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Exhibit 10.3
 
 

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (“Agreement”) is made as of March 14, 2007, by and among
FRANKLIN COVEY CO., a Utah corporation (“Borrower”), FRANKLIN COVEY PRINTING,
INC., a Utah corporation, FRANKLIN DEVELOPMENT CORPORATION, a Utah corporation
(“Development”), FRANKLIN COVEY TRAVEL, INC., a Utah corporation, FRANKLIN COVEY
CATALOG SALES, INC., a Utah corporation, FRANKLIN COVEY CLIENT SALES, INC., a
Utah corporation (“Client”), FRANKLIN COVEY PRODUCT SALES, INC., a Utah
corporation, FRANKLIN COVEY SERVICES, L.L.C., a Utah limited liability company
(“Services”), and FRANKLIN COVEY MARKETING, LTD., a Utah limited partnership
(“Marketing”) (individually and collectively, as the context requires,
“Guarantor” and, together with Borrower, individually and collectively, as the
context requires, “Debtor”), JPMORGAN CHASE BANK, N.A., a national banking
association (“Collateral Agent”), not in its individual capacity, but solely as
collateral agent for JPMORGAN CHASE BANK, N.A., a national banking association
(“Chase”), and ZIONS FIRST NATIONAL BANK, a national banking association
(“Zions” and, together with Chase, individually and collectively, as the context
requires, the “Secured Party”), in conjunction with the Guaranty made by
Guarantor in favor of Secured Party and the Loan made to Borrower by Secured
Party pursuant to the Loan Agreement.
 
WHEREAS, Guarantor has executed the Guaranty in favor of Secured Party, pursuant
to which Guarantor has agreed to guaranty repayment of the Loan;
 
WHEREAS, Borrower and Secured Party, as lender, have entered into the Loan
Agreement, pursuant to which Secured Party, subject to the terms and conditions
contained therein, is to make the Loan to Borrower;
 
WHEREAS, it is a condition precedent to Secured Party’s making any loans or
otherwise extending credit to Borrower under the Loan Agreement that Debtor
execute and deliver to Secured Party a security agreement in substantially the
form hereof encumbering all of the personal property assets of Debtor; and
 
WHEREAS, Debtor wishes to grant a security interest in favor of Collateral Agent
in all of Debtor’s personal property assets as herein provided.
 
NOW, THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
 
1.  Definitions. All capitalized terms used herein without definitions shall
have the respective meanings provided therefor in the Chase Loan Agreement. All
terms defined in the Utah Uniform Commercial Code, Utah Code Annotated Sections
70A-9a-101 et seq., and used herein shall have the same definitions herein as
specified therein. However, if a term is defined in Article 9a of the Utah
Uniform Commercial Code differently than in another Article of the Utah Uniform
Commercial Code, the term has the meaning specified in Article 9a. In addition
to the foregoing, the following terms as used herein (including, without
limitation, in the Recitals to this Agreement) are defined as follows:
 
1.1  “Chase Guaranty” means that certain Repayment Guaranty of even date
herewith from Guarantor in favor of Chase, as the same may be amended or
modified from time to time.
 
1.2  “Chase Loan” means the revolving line of credit extended by Chase to
Borrower pursuant and subject to the Chase Note, the Chase Loan Agreement and
the other Chase Loan Documents.
 
1.3  “Chase Loan Agreement” means that certain Revolving Line of Credit
Agreement of even date herewith by and between Borrower and Chase, as the same
may be amended or modified from time to time.
 
1.4  “Chase Loan Documents” means, collectively, the Chase Loan Agreement, the
Chase Note, the Security Documents, the Intercreditor Agreement and all other
documents that from time to time govern or evidence the Chase Obligations or
secure payment or performance thereof, as such documents may be amended or
modified from time to time.
 
1.5  “Chase Note” means that certain Secured Promissory Note of even date
herewith executed by Borrower and payable to Chase in the maximum principal
amount of $18,000,000, as the same may be amended or modified from time to time.
 
