; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding
sentence.
(d) Notices. All notices and
other communications provided for or permitted hereunder shall be made in
writing and will be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by fax or (iii) one business day after
being deposited with a reputable next-day courier, postage prepaid, to the
parties as follows:
(x) if to the Company,
initially at 2200 West Parkway Boulevard, Salt Lake City, Utah 84119-2331, Fax
Number (801) 817-8723, Attention: Val J. Christensen, General Counsel, and
thereafter at such other address, notice of which is given to the holders of
Registrable Securities in accordance with the provisions of this
Section 12(d);
(y) if to Purchaser,
initially at 3232 McKinney Avenue, Suite 890, Dallas, Texas 75204, Fax Number
(214) 220-4924, Attention: Donald J. McNamara, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 12(d); and
(z) if to any other
holder of Registrable Securities, at the most current address given by such
holder to the Company in accordance with the provisions of this
Section 12(d).
(e) Owner of
Registrable Securities. The Company will
maintain, or will cause its registrar and transfer agent to maintain, a stock
book with respect to the Series B Preferred, the Common Stock and the
Warrant Shares, in which all transfers of Registrable Securities of which the
Company has received notice will be recorded. The Company may deem and treat the
person in whose name Registrable Securities are registered in the stock book of
the Company as the owner thereof for all purposes, including without limitation
the giving of notices under this Agreement.
(f) Successors and
Assigns. This Agreement
will inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties and will inure to the benefit of each holder of
any Registrable Securities. The Company may not assign its rights or obligations
hereunder without the prior written consent of each holder of any Registrable
Securities. The holders of the Registrable Securities may assign the rights and
obligations under this Agreement to any subsequent holder of such Registrable
Securities (that is a Qualified Transferee). Notwithstanding the foregoing, no
Qualified Transferee will have any of the rights granted under this Agreement
(i) until such transferee shall have acknowledged its rights and
obligations hereunder by a signed written statement of such transferee’s
acceptance of such rights and obligations or (ii) if the transferor
notifies the Company in writing on or prior to such transfer that the transferee
shall not have such rights in which case such transferee shall not be deemed to
be a Qualified Transferee for purposes of this Agreement.
(g) Counterparts. This Agreement
may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed will be deemed to be an
original and all of which taken together will constitute one and the same
instrument.
(h) Headings. The headings in
this Agreement are for convenience of reference only and will not limit or
otherwise affect the meaning hereof.
(i) Governing
Law. This Agreement
will be governed by and construed in accordance with the laws of the State of
Utah, as applied to contracts made and performed within the State of Utah,
without regard to principles of conflict laws.
(j) Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein will remain
in full force and effect and will in no way be affected, impaired or
invalidated, and the parties hereto will use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
(k) Entire
Agreement. This Agreement
is intended by the parties as a final expression of their agreement and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the registration rights
granted by the Company with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such registration rights.
(l) Attorneys’
Fees. In any action or
proceeding brought to enforce any provision of this Agreement, or where any
provision hereof is validly asserted as a defense, the prevailing party, as
determined by the court, will be entitled to recover reasonable attorneys’ fees
in addition to any other available remedy.
[Signature page
follows.]
IN WITNESS
WHEREOF, the parties have executed this Amended and Restated Registration Rights
Agreement as of the date first written above.
| FRANKLIN COVEY CO. | ||
|
By: |
/s/ ROBERT A. WHITMAN | |
|
Name: |
Robert A. Whitman | |
|
Title: |
President and Chief Executive Officer |
| KNOWLEDGE CAPITAL INVESTMENT GROUP | ||
|
By: |
Inspiration Investments Partners III, L.P. | |
|
Its: |
Manager | |
|
By: |
Inspiration Investments GenPar III, L.P. | |
|
Its: |
General Partner | |
|
By: |
Hampstead Associates, Inc. | |
|
Its: |
Managing General Partner | |
|
By: |
/s/ DONALD J. MCNAMARA | |
|
Name: |
Donald J. McNamara | |
|
Title: |
President |
Exhibit
99.3
AMENDED
AND RESTATED
MONITORING
AGREEMENT
THIS AMENDED AND
RESTATED MONITORING AGREEMENT (this “Agreement”) is made and
entered into as of March 8, 2005 between Franklin Covey Co., a Utah corporation
(the “Company”), and Hampstead
Interests, LP, a Texas limited partnership (“HI”).
A. Knowledge Capital
Investment Group, a Texas general partnership related to HI (“Purchaser”), has entered
into that certain Preferred Stock Amendment and Warrant Issuance Agreement dated
November 29, 2004, between Purchaser and the Company (as amended from time to
time, the “Amendment
Agreement”);
B. HI, by and through
itself, its affiliates and their respective officers, employees and
representatives, has expertise in the areas of management, finance, strategy,
investment and acquisitions relating to the business of the Company;
C. The Company, to
avail itself of the expertise of HI in the aforesaid areas, entered into a
Monitoring Agreement dated as of June 2, 1999 with HI (the “Prior
Monitoring Agreement”);
D. The Prior
Monitoring Agreement may be amended by a writing signed by both parties thereto;
and
E. Pursuant to the
Amendment Agreement, the parties desire to amend and restate the Prior
Monitoring Agreement as set forth herein.
NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth herein, the Company
and HI hereby agree that the Prior Monitoring Agreement is terminated and is
superceded and replaced in its entirety by this Agreement, and the parties
further agree as follows:
1. Monitoring
Services.
(a) HI will use
reasonable efforts to advise and assist the Company in connection with the
development of its strategic plan, including acquisitions, divestitures, new
development and financing matters. The precise nature of the services to be
performed hereunder by HI will be determined from time to time by the mutual
agreement of HI and the Company. The Company hereby acknowledges that the
persons performing the foregoing services are full-time employees of HI or other
entities and will not be expected to devote substantially all of their efforts
to the Company but rather only so much of their efforts as, from time to time,
HI determines in its sole discretion to be appropriate in the
circumstances.
(b) HI and the
individuals acting on its behalf that are actually providing the services
contemplated hereby will be independent contractors, rather than employees or
agents, and will have only such authority as is incident to the discharge of the
duties herein contemplated or specifically authorized from time to time by the
Board of Directors of the Company (the “Board”).
2. Consideration.
(a) In consideration
of the services to be provided by HI, the Company will pay to HI a quarterly
monitoring fee equal to (x) $100,000 multiplied by (y) a fraction, the numerator
of which is the number of shares of the Company’s Series A Preferred Stock (the
“Series A
Preferred”) held by
Purchaser as of the last day of the preceding fiscal quarter and the denominator
of which is 3,311,438 (the “Initial
Purchaser Shares”), giving effect
to any stock split, stock dividend or similar event, payable during the term of
this Agreement on the first day of each fiscal quarter of the Company (the
“Fee”).
(b)
HI’s
rights under this Section 2 will not be subject to offset or reduction by
reason of any obligation of the Company or any of its affiliates to pay any
other financial advisory fee or other compensation to any other person or
entity, including without limitation any entity affiliated with HI, and will not
limit such other rights and obligations to which the Company and HI or their
respective affiliates may from time to time agree in the future.
3. Reimbursements. In addition to
the Fee, the Company will pay directly or reimburse HI for its Out-of-Pocket
Expenses. Promptly following the Company’s request therefor, HI will provide
written substantiation in reasonable detail relating to any Out-of-Pocket
Expenses to be paid or reimbursed by the Company pursuant to this Agreement. For
purposes of this Agreement, the term “Out-of-Pocket Expenses” means the
reasonable out-of-pocket costs and expenses for travel that are actually and
reasonably incurred by HI or its affiliates in connection with the services
rendered hereunder. All reimbursements for Out-of-Pocket Expenses will be made
promptly upon or as soon as practicable after presentation by HI to the Company
of a written statement therefor.
4. Indemnification.
(a) The Company will
indemnify and hold harmless HI, its affiliates, including without limitation
Purchaser, and their respective partners (both general and limited), members
(both managing and otherwise), officers, directors, employees, agents and
representatives (each such person being an “Indemnified
Party”) from and
against any and all losses, claims, damages and liabilities, whether joint or
several (the “Indemnifiable
Losses”), related to,
arising out of or in connection with the services contemplated by this Agreement
or the engagement of HI pursuant to, and the performance by HI of the services
contemplated by, this Agreement, whether or not pending or threatened, whether
or not an Indemnified Party is a party and whether or not such action, claim,
suit, investigation or proceeding is initiated or brought by the Company
directly, derivatively or otherwise, including without limitation any action,
suit, proceeding or investigation arising out of any action or failure to take
action by the Company or any of its subsidiaries, whether or not based on a
theory of primary or secondary liability, and will reimburse any Indemnified
Party for all reasonable costs and expenses (including reasonable attorneys’
fees and expenses) as they are incurred in connection with investigating,
preparing, pursuing, defending or assisting in the defense of any action, claim,
suit, investigation or proceeding for which the Indemnified Party would be
entitled to indemnification under the terms of this sentence, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto, provided, that, subject to
the following sentence, the Company, upon execution of a written undertaking
reasonably satisfactory to HI confirming the Company’s indemnity obligations
hereunder (without any reservation of rights) and expressly releasing all
Indemnified Parties from any and all liability related to the matter in question
(such undertaking, an “Indemnity
Undertaking”), will be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment. Any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense, and in any action, claim, suit, investigation or
proceeding in which both the Company and/or one or more of its subsidiaries, on
the one hand, and an Indemnified Party, on the other hand, is, or is reasonably
likely to become, a party, such Indemnified Party will have the right to employ
separate counsel at the expense of the Company and to control its own defense of
such action, suit, claim, investigation or proceeding if, in the reasonable
opinion of counsel to such Indemnified Party, a conflict or potential conflict
exists between the Company, on the one hand, and such Indemnified Party, on the
other hand, that would make such separate representation advisable. The Company
will not, without the prior written consent of the applicable Indemnified Party,
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, suit, investigation, action or proceeding relating to the
matters contemplated hereby, (if any Indemnified Party is a party thereto or has
been threatened to be made a party thereto) unless such settlement, compromise
or consent includes an unconditional release of the applicable Indemnified Party
and each other Indemnified Party from all liability arising or that may arise
out of such claim, suit, investigation, action or proceeding. Provided the
Company is not in breach of its indemnification obligations hereunder, no
Indemnified Party may settle or compromise any claim subject to indemnification
hereunder without the consent of the Company, provided, that prior
thereto such Indemnified Party has been furnished with an Indemnity
Undertaking.
