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 29, 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):
|
o |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425) | |
|
o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) | |
|
o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) | |
|
o |
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.
Val J.
Christensen, Executive Vice President, General Counsel and Secretary,
terminated service as an executive officer on March 29, 2005. Under the terms of
the Separation Agreement, the Company will pay to Mr. Christensen the lump sum
severance amount of $900,000, less applicable withholdings. Such amount
represents the Company’s severance obligation to Mr. Christensen in the amount
of $450,000, representing one year’s target cash compensation, and another
$450,000, representing payment for a one year sabbatical leave to which Mr.
Christensen was entitled, but did not take, as an executive officer who served
the Company for approximately 17 years. In addition, he
will receive the cash performance bonus he would have been entitled to for our
current fiscal year as if he had remained employed in his prior position and his
performance objectives for the year were met, the amount of which we estimate at
$150,000. In addition, his options and restricted stock vested, we waived
the requirement that options be exercised in 90 days and we will pay him $57,000
to offset income taxes resulting from the acceleration of restricted stock
awards.
Subsequent to
entering into the Separation Agreement, on March 29, 2005, the Company and Mr.
Christensen entered into a Legal Services Agreement effective as of such date
(the “Legal Services Agreement”). Under the terms of the Legal Services
Agreement, the Company will retain Mr. Christensen as independent legal counsel
to provide services to the Company for 1,000 hours per year. This will allow us
to continue to benefit from Mr. Christensen’s extensive institutional knowledge
and experience gained from serving at the Company for approximately 17 years and
representing the
Company as outside counsel for several years
prior to joining the Company, while allowing Mr. Christensen one-half of his
time to pursue other interests apart from providing legal services. We will
pay Mr. Christensen an annual retainer in the amount of $225,000, effectively
allowing us to obtain the services of Mr. Christensen at the rate of $225
per hour for 1,000 hours annually, a rate which we believe to be below
market for legal counsel with similar capacity and experience. In addition, the
Company will pay Mr. Christensen $325 for every hour of legal services, if any,
provided in excess of the initial 1,000 hours of legal services provided in any
given year, payable following any month in which Mr. Christensen provides more
than 83.3 hours of legal services. Mr. Christensen will be an
independent contractor and not entitled to company benefits for performing these
services.
The foregoing
summaries of the separation and legal services agreements are subject to, and
qualified in its entirety by, the full text of those documents filed
herewith. See Item 9.01 of this Report.
Item
1.02 Termination
of a Material Definitive Agreement.
The disclosure
contained in Item 1.01 above is hereby incorporated into this Item 1.02 by
reference.
Item
5.02 Departure
of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers.
On March 29, 2005,
Mr. Christensen terminated employment as our Executive Vice President,
General Counsel and Secretary. See Item 1.01 of this
Report.
Item
9.01 Financial
Statements and Exhibits.
(c) Exhibits
|
99.1 |
Separation
Agreement between the Company and Val J. Christensen, dated March 29,
2005. |
|
99.2 |
Legal
Services Agreement between the Company and Val J. Christensen, dated March
29, 2005. |
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: April
4, 2005 |
|||
By: |
/s/
ROBERT A. WHITMAN |
||
Name: |
Robert
A. Whitman |
||
Title: |
Chief Executive Officer |
EXHIBIT
INDEX
|
99.1 |
Separation
Agreement between the Company and Val J. Christensen, dated as of March
29, 2005. |
|
99.2 |
Legal
Services Agreement between the Company and Val J. Christensen, dated March
29, 2005. |
Exhibit
99.1
March 29,
2005
Val John
Christensen
1781 East Lorien
Drive
Bountiful, Utah
84010
Dear
Val:
This letter
memorializes the details of your separation from Franklin Covey.
1. Termination of
Employment. Your employment
as Executive Vice President and General Counsel of Franklin Covey Co. (the
“Company”) shall terminate effective March 29, 2005.
2. Severance
Payment and Performance Bonus. The Company
shall, within 10 days after the date of execution of this letter agreement, pay
you a lump sum severance in the gross amount of $900,000, less all applicable
withholdings. This sum represents (i) the Company’s severance obligation to you
in the amount of $450,000, representing one year’s target cash compensation,
plus (ii) $450,000, representing the one year sabbatical leave to which you were
entitled, but did not take, as an executive officer who served the Company for
more than 16 years. In addition, the Company shall pay you, at the time or times
it pays such bonuses to the executive officers of the Company, each cash
performance bonus to which you would have been entitled with respect to the
Company’s fiscal year 2005 performance as if your employment as an executive
officer of the Company had continued through the end of fiscal year 2005 and as
if each of your personal performance objectives for fiscal 2005 had been met.
