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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO ______________
FRANKLIN COVEY CO.
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(Exact name of registrant as specified in its charter)
Utah 1-11107 87-0401551
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2200 West Parkway Boulevard
Salt Lake City, Utah 84119-2331
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (801) 817-1776
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class Registered
----------------------------------- ---------------------------------------
Common Stock, $.05 Par Value New York Stock Exchange
[ ] Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant on November 1, 2000, based upon the closing sale price of the
Common Stock of $8.25 per share on that date, was approximately $140,803,583.
Shares of the Common Stock held by each officer and director and by each person
who may be deemed to be an affiliate of the Registrant have been excluded.
As of November 1, 2000, the Registrant had 20,643,182 shares of Common
Stock outstanding.
Parts of the Registrant's Proxy Statement for the Registrant's Annual
Meeting of Shareholders, which is scheduled to be held on January 12, 2001, are
incorporated by reference in Part III of this Form 10-K.
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1
FORM 10-K/A
AMENDMENT NO. 1
The Registrant hereby includes the final version of the Employment
Agreement, preliminarily filed as exhibit 10-21 to Form 10-K.
2
FORM 10-K/A
AMENDMENT NO. 1
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRANKLIN COVEY
By: /s/ Val John Christensen
------------------------------
Val John Christensen
Executive Vice President,
General Counsel and Secretary
Date: January 11, 2001
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FORM 10-K/A
AMENDMENT NO. 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of September 1, 2000,
is made and entered into by and between Franklin Covey Co., a Utah corporation
(the "Company"), and Robert A. Whitman ("Executive").
WHEREAS, Executive has been serving as the Chairman of the Board, President
and Chief Executive Officer
of the Company;
WHEREAS, in order to induce Executive to continue to serve in such
positions, the Company desires to provide Executive with compensation and other
benefits on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive is willing to continue such employment and perform
services for the Company, on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, it is agreed as follows:
1. EMPLOYMENT, POSITIONS AND DUTIES.
1.1 TERM. The Company hereby agrees to employ Executive and Executive
hereby agrees to undertake employment with the Company upon the terms and
conditions set forth in this Agreement. Executive's employment will be for a
term beginning on January 1, 2000, and, subject to earlier expiration upon
Executive's termination under Section 5, expiring on August 31, 2007 (the
"Initial Term"), unless the Initial Term is extended on such terms and
conditions and for such period of time as may be agreed upon in writing by
Executive and the Company. The Initial Term, as so extended or earlier
terminated, is referred to in this Agreement as the "Term."
1.2 POSITIONS AND DUTIES. Throughout the Term, Executive will serve as
President and Chief Executive Officer and/or Executive Chairman of the Company
and perform the duties of such positions reporting to the Board of Directors of
the Company. In addition, the Company will use its best efforts to cause
Executive to be elected as Chairman of the Board of Directors of the Company
(hereinafter referred to as the "Board"). Executive will perform such services
as are normally delegated to such positions and such other additional services
as may be reasonably delegated to him from time to time by the Board. Executive
further agrees to hold such additional positions with the Company as may be
assigned to him from time to time by the Board. During the Term, Executive will
be the Company's full-time employee and, except as may otherwise be approved in
advance in writing by the Board, and during vacation periods and reasonable
periods of absence due to sickness, personal injury or other disability,
Executive will devote substantially all of his working time and efforts to his
duties under this Agreement. Notwithstanding the foregoing, Executive may (i)
subject to the approval of the Board, serve as a director or advisory committee
member of noncompeting for-profit companies, (ii) manage personal and family
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investments and (iii) serve as an officer, director, trustee or otherwise
participate in purely educational, welfare, social, charitable, religious and
civic organizations. In connection with his employment during the Term, unless
otherwise agreed by Executive and the Board, Executive will be based at the
Company's principal executive offices in Salt Lake City, Utah. Executive will
undertake normal business travel on behalf of the Company, the reasonable
expenses of which will be paid by the Company pursuant to Section 4.