(b) If any
indemnification sought by any Indemnified Party pursuant to this Section is
unavailable for any reason or is insufficient to hold the Indemnified Party
harmless against any Indemnifiable Losses referred to herein, then the Company
will contribute to the Indemnifiable Losses for which such indemnification is
held unavailable or insufficient in such proportion as is appropriate to reflect
the relative benefits received (or anticipated to be received) by the Company,
on the one hand, and HI, on the other hand, in connection with the transactions
which gave rise to such Indemnifiable Losses or, if such allocation is not
permitted by applicable law, not only such relative benefits but also the
relative faults of the Company, on the one hand, and HI, on the other hand, as
well as any other equitable considerations, subject to the limitation that in
any event the aggregate contribution by the Indemnified Parties to all
Indemnifiable Losses with respect to which contribution is available hereunder
will not exceed the Fees paid through the date on which (or, if more than one
date, the last date on which) the conduct occurred that gave rise to the
Indemnifiable Loss.
(c) Notwithstanding
any other provision hereof, none of HI nor any employee, officer, director or
other related person or entity will have any liability or obligation by reason
of this Agreement for performance or nonperformance of services contemplated
hereby except and solely to the extent that it is judicially determined by a
court of competent jurisdiction that such person intentionally breached or
caused to be breached a material provision of this Agreement. The parties hereto
hereby expressly disclaim any liability or obligation of HI and its affiliates
or any of their respective employees, officers, directors and other related
persons or entities for actual or alleged negligence of any character in
connection with the services contemplated by this Agreement.
(d) The provisions of
this Section 4 will be in addition to and in no manner limit or otherwise affect
any other right that HI or any other Indemnified Party may have, whether by
contract, or arising as a matter of law or the constituent documents of any
other entity.
5. Term. This Agreement
will become effective on the date first written above and will continue until
such date on which Purchaser and its affiliates together own less than 880,000
of the Initial Purchaser Shares, giving effect to any stock split, stock
dividend or similar event. Notwithstanding any other provision hereof, HI may
terminate its obligations under Section 1 with or without cause on 60
calendar days prior written notice to the Company. The termination or expiration
of the term of this Agreement (i) will not affect HI’s rights under
Sections 3 or 4 hereof (which will survive any termination or expiration of
this Agreement) and (ii) will terminate HI’s rights under Section 2
hereof (except that for the period during which such expiration or termination
occurs the quarterly fee will be prorated based on the number of days in such
quarter prior to such termination or expiration divided by 90).
6. Miscellaneous.
(a) No amendment or
waiver of any provision of this Agreement, or consent to any departure by either
party hereto from any such provision, shall be effective unless the same shall
be in writing and signed by each of the parties hereto. Any amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. The waiver by any party of any breach of this Agreement
shall not operate as or be construed to be a waiver by such party of any
subsequent breach.
(b) Any notices or
other communications required or permitted hereunder shall be sufficiently given
if delivered personally or sent by facsimile, Federal Express or other overnight
courier, addressed as follows or to such other address of which the parties may
have given notice:
| If to HI: | Hampstead Interests, LP | |
| 3232 McKinney Avenue | ||
| Suite 890 | ||
| Dallas, Texas 75204 | ||
| Attention: Donald J. McNamara | ||
| Fax: (214) 220-4924 |
| If to the Company: | Franklin Covey Co. | |
| 2200 West Parkway Boulevard | ||
| Salt Lake City, UT 84119-2311 | ||
| Attention: Val J. Christensen | ||
| Fax: (801) 817-8723 | ||
Unless otherwise
specified herein, such notices or other communications shall be deemed received
(i) on the date delivered, if delivered personally or sent by facsimile,
and (ii) one business day after being sent by Federal Express or other
overnight courier.
(c) This Agreement
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of Utah. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successors and assigns.
The provisions of Section 4 shall inure to the benefit of each Indemnified
Party.
(d) This Agreement may
be executed by one or more parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) The waiver by any
party of any breach of this Agreement shall not operate as or be construed to be
a waiver by such party of any subsequent breach.
(f) Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(g) For purposes of
this Agreement, (i) “affiliate” of any person
means another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
first person and (ii) “person” means an
individual, corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
(h) When a reference
is made in this Agreement to an Article, Section, Exhibit or Schedule, such
reference is to a Section of this Agreement unless otherwise indicated. Whenever
the words “include,” “includes” or “including” are used in this
Agreement, they will be deemed to be followed by the words “without
limitation.” The words
“hereof,” “herein” and
“hereunder” and words of
similar import when used in this Agreement will refer to this Agreement as a
whole and not to any particular provision of this Agreement. All terms defined
in this Agreement will have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. References to a person are
also to its permitted successors and assigns.
(i) This Agreement
(including the documents and instruments referred to herein)
(i) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (ii) except for the provisions of
Section 4, are not intended to confer upon any person other than the
parties any rights or remedies.
(j) Neither this
Agreement nor any of the rights, interests or obligations under this Agreement
may be assigned, in whole or in part, by operation of law or otherwise by either
of the parties hereto without the prior written consent of the other party. Any
assignment in violation of the preceding sentence will be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(k) The parties agree
that irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in the State of Utah or in Utah state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (i) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Utah or any Utah state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal court sitting in the State of
Utah or a Utah state court.
[Signature page
follows.]
IN WITNESS
WHEREOF, the parties have caused this Amended and Restated Monitoring Agreement
to be executed as of the date first written above by their respective officers
thereto duly authorized.
| FRANKLIN COVEY CO. | ||
|
By: |
/s/ ROBERT A. WHITMAN | |
|
Name: |
Robert A. Whitman | |
|
Title: |
President and Chief Executive Officer |
| HAMPSTEAD INTERESTS, LP | ||
|
By: |
Hampstead Interests GenPar Partners | |
|
Its: |
General Partner | |
|
By: |
Hampstead Associates, Inc. | |
|
Its: |
General Partner and Manager | |
|
By: |
/s/ DONALD J. MCNAMARA | |
|
Name: |
Donald J. McNamara | |
|
Title: |
President |
Exhibit
99.4
THIS
WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO
PURCHASE COMMON STOCK
|
Number
of Shares:
|
5,913,402
shares
|
|
Warrant
Price:
|
$8.00 per
share
|
|
Issuance
Date:
|
March 8,
2005
|
|
Expiration
Date:
|
March 8,
2013
|
FOR VALUE
RECEIVED, Knowledge
Capital Investment Group, a Texas general partnership, or its registered
assigns (hereinafter called the “Holder”) is entitled to
purchase from Franklin Covey Co., a Utah corporation (the “Company”), the above
referenced number of shares of the Company’s Common Stock (the “Common
Stock”), at the Warrant
Price referenced above, all subject to adjustment from time to time as described
herein. The exercise of this Warrant shall be subject to the provisions,
limitations and restrictions contained herein. This Warrant is issued pursuant
to the terms of that certain Preferred Stock Amendment and Warrant Issuance
Agreement dated as of November 29, 2004 (the “Amendment
Agreement”).
I. TERM AND
EXERCISE
1.1 Term. This Warrant is
exercisable in whole or in part (but not as to any fractional share of Common
Stock), from time to time, at any time after the first anniversary of the
Issuance Date and prior to 5:00 p.m. on the Expiration Date set forth
above.
1.2 Procedure for
Exercise of Warrant.
(a) The Holder may
exercise this Warrant by delivering the following to the principal office of the
Company in accordance with Section 4.1 hereof: (i) a
duly executed Notice of Exercise in substantially the form attached as
Exhibit
A
and (ii) this Warrant. If the Notice of Exercise delivered to the Company
indicates that the Holder has elected to exercise this Warrant by paying the
exercise price in cash, and if the Fair Market Value (as defined in Section
1.2(b)) is greater than the Warrant Price as of the day of exercise, then the
Company may elect to require the Holder to exercise this Warrant using the net
exercise method set forth in Section 1.2(b) if the Company provides written
notice to the Holder (in accordance with Section 4.1) within five
business days following its receipt of the Notice of Exercise (a “Company Net
Exercise Election”). If the Holder
has elected to pay the exercise price of this Warrant in cash and the Company
fails to make a timely Company Net Exercise Election, the Holder may, after such
fifth business day, deliver payment of the Warrant Price in cash, certified or
official bank check payable to the order of the Company, or wire transfer of
funds to the Company’s account (or any combination of any of the foregoing) in
the amount of the Warrant Price for each share being purchased.
(b) If the Fair Market
Value is greater than the Warrant Price as of the day of exercise, the Holder
may elect to receive, or if the Company makes a Company Net Exercise Election,
the Holder will receive, without the payment by the Holder of any additional
consideration and subject to the provisions of Section 1.2(c), shares of
Common Stock equal to the value of the “spread” on the shares (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company in accordance with Section 4.1, together with
the Notice of Exercise, in which event the Company shall issue to the Holder
hereof a number of shares of Common Stock computed using the following
formula:
|
X= |
Y x (FMV -
WP) |
| FMV |
Where:
|
X
|
=
|
the number
of shares of Common Stock to be Issued to the Holder pursuant to this net
exercise
|
|
Y
|
=
|
the number
of shares of Common Stock purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, that portion of the Warrant
requested to be exercised
|
|
FMV
|
=
|
the Fair
Market Value (as of the date of such calculation) of one share of Common
Stock
|
|
WP |
= |
the Warrant Price (as adjusted as of the date of such calculation) |
|
|
|
|
For purposes of
this Warrant, the “Fair Market
Value” of one share of
the Common Stock as of a particular date shall be determined as follows: (i) if
traded on a national securities exchange or through the Nasdaq Stock Market, the
Fair Market Value shall be deemed to be the volume weighted average trading
price of the Common Stock on such exchange for the most recent five trading days
immediately prior to the date of exercise indicated in the Notice of Exercise;
(ii) if traded over-the-counter only and not on the Nasdaq Stock Market, the
Fair Market Value shall be deemed to be the average of the closing bid and asked
prices over the most recent five trading days immediately prior to the date of
exercise indicated in the Notice of Exercise; and (iii) if there is no active
public market, the Fair Market Value shall be the fair market value of the
Common Stock as of the date of exercise, as determined in good faith by the
Board of Directors of the Company; provided, that any such
five trading day period referenced above shall be extended by the number of
trading days during such period on which trading in the Company’s Common Stock
is suspended by, or not traded on, the securities exchange, Nasdaq Stock Market
or over-the-counter market on which the Common Stock is then listed or
traded.
(c) If either the
Holder or the Company elects that this Warrant will be exercised using the net
exercise method set forth in Section 1.2(b), then the Company, at its
option, may further elect, in connection with such net exercise, to (i) issue to
the Holder the number of shares of Common Stock that would be issuable pursuant
to Section 1.2(b) or (ii) pay to the Holder a cash amount equal to the Fair
Market Value of the number of shares of Common Stock that otherwise would be
issuable pursuant to Section 1.2(b) (the “Cash
Spread”).
1.3 Effective Date
of Exercise; Delivery of Certificate.
(a) In the event of
any exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder if
otherwise permitted under this Warrant, together with any other securities or
other property which the Holder is entitled to receive upon exercise of this
Warrant (including, without limitation, the Cash Spread if the Company has
elected to pay to the Holder the Cash Spread pursuant to Section 1.2(c)), shall be
delivered to the Holder hereof, at the Company’s expense, within a reasonable
time after the rights represented by this Warrant shall have been so exercised;
and, unless this Warrant has expired or has been exercised in full, a new
Warrant representing the number of shares (except a remaining fractional share),
if any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the Holder hereof.