1.6  “Chase Obligations” means, collectively, (a) payment of the Chase Loan; (b)
with respect to Guarantor, the payment of the Guarantor Obligations (as defined
in the Chase Guaranty); (c) all of the terms, conditions, agreements,
stipulations, covenants, and provisions of this Agreement, all other Chase Loan
Documents, and any other agreement, document or instrument (and any and all
renewals, replacements, amendments, modifications or extensions thereof), given
by Debtor to Chase to evidence or to secure the indebtedness secured hereby; (d)
all late charges, default interest, prepayment charges or premiums, loan fees,
commitment fees and extension fees described in this Agreement and all other
Chase Loan Documents and all costs of collecting the indebtedness or other
amounts evidenced by this Agreement and all other Chase Loan Documents,
including any and all costs and expenditures of a receiver in possession and
reasonable attorneys’ fees; (e) payment of all sums advanced by Chase to protect
the Personal Property, with interest thereon equal to the highest default
interest rate as provided by the Chase Note; and (f) all modifications,
extensions and renewals of any of the obligations secured hereby, however
evidenced. This Agreement shall also secure the payment and performance of any
additional loans that may hereafter be made by Chase to Debtor which are
evidenced by a promissory note or notes or other writings stating that they are
secured by this Agreement. This Agreement shall also secure all amounts,
including costs of collection, payable under any guarantee(s) now or hereafter
relating to the obligations secured hereby.
 
1.7  “Event of Default” means the failure of Debtor to pay or perform any of the
Obligations as and when due to be paid or performed under the terms of the Loan
Documents.
 
1.8  “Guaranty” means, individually and collectively, as the context requires,
the Chase Guaranty and the Zions Guaranty.
 
1.9       "Intercreditor Agreement" means that certain Intercreditor Agreement
of even date herewith by and among Collateral Agent and Secured Party, as the
same may be amended or modified from time to time.
1.10  “Loan” means, individually and collectively, as the context requires, the
Chase Loan and the Zions Loan.
 
1.11  “Loan Agreement” means, individually and collectively, as the context
requires, the Chase Loan Agreement and the Zions Loan Agreement.
 
1.12  “Loan Documents” means, individually and collectively, as the context
requires, the Chase Loan Documents and the Zions Loan Documents.
 
1.13  “Note” means, individually and collectively, as the context requires, the
Chase Note and the Zions Note.
 
1.14  “Obligations” means, individually and collectively, as the context
requires, the Chase Obligations and the Zions Obligations.
 
1.15  “Personal Property” means all right, title, and interest of Debtor in (i)
all personal property now or hereafter owned by Debtor, (ii) all other rights
and interests of Debtor now or hereafter held in personal property, including,
without limiting the foregoing, all of Debtor’s present and future “Accounts,”
“Cash Proceeds,” “Chattel Paper,” “Collateral,” “Deposit Accounts,” “Electronic
Chattel Paper,” “Equipment,” “Fixtures,” “General Intangibles,” “Goods,”
“Instruments,” “Inventory,” “Investment Property,” “Letter-of-Credit Rights,”
“Noncash Proceeds,” and “Tangible Chattel Paper” (as such terms are defined in
the Uniform Commercial Code as in effect from time to time in the State of Utah,
or any other jurisdiction, as applicable (the “Uniform Commercial Code”)), (iii)
all personal property and rights and interests in personal property of similar
type or kind hereafter acquired by Debtor, (iv) all of Debtor’s right, title and
interest in and to all deposit accounts maintained with Secured Party or any
affiliate of Secured Party, (v) all appurtenances and additions thereto and
substitutions or replacements thereof, and (vi) all proceeds thereof (as
hereinafter provided).
 
1.16  “Zions Guaranty” means that certain Repayment Guaranty of even date
herewith from Guarantor in favor of Zions, as the same may be amended or
modified from time to time.
 
1.17  “Zions Loan” means the revolving line of credit extended by Zions to
Borrower pursuant and subject to the Zions Note, the Zions Loan Agreement and
the other Zions Loan Documents.
 
1.18      "Zions Loan Agreement" means that certain Revolving Line of Credit
Agreement of even date herewith by and between Borrower and Zions, as teh same
may be amended or modified from time to time.
 
1.19      "Zions Loan Documents" means, collectively, the Zions Loan Agreement,
the Zions Note, the Security Documents, the Intercreditor Agreement and all
other documents that from time to time govern or evidence the Zions Obligations
or secure payment of performance thereof, as such documents may be amended or
modified from time to time.
 
1.20      "Zions Note" means that certain Secured Promissory Note of even date
herewith executed by Borrower and payable to Zions in the maximum principal
amount of $7,000,000, as the same may be amended or modified from time to time.
 