1.3 INDEMNIFICATION. The Company will provide to Executive its standard
indemnification for officers and directors of the Company.
2. COMPENSATION.
2.1 SALARY. During the Term, the Company will pay Executive an annual base
salary ("Base Salary") of $500,000, which will be reviewed annually by the
Organization and Compensation Committee of the Board (the "Compensation
Committee"), provided, however, that the Organization and Compensation Committee
will not be required to review Executive's Base Salary prior to the fiscal year
of the Company beginning September 1, 2001. Base Salary may be increased, but
not decreased, and as so adjusted will constitute "Base Salary" under this
Agreement. Base Salary will be payable at the times and in the manner consistent
with the Company's general policies regarding compensation of executive
officers.
2.2 ANNUAL INCENTIVE COMPENSATION. Executive will be eligible to
participate in an annual cash incentive program on terms commensurate with
Executive's position and level of responsibility; provided, however, that
Executive's annual target incentive compensation will be not less than 100% of
Base Salary (prorated for any fiscal year of the Company in which Executive is
employed for less than 12 full months), with a potential pay-out range from zero
to 150% of such Base Salary based on Executive's attainment of performance
objectives as determined by the Compensation Committee. Except as set forth in
the preceding sentence, nothing in this Section 2.2 will guarantee to Executive
any specific amount of incentive compensation.
2.3 LONG-TERM INCENTIVE COMPENSATION.
2.3.1 The Company will grant to Executive, pursuant to the terms of the
Company's 1992 Stock Incentive Plan and the terms and conditions set forth in
this Section 2.3.1, an option to purchase 1,602,000 shares of the Company's
common stock, par value $.01 per share, at an exercise price of $14.00 per
share. Except as provided in Section 5, the option may be exercised only while
Executive is employed by the Company as either its Chief Executive Officer or as
its Executive Chairman. The option will be fully exercisable on August 31, 2007,
and will be exercisable prior to August 31, 2007, in accordance with the
following schedule, on or after any date that the average closing sale price of
the Company's common stock for the preceding 90 consecutive trading days equals
or exceeds the average price set forth in the schedule:
5
Cumulative Number of
Average Closing Shares for which
Price Per Share Option is Exercisable
--------------- ---------------------
$20 801,000
$25 934,500
$30 1,068,000
$35 1,201,500
$40 1,335,000
$45 1,418,500
$50 or more 1,602,000
For purposes of this Agreement, the closing sale price of the Company's common
stock will be the closing sale price in the principal market in which the common
stock is traded at any relevant time, and a trading day is a day on which there
is a sale of the Company's common stock in such market. To the extent
unexercised, the option will expire and cease to be exercisable on August 31,
2010.
2.3.2 At Executive's request, the Company will lend to Executive on a full
recourse basis an amount equal to the aggregate exercise price of any shares of
common stock purchased on exercise of the option described in Section 2.3.1 plus
the aggregate amount of federal, state and local income taxes incurred by
Executive as a result of such exercise. Any such loan will become due and
payable to the extent Executive sells or otherwise disposes of shares of common
stock purchased with the loan proceeds and will become due and payable in full,
without regard to any such sales, five years after the date of the loan. All
other terms and conditions of the loan will be substantially similar to the
terms and conditions of loans to key employees in effect from time to time under
the Company's Management Stock Purchase Loan Program.
3. EMPLOYEE BENEFITS.
3.1 EMPLOYEE BENEFIT PROGRAMS, PLANS AND PRACTICES. During the Term, the
Company will provide Executive and his eligible dependents, subject to the terms
and conditions of the applicable plans as they may be amended from time to time,
participation in all Company-sponsored employee benefit plans, including all
employee retirement income and welfare benefit policies, plans, programs or
arrangements in which senior executives of the Company participate, including
the Company's health and disability plans, 401(k) plan and voluntary
nonqualified deferred compensation plan, if any such plans are provided by the
Company, in a manner commensurate with his position and level of responsibility
in the Company.