(b) The person in
whose name any certificate for shares of Common Stock is issued upon exercise of
this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and
payment of the Warrant Price was received by the Company, irrespective of the
date of delivery of such certificate, except that, if the date of such surrender
and payment is on a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the stock transfer
books are open.
1.4 Fractional
Shares. This Warrant may
not be exercised for fractional shares, and no fractional share of any class or
series of the Company’s capital stock shall be issued upon exercise of the
Warrant.
II. ADJUSTMENTS
2.1 Subdivision or
Combination of Shares. In case the
Company shall at any time subdivide its outstanding Common Stock into a greater
number of shares, the Warrant Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares obtainable
upon exercise of this Warrant shall be proportionately increased. Conversely, in
case the outstanding Common Stock of the Company shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares
obtainable upon exercise of this Warrant shall be proportionately
decreased.
2.2 Dividends in
Common Stock, Other Stock or Property. If at any time or from time to time
the holders of Common Stock (or any shares of stock or other securities at the
time receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor:
(a) Common Stock,
options (other than options to which Section 2.4 is applicable) or any shares or
other securities which are at any time directly or indirectly convertible into
or exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;
(b) any cash paid or
payable other than as a regular cash dividend; or
(c) Common Stock or
additional shares or other securities or property (including cash) by way of
spin-off, split-up, reclassification, combination of shares or similar corporate
rearrangement (other than Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 2.1 above) and
additional shares, other securities or property issued in connection with a
Change (as defined below) (which shall be covered by the terms of Section
2.3
below),
then and in each
such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had such Holder been the holder
of record of such Common Stock as of the date on which holders of Common Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
2.3 Reorganization,
Reclassification, Consolidation, Merger and Sale. If any
recapitalization, reclassification or reorganization of the share capital of the
Company, or any consolidation or merger of the Company with another corporation
or other entity, or the sale of all or substantially all of its shares and/or
assets or other transaction (including, without limitation, a sale of
substantially all of its assets followed by a liquidation) shall be effected in
such a way that holders of Common Stock shall be entitled to receive shares,
securities or other assets or property (a “Change”), then, as a condition of
such Change, lawful and adequate provisions shall be made by the Company whereby
the Holder hereof shall thereafter have the right to purchase and receive (in
lieu of the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares,
securities or other assets or property as may be issued or payable with respect
to or in exchange for the number of shares of outstanding Common Stock which
such Holder would have been entitled to receive had such Holder exercised this
Warrant immediately prior to the consummation of such Change. The Company or its
successor shall promptly issue to Holder a new Warrant for such new securities
or other property. The new Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to give effect to the adjustments
provided for in this Article II including, without limitation, adjustments to
the Warrant Price and to the number of securities or property issuable upon
exercise of the new Warrant. The provisions of this Section 2.3 shall similarly
apply to successive Changes. The Company will
not effect any Change unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such Change shall assume
by written instrument the obligation to deliver to such Holder such shares of
stock, securities or assets, other than cash, as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.
2.4 Rights
Offering. If, at any time or from time to time prior to the full exercise of
this Warrant, the Company shall offer to all holders of Common Stock any rights,
options or warrants to acquire additional shares of capital stock of the
Company, then the Holder will be entitled to receive such rights, options or
warrants on the same terms they are offered to all holders of Common Stock as if
the Holder had exercised this Warrant in full immediately prior to the record
date for the offering of such rights, options or warrants.
2.5 Notice of
Adjustment. Upon any
adjustment of the Warrant Price, then and in each such case the Company shall
give written notice thereof, by first-class mail, postage prepaid, addressed to
the Holder at the address of such Holder as shown on the books of the Company,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares obtainable upon
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
2.6 Other
Notices. In case at any
time:
(a) the Company shall
declare any cash dividend or distribution to which Section 2.2 would be
applicable;
(b) the Company shall
authorize the granting or issuance to the holders of its Common Stock of rights
or warrants to subscribe for or purchase any shares of stock of any class or
other rights;
(c) the Company
obtains knowledge of any offer to purchase (including any tender offer) any
shares of any class of its stock from the Company or the holders of such
shares;
(d) there shall be any
subdivision or combination of the Common Stock;
(e) there shall be any
recapitalization, reorganization or reclassification of the share capital of the
Company, or any consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation or other entity;
or
(f) there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the
Company;
then, in any one
or more of said cases, the Company shall give, by first-class mail, postage
prepaid, addressed to the Holder at the address of such Holder determined in
accordance with the provisions of Section 4.1 (i) at least 10 days’ prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription or
purchase rights or for determining rights to vote in respect of any such
recapitalization, reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, (ii) in the case of any such
recapitalization, reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, at least 10 days’ prior written notice
of the date when the same shall take place, and (iii) promptly upon obtaining
knowledge of any such offer to purchase shares of any class of its stock. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be, and such notice in accordance with the foregoing
clause (iii) shall also specify in reasonable detail the terms of the offer to
purchase.
III. OWNERSHIP AND
TRANSFER
3.1 Ownership of
This Warrant. The Company may
deem and treat the person in whose name this Warrant is registered as the holder
and owner hereof (notwithstanding any notations of ownership or writing hereon
made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary until presentation of this Warrant for
registration of any permitted transfers.
3.2 Rights of
Shareholder. This Warrant shall not entitle its holder to any of the rights
of a shareholder of the Company until the Warrant shall have been exercised and
the shares of Common Stock or other securities to which Holder is entitled
pursuant to the exercise hereof shall have been issued.
3.3 Replacement of
Warrant. On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and (a) in the case
of loss, theft, or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or (b) in the case of
mutilation, on surrender and cancellation of this Warrant, the Company shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount. The Holder shall reimburse the Company for all reasonable expenses
incidental to replacement of this Warrant.
3.4 Transfer of
Warrant. Subject to
Section 3.5 below, the
Warrant shall be freely transferable, subject to compliance with all applicable
laws, including, but not limited to, the Securities Act of 1933, as amended (the
“Act”). If, at the time of the surrender of this Warrant in connection with any
transfer of this Warrant, this Warrant shall not be registered under the Act,
the Company may require, as a condition of allowing such transfer, that the
Holder of this Warrant furnish to the Company a written opinion of counsel
(which counsel shall be reasonably acceptable to the Company, provided, that any
law firm having at least 100 lawyers, including associates and partners, shall
be deemed acceptable) to the effect that such transfer is exempt from or not
subject to the registration requirements of Section 5 of the Act. Transfer of
this Warrant and all rights hereunder, in whole or in part, in accordance with
the foregoing provisions, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company referred to in Section 1.2 or the office or
agency designated by the Company pursuant to Section 4.1, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. Following a transfer that complies
with the requirements of this Section 3.4, the Warrant may
be exercised by a new Holder for the purchase of shares of Common Stock
regardless of whether the Company issued or registered a new Warrant on the
books of the Company.
3.5 Right of First
Refusal. Subject
to the terms and conditions specified in this Article III, the Holder hereby
grants to the Company a right of first refusal (the “Right of First Refusal”)
with respect to any future sale, transfer or assignment by the Holder of this
Warrant and the rights granted hereunder, in whole or in part. Each time the
Holder proposes to offer this Warrant and the rights granted hereunder, in whole
or in part, for sale, transfer or assignment (the “Offered Warrant”), the Holder
will first make an offering of the Offered Warrant to the Company in accordance
with the following provisions:
(a) Notice. The Holder will
deliver notice (the “Offer
Notice”) to the Company
stating (i) its bona fide intention to offer the Offered Warrant, and (ii) the
price and terms upon which it proposes to offer the Offered Warrant;
and
(b) Mechanics. Within 20 days
after its receipt of the Offer Notice (the “Election
Period”), the Company
may elect to purchase or obtain, at the price and on the terms specified in the
Offer Notice, the Offered Warrant. If the Company elects to exercise its Right
of First Refusal, the parties shall consummate the sale of the Offered Warrant
within 20 days after the Company received the Offer Notice. In the event that
the Company does not elect to purchase or obtain the Offered Warrant as
specified in the Offer Notice within the Election Period, the Holder may, during
the 90 calendar days following the expiration of the Election Period, sell the
Offered Warrant to any person or persons at a price not less than 90% of the
price, and upon terms no more favorable than those specified in the Offer
Notice. If the Holder does not sell the Offered Warrant within such 90-calendar
day period, then the right of first offer provided pursuant to this Section
3.5 will be deemed to
be revived and the Offered Warrant will not be offered unless again reoffered to
the Company in accordance with this Section 3.5. If, on the other
hand, the Holder does sell the Offered Warrant to any person or persons within
such 90-calendar day period and as otherwise provided in this Section
3.5, then the Company
shall issue to such person or persons a new Warrant that shall not be subject to
this Section 3.5.
IV. MISCELLANEOUS
PROVISIONS.
4.1 Address for
Notices. Any notice or
other document required or permitted to be given or delivered to the Holder
shall be delivered or forwarded to the Holder at the address set forth in the
Transmittal Letter (as such term is defined in the Amendment Agreement)
delivered to the Company by the Holder pursuant to the Amendment Agreement, or
to such other address or number as shall have been furnished to the Company in
writing by the Holder in accordance with this Section 4.1. Any notice or
other document required or permitted to be given or delivered to the Company
shall be delivered or forwarded to the Company at 2200 West Parkway Boulevard,
Salt Lake City, Utah 84119, Attention: Val J. Christensen, General Counsel,
Facsimile No.: (801) 817-8723, or to such other address or number as shall have
been furnished to Holder in writing by the Company.
4.2 Timing of
Notices. All notices, requests and approvals required by this Warrant shall
be in writing and shall be conclusively deemed to be given (a) when
hand-delivered to the other party; (b) when received if sent by facsimile at the
address and number set forth above, provided, that notices given by facsimile
shall not be effective unless either (i) a duplicate copy of such facsimile
notice is promptly given by depositing the same in the mail, postage prepaid and
addressed to the party as set forth below or (ii) the receiving party delivers a
written confirmation of receipt for such notice by any other method permitted
under this paragraph, and further provided, that any notice given by facsimile
received after 5:00 p.m. (recipient’s time) or on a non-business day shall be
deemed received on the next business day; (c) five business days after deposit
in the United States mail, certified, return receipt requested, postage prepaid,
and addressed to the party as set forth in Section 4.1 above; or (d) the
next business day after deposit with an international overnight delivery
service, postage prepaid, addressed to the party as set forth above with next
business day delivery guaranteed, provided, that the sending party receives
confirmation of delivery from the delivery service provider.
4.3 Governing
Law. This Warrant shall be governed by and construed in accordance with the
laws of the State of Utah as applied to agreements among Utah residents made and
to be performed entirely within the State of Utah, without giving effect to the
conflict of law principles thereof.