1.21  “Zions Obligations” means, collectively, (a) payment of the Zions Loan;
(b) with respect to Guarantor, the payment of the Guarantor Obligations (as
defined in the Zions Guaranty); (c) all of the terms, conditions, agreements,
stipulations, covenants, and provisions of this Agreement, all other Zions Loan
Documents, and any other agreement, document or instrument (and any and all
renewals, replacements, amendments, modifications or extensions thereof), given
by Debtor to Zions to evidence or to secure the indebtedness secured hereby; (d)
all late charges, default interest, prepayment charges or premiums, loan fees,
commitment fees and extension fees described in this Agreement and all other
Zions Loan Documents and all costs of collecting the indebtedness or other
amounts evidenced by this Agreement and all other Zions Loan Documents,
including any and all costs and expenditures of a receiver in possession and
reasonable attorneys’ fees; (e) payment of all sums advanced by Zions to protect
the Personal Property, with interest thereon equal to the highest default
interest rate as provided by the Zions Note; and (f) all modifications,
extensions and renewals of any of the obligations secured hereby, however
evidenced. This Agreement shall also secure the payment and performance of any
additional loans that may hereafter be made by Zions to Debtor which are
evidenced by a promissory note or notes or other writings stating that they are
secured by this Agreement. This Agreement shall also secure all amounts,
including costs of collection, payable under any guarantee(s) now or hereafter
relating to the obligations secured hereby.
 
2.  Grant of Security Interest. Debtor hereby grants to Collateral Agent, to
secure the payment and performance in full of all of the Obligations, a security
interest in and so pledges and assigns to Collateral Agent all of the
“Collateral” as described in the Loan Agreement, together with all of Debtor’s
Personal Property and all other personal property assets of Debtor, wherever
located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof (all of the same being hereinafter called the
“Collateral”), including, without limitation, “Accounts,” “Cash Proceeds,”
“Chattel Paper,” “Collateral,” “Deposit Accounts,” “Electronic Chattel Paper,”
“Equipment,” “Fixtures,” “General Intangibles,” “Goods,” “Instruments,”
“Inventory,” “Investment Property,” “Letter-of-Credit Rights,” “Noncash
Proceeds,” and “Tangible Chattel Paper,” as defined in the Uniform Commercial
Code, as more particularly described on Exhibit A hereto, and all insurance
claims and other proceeds or products thereof, whether now owned or existing or
hereafter acquired or arising, wherever located and whether in Debtor’s
possession and control or in the possession and control of a third party.
Collateral Agent acknowledges that the attachment of its security interest in
any additional commercial tort claim as original collateral is subject to
Debtor’s compliance with Section 4.7.
 
3.  Authorization to File Financing Statements. Debtor hereby irrevocably
authorizes Collateral Agent at any time and from time to time to file in any
filing office in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the Collateral (i) as all
assets of Debtor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article
9a of the Uniform Commercial Code, or (ii) as being of an equal or lesser scope
or with greater detail, and (b) provide any other information required by part 5
of Article 9a of the Uniform Commercial Code, for the sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
Debtor is an organization, the type of organization and any organizational
identification number issued to Debtor and, (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as as-extracted
collateral or timber to be cut, a sufficient description of real property to
which the Collateral relates. Debtor agrees to furnish any such information to
Collateral Agent promptly upon Collateral Agent’s request. Debtor also ratifies
its authorization for Collateral Agent to have filed in any Uniform Commercial
Code jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.
 
4.  Other Actions. To further the attachment, perfection and first priority of,
and the ability of Collateral Agent to enforce, Collateral Agent’s security
interest in the Collateral, and without limitation on Debtor’s other obligations
in this Agreement, Debtor agrees, in each case at Debtor’s expense, to take the
following actions with respect to the following Collateral:
 
4.1  Promissory Notes and Tangible Chattel Paper. If Debtor shall at any time
hold or acquire any promissory notes or tangible chattel paper having an
original principal amount of $100,000 or more (but excluding loans made pursuant
to Borrower’s management common stock loan program (as described on Schedule
5.20 to the Chase Loan Agreement)), Debtor shall forthwith endorse, assign and
deliver such promissory notes or tangible chattel paper to Collateral Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as Collateral Agent may from time to time specify.
 