3.2 VACATION AND FRINGE BENEFITS. Executive will be entitled to six weeks
vacation in accordance with the Company's vacation policy and to fringe benefits
made available to senior executives of the Company commensurate with his
position and level of responsibility in the Company.
6
4. EXPENSES. During the Term, the Company will promptly reimburse Executive for
all travel and other business expenses that Executive incurs in the course of
performing his duties under this Agreement in a manner commensurate with
Executive's position and level of responsibility with the Company and in
accordance with the Company's policies and rules relating to the reimbursement
of such expenses.
5. TERMINATION OF EMPLOYMENT. The termination of Executive's employment will be
governed by the following provisions:
5.1 VOLUNTARY TERMINATION BY EXECUTIVE; DISCHARGE FOR CAUSE.
5.1.1 During the Term, the Company may terminate Executive's
employment hereunder for Cause (as hereinafter defined). In the event that
during the Term Executive's employment is terminated by the Company for
Cause or by Executive other than for Good Reason (as defined in Section
5.2.1) or other than as a result of Executive's total and permanent
disability (within the meaning of Section 5.2.1) or death, the Company will
pay as soon as practicable to Executive (i) the earned and unpaid Base
Salary to which Executive is entitled, pursuant to Section 2.1, and any
other compensation earned but not yet paid through the date of Executive's
termination, which will include any amounts payable with respect to prior
years (collectively, the "Compensation Payments") and (ii) any amounts owed
for accrued but unused vacation days (the "Vacation Payment"), and
Executive will be entitled to no other compensation, except as otherwise
due to him under applicable law or the terms of any applicable plan or
program and except in settlement of deferred compensation arrangements, if
any, in accordance with their terms. Executive will not be entitled, among
other things, to the payment of any annual incentive compensation in
respect of all or any portion of the fiscal year in which such termination
occurs.
5.1.2 For purposes of this Agreement, the Company will have "Cause" to
terminate Executive's employment hereunder if (i) Executive has been
convicted by a court of competent jurisdiction of the commission of a
felony (other than a traffic violation or as a result of vicarious
liability), (ii) Executive has willfully and continuously failed to attempt
in good faith to perform his duties after written notice from the Board of
such failure, (iii) Executive has willfully failed or refused to attempt in
good faith to comply with a specific and proper directive of the Board
delivered to him in writing, (iv) Executive engaged in willful misconduct
with regard to the Company that is materially injurious to the Company, or
(v) Executive has committed a serious breach of trust in disregard of the
Company's interest or that is undertaken for personal gain. Any act or
failure to act by Executive will be considered as "willful" if it was done
or omitted to be done by him not in good faith, and will exclude any act or
failure to act resulting from Executive's physical or mental impairment.
Prior to taking any action, the Board will provide Executive with notice
and an opportunity to appear with counsel before a special meeting of the
Board, and where possible, will provide Executive with a reasonable
opportunity to cure the act or failure to act that is alleged to constitute
"Cause." Such Board action will be taken by a resolution duly adopted by
the Board.
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5.2 INVOLUNTARY TERMINATION.