Assuming the Company achieves the fiscal 2005 performance goals upon which the
maximum fiscal 2005 performance bonus you would have received are based, the
aggregate amount of this payment would be $150,000.
3. COBRA and Other
Benefits. Following
termination of your employment on March 29, 2005, you will be eligible for
continued health care coverage pursuant to COBRA. Franklin Covey will pay COBRA
premiums for the entire 18 month period during which you are eligible for COBRA
benefits. All other benefits will terminate effective March 29,
2005.
4. Existing Stock
Options and Restricted Share Awards. You shall
continue to own, hold and maintain all Franklin Covey stock options and
restricted share awards owned and held by you as of the date of this letter
agreement, subject to the following terms:
|
a.
|
All such stock options and restricted share awards, to the extent not yet vested, shall vest immediately. In addition, the Company shall, consistent with its policy and practice relative to other Restricted Share Award recipients, pay you the gross sum of $57,330.00 (.40 x $2.73 x 52,500 shares) to partially offset federal and state income taxes resulting from the vesting of your restricted shares. |
|
b.
|
The Company agrees to waive the requirement in your stock option agreements that you exercise your options within 90 days after the termination of your employment, the effect of which waiver is to allow you to continue to hold and exercise all vested options granted thereunder for the term specified therein. You acknowledge that by virtue of this waiver, all Incentive Stock Options shall become non-qualified stock options for Federal income tax purposes. |
5. Franklin Covey
Laptop Computer. You acknowledge
that the only item of Franklin Covey property in your possession is your laptop
computer (identification number 112774), which you agree to return to Franklin
Covey within 15 days after the date of FranklinCovey’s written request
therefor.
6. Noncompete;
Nondisclosure; Nonsolicitation; Nondisparagement. During the
course of your employment with Franklin Covey, you have obtained information or
knowledge that is confidential or proprietary in nature relating to Franklin
Covey’s business, operations, services, products or equipment. To remain
eligible to receive the payments and benefits described herein, you agree that
for a period of two (2) years, you will not; (i) exploit, disclose or assist
others in exploiting, using or disclosing, to compete or to assist others to
compete, directly or indirectly, with the business of Franklin Covey, and
Franklin Covey proprietary information or proprietary documents including,
without limitation: (a) market, business or alliance strategies or initiatives;
(b) pricing and material pricing information or strategies; (c) new products or
services concepts, or ideas; (d) customer lists; and (e) vendor and supplier
lists. Further, you agree that for a period of two (2) years, you will not make
any statements to third parties that disparage, demean, or criticize Franklin
Covey officers, management, employees, business practices, strategies, products,
or services. The foregoing shall not prevent you from making truthful statements
under oath as a witness in a proceeding by a court of competent jurisdiction or
administrative agency.
7. General
Release. For and in
consideration of the payments and benefits described herein, the receipt and
sufficiency of which you hereby acknowledge, on your own behalf, and on behalf
of your heirs and assigns, and all persons claiming under you, you hereby fully
and forever unconditionally release and discharge Franklin Covey Co., all of its
affiliated and related corporations, their predecessors, successors and assigns,
together with their divisions and departments, and all past or present officers,
directors, employees, insurers and agents of any of them (hereinafter referred
to collectively as “Releasees”) of and from, and you covenant not to sue or
assert against Releasees, for any purpose, all claims, administrative
complaints, demands, actions and causes of action, of every kind and nature
whatsoever, whether at law or in equity, and both negligent and intentional,
arising from or in any way related to your employment by Franklin Covey, based
in whole or in part upon any act or omission occurring on or before the date of
this general release, without regard to your present actual knowledge of the act
or omission, which you may now have, or which you, or any person acting on your
behalf may at any future time have or claim to have, including specifically, but
not by way of limitation, matters which may arise at common law or under
federal, state or local laws, such as the Fair Labor Standards Act, the Employee
Retirement Income Security Act, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Older Workers Protection Act, the Rehabilitation Act of 1973, the American With
Disabilities Act, and the Equal Pay Act. You warrant that you have not assigned
or transferred any right or claim described in this general release. You
expressly assume all risk that the facts and law concerning this general release
may be other than as presently known to you. You acknowledge that, in signing
this general release, you are not relying on any information provided to you by
Releasees or upon Releasees to provide information not known to
you.