4.2  Deposit Accounts. For each deposit account that Debtor at any time opens or
maintains, Debtor shall, at Collateral Agent’s request and option, pursuant to
an agreement in form and substance satisfactory to Collateral Agent, either (a)
cause the depositary bank to comply at any time with instructions from
Collateral Agent to such depositary bank directing the disposition of funds from
time to time credited to such deposit account, without further consent of
Debtor, or (b) arrange for Collateral Agent to become the customer of the
depositary bank with respect to the deposit account, with Debtor being
permitted, only with the consent of Collateral Agent, to exercise rights to
withdraw funds from such deposit account. Collateral Agent agrees with Debtor
that Collateral Agent shall not give any such instructions or withhold any
withdrawal rights from Debtor, unless an Event of Default has occurred and is
continuing, or would occur, if effect were given to any withdrawal not otherwise
permitted by the Loan Documents. The provisions of this paragraph shall not
apply to (i) any deposit account for which Debtor, the depositary bank and
Collateral Agent have entered into a cash collateral agreement specially
negotiated among Debtor, the depositary bank and Collateral Agent for the
specific purpose set forth therein, (ii) a deposit account for which Collateral
Agent is the depositary bank and is in automatic control, and (iii) deposit
accounts specially and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of Debtor’s salaried
employees.
 
4.3  Investment Property. If Debtor shall at any time hold or acquire any
certificated securities in any Guarantor, Debtor shall forthwith endorse, assign
and deliver the same to Collateral Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as Collateral Agent may from time
to time specify. If any securities now or hereafter acquired by Debtor are
uncertificated and are issued to Debtor or its nominee directly by the issuer
thereof, Debtor shall promptly notify Collateral Agent thereof and, at
Collateral Agent’s request and option, pursuant to an agreement in form and
substance satisfactory to Collateral Agent, either (a) cause the issuer to agree
to comply with instructions from Collateral Agent as to such securities, without
further consent of Debtor or such nominee, or (b) arrange for Collateral Agent
to become the registered owner of the securities. If any securities, whether
certificated or uncertificated, or other investment property now or hereafter
acquired by Debtor are held by Debtor or its nominee through a securities
intermediary or commodity intermediary, Debtor shall promptly notify Collateral
Agent thereof and, at Collateral Agent’s request and option, pursuant to an
agreement in form and substance satisfactory to Collateral Agent, either (i)
cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from Collateral Agent to such securities intermediary as to such securities or
other investment property, or (as the case may be) to apply any value
distributed on account of any commodity contract as directed by Collateral Agent
to such commodity intermediary, in each case without further consent of Debtor
or such nominee, or (ii) in the case of financial assets or other investment
property held through a securities intermediary, arrange for Collateral Agent to
become the entitlement holder with respect to such investment property, with
Debtor being permitted, only with the consent of Collateral Agent, to exercise
rights to withdraw or otherwise deal with such investment property. Collateral
Agent agrees with Debtor that Collateral Agent shall not give any such
entitlement orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by Debtor, unless an Event of
Default has occurred and is continuing, or, after giving effect to any such
investment and withdrawal rights not otherwise permitted by the Loan Documents,
would occur. Without the prior written consent of Lender, neither Borrower,
Development, Client, Services nor Marketing shall (x) amend or cause to be
amended the Guarantor Operating Documents of Services or Marketing to provide
that the membership interests of Services or the partnership interests of
Marketing are a security and are governed by Article 8 of the Uniform Commercial
Code or (y) issue certificates evidencing the ownership of the membership or
partnership interests of Services or Marketing, respectively. The provisions of
this paragraph shall not apply to any financial assets credited to a securities
account for which Collateral Agent is the securities intermediary.
 
4.4  Collateral in the Possession of a Bailee. If any Collateral is at any time
in the possession of a bailee, Debtor shall promptly notify Collateral Agent
thereof and, at Collateral Agent’s request and option, shall promptly obtain an
acknowledgement from the bailee, in form and substance satisfactory to
Collateral Agent, that the bailee holds such Collateral for the benefit of
Collateral Agent, and that such bailee agrees to comply, without further consent
of Debtor, with instructions from Collateral Agent as to such Collateral.
Collateral Agent agrees with Debtor that Collateral Agent shall not give any
such instructions unless an Event of Default has occurred and is continuing or
would occur after taking into account any action by Debtor with respect to the
bailee.
 
4.5  Electronic Chattel Paper and Transferable Records. If Debtor at any time
holds or acquires an interest in any electronic chattel paper or any
“transferable record,” as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, Debtor shall promptly notify Collateral Agent thereof and, at the
request and option of Collateral Agent, shall take such action as Collateral
Agent may reasonably request to vest in Collateral Agent control, under Section
9a-105 of the Uniform Commercial Code, of such electronic chattel paper or
control under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record. Collateral Agent agrees with Debtor that Collateral Agent
will arrange, pursuant to procedures satisfactory to Collateral Agent and so
long as such procedures will not result in Collateral Agent’s loss of control,
for Debtor to make alterations to the electronic chattel paper or transferable
record permitted under Section 9a-105 of the Uniform Commercial Code or, as the
case may be, Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or Section 16 of the Uniform Electronic Transactions Act
for a party in control to make without loss of control, unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by Debtor with respect to such electronic chattel paper or
transferable record.
 