5.2.1 During the Term, Executive's employment hereunder may be
terminated by the Company for any reason other than Cause by delivery in
accordance with Section 9.4 to Executive of a notice of termination and a
copy of a resolution duly adopted by the Board; provided, however, that the
mere failure to extend the Initial Term will not be deemed to be a
termination of Executive's employment. Executive will be treated for
purposes of this Agreement as having been involuntarily terminated other
than for Cause if, during the Term, Executive dies, becomes totally and
permanently disabled (as hereinafter defined) or terminates his employment
with the Company prior to termination for Cause for any of the following
reasons (each, a "Good Reason"): (i) the Company's breach of any material
provision of this Agreement which has not been cured within 30 days after
written notice to the Company of such breach from Executive; (ii) the
failure to elect or reelect or otherwise to maintain Executive as a
director of the Company or as Chairman or Chief Executive Officer of the
Company; (iii) a material reduction in Executive's duties, responsibilities
or authority; and (iv) the relocation of Executive's principal place of
employment more than 50 miles from the Company's current executive offices
in Salt Lake City, Utah. For purposes of this Section 5.2, Executive will
be totally and permanently disabled if he is disabled within the meaning of
the Company's long-term disability benefit plan or insurance policy
applicable to Executive and he remains so disabled for a period of at least
six months.
5.2.2 In the event Executive's employment is terminated during the
Term pursuant to Section 5.2.1, the Company will pay to Executive as soon
as practicable (i) the Compensation Payments, (ii) an amount equal to 2 1/2
times Executive's Base Salary, (iii) the Vacation Payment, (iv) the annual
incentive compensation under Section 2.2 at the target level of performance
in respect of the fiscal year of the Company in which Executive's
termination occurs, prorated for the number of days until Executive's
termination during such fiscal year, (v) an amount equal to 2 1/2 times the
average annual incentive compensation payment awarded to Executive pursuant
to Section 2.2 for the three fiscal years of the Company immediately
preceding the fiscal year in which Executive's employment is terminated,
and (vi) such payments under applicable plans or programs, including but
not limited to those referred to in Section 3.1, to which Executive is
entitled pursuant to the terms of such plans or programs. In addition, (x)
Executive, his spouse and dependents will be entitled to continued medical,
dental and other health benefits under the Company's health benefit plans
or programs in which he participated at termination of employment in lieu
of COBRA continuation coverage, provided he pays the applicable premium for
such coverage charged to similarly situated active employees of the
Company, (y) all stock options remain exercisable, to the extent
exercisable at Executive's termination of employment, for a period of five
years following the date of Executive's termination of employment or, if
less, the period ending on August 31, 2010, and (z) all deferred
compensation arrangements, if any, will be settled in accordance with their
terms.
8
5.3 CHANGE IN CONTROL.
5.3.1 For purposes of this Agreement, "Change in Control" means the
occurrence during the Term of any of the following events:
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the combined voting power of
the then outstanding voting securities ("Voting Stock") of the
Company; provided, however, that the following acquisitions will not
constitute a Change in Control: (A) any issuance of Voting Stock of
the Company directly from the Company that is approved by the
Incumbent Board (as defined in Section 5.3.1(ii)), (B) any acquisition
by the Company of Voting Stock of the Company, (C) any acquisition of
Voting Stock of the Company by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the
Company, or (D) any acquisition of Voting Stock of the Company by any
Person pursuant to a Business Combination that complies with clauses
(A), (B) and (C) of Section 5.3.1(iii), or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a Director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of
at least two-thirds of the Directors then comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for
director, without objection to such nomination) will be deemed to have
been a member of the Incumbent Board; or
(iii) consummation of a reorganization, merger or consolidation,
a sale or other disposition of all or substantially all of the assets
of the Company, or other transaction (each, a "Business Combination"),
unless, in each case, immediately following such Business Combination,
(A) all or substantially all of the individuals and entities who were
the beneficial owners of Voting Stock of the Company immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 50% of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such Business
Combination (including, without limitation, an entity which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries), (B) no Person (other than the Company, such entity
resulting from such Business Combination, or any employee benefit plan
(or related trust) sponsored or maintained by the Company, any
subsidiary of the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of
the combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such Business Combination, and (C)
at least a majority of the members of the Board of Directors of the
entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement
or of the action of the Board providing for such Business Combination;
or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a
Business Combination that complies with clauses (A), (B) and (C) of
Section 5.3.1(iii).