4.4 Waiver,
Amendments and Headings. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both parties (either generally or in a particular instance and either
retroactively or prospectively). The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
[Signature page
follows.]
IN WITNESS
WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer as of the Issuance Date.
| COMPANY: | ||
| FRANKLIN COVEY CO. | ||
|
By: |
/s/ ROBERT A. WHITMAN | |
|
Name: |
Robert A. Whitman | |
|
Title: |
President |
EXHIBIT
A
FORM OF
NOTICE OF EXERCISE
[To be
signed only upon exercise of the Warrant]
TO BE
EXECUTED BY THE REGISTERED HOLDER
TO
EXERCISE THE WARRANT
The undersigned
hereby elects to purchase _______ shares of Common Stock of Franklin Covey Co.
(the “Company”) pursuant to the
terms of the attached Warrant [check one]:
|
[
] |
Cash
Exercise. The
undersigned has delivered $_______, the aggregate Warrant Price for _____
shares of the Company’s Common Stock purchased herewith, in full in cash
or by certified or official bank check or wire
transfer; |
|
[
] |
Net
Exercise. In
exchange for the issuance of _______ shares of the Company’s Common Stock,
the undersigned hereby agrees to surrender the right to purchase _______
shares of the Common Stock pursuant to the net exercise provisions set
forth in Section 1.2(b) of the
Warrant. |
Please issue a
certificate or certificates representing such shares in the name of the
undersigned or in such other name as is specified below and in the denominations
as is set forth below:
|
[Type name
of Holder as it should appear on the stock certificate]
|
|
[Requested
denominations - if no denomination is specified, a single certificate will
be issued]
|
|
The initial
address of such Holder to be entered on the books of the Company shall
be: |
The undersigned
hereby represents and warrants that the undersigned is acquiring such shares for
his own account, and not for resale or with a view to distribution of such
shares or any part thereof except in accordance with an effective registration
statement under the Securities Act of 1933, as amended, or a valid exemption
from registration under such Act.
|
|
By: |
|
|
Print Name: |
||
|
Title: |
||
|
Dated: |
EXHIBIT
B
ASSIGNMENT
FORM
FOR VALUE RECEIVED
the undersigned registered owner of this Warrant for the purchase of shares of
common stock of Franklin Covey Co. hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under this Warrant,
with respect to the number of shares of common stock set forth
below:
|
(Name and
Address of Assignee) |
|
(Number of
Shares of Common Stock) |
and does hereby
irrevocably constitute and appoint ____________ attorney-in-fact to register
such transfer on the books of the Company, maintained for the purpose, with full
power of substitution in the premises.
|
Dated: |
|
|
(Print Name
and Title) |
|
|
(Signature) |
|
|
(Witness) |
NOTICE: The
signature on this assignment must correspond with the name as written upon the
face of the Warrant in every particular, without alteration or enlargement or
any change whatsoever.
Exhibit
99.5
WARRANT TO
PURCHASE COMMON STOCK
| Number of Shares: |
________
shares1 Each holder of Series A Preferred will
be entitled to purchase 71.43 common shares for each $1,000 in aggregate
liquidation value attributable to the shares of Series A Preferred held by
such holder, disregarding fractional shares
|
| Warrant Price: |
$8.00
per share
|
| Issuance Date: |
March
____, 2005
|
| Expiration Date: |
March
____, 2013
|
1 Each holder
of Series A Preferred will be entitled to purchase 71.43 common shares for each
$1,000 in aggregate liquidiation value attributable to the shares of Series A
Preferred held by such holder, disregarding fractional shares.
FOR VALUE RECEIVED,
_____________________ or its registered assigns
(hereinafter called the “Holder”) is entitled to purchase from Franklin
Covey Co., a Utah corporation (the “Company”), the above referenced
number of shares of the Company’s Common Stock (the “Common Stock”), at
the Warrant Price referenced above, all subject to adjustment from time to time
as described herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions contained herein. This Warrant is
issued pursuant to the terms of that certain Preferred Stock Amendment and
Warrant Issuance Agreement dated as of November 29, 2004 (the “Amendment
Agreement”).
I. TERM AND EXERCISE
1.1 Term.
This Warrant is exercisable in whole or in part (but not as to any fractional
share of Common Stock), from time to time, at any time after the first
anniversary of the Issuance Date and prior to 5:00 p.m. on the Expiration
Date set forth above, provided, that prior to the commencement of such period
the Company shall have caused a registration statement covering the issuance of
the shares of Common Stock issuable upon exercise of this Warrant to have become
or declared effective by the Securities and Exchange Commission and during such
period such registration statement shall have remained continuously
effective.
1.2 Procedure
for Exercise of Warrant.
(a) The
Holder may exercise this Warrant by delivering the following to the principal
office of the Company in accordance with Section 4.1 hereof: (i) a duly executed
Notice of Exercise in substantially the form attached as Exhibit A and
(ii) this Warrant. If the Notice of Exercise delivered to the Company indicates
that the Holder has elected to exercise this Warrant by paying the exercise
price in cash, and if the Fair Market Value (as defined in Section 1.2(b)) is
greater than the Warrant Price as of the day of exercise, then the Company may
elect to require the Holder to exercise this Warrant using the net exercise
method set forth in Section 1.2(b) if the Company provides written notice to the
Holder (in accordance with Section 4.1) within five business days following its
receipt of the Notice of Exercise (a “Company Net Exercise Election”). If
the Holder has elected to pay the exercise price of this Warrant in cash and the
Company fails to make a timely Company Net Exercise Election, the Holder may,
after such fifth business day, deliver payment of the Warrant Price in cash,
certified or official bank check payable to the order of the Company, or wire
transfer of funds to the Company’s account (or any combination of any of the
foregoing) in the amount of the Warrant Price for each share being
purchased.
(b) If
the Fair Market Value is greater than the Warrant Price as of the day of
exercise, the Holder may elect to receive, or if the Company makes a Company Net
Exercise Election, the Holder will receive, without the payment by the Holder of
any additional consideration and subject to the provisions of
Section 1.2(c), shares of Common Stock equal to the value of the “spread”
on the shares (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company in accordance with Section 4.1,
together with the Notice of Exercise, in which event the Company shall issue to
the Holder hereof a number of shares of Common Stock computed using the
following formula:
|
X
= |
Y x
(FMV - WP) |
|
|
|
FMV |
Where:
|
X |
= |
the
number of shares of Common Stock to be Issued to the Holder pursuant to
this net exercise
|
|
Y |
= |
the
number of shares of Common Stock purchasable under the Warrant or, if only
a portion of the Warrant is being exercised, that portion of the Warrant
requested to be exercised
|
|
FMV |
= |
the
Fair Market Value (as of the date of such calculation) of one share of
Common Stock
|
|
WP |
= |
the Warrant Price (as adjusted as of the date of such calculation) |
For purposes of this Warrant, the “Fair Market Value” of one
share of the Common Stock as of a particular date shall be determined as
follows: (i) if traded on a national securities exchange or through the Nasdaq
Stock Market, the Fair Market Value shall be deemed to be the volume weighted
average trading price of the Common Stock on such exchange for the most recent
five trading days immediately prior to the date of exercise indicated in the
Notice of Exercise; (ii) if traded over-the-counter only and not on the Nasdaq
Stock Market, the Fair Market Value shall be deemed to be the average of the
closing bid and asked prices over the most recent five trading days immediately
prior to the date of exercise indicated in the Notice of Exercise; and (iii) if
there is no active public market, the Fair Market Value shall be the fair market
value of the Common Stock as of the date of exercise, as determined in good
faith by the Board of Directors of the Company; provided, that any such
five trading day period referenced above shall be extended by the number of
trading days during such period on which trading in the Company’s Common Stock
is suspended by, or not traded on, the securities exchange, Nasdaq Stock Market
or over-the-counter market on which the Common Stock is then listed or
traded.
(c) If
either the Holder or the Company elects that this Warrant will be exercised
using the net exercise method set forth in Section 1.2(b), then the
Company, at its option, may further elect, in connection with such net exercise,
to (i) issue to the Holder the number of shares of Common Stock that would be
issuable pursuant to Section 1.2(b) or (ii) pay to the Holder a cash amount
equal to the Fair Market Value of the number of shares of Common Stock that
otherwise would be issuable pursuant to Section 1.2(b) (the “Cash
Spread”).
1.3 Effective
Date of Exercise; Delivery of Certificate.
(a) In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder if otherwise permitted under this Warrant, together
with any other securities or other property which the Holder is entitled to
receive upon exercise of this Warrant (including, without limitation, the Cash
Spread if the Company has elected to pay to the Holder the Cash Spread pursuant
to Section 1.2(c)), shall be delivered to the Holder hereof, at the Company’s
expense, within a reasonable time after the rights represented by this Warrant
shall have been so exercised; and, unless this Warrant has expired or has been
exercised in full, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder hereof.
(b) The
person in whose name any certificate for shares of Common Stock is issued upon
exercise of this Warrant shall for all purposes be deemed to have become the
holder of record of such shares on the date on which the Warrant was surrendered
and payment of the Warrant Price was received by the Company, irrespective of
the date of delivery of such certificate, except that, if the date of such
surrender and payment is on a date when the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.
1.4 Fractional
Shares. This Warrant may not be exercised for fractional shares, and no
fractional share of any class or series of the Company’s capital stock shall be
issued upon exercise of the Warrant.
II. ADJUSTMENTS
2.1 Subdivision
or Combination of Shares. In case the Company shall at any time subdivide
its outstanding Common Stock into a greater number of shares, the Warrant Price
in effect immediately prior to such subdivision shall be proportionately reduced
and the number of shares obtainable upon exercise of this Warrant shall be
proportionately increased. Conversely, in case the outstanding Common Stock of
the Company shall be combined into a smaller number of shares, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased and the number of shares obtainable upon exercise of this Warrant
shall be proportionately decreased.
2.2 Dividends
in Common Stock, Other Stock or Property. If at any time or from time to
time the holders of Common Stock (or any shares of stock or other securities at
the time receivable upon the exercise of this Warrant) shall have received or
become entitled to receive, without payment therefor:
(a) Common
Stock, options (other than options to which Section 2.4 is applicable) or any
shares or other securities which are at any time directly or indirectly
convertible into or exchangeable for Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
(b) any
cash paid or payable other than as a regular cash dividend; or
(c) Common
Stock or additional shares or other securities or property (including cash) by
way of spin-off, split-up, reclassification, combination of shares or similar
corporate rearrangement (other than Common Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 2.1
above) and additional shares, other securities or property issued in connection
with a Change (as defined below) (which shall be covered by the terms of Section
2.3 below),
then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the cases referred to in clause (b) above and this
clause (c)) which such Holder would hold on the date of such exercise had such
Holder been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
2.3 Reorganization,
Reclassification, Consolidation, Merger and Sale. If any recapitalization,
reclassification or reorganization of the share capital of the Company, or any
consolidation or merger of the Company with another corporation or other entity,
or the sale of all or substantially all of its shares and/or assets or other
transaction (including, without limitation, a sale of substantially all of its
assets followed by a liquidation) shall be effected in such a way that holders
of Common Stock shall be entitled to receive shares, securities or other assets
or property (a “Change”), then, as a condition of such Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares, securities or other
assets or property as may be issued or payable with respect to or in exchange
for the number of shares of outstanding Common Stock which such Holder would
have been entitled to receive had such Holder exercised this Warrant immediately
prior to the consummation of such Change. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to give effect to the adjustments provided for
in this Article II including, without limitation, adjustments to the Warrant
Price and to the number of securities or property issuable upon exercise of the
new Warrant. The provisions of this Section 2.3 shall similarly apply to
successive Changes. The Company will not effect any Change unless, prior to the
consummation thereof, the successor corporation (if other than the Company)
resulting from such Change shall assume by written instrument the obligation to
deliver to such Holder such shares of stock, securities or assets, other than
cash, as, in accordance with the foregoing provisions, such Holder may be
entitled to purchase.