4.6  Letter-of-Credit Rights. If Debtor is at any time a beneficiary under a
letter of credit, Debtor shall promptly notify Collateral Agent thereof and, at
the request and option of Collateral Agent, Debtor shall, pursuant to an
agreement in form and substance satisfactory to Collateral Agent, either (i)
arrange for the issuer and any confirmer or other nominated person of such
letter of credit to consent to an assignment to Collateral Agent of the proceeds
of the letter of credit, or (ii) arrange for Collateral Agent to become the
transferee beneficiary of the letter of credit.
 
4.7  Commercial Tort Claims. If Debtor shall at any time hold or acquire a
commercial tort claim, Debtor shall promptly notify Collateral Agent in a
writing signed by Debtor of the particulars thereof and grant to Collateral
Agent in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to Collateral Agent.
 
4.8  Other Actions as to Any and All Collateral. Debtor further agrees, at the
request and option of Collateral Agent, to take any and all other actions
Collateral Agent may determine to be necessary or useful for the attachment,
perfection and first priority of, and the ability of Collateral Agent to
enforce, Collateral Agent’s security interest in any and all of the Collateral,
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that Debtor’s signature thereon is
required therefor, (b) causing Collateral Agent’s name to be noted as secured
party on any certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of Collateral
Agent to enforce, Collateral Agent’s security interest in such Collateral, (c)
complying with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of Collateral Agent to
enforce, Collateral Agent’s security interest in such Collateral, (d) using
commercially reasonable efforts to obtain governmental and other third party
waivers, consents and approvals in form and substance satisfactory to Collateral
Agent, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, (e) using commercially reasonable efforts
to obtain waivers from mortgagees in form and substance satisfactory to
Collateral Agent, (f) taking all actions under any earlier versions of the
Uniform Commercial Code or under any other law, as reasonably determined by
Collateral Agent to be applicable in any relevant Uniform Commercial Code or
other jurisdiction, including any foreign jurisdiction, and (g) acknowledging
the Intercreditor Agreement (but not any amendments or other modifications of
the Intercreditor Agreement). Borrower shall use commercially reasonable efforts
to cause to be delivered to Collateral Agent, within sixty (60) days after the
Closing Date, a landlord waiver and consent in a form reasonably acceptable to
Collateral Agent, from each of (a) Franklin SaltLake LLC, the landlord of the
premises leased by Development pursuant to that certain Master Lease Agreement
dated June 12, 2005, and (b) (i) CB Richard Ellis Investors, L.L.C. (“CBREI”),
the master landlord of the premises leased by EDS Information Services L.L.C.
(“EDS”) pursuant to that certain Lease Agreement dated as of June 26, 2001 with
Development, the landlord’s interest under which was assigned to CBREI by
Development pursuant to that certain Assignment of Lease dated as of June 26,
2001, and (ii) EDS, the sublandlord of the premises subleased by Borrower
pursuant to that certain Sublease Agreement dated as of June 26, 2001. Upon the
execution of each other real property lease to which Borrower or Guarantor is a
party as a tenant, Borrower shall use commercially reasonable efforts to cause
to be delivered to Collateral Agent a landlord waiver and consent from the
landlord under each such lease, in a form reasonably acceptable to Collateral
Agent.
 
4.9  Contesting Liens. Borrower shall promptly discharge, or cause to be
discharged, any liens or claims of lien filed or otherwise asserted in writing
against the Collateral other than the Permitted Exceptions. If Borrower fails
either to promptly discharge or contest any such liens or claims of lien, then
Collateral Agent may, in its sole and absolute discretion, but shall not be
required to, procure the release and discharge of any such lien and any judgment
or decree thereon, and in furtherance thereof may, in its sole and absolute
discretion, effect any settlement or compromise. All amounts expended by
Collateral Agent in connection with the provisions of this Section shall be
deemed to constitute an Advance under a Loan Agreement. In settling,
compromising or arranging for the discharge of any liens under this Section,
Collateral Agent shall not be required to establish or confirm the validity or
amount of the lien.
 