9
5.3.2 If (i) a Change in Control occurs during the Term, (ii) the
Change in Control has not been approved by the Incumbent Board and (iii)
during the 24-month period following the date of the Change in Control,
Executive's employment is terminated by the Company for any reason other
than Cause or by Executive for Good Reason, the Company will pay to
Executive the amounts set forth in Section 5.2.2 and will provide Executive
with the benefits set forth in such Section, except that all stock options
held by Executive on the date of such termination of employment will be
fully exercisable without regard to the exercise schedule set forth in
Section 2.3.1 or any applicable stock option agreement.
5.3.3 If a Change in Control occurs during the Term, and the Change in
Control has been approved by the Incumbent Board, 801,000 shares of the
Company's common stock subject to the stock option described in Section
2.3.1 (or if the number of shares subject to such option that are not
immediately exercisable is less than 801,000 shares, such lesser number of
shares) will immediately become exercisable on the date of the Change in
Control without regard to the exercise schedule set forth in that Section
or the vesting provisions of any applicable stock option agreement. If,
during the 24-month period following the date of such Change in Control,
Executive's employment is terminated by the Company for reasons other than
Cause or by Executive for Good Reason, the Company will pay to Executive
the amounts set forth in Section 5.2.2 and will provide Executive with the
benefits set forth in such Section.
5.3.4 Anything in this Agreement to the contrary notwithstanding, in
the event that it is determined (as hereinafter provided) that any payment
(other than the Gross-Up payments provided for in this Section 5.3.4 and
Annex A) or distribution by the Company or any of its affiliates or any
other person in connection with the Change in Control to or for the benefit
of Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, or the lapse or termination
of any restriction on, or the vesting or exercisability of, any stock
option (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then Executive will be
entitled to receive an additional payment or payments (collectively, a
"Gross-Up Payment"). The Gross-Up Payment will be in an amount such that,
after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment. For
purposes of determining the amount of the Gross-Up Payment, Executive will
be considered to pay (x) federal income taxes at the highest rate in effect
in the year in which the Gross-Up Payment will be made and (y) state and
local income taxes at the highest rate in effect in the state or locality
in which the Gross-Up Payment would be subject to state or local tax, net
of the maximum reduction in federal income tax that could be obtained from
deduction of such state and local taxes. The obligations set forth in this
Section 5.3.4 will be subject to the procedural provisions described in
Annex A.
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5.4 NONDUPLICATION OF BENEFITS. To the extent, and only to the extent, a
payment or benefit that is paid or provided under this Section 5 would also be
paid or provided under the terms of any plan, program, agreement or arrangement
applicable to Executive, such applicable plan, program, agreement or arrangement
will be deemed to have been satisfied by the payment made or benefit provided
under this Agreement.
5.5 RESIGNATIONS. Except to the extent requested by the Board, upon any
termination of Executive's employment with the Company, Executive will
immediately resign all positions and directorships with the Company and each of
its subsidiaries and affiliates.
5.6 RELEASE. The right of Executive to receive termination payments and
benefits under Section 5.3 is conditioned on (i) the execution by Executive of a
mutual general release in a form reasonably satisfactory to the Company and
typically used in the context of the termination of an executive officer that
will provide only for a release of specific claims arising out of, or relating
to, Executive's employment with the Company and will not provide for the release
of any claims for payments and benefits under this Agreement (or under any other
plan, policy or arrangement, including equity plans of the Company or any of its
affiliates in which Executive participates or otherwise has rights) and rights
of indemnification provided to Executive by the Company and (ii) the expiration
of any revocation period specified in such release. 6. Mitigation and Offset.
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of
Executive hereunder or otherwise.