2.4 Rights
Offering. If, at any time or from time to time prior to the full exercise of
this Warrant, the Company shall offer to all holders of Common Stock any rights,
options or warrants to acquire additional shares of capital stock of the
Company, then the Holder will be entitled to receive such rights, options or
warrants on the same terms they are offered to all holders of Common Stock as if
the Holder had exercised this Warrant in full immediately prior to the record
date for the offering of such rights, options or warrants.
2.5 Notice of Adjustment. Upon any adjustment of the
Warrant Price, then and in each such case the Company shall give written notice
thereof, by first-class mail, postage prepaid, addressed to the Holder at the
address of such Holder as shown on the books of the Company, which notice shall
state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares obtainable upon exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
2.6 Other Notices. In case at any time:
(a) the
Company shall declare any cash dividend or distribution to which Section 2.2
would be applicable;
(b) the
Company shall authorize the granting or issuance to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or other rights;
(c) the
Company obtains knowledge of any offer to purchase (including any tender offer)
any shares of any class of its stock from the Company or the holders of such
shares;
(d) there
shall be any subdivision or combination of the Common Stock;
(e) there
shall be any recapitalization, reorganization or reclassification of the share
capital of the Company, or any consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation or other
entity; or
(f) there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Company;
then, in any one or more of said cases, the Company shall give, by
first-class mail, postage prepaid, addressed to the Holder at the address of
such Holder determined in accordance with the provisions of Section 4.1 (i) at
least 10 days’ prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription or purchase rights or for determining rights to vote in respect
of any such recapitalization, reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, (ii) in the case of any
such recapitalization, reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least 10 days’ prior written
notice of the date when the same shall take place, and (iii) promptly upon
obtaining knowledge of any such offer to purchase shares of any class of its
stock. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, such
notice in accordance with the foregoing clause (ii) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be, and such notice in accordance with the foregoing
clause (iii) shall also specify in reasonable detail the terms of the offer to
purchase.
III. OWNERSHIP AND TRANSFER
3.1 Ownership
of This Warrant. The Company may deem and treat the person in whose name
this Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary until
presentation of this Warrant for registration of any permitted transfers.
3.2 Rights
of Shareholder. This Warrant shall not entitle its holder to any of the
rights of a shareholder of the Company until the Warrant shall have been
exercised and the shares of Common Stock or other securities to which Holder is
entitled pursuant to the exercise hereof shall have been issued.
3.3 Replacement
of Warrant. On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and (a) in the case
of loss, theft, or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or (b) in the case of
mutilation, on surrender and cancellation of this Warrant, the Company shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount. The Holder shall reimburse the Company for all reasonable expenses
incidental to replacement of this Warrant.
3.4 Transfer
of Warrant. Subject to Section 3.5 below, the Warrant shall be freely
transferable, subject to compliance with all applicable laws, including, but not
limited to, the Securities Act of 1933, as amended (the “Act”). If, at the time
of the surrender of this Warrant in connection with any transfer of this
Warrant, this Warrant shall not be registered under the Act, the Company may
require, as a condition of allowing such transfer, that the Holder of this
Warrant furnish to the Company a written opinion of counsel (which counsel shall
be reasonably acceptable to the Company, provided, that any law firm having at
least 100 lawyers, including associates and partners, shall be deemed
acceptable) to the effect that such transfer is exempt from or not subject to
the registration requirements of Section 5 of the Act. Transfer of this Warrant
and all rights hereunder, in whole or in part, in accordance with the foregoing
provisions, shall be registered on the books of the Company to be maintained for
such purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 1.2 or the office or agency designated by the
Company pursuant to Section 4.1, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. Following a transfer that complies with the requirements
of this Section 3.4, the Warrant may be exercised by a new Holder for the
purchase of shares of Common Stock regardless of whether the Company issued or
registered a new Warrant on the books of the Company.
3.5 Right
of First Refusal. Subject to the terms and conditions specified in this
Article III, the Holder hereby grants to the Company a right of first refusal
(the “Right of First Refusal”) with respect to any future sale, transfer or
assignment by the Holder of this Warrant and the rights granted hereunder, in
whole or in part. Each time the Holder proposes to offer this Warrant and the
rights granted hereunder, in whole or in part, for sale, transfer or assignment
(the “Offered Warrant”), the Holder will first make an offering of the Offered
Warrant to the Company in accordance with the following provisions:
(a) Notice.
The Holder will deliver notice (the “Offer Notice”) to the Company
stating (i) its bona fide intention to offer the Offered Warrant, and (ii) the
price and terms upon which it proposes to offer the Offered Warrant; and
(b) Mechanics.
Within 20 days after its receipt of the Offer Notice (the “Election
Period”), the Company may elect to purchase or obtain, at the price and on
the terms specified in the Offer Notice, the Offered Warrant. If the Company
elects to exercise its Right of First Refusal, the parties shall consummate the
sale of the Offered Warrant within 20 days after the Company received the Offer
Notice. In the event that the Company does not elect to purchase or obtain the
Offered Warrant as specified in the Offer Notice within the Election Period, the
Holder may, during the 90 calendar days following the expiration of the Election
Period, sell the Offered Warrant to any person or persons at a price not less
than 90% of the price, and upon terms no more favorable than those specified in
the Offer Notice. If the Holder does not sell the Offered Warrant within such
90-calendar day period, then the right of first offer provided pursuant to this
Section 3.5 will be deemed to be revived and the Offered Warrant will not be
offered unless again reoffered to the Company in accordance with this Section
3.5. If, on the other hand, the Holder does sell the Offered Warrant to any
person or persons within such 90-calendar day period and as otherwise provided
in this Section 3.5, then the Company shall issue to such person or persons a
new Warrant that shall not be subject to this Section 3.5.
IV. MISCELLANEOUS PROVISIONS.
4.1 Address
for Notices. Any notice or other document required or permitted to be given
or delivered to the Holder shall be delivered or forwarded to the Holder at the
address set forth in the Transmittal Letter (as such term is defined in the
Amendment Agreement) delivered to the Company by the Holder pursuant to the
Amendment Agreement, or to such other address or number as shall have been
furnished to the Company in writing by the Holder in accordance with this
Section 4.1. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered or forwarded to the Company at 2200
West Parkway Boulevard, Salt Lake City, Utah 84119, Attention: Val J.
Christensen, General Counsel, Facsimile No.: (801) 817-8723, or to such other
address or number as shall have been furnished to Holder in writing by the
Company.
4.2 Timing
of Notices. All notices, requests and approvals required by this Warrant
shall be in writing and shall be conclusively deemed to be given (a) when
hand-delivered to the other party; (b) when received if sent by facsimile at the
address and number set forth above, provided, that notices given by facsimile
shall not be effective unless either (i) a duplicate copy of such facsimile
notice is promptly given by depositing the same in the mail, postage prepaid and
addressed to the party as set forth below or (ii) the receiving party delivers a
written confirmation of receipt for such notice by any other method permitted
under this paragraph, and further provided, that any notice given by facsimile
received after 5:00 p.m. (recipient’s time) or on a non-business day shall be
deemed received on the next business day; (c) five business days after deposit
in the United States mail, certified, return receipt requested, postage prepaid,
and addressed to the party as set forth in Section 4.1 above; or (d) the next
business day after deposit with an international overnight delivery service,
postage prepaid, addressed to the party as set forth above with next business
day delivery guaranteed, provided, that the sending party receives confirmation
of delivery from the delivery service provider.
4.3 Governing
Law. This Warrant shall be governed by and construed in accordance with the
laws of the State of Utah as applied to agreements among Utah residents made and
to be performed entirely within the State of Utah, without giving effect to the
conflict of law principles thereof.
4.4 Waiver,
Amendments and Headings. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both parties (either generally or in a particular instance and either
retroactively or prospectively). The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
[Signature page follows.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer as of the Issuance Date.
| COMPANY: | ||
| FRANKLIN COVEY CO. | ||
|
By: |
||
|
Name: |
||
|
Title: |
EXHIBIT A
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the
Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WARRANT
The undersigned hereby elects to purchase _______ shares of Common
Stock of Franklin Covey Co. (the “Company”) pursuant to the terms of the
attached Warrant [check one]:
|
[
] |
Cash
Exercise. The undersigned has delivered $_______, the aggregate
Warrant Price for _____ shares of the Company’s Common Stock purchased
herewith, in full in cash or by certified or official bank check or wire
transfer; |
|
[
] |
Net
Exercise. In exchange for the issuance of _______ shares of the
Company’s Common Stock, the undersigned hereby agrees to surrender the
right to purchase _______ shares of the Common Stock pursuant to the net
exercise provisions set forth in Section 1.2(b) of the
Warrant. |
Please issue a certificate or certificates representing such
shares in the name of the undersigned or in such other name as is specified
below and in the denominations as is set forth below:
|
[Type name
of Holder as it should appear on the stock certificate]
|
|
[Requested
denominations - if no denomination is specified, a single certificate will
be issued]
|
The initial address of such Holder to be entered on the books of
the Company shall be:
|
By: |
||
|
Print
Name: |
||
|
Title: |
||
|
Dated: |
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant for the purchase of shares of common stock of Franklin Covey Co. hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
common stock set forth below:
|
(Name and
Address of Assignee) |
|
(Number of
Shares of Common Stock) |
and does hereby irrevocably constitute and appoint ____________
attorney-in-fact to register such transfer on the books of the Company,
maintained for the purpose, with full power of substitution in the premises.
|
Dated: |
||
|
(Print Name
and Title) |
||
|
(Signature) |
||
|
(Witness) |
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the Warrant in every particular, without
alteration or enlargement or any change whatsoever.
Exhibit
99.6
ARTICLES
OF RESTATEMENT
OF
FRANKLIN
COVEY CO.
In accordance with
Section 16-10a-1007 of the Utah Revised Business Corporation Act (the
“Act”), Franklin Covey
Co., a Utah corporation (the “Company”), hereby
certifies as follows:
1. The name of the
corporation is Franklin Covey Co.