8. Acknowledgment. You acknowledge
that you have read this agreement, understand its terms, and have had an
opportunity to have answered to your satisfaction any questions concerning the
terms hereof. You execute this agreement voluntarily and of your own free will
and choice, after having been advised to seek your own legal counsel, without
threat, coercion or duress, intending to be legally bound.
9. Waiver of
Review Period. You acknowledge
that Franklin Covey provided you with a copy of this letter agreement for your
review and consideration on March 10, 2005, and advised you that you have
twenty-one (21) days in which to consider and review this letter agreement prior
to signing it, and that you have knowingly waived that twenty-one (21) day
review period prior to your execution of this letter agreement. You further
acknowledge that for a period of seven (7) days following the execution of this
letter agreement, you may revoke this agreement by providing notice of such
revocation to Franklin Covey. You agree that any such notice shall be given to
Franklin Covey Co., Attn. Robert A. Whitman, 2200 West Parkway Boulevard, Salt
Lake City, Utah 84119. Such notice, if given, must be actually received by
Franklin Covey (7) days following your execution of this letter agreement. You
agree that if you exercise your revocation right, the respective rights and
obligations of the parties to this agreement will be automatically void and you
will immediately pay to Franklin Covey, upon demand, any and all payments made
by Franklin Covey to you under this letter agreement. You acknowledge that the
irrevocable termination of your employment as of the date stated in Section 1,
above, will not be altered by your exercise of your revocation
right.
10. Remedies. In addition to
any other legal or equitable remedies Franklin Covey may have, all unpaid
payments and benefits described in this agreement shall be immediately canceled,
terminated and forfeited in their entirety in the event you violate any of the
provisions hereof.
11. Governing
Law. The laws of the
State of Utah shall govern this agreement. This is the entire agreement between
the parties. No other promises or agreements have been made to you except as
stated in this agreement. This agreement may not be changed or modified except
by a written document signed by the parties.
12. Entire
Agreement. This letter
agreement reflects the entire agreement of the parties relative to the subject
matter hereof and supercedes any oral or written agreements relating thereto.
Please signify
your agreement with the foregoing by signing both original letters where
indicated below and returning one original to me.
Sincerely,
|
/s/ ROBERT
A. WHITMAN |
||
|
Robert A.
Whitman |
||
|
President
and CEO |
||
|
Franklin
Covey Co. |
ACCEPTED AND
AGREED
This 29th day
of March, 2005.
|
/s/ VAL JOHN
CHRISTENSEN |
|||
|
Val John
Christensen |
Exhibit
99.2
LEGAL
SERVICES AGREEMENT
Background
From December
1989, until March 30, 2005, Val J. Christensen (“Christensen”) served Franklin
Covey, Co. and its subsidiaries (collectively the “Company”) as a senior
executive officer and full-time General Counsel. From August 1984 until December
1989, Christensen served as outside independent legal counsel to the Company.
For over 20 years, both as independent and in-house counsel, Christensen has had
responsibility for providing a wide range of general and specialized legal
services, representing (or supervising others who have represented) the Company
in judicial and administrative matters, and providing business and transaction
advisory services to the Company, its management and board of directors (the
“Services”). As Christensen reestablishes a private law practice, the Company
desires to retain Christensen and Christensen is willing to be retained, as an
independent contractor, to provide the Services for at least 1000 hours per year
for the three-year term described below, on the terms and conditions set forth
herein.
Agreement
In consideration
of the mutual promises set forth herein, the Company hereby engages Christensen,
and Christensen agrees to be engaged as independent legal counsel to provide a
minimum of 1000 hours of Services for and on behalf of the Company, subject to
the following terms and conditions:
1. Retainer and
Hourly Fees. Christensen
shall make himself available and accessible to render Services to the Company
for not less than 1000 hours per year, for the three year Term, as defined
below. The Company shall pay Christensen an annual retainer in the amount of
$225,000.00, payable in monthly installments of $18,500 on the 15th day of each
month during the Term (the “Retainer Fee”), commencing April 15, 2005. In
addition to the Retainer Fee, the Company shall pay Christensen an hourly fee in
the amount of $325 per hour for each hour of Services he renders in excess of
1000 hours per year (“Additional Services Fee”). The Additional Services Fee
shall be payable on a monthly basis if Christensen performs Services in excess
of 83.3 hours during the month. Christensen shall submit, within 5 days after
the end of each month of the Term, an itemized description of Services rendered
and a record of his time spent thereon during said month, which record shall be
accompanied by an invoice for Additional Services Fees, if any, payable for said
month. Invoices for Additional Services Fees shall be payable within 30 days
after the date the invoice is received by the Company. Christensen and
the Company shall review billings on a quarterly basis and make appropriate
payment adjustments in the succeeding quarter that are necessary to true up for
underpayment or overpayment for Services performed during the quarter.