7. COVENANTS.
7.1 COMPETITIVE ACTIVITY. During the period of Executive's employment by
the Company and for a period of three years thereafter, Executive will not,
without the prior written consent of the Company, which consent may be withheld
for any reason or no reason, directly or indirectly engage in any Competitive
Activity. For this purpose, "Competitive Activity" means Executive's
participation in the management of any business enterprise if such enterprise
engages in substantial and direct competition with the Company and such
enterprise's sales of any product or service competitive with any product or
service of the Company amounted to 10% or more of such enterprise's net sales
for its most recently completed fiscal year and if the Company's net sales of
said product or service amounted to 10% or more of the Company's net sales for
its most recently completed fiscal year. "Competitive Activity" will not include
(i) the mere ownership of securities in any such enterprise, provided, however,
in the case of publicly-traded enterprises, such ownership does not exceed 5% of
the outstanding voting securities or units of such enterprise, and the exercise
of rights appurtenant thereto or (ii) participation in the management of any
such enterprise other than in connection with the competitive operations of such
enterprise. The Company will promptly and in good faith respond in writing to
any request made by Executive as to whether an activity, engagement or
employment contemplated by Executive constitutes Competitive Activity for
purposes of this Agreement.
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7.2 CONFIDENTIALITY. During the Term, the Company agrees that it will
disclose to Executive its confidential or proprietary information (as defined in
this Section 7.2) to the extent necessary for Executive to carry out his
obligations to the Company. Executive hereby covenants and agrees that he will
not, without the prior written consent of the Company, during the Term or
thereafter disclose to any person not employed by the Company, or use in
connection with engaging in competition with the Company, any confidential or
proprietary information of the Company. For purposes of this Agreement, the term
"confidential or proprietary information" will include all information of any
nature and in any form that is owned by the Company and that is not publicly
available (other than by Executive's breach of this Section 7.2) or generally
known to persons engaged in businesses similar or related to those of the
Company. Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees, industry
contracts, strategic business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all other information
of a confidential or proprietary nature. For purposes of the preceding two
sentences, the term "Company" will also include any subsidiary of the Company
(collectively, the "Restricted Group"). The foregoing obligations imposed by
this Section 7.2 will not apply (i) during the Term, in the course of the
business of and for the benefit of the Company, (ii) if such confidential or
proprietary information has become, through no fault of Executive, generally
known to the public or (iii) if Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement).
7.3 NONSOLICITATION. Executive hereby covenants and agrees that during the
Term and for two years thereafter Executive will not, except in connection with
his duties under this Agreement, without the prior written consent of the
Company on behalf of Executive or on behalf of any person, firm or company,
directly or indirectly, attempt to solicit or hire, or assist any other person
in so soliciting or hiring, any employee of the Restricted Group, or any person
who has received an offer of employment from the Restricted Group, to give up,
or to not commence, employment or a business relationship with the Restricted
Group.
7.4 ENFORCEMENT. Executive and the Company agree that the covenants
contained in Sections 7.1, 7.2 and 7.3 are reasonable under the circumstances,
and further agree that if in the opinion of any court of competent jurisdiction
any such covenant is not reasonable in any respect, such court will have the
right, power and authority to excise or modify any provision or provisions of
such covenants as to the court will appear not reasonable and to enforce the
remainder of the covenants as so amended. Executive acknowledges and agrees that
the remedy at law available to the Company for breach of any of his obligations
under Sections 7.1, 7.2 and 7.3 would be inadequate and that damages flowing
from such a breach may not readily be susceptible to being measured in monetary
terms. Accordingly, Executive acknowledges, consents and agrees that, in
addition to any other rights or remedies that the Company may have at law, in
equity or under this Agreement, upon adequate proof of his violation of any such
provision of this Agreement, the Company will be entitled to immediate
injunctive relief and may obtain a temporary order restraining any threatened or
further breach, without the necessity of proof of actual damage.