2. The text of the
Amended and Restated Articles of Incorporation (the “Restated Articles”),
amending and restating the Company’s Revised Articles of Incorporation, is
attached hereto as Exhibit A and is incorporated herein by this reference. The
Restated Articles supersede the original Articles of Incorporation of the
Company and all prior amendments thereto (the “Prior Articles”).
3. The Restated
Articles were adopted by the Company’s Board of Directors on November 12, 2004
and the shareholders at the annual meeting of the shareholders held March 4,
2005 (the “Shareholders’
Meeting”), in accordance
with the requirements of the Act.
4. As of January 7,
2005, the record date for the Shareholders’ Meeting (the “Record Date”), the
following voting groups were entitled to vote separately on the Restated
Articles:
| · |
Common
Stock. With respect to the voting group comprised of the holders of the
common stock, par value $0.05 per share (the “Common Stock”), (i) the
number of outstanding shares of Common Stock was 20,654,403, (ii) the
number of votes entitled to be cast by the holders of Common Stock was
20,654,403 and (iii) the number of Common Stock votes indisputably
represented at the Shareholders’ Meeting was
20,011,056. |
| · |
Series A
Preferred Stock. With respect to the voting group comprised of the holders
of the Series A Preferred Stock, no par value per share, (the “Series A
Preferred Stock”), (i) the number of outstanding shares of Series A
Preferred Stock was 873,457.404, (ii) the number of votes entitled to be
cast by the holders of Series A Preferred Stock was 873,457.404 and (iii)
the number of Series A Preferred Stock votes indisputably represented at
the Shareholders’ Meeting was 838,121.47. |
| · |
Series B
Preferred Stock. No shares of Series B Preferred Stock, no par value per
share, were outstanding, and therefore no holders were entitled to vote at
the Shareholders’ Meeting as a voting
group. |
| · |
Common
Equivalent Shares. With respect to the voting group comprised of the
holders of the Common Stock and the Series A Preferred Stock based upon
the Common Stock voting power attributable to the Series A Preferred Stock
as set forth in the Prior Articles (collectively, the “Common Equivalent
Group”), (i) the number of outstanding shares of Common Stock was
20,654,403 and the number of outstanding shares of Series A Preferred
Stock was 873,457.404, (ii) the number of votes entitled to be cast by the
Common Equivalent Group was 27,642,068 and (iii) the number of Common
Equivalent Group votes indisputably represented at the Shareholders’
Meeting was 26,716,026. |
5. For each voting
group, the following number of votes were cast in favor of approving the
following provisions in the Restated Articles:
(a) To modify the
rights, preferences and limitations of the Series A Preferred Stock and the
Series B Preferred Stock: (i) 15,279,881 Common Equivalent Group votes, (ii)
8,617,174 Common Stock votes and (iii) 832,838.6 Series A Preferred Stock votes.
For each voting group, the number of votes cast in favor of these provisions in
the Restated Articles was sufficient for approval by such voting
group.
(b) To effect a
one-to-four forward split of each outstanding share of Series A Preferred Stock:
(i) 15,280,572 Common Equivalent Group votes and (ii) 832,919.86 Series A
Preferred Stock votes. For each voting group, the number of votes cast in favor
of these provisions in the Restated Articles was sufficient for approval by such
voting group.
(c) To increase the
Company’s authorized Preferred Stock, no par value per share, from 4,000,000 to
14,000,000 shares: (i) 15,205,366 Common Equivalent Group votes, (ii) 8,541,984
Common Stock votes and (iii) 832,922.98 Series A Preferred Stock votes. For each
voting group, the number of votes cast in favor of this provision in the
Restated Articles was sufficient for approval by such voting group.
(d) To increase the
number of shares of Preferred Stock designated as Series A Preferred Stock from
1,500,000 to 4,000,000 shares: (i) 15,220,527 Common Equivalent Group votes and
(ii) 832,922.98 Series A Preferred Stock votes. For each voting group, the
number of votes cast in favor of this provision in the Restated Articles was
sufficient for approval by such voting group.
(e) To increase the
number of shares of Preferred Stock designated as Series B Preferred Stock from
400,000 to 4,000,000 shares: (i) 15,222,695 Common Equivalent Group votes and
(ii) 832,841.73 Series A Preferred Stock votes. For each voting group, the
number of votes cast in favor of this provision in the Restated Articles was
sufficient for approval by such voting group.
(f) To eliminate from
or modify in the Prior Articles certain miscellaneous provisions such as
simplifying the provision providing for a detailed list of the purposes of the
Company, eliminating the provision designating the Company’s registered office
and agent, eliminating the provision authorizing the Board of Directors to make
partial liquidating distributions or to encumber the Company’s assets and
eliminating the provision addressing interested director transactions, which is
substantially similar to a provision of the Act concerning interested director
transactions: (i) 15,195,105 Common Equivalent Group votes and (ii) 832,838.79
Series A Preferred Stock votes. For each voting group, the number of votes cast
in favor of this provision in the Restated Articles was sufficient for approval
by such voting group.
IN WITNESS
WHEREOF, these Articles of Restatement have been executed on behalf of the
Company as of this 4th day of March, 2005.
| FRANKLIN COVEY CO. | ||
|
By: |
/s/ ROBERT A. WHITMAN | |
|
Name: |
Robert A. Whitman | |
|
Title: |
Chief Executive Officer |
EXHIBIT
A
AMENDED
AND RESTATED ARTICLES OF INCORPORATION
OF
FRANKLIN
COVEY CO.
ARTICLE
I
The name of the
corporation is Franklin Covey Co. (the “Company”).
ARTICLE
II
The duration of
the Company is perpetual.
ARTICLE
III
The purpose of the
Company is to engage in any lawful act or activity for which corporations may be
organized under the Utah Revised Business Corporation Act, as amended (the
“Act”).
ARTICLE
IV
The Company is
authorized to issue two classes of stock, which shall be designated,
respectively, as common stock, par value $0.05 per share (“Common
Stock”), and preferred
stock, no par value (“Preferred
Stock”). The total
number of shares of capital stock that the Company shall have authority to issue
is 54,000,000, consisting of 40,000,000 shares of Common Stock, and 14,000,000
shares of Preferred Stock.
The designation,
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of each class
of stock, and the express grant of authority to the Board of Directors to fix by
resolution the designation, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of each share of Preferred Stock which are not fixed by
these Amended and Restated Articles of Incorporation, are as
follows:
A. Common
Stock.
1. Dividends. Subject to the
rights of the holders of Preferred Stock, and subject to any other provisions of
the Articles of Incorporation, holders of Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock or property of the
Company as may be declared thereon by the Board of Directors from time to time
out of assets or funds of the Company legally available therefor.
2. Liquidation;
Dissolution. In the event of
any liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Company and after payment or provision for
payment to the holders of each series of Preferred Stock of all amounts required
in accordance with Section B.3 of this Article IV, the remaining assets and
funds of the Company shall be divided among and paid to the holders of Common
Stock.
3. Voting.
(a) At every meeting
of the stockholders every holder of Common Stock shall be entitled to one vote
in person or by proxy for each share of such Stock standing in his name on the
stock transfer records of the Company.
(b) No shareholder
shall have the right to cumulate votes in the election of
directors.
4. Preemptive
Rights. No holder of
shares of Common Stock of the Company shall, as such holder, be entitled as of
right to subscribe for, purchase or receive any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock, but
all such additional shares of stock of any class, or bonds, debentures or other
securities convertible into or exchangeable for stock, may be issued and
disposed of by the Board of Directors on such terms and for such consideration,
so far as may be permitted by law, and to such persons, as the Board of
Directors in its absolute discretion may deem advisable.
B. Preferred
Stock.
1. Number;
Series. The Preferred
Stock may be issued in one or more series, from time to time, with each such
series to have such designation, powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in Section C of this
Article IV or in the resolution or resolutions providing for the issue of such
series adopted by the Board of Directors of the Company, subject to the
limitations prescribed by law and in accordance with the provisions hereof, the
Board of Directors being hereby expressly vested with authority to adopt any
such resolution or resolutions. The authority of the Board of Directors with
respect to each such series shall include, but not be limited to, the
determination or fixing of the following:
(a) The distinctive
designation and number of shares comprising such series, which number may
(except where otherwise provided by the Board of Directors in creating such
series) be increased or decreased (but not below the number of shares then
outstanding) from time to time by like action of the Board of
Directors;
(b) The dividend rate
of such series, the conditions and times upon which such dividends shall be
payable, the relation which such dividends shall bear to the dividends payable
on any other class or classes of stock or series thereof, or on the other series
of the same class, and whether dividends shall be cumulative or
noncumulative;
(c) The conditions
upon which the shares of such series shall be subject to redemption by the
Company and the times, prices and other terms and provisions upon which the
shares of the series may be redeemed;
(d) Whether or not the
shares of the series shall be subject to the operation of retirement or sinking
fund provisions to be applied to the purchase or redemption of such shares and,
if such retirement or sinking fund be established, the annual amount thereof and
the terms and provisions relative to the operation thereof;
(e) Whether or not the
shares of the series shall be convertible into or exchangeable for shares of any
other class or classes, with or without par value, or of any other series of the
same class and, if provision is made for conversion or exchange, the times,
prices, rates, adjustments, and other terms and conditions of such conversion or
exchange;
(f) Whether or not the
shares of the series shall have voting rights, in addition to the voting rights
provided by law, and, if so, subject to the limitations hereinafter set forth,
the terms of such voting rights;
(g) The rights of the
shares of the series in the event of voluntary or involuntary liquidation,
dissolution, or upon distribution of assets of the Company; and
(h) Any other powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of the shares of such
series, as the Board of Directors may deem advisable and as shall not be
inconsistent with the provisions of these Articles of
Incorporation.
2. Dividends. The holders of
the shares of Preferred Stock of each series shall be entitled to receive, when
and as declared by the Board of Directors, out of the funds legally available
for the payment of dividends, dividends at the rate fixed by the Board of
Directors for such series for the current period and, if cumulative, for all
prior periods for which such dividends are cumulative, and no more, before any
dividends, other than dividends payable in Common Stock, shall be declared and
paid, or set apart for payment, on the Common Stock with respect to the same
dividend period.
Whenever, at any
time, dividends on the then outstanding Preferred Stock as may be required with
respect to any series outstanding shall have been paid or declared and set apart
for payment on the then outstanding Preferred Stock, and after complying with
respect to any retirement or sinking fund or funds for all applicable series of
Preferred Stock, the Board of Directors may, subject to the provisions of
Section C of this Article IV or the resolution or resolutions creating the
series of Preferred Stock, declare and pay dividends on the Common stock as
provided in Section A.1 of this Article IV, and the holders of shares of
Preferred Stock shall not be entitled to share therein, except as otherwise
provided in the resolution or resolutions creating any series.