2. Office,
Furniture, Equipment and Materials. Christensen
shall (i) provide all equipment and materials necessary to perform the Services,
and (ii) have the right to perform the Services in the manner, at the times and
locations, and using the means Christensen in his sole discretion deems
necessary and appropriate; provided, however, that if the Company determines, in
its sole discretion, that it better facilitates its communication with
Christensen and enhances work product delivery and efficiency, Christensen may
be allowed to use surplus office space and furniture at the Company’s
headquarters and have access to and utilize the Company’s email, voice mail and
computer network systems (the “Systems”) on the same terms and conditions
governing the use of office space and Systems by other independent contractors.
3. Expense
Reimbursement. Christensen
shall be responsible for his own business expenses incurred in rendering the
Services pursuant to this Agreement; provided, however, that the Company shall
reimburse Christensen for expenses incurred for duplication of documents, fax
and long distance telephone charges, special messengers, couriers, postal
services, expenses associated with computerized legal research, and travel
expenses (when travel is requested by the Company), including airfare, meals,
lodging and other similar business expenses.
4. Term of
Agreement. The term of this
Agreement shall be for a period of three (3) years, commencing on the date
hereof and expiring on March 30, 2008 (the “Term”); provided, however, that the
Term shall automatically be extended for successive one (1) year periods unless
either party gives written notice of non-renewal prior to 5:00 PM of the date
one year prior to the expiration date of the Term, or any extended period of the
Term. The foregoing notwithstanding, in the event Christensen gives written
notice to the Company of his intent to accept a bona fide third-party offer of
employment that would preclude him from performing part or all of the Services
during any portion of the Term or extended term, Christensen shall, at the
option of the Company, continue to provide Services on a winding down transition
basis for a period not to exceed 90 days, at the end of which period this
Agreement shall terminate.
5. Federal and
State Income Taxes. The Company
shall have no responsibility for federal or state income tax withholding, FICA,
worker’s compensation insurance, or any other state or federal payments for or
on behalf of Christensen. Christensen is personally liable for all income tax,
FICA and other similar obligations incurred with respect to payments made by the
Company to Christensen pursuant to this Agreement and on the earnings paid to
any workers hired by Christensen, and Christensen shall indemnify and hold the
Company harmless from and against any such liabilities, claims or
obligations.
6. Company
Benefits. Other than COBRA
and any other benefits to which he is entitled as a former employee of the
Company, Christensen will not be eligible to participate in any medical, health,
life, disability, or other insurance programs or other benefits provided by the
Company to its regular employees.
7. Independent
Attorney. Christensen
represents that he a member of the Utah and California Bar Associations and
holds himself out to the business community as an attorney licensed to practice
law in the states of Utah and California. The Company acknowledges that
Christensen is not prohibited from providing legal and business consulting
services to others, and that he does in fact offer to perform and performs such
services for others in the course of operating his own business.
8. Confidentiality. Christensen
agrees to maintain in confidence all Company or Company client-related
information which Christensen may receive as a result of his attorney-client
relationship with the Company. Further, Christensen agrees that he will not
disclose to anyone, for any reason, or use directly or indirectly to compete
with The Company, any confidential information, including, without limitation,
client information, client and prospective client lists, trade secrets, etc.,
that may be accessible to Christensen in connection with his working
relationship with the Company.
9. Independent
Contractor. Nothing
contained in this Agreement shall be deemed or construed by the parties hereto
or by any third party to create the relationship of employer and employee, it
being expressly understood and agreed that neither any provision contained in
this Agreement nor any act or acts of the parties hereto shall be deemed to
create any relationship between the Christensen and the Company other than the
relationship of an attorney and his client.
10. Choice of
Law. This Agreement
shall be interpreted according to the laws of the State of Utah.
11. Entire
Agreement. This Legal
Services Agreement reflects the entire agreement between the parties relative to
the subject matter hereof and supercedes any oral or written agreements relating
thereto.
|
Date: |
March 29, 2005 |
/s/ VAL JOHN
CHRISTENSEN |
|||
|
Val John
Christensen |
|||||
|
FRANKIN
COVEY CO. |
|||||
|
Date: |
March 29, 2005 |
By: |
/s/ ROBERT
A. WHITMAN |
||
|
Robert A.
Whitman |
|||||
|
Its: |
Chairman
& CEO |