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7.5 POST-TERMINATION ASSISTANCE. Executive agrees that after his employment
with the Company has terminated he will provide, upon reasonable notice and in
coordination with his other activities, such information and assistance to the
Company as may reasonably be requested by the Company in connection with any
litigation in which it or any of its affiliates is or may become a party and
that is related to a matter arising during the Term of which Executive has
knowledge; provided, however, that the Company agrees to reimburse Executive on
an after-tax basis for any related out-of-pocket expenses, including travel and
legal expenses.
8. SURVIVAL. The expiration or termination of the Term will not impair the
rights or obligations of any party hereto that accrue hereunder prior to such
expiration or termination, except to the extent specifically stated herein,
without limiting the survival of any other provisions. In addition to the
foregoing, Executive's covenants contained in Sections 7.1, 7.2, 7.3 and 7.5 and
the Company's obligations under Section 5, will survive the expiration or
termination of this Agreement or of Executive's employment.
9. MISCELLANEOUS PROVISIONS.
9.1 BINDING ON SUCCESSORS; ASSIGNMENT. This Agreement will be binding upon
and inure to the benefit of the Company, Executive and each of their respective
successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable;
provided, however, that neither this Agreement nor any rights or obligations
hereunder will be assignable or otherwise subject to hypothecation by Executive
(except by will or by operation of the laws of intestate succession) or by the
Company, except that the Company may assign this Agreement to any successor
(whether by merger, purchase or otherwise) to all or substantially all of the
stock, assets or businesses of the Company, if such successor expressly agrees
to assume the obligations of the Company hereunder pursuant to a written
agreement delivered to Executive.
9.2 GOVERNING LAW. This Agreement will be governed, construed, interpreted
and enforced in accordance with the substantive laws of the State of Utah,
without regard to conflicts of law principles.
9.3 SEVERABILITY. Any provision of this Agreement that is deemed invalid,
illegal or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.
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9.4 NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or upon actual receipt if mailed
by United States mail or sent by overnight courier service and addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive office and to Executive at his principal residence, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith.
9.5 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one and the same Agreement.
9.6 ENTIRE AGREEMENT. Except as provided in the Change in Control
Agreement, the terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to Executive's employment by
the Company and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement will
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding to vary the terms of this Agreement.
9.7 AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, approved by the Company and
signed by Executive and the Company. Failure on the part of either party to
complain of any action or omission, breach or default on the part of the other
party, no matter how long the same may continue, will never be deemed to be a
waiver of any rights or remedies hereunder, at law or in equity. Executive or
the Company may waive compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply with or perform
only through an executed writing; provided, however, that such waiver will not
operate as a waiver of, or estoppel with respect to, any other or subsequent
failure.
9.8 NO INCONSISTENT ACTIONS. The parties will not voluntarily undertake or
fail to undertake any action or course of action that is inconsistent with the
provisions or essential intent of this Agreement. Furthermore, it is the intent
of the parties hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.
9.9 HEADINGS AND SECTION REFERENCES. The headings used in this Agreement
are intended for convenience or reference only and will not in any manner
amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.
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9.10 BENEFICIARIES. Executive will be entitled to select (and change, to
the extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death, including severance payments, and may change such election, in either
case by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to "Executive" will be deemed, where appropriate, to his beneficiary,
estate or other legal representative.
9.11 WITHHOLDING. The Company will be entitled to withhold from payment any
amount of withholding required by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
FRANKLIN COVEY CO.