3. Liquidation;
Dissolution. The holders of
the Preferred Stock of each series shall be entitled upon liquidation or
dissolution of the Company to such preferences as are provided in Section C of
this Article IV or the resolution or resolutions creating such series of
Preferred Stock, and no more, before any distribution of the assets of the
Company shall be made to the holders of shares of the Common Stock. Whenever the
holders of shares of the Preferred Stock shall have been paid the full amounts
to which they shall be entitled, the holders of shares of the Common Stock shall
be entitled to share in all assets of the Company remaining as provided in
Section A.2 of this Article IV. If, upon such liquidation, dissolution or
winding up, the assets of the Company distributable as aforesaid among the
holders of the Preferred Stock is insufficient to permit the payment to them of
said preferential amounts, then such assets shall be distributed ratably among
such holders in proportion to the respective total amounts which they shall be
entitled to receive as provided in this Section B.3.
4. Voting. Except as
otherwise provided by a resolution or resolutions of the Board of Directors
creating any series of Preferred Stock or by the Act, the Common Stock issued
and outstanding shall have and possess the exclusive power to vote for the
election of directors and for all other purposes as provided in Section A.3 of
this Article IV.
5. Preemptive
Rights. Except as may be
provided in the resolution or resolutions of the Board of Directors providing
for the issue of any series of Preferred Stock, no holder of shares of the
Preferred Stock of the Company shall, as such holder, be entitled as of right to
subscribe for, purchase or receive any part of any new or additional issue of
stock of any class, whether now or hereafter authorized, or of bonds, debentures
or other securities convertible into or exchangeable for stock, but all such
additional shares of stock of any class, or bonds, debentures or other
securities convertible into or exchangeable for stock, may be issued and
disposed of by the Board of Directors on such terms and for such consideration,
so far as may be permitted by laws, and to such persons, as the Board of
Directors in its absolute discretion may deem advisable.
C. Series A and
Series B Preferred Stock.
1. Certain Defined
Terms, Etc. In addition to the
terms defined elsewhere herein, certain terms used in this Article IV.C
with initial capital letters have the meanings given to them in Section 11.
References in this Article IV.C to Sections are, unless otherwise stated,
references to Sections of this Article IV.C.
2. Designation.
(a) 4,000,000 shares of
Preferred Stock of the Company are designated as “Series A Preferred Stock”
having the powers, preferences and relative participating, optional and other
special rights and the qualifications, limitations or restrictions thereof as
set forth in this Article IV.C (the “Series A
Preferred”).
Effective as of
the date these Restated Articles are duly filed with the Utah Department of
Commerce, Division of Corporations and Commercial Code (the “Effective
Date”), each share of
Series A Preferred issued and outstanding immediately prior to the Effective
Date (the “Old Series A
Stock”) shall
automatically and without any action on the part of the holder thereof be split,
reclassified, changed and converted into four shares of Series A Preferred (the
“New Series A
Stock”). The foregoing
forward stock split shall be subject to the treatment of fractional share
interests as described below.
Each holder of a
certificate or certificates, which immediately prior to the Effective Date
represented outstanding shares of Old Series A Stock (the “Old Series A
Certificates”), shall be
entitled to receive, as soon as reasonably practicable following the surrender
of such Old Series A Certificates to the Company or the Company’s transfer agent
for cancellation, a new certificate or certificates (the “New Series A
Certificates”) representing
that number of whole shares of the New Series A Stock into which and for which
the shares of the Old Series A Stock, formerly represented by such Old Series A
Certificates so surrendered, are reclassified under the terms hereof. Each New
Series A Certificate issued by the Company shall bear the legend required by
Section 8(b)(iii).
From and after the
Effective Date, and until such certificates are surrendered, the Old Series A
Certificates shall be deemed for all corporate purposes to evidence ownership of
that number of whole shares of the New Series A Stock into which and for which
the shares of the Old Series A Stock have been reclassified under the terms
hereof. No certificates or scrip representing fractional share interests in New
Series A Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a stockholder of the
Company. A holder of Old Series A Certificates shall receive, as soon as
reasonably practicable following the surrender of such certificates, in lieu of
any fraction of a share of New Series A Stock to which the holder would
otherwise be entitled, a cash payment therefor. Such cash payment will
equal the fraction to which the stockholder would otherwise be entitled
multiplied by $25.00. If more than one Old Series A Certificate shall be
surrendered at one time for the account of the same stockholder, the number of
full shares of New Series A Stock for which New Series A Certificates shall be
issued shall be computed on the basis of the aggregate number of shares of New
Series A Stock represented by the Old Series A Certificates so
surrendered. In the event that the Company or the Company’s transfer agent
determines that a holder of Old Series A Certificates has not tendered all such
certificates for exchange, the Company or the Company’s transfer agent shall
carry forward any fractional share of New Series A Stock until all Old Series A
Certificates held by such holder have been presented for exchange such that
payment for fractional shares to any one person shall not exceed the value of
one share of New Series A Stock held by such person. All references
elsewhere in these Restated Articles to the “Series A Preferred” shall, after
the Effective Date, refer to the New Series A Stock.
(b) 4,000,000 shares
of Preferred Stock of the Company are designated as “Series B Preferred
Stock” having the powers, preferences and relative participating, optional and
other special rights and the qualifications, limitations or restrictions thereof
as set forth in this Article IV.C (the “Series B
Preferred”). The Series A
Preferred and the Series B Preferred are together referred to herein as the
“Senior
Preferred.”
3. Dividends and
Distributions.
(a) The holders of
shares of Senior Preferred, if any, and in preference to the holders of Common
Stock, and of any other class or series of Preferred Stock or other capital
stock of the Company (together with the Common Stock, “Junior
Stock”), will be
entitled to receive dividends at an annual rate of $2.50 per share (as adjusted
for any stock dividends, combinations or splits with respect to such shares)
(such dividends, “Regular
Dividends”), payable
quarterly in arrears on the 15th day of each of March, June, September and
December of each year or such other dates as are the 15th day of the month
following the end of each of the Company’s fiscal quarters (except that if any
such date is a Saturday, Sunday or legal holiday, then such dividend will be
payable on the next day that is not a legal holiday) (the “Dividend
Payment Date”), commencing,
with respect to each share of Senior Preferred, on the first date on which such
share of Senior Preferred is issued (the “Initial
Issuance Date”) to such
holders, prior and in preference to any declaration or payment of any dividend
on any Junior Stock; provided that dividends on
shares of Series B Preferred issued upon conversion of shares of Series A
Preferred will commence on the Initial Issuance Date of the shares of Series A
Preferred that are converted into such shares of Series B Preferred. Regular
Dividends will be cumulative and accrue with respect to each outstanding share
of Senior Preferred from the date dividends commence on such share (the
“Dividend
Commencement Date”), whether or not
declared by the Board and whether or not there are funds of the Company legally
available for payment of such dividends. No accrued or accumulated dividends on
the Senior Preferred will bear interest.
(b) Each Regular
Dividend will be payable to holders of record as they appear on the stock books
of the Company on the last day of each fiscal quarter of the
Company.
4. Voting
Rights.
(a) In addition to the
rights provided in Sections 4(b), 4(c) and 4(d), holders of record of
Series A Preferred (the “Series A
Holders”) will have the
right to vote or consent in writing together with the Common Stock on all
matters presented to the holders of Common Stock as set forth in Section 4(e).
Apart from the rights provided in Sections 4(b), 4(c) and 4(d), holders of
record of Series B Preferred (the “Series B
Holders”) will have no
voting rights.
(b) In addition to the
voting rights provided by Sections 4(a), 4(c) and 4(d), as long as any
shares of Senior Preferred are outstanding, the affirmative vote or consent of
the holders of a majority of the then-outstanding shares of Senior Preferred,
voting as a separate voting group, will be required in order for the Company
to:
(i) amend, alter or
repeal, whether by merger, consolidation or otherwise, the terms of this
Article IV.C or any other provision of the Restated Articles, in any way
that adversely affects any of the powers, designations, preferences and
relative, participating, optional and other special rights of the Senior
Preferred, and the qualifications, limitations or restrictions
thereof;
(ii) issue any shares
of capital stock ranking prior or superior to, or on parity with, the Senior
Preferred with respect to dividends or other distributions or upon liquidation,
dissolution or winding up of the Company, or issue any Junior Stock other than
Common Stock;
(iii) subdivide or
otherwise change shares of Senior Preferred into a different number of shares
whether in a merger, consolidation, combination, recapitalization,
reorganization or otherwise; or
(iv) issue any shares
of Senior Preferred other than in accordance with this
Article IV.C.
(c) In addition to the
voting rights provided by Sections 4(a), 4(b) and 4(d), the affirmative
vote or consent of the holders of a majority of the then-outstanding shares of
Senior Preferred, voting as a separate voting group, will be required for the
Company to declare or pay any dividends or other distributions on or in respect
of Junior Stock (a “Junior Stock
Dividend”); provided, however, that such
affirmative vote or consent of the holder of Senior Preferred shall not be
required for any proposed Junior Stock Dividend if (i) the Company has paid all
Regular Dividends for all fiscal quarters preceding the fiscal quarter in which
the Company proposes to pay such Junior Stock Dividend and (ii) the Company has
reserved sufficient funds to pay the Regular Dividend that will become payable
for such fiscal quarter in which the Company proposes to pay a Junior Stock
Dividend in accordance with Section 3.
(d) In addition to the
voting rights provided by Sections 4(a), 4(b) and 4(c), whenever dividends
of the Senior Preferred shall be in arrears in an amount equal to at least six
quarterly dividends (whether or not consecutive), the number of members of the
Board shall be increased by two and the holders of the Senior Preferred (voting
as a voting group) will be entitled to vote for and elect such two additional
directors of the Company at any meeting of shareholders of the Company at which
directors are to be elected during the period such dividends remain in arrears.
Whenever the right to elect directors shall have accrued to the holders of the
Senior Preferred, the proper officers of the Company shall call a meeting for
the election of such directors, such meeting to be held not less than 45 nor
more than 90 days after the accrual of such right. The right of the holders of
the Senior Preferred to vote for such two additional directors shall terminate
when all accrued and unpaid dividends on the Senior Preferred have been paid or
set apart for payment. The term of office of all directors so elected shall
terminate immediately upon the termination of the right of the holders of the
Senior Preferred to vote for such two additional directors. In connection with
such right to vote, each holder of Senior Preferred will have one vote for each
share of Senior Preferred held.
(e) On all matters
presented before the holders of the Common Stock for their vote or consent, each
share of Series A Preferred will be entitled to the number of votes equal
to two shares of Common Stock (as adjusted for any stock dividends, combinations
or splits with respect to shares of Common Stock); provided, however, the aggregate
number of votes attributable to any Series A Holder’s shares of Series A
Preferred shall be reduced by the sum of (x) the number of shares of Common
Stock acquired by such Series A Holder upon the exercise of any warrant issued
to such Series A Holder pursuant to the Preferred Stock Amendment and Warrant
Issuance Agreement dated November 29, 2004 between the Company and the investor
identified therein (each, a “Warrant”) and (y) the
number of shares of Common Stock purchasable upon exercise of any Warrant that
has been sold or transferred by such Series A Holder to any other person or
entity.
(f) Notwithstanding
any other provision of the Restated Articles or Bylaws of the Company, the
holders of a majority of the then-outstanding Senior Preferred may consent in
writing to any matter about which a class vote is contemplated by
Section 4(b), 4(c) or 4(d), which written consent when so executed by the
holders of a majority of the then-outstanding Senior Preferred will be deemed,
subject to applicable Utah law, to satisfy the requirements of
Section 4(b), 4(c) or 4(d), as applicable.
5. Reacquired
Shares. Any shares of
Senior Preferred that are issued and thereafter cease to be issued and
outstanding for any reason, whether because shares of Series A Preferred are
converted into shares of Series B Preferred pursuant to Section 8 or shares of
Senior Preferred are purchased or otherwise acquired by the Company in any
manner whatsoever, will reduce the number of authorized shares of either
Series A Preferred or Series B Preferred, as applicable, will be restored
to the status of authorized but unissued shares of Preferred Stock of the
Company, and may be reissued as part of a new series of Preferred Stock of the
Company subject to the conditions and restrictions on issuance set forth herein
or in any other articles of amendment creating a series of Preferred Stock or
any other stock of the Company.
6. Liquidation,
Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution will be
made to the holders of shares of Junior Stock unless, prior thereto, the holders
of shares of Senior Preferred shall have received in cash $25.00 per share (the
“Liquidation Price”) plus accrued and unpaid dividends to the date of payment.
Neither a consolidation or merger of the Company with another corporation or
other legal entity, nor a sale or transfer of all or part of the Company’s
assets for cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company for purposes of this
Section 6.
7. Redemption.
(a) Redemption
Right. The shares of
Senior Preferred will not be redeemable, except as otherwise agreed between the
Company and any holder or holders of Senior Preferred and except that
(i) during the period beginning on March 8, 2005 and ending on
March 8, 2006 (the “Initial
Redemption Period”), the Company
may, upon 15 business days prior notice to the holders of Senior Preferred,
redeem all or any portion of the then-outstanding Senior Preferred at 100% of
the then-applicable Liquidation Price plus accrued and unpaid dividends to the
date of payment and (ii) beginning on the fifth anniversary of the
expiration of the Initial Redemption Period, the Company may, upon 15 business
days prior notice to the holders of Senior Preferred, redeem all or any portion
of the then-outstanding Senior Preferred at 101% of the then-applicable
Liquidation Price plus accrued and unpaid dividends to the date of payment. Any
partial redemption effected pursuant to this Section 7 shall be made on a
pro-rata basis among the holders of Senior Preferred in proportion to the shares
of Senior Preferred then held by them. Notwithstanding anything to the contrary,
the mandatory conversion of shares of Series A Preferred into shares of Series B
Preferred pursuant to Section 8 hereof may occur at any time during the
notice periods set forth in clauses (i) and (ii) of this
Section 7(a).
(b) Redemption
Notice. Any notice of
redemption given pursuant to Section 7(a) (“Redemption
Notice”) will be given
in writing by the Company by first class mail, postage prepaid, to each holder
of record of Senior Preferred on the record date fixed for such redemption by
the Board at such holder’s address as it appears on the stock books of the
Company, provided that no failure to give such notice nor any deficiency therein
will affect the validity of the procedure for redemption of any shares of Senior
Preferred except as to the holder or holders to whom the Company has failed to
give such notice or whose notice was defective. The Redemption Notice will
state:
(i) the redemption
price;
(ii) the total number
of shares of Senior Preferred being redeemed;
(iii) the date fixed for
redemption by the Board, which date will occur within the applicable redemption
period specified in Section 7(a) above (the “Redemption
Date”);
(iv) the place or
places and manner in which the holder is to surrender his or her certificate(s)
to the Company; and
(v) that dividends on
the shares of Senior Preferred to be redeemed will cease to accumulate on the
Redemption Date unless the Company defaults on the redemption
price.
Upon surrender of
the certificate(s) representing shares of Senior Preferred that are the subject
of redemption pursuant to Section 7(a), duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice and on the Redemption Date, the
full redemption price for such shares will be paid in cash to the Person whose
name appears on such certificate(s) as the owner thereof, and each surrendered
certificate will be canceled and retired.
(c) Senior
Dividends. On and after the
Redemption Date or on or after the date of redemption otherwise agreed upon by
and between the Company and any holder or holders of shares of Senior Preferred,
unless the Company defaults in the payment in full of the applicable redemption
price, dividends on the Senior Preferred to be redeemed will cease to
accumulate, and all rights of the holders thereof will terminate with respect
thereto on the Redemption Date (or such other redemption date, if applicable),
other than the right to receive the applicable redemption price; provided, however, that if a
Redemption Notice has been given as provided in Section 7(b) and the funds
necessary for redemption (including an amount in cash in respect of all
dividends that will accumulate to the Redemption Date) have been irrevocably
deposited in trust with a bank having an aggregate shareholders’ equity of at
least $5.0 billion for the equal and ratable benefit of all holders of shares of
Senior Preferred that are to be redeemed, then, at the close of business on the
day on which such funds are deposited in trust, dividends on the Senior
Preferred to be redeemed will cease to accumulate and the holders thereof will
cease to be shareholders of the Company and be entitled only to receive the
redemption price.
8. Conversion.
(a) No Optional
Conversion. Neither the
Series A Preferred nor the Series B Preferred will be convertible into the
Common Stock or any other class or series of the Company’s capital stock except
as provided in Section 8(b).
(b) Mandatory
Conversion.
(i) If any Series A
Holder voluntarily or involuntarily transfers, sells, assigns, devises,
distributes or bequeaths any of such Series A Holder’s interest in any shares of
Series A Preferred (including, without limitation, the power to vote or provide
a consent with respect to any shares of Series A Preferred by proxy or
otherwise) (a “Transfer”) to any Person
(the “Transferee”) other than a
Permitted Transferee, then each share of Series A Preferred subject to such
Transfer automatically, without any action on the part of the Company or such
Series A Holder, will be deemed to be converted into one share of fully paid and
non-assessable Series B Preferred immediately before such transfer is completed.
In the event of such a transfer, the Company and the transfer agent for the
Series A Preferred, if any (the “Transfer
Agent”), shall not
register the transfer of such shares of Series A Preferred except to the Company
or a Permitted Transferee of such Series A Holder; provided, however, that such
restrictions on transfer shall not apply to a Business Combination of the
Company with or into another corporation or entity, if the Company is not the
Surviving Person.
(ii) Notwithstanding
anything to the contrary set forth herein, any Series A Holder may pledge such
Series A Holder’s shares to a financial institution pursuant to a bona fide
pledge of such shares as collateral security of indebtedness due to the pledgee;
provided, however, that such shares
shall remain subject to the provisions of this Section 8(b) and may not be voted
by the pledgee and, upon any transfer of such shares to the pledgee, such shares
shall convert into Series B shares in accordance with paragraph (i)
above.
(iii) Each certificate
representing shares of Series A Preferred shall be endorsed with a legend that
states that immediately prior to any Transfer of such shares of Series A
Preferred such shares automatically will be converted into shares of Series B
Preferred in accordance with the Restated Articles, and no such transfer will be
valid unless such transfer has been recorded in stock transfer records kept by
the Company or the Transfer Agent.
(iv) To effect any
Transfer of Series A Preferred (which shall be converted into shares of Series B
Preferred immediately prior to such Transfer as set forth in this Section 8(b)),
the Series A Holder proposing to transfer such converted shares of Series A
Preferred must surrender the certificate(s) representing such shares at the
office of the Company or the Transfer Agent for the Series A Preferred with
instructions identifying the Transferee proposed to receive converted shares of
Series B Preferred. Thereupon, there shall be issued and delivered to such
Transferee at such office in the name of the Transferee a certificate or
certificates for the number of shares of Series B Preferred into which the
Series A Preferred were converted.
(c) Reservation of
Stock Issuable Upon Conversion. The Company will
at all times reserve and keep available out of its authorized but unissued
shares of Series B Preferred solely for the purpose of effecting the conversion
of the shares of the Series A Preferred such number of its shares of Series
B Preferred as will from time to time be sufficient to effect the conversion of
all then-outstanding shares of the Series A Preferred; and if at any time
the number of authorized but unissued shares of Series B Preferred will not be
sufficient to effect the conversion of all then-outstanding shares of the
Series A Preferred, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Series B Preferred to such number of shares as will be sufficient for
such purpose.
9. Fractional
Shares. Following the
split of the Old Series A Stock into the New Series A Stock, the Senior
Preferred may not be issued in fractions of a share.
10. Rank. The
Series A Preferred and the Series B Preferred will have equal rank. The
Senior Preferred will rank senior as to all capital stock of the Company,
including all Junior Stock, in each case as to the payment of dividends or other
distributions or upon liquidation, dissolution or winding up.
11. Certain Defined
Terms. In addition to
the terms defined elsewhere in this Article IV.C, the following terms will
have the following meanings when used herein with initial capital
letters:
(a) “Affiliate” of any Person
means any other Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
such Person; and, for purposes of this definition only, “control” (including the
terms “controlling,” “controlled by,” and “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of
the management, policies or activities of a Person whether through the ownership
of securities, by contract or agency or otherwise;
(b) “Business
Combination” means any
merger, consolidation, combination, recapitalization, reorganization or other
transaction (whether or not the Company is the Surviving Person);
(c) “Permitted
Transferee” means, with
respect to any Series A Holder, any Person that is (i) an Affiliate of such
Series A Holder, (ii) a stockholder, partner or member or other equity owner
holding at least 5% of the outstanding equity of such Series A Holder
(calculated on a fully diluted basis), or (iii) such Series A Holder’s immediate
family member or a trust for the benefit of such Series A Holder;
(d) “Person” means any
individual, firm, corporation or other entity and included any successor
(whether by merger or otherwise) of such entity; and
(e) “Surviving
Person” means the
continuing, surviving or resulting Person in a Business Combination, the Person
receiving a transfer of all or a substantial part of the properties and assets
of the Company, or the Person consolidating with or merging into the Company in
a Business Combination in which the Company is the continuing or surviving
Person, but in connection with which the Senior Preferred is exchanged or
converted into the securities of any other Person or the right to receive cash
or any other property.
ARTICLE
V
To the fullest
extent permitted by the Act or pursuant to any successor statute with similar
effect, no director shall be liable to the Company or its shareholders for
monetary damages. If the laws of the State of Utah are amended after the
adoption of these Amended and Restated Articles of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Company shall be eliminated
or limited to the fullest extent permitted by the laws of the State of Utah, as
so amended. The Company is authorized to indemnify directors and officers of the
Company to the fullest extent permitted under applicable laws. Any repeal or
modification of any applicable law or the foregoing provisions of this Article V
shall not adversely affect any right of indemnification or limitation of
liability of a director of the Company relating to acts or omissions occurring
prior to such repeal or modification.