By:
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Name:
---------------------------------------
Title:
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EXECUTIVE
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Robert A. Whitman
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ANNEX A
EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS
(1) Subject to the provisions of Paragraph (5) hereof, all determinations
required to be made under Section 5.3.4 and Annex A, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to Executive and the
amount of such Gross-Up Payment, if any, will be made by a nationally recognized
accounting firm (the "National Firm") selected by the Company in its sole
discretion, which National Firm may be the Company's independent auditors. The
Company will direct the National Firm to submit its determination and detailed
supporting calculations to both the Company and Executive within 60 calendar
days after the date of Executive's termination of employment, and any such other
time or times as may be requested by the Company or Executive. If the National
Firm determines that any Excise Tax is payable by Executive, the Company will
pay the required Gross-Up Payment to Executive within five business days after
receipt of such determination and calculations with respect to any Payment to
Executive. If the National Firm determines that no Excise Tax is payable by
Executive with respect to any material benefit or amount (or portion thereof),
it will, at the same time as it makes such determination, furnish the Company
and Executive with an opinion that Executive has substantial authority not to
report any Excise Tax on his federal, state or local income or other tax return
with respect to such benefit or amount. As a result of the uncertainty in the
application of Section 4999 of the Code and the possibility of similar
uncertainty regarding applicable state or local tax law at the time of any
determination by the National Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Paragraph (5) hereof and Executive thereafter is required to make a payment
of any Excise Tax, Executive will direct the National Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and Executive as promptly
as possible. Any such Underpayment will be promptly paid by the Company to, or
for the benefit of, Executive within five business days after receipt of such
determination and calculations.
(2) The Company and Executive will each provide the National Firm access to
and copies of any books, records and documents in the possession of the Company
or Executive, as the case may be, reasonably requested by the National Firm, and
otherwise cooperate with the National Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by Paragraph
(1) hereof. Any determination by the National Firm as to the amount of the
Gross-Up Payment will be binding upon the Company and Executive.
(3) The federal, state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with the
determination of the National Firm with respect to the Excise Tax payable by
Executive. Executive will report and make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
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correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns
(with any irrelevant portions of such returns to be redacted), if relevant, as
filed with the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the filing of
Executive's federal income tax return, or corresponding state or local tax
return, if relevant, the National Firm determines that the amount of the
Gross-Up Payment should be reduced, Executive will within five business days pay
to the Company the amount of such reduction.
(4) The fees and expenses of the National Firm for its services in
connection with the determinations and calculations contemplated by Paragraph
(1) hereof will be borne by the Company.
(5) Executive will notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification will be given as promptly as practicable but no later than 10
business days after Executive actually receives notice of such claim and
Executive will further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by Executive). Executive will not pay such claim prior to the expiration
of the 30-calendar-day period following the date on which he gives such notice
to the Company or, if earlier, the date that any payment of amount with respect
to such claim is due. If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive will:
(A) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(B) take such action in connection with contesting such claim as the
Company reasonably requests in writing from time to time, including without
limitation accepting legal representation with respect to such claim by an
attorney competent in respect of the subject matter and reasonably selected
by the Company;
(C) cooperate with the Company in good faith in order effectively to
contest such claim; and
(D) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless Executive, on an after-tax basis,
for and against any Excise Tax or income or other tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Paragraph (5), the Company will control all proceedings taken in connection with
the contest of any claim contemplated by this Paragraph (5) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
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(provided, however, that Executive may participate therein at his own cost and
expense) and may, at its option, either direct Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company determines; provided, however, that if the
Company directs Executive to pay the tax claimed and sue for a refund, the
Company will advance the amount of such payment to Executive on an interest-free
basis and will indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income or other tax, including interest or penalties with
respect thereto, imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which the contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of any such contested claim will be limited
to issues with respect to which a Gross-Up Payment would be payable hereunder
and Executive will be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(6) If, after the receipt by Executive of an amount advanced by the Company
pursuant to Paragraph (5) hereof, Executive receives any refund with respect to
such claim, Executive will (subject to the Company's complying with the
requirements of Paragraph (5) hereof) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto), less any taxes Executive is required to pay on such
account. If, after the receipt by Executive of an amount advanced by the Company
pursuant to Paragraph (5) hereof, a determination is made that Executive is not
entitled to any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to contest such denial or refund prior
to the expiration of 30 calendar days after such determination, then such
advance will be forgiven and will not be required to be repaid and the amount of
any such advance will offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid by the Company to Executive pursuant to Section
5.3.4 and this Annex A.
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