5.  Relation to Other Loan Documents. The provisions of this Agreement
supplement the provisions of any other Loan Documents granted by Debtor to
Collateral Agent which secures the payment or performance of any of the
Obligations. Nothing contained in the other Loan Documents shall derogate from
any of the rights or remedies of Collateral Agent hereunder.
 
6.  Intentionally Omitted.
 
7.  Representations and Warranties Concerning Debtor’s Legal Status. If
requested by Collateral Agent, Debtor shall complete and deliver to Collateral
Agent a certificate signed by Debtor and entitled “Perfection Certificate” (the
“Perfection Certificate”). Debtor represents and warrants to Collateral Agent as
follows: (a) Debtor’s exact legal name is that indicated in the introductory
paragraph hereto and in the Perfection Certificate, if any, and on Exhibit B
attached hereto, (b) Debtor is an organization of the type, and is organized in
the jurisdiction set forth in the introductory paragraph hereto and in the
Perfection Certificate, if any, and on Exhibit B attached hereto, (c) the
Perfection Certificate, if any, and Exhibit B attached hereto accurately set
forth Debtor’s organizational identification number or accurately state that
Debtor has none, (d) the Perfection Certificate, if any, and Exhibit B attached
hereto accurately set forth Debtor’s place of business or, if more than one, its
chief executive office, as well as Debtor’s mailing address, if different, (e)
all other information set forth on the Perfection Certificate, if any,
pertaining to Debtor is accurate and complete as of the date on which it was
executed by Debtor, and (f) Borrower will promptly notify Lender in writing of a
change in any information provided in the Perfection Certificate since the date
on which it was executed by Debtor.
 
8.  Covenants Concerning Debtor’s Legal Status. Debtor covenants with Collateral
Agent as follows: (a) without providing at least thirty (30) days’ prior written
notice to Collateral Agent, Debtor will not change its name, its place of
business or, if more than one, chief executive office, or its mailing address or
organizational identification number if it has one, (b) if Debtor does not have
an organizational identification number and later obtains one, Debtor shall
forthwith notify Collateral Agent of such organizational identification number,
and (c) Debtor will not change its type of organization, jurisdiction of
organization or other legal structure.
 
9.  Representations and Warranties Concerning Collateral, etc. Debtor further
represents and warrants to Collateral Agent as follows: (a) Debtor is the owner
of or has other rights in or power to transfer the Collateral, free from any
right or claim or any person or any adverse Lien or Encumbrance or security
interest, except for Liens or Encumbrances and security interests in favor of
Collateral Agent, Permitted Exceptions and other Liens or Encumbrances permitted
by the Loan Agreement, (b) none of the Collateral constitutes, or is the
proceeds of, “farm products” as defined in Section 9-102(a)(34) of the Uniform
Commercial Code, (c) Debtor holds no commercial tort claim except as indicated
on the Perfection Certificate, or as Debtor has notified Collateral Agent in
writing, (d) Debtor has at all times operated its business in compliance with
all applicable provisions of the federal Fair Labor Standards Act, as amended,
and with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances except, in each case where failure to comply would not
result in a Material Adverse Change, (e) all other information set forth on the
Perfection Certificate, if any, pertaining to the Collateral is accurate and
complete in all material respects as of the date of such certificate, and (f)
the security interests granted herein are perfected and are of first priority,
except to the extent of the Permitted Exceptions.
 
10.  Covenants Concerning Collateral, etc. Debtor further covenants with
Collateral Agent as follows except to the extent that failure to do so would not
cause a Material Adverse Change: (a) the Collateral, to the extent not delivered
to Collateral Agent pursuant to Section 4, will be kept at those locations
listed on the Perfection Certificate, if any, and on Exhibit B attached hereto
and Debtor will not remove the Collateral from such locations, other than in the
ordinary course of business or as permitted under the Loan Agreement or the
Guaranty, without providing at least thirty (30) days’ prior written notice to
Collateral Agent, (b) except for the security interest herein granted and liens
permitted by the Loan Documents, including without limitation the Permitted
Exceptions, Debtor shall be the owner of or have other rights in the Collateral
free from any right or claim of any other person, lien, security interest or
other encumbrance, and Debtor shall defend the same against all claims and
demands of all persons at any time claiming the same or any interests therein
adverse to Collateral Agent, (c) Debtor shall not pledge, mortgage or create, or
suffer to exist any right of any person in or claim by any person to the
Collateral, or any security interest, lien or encumbrance in the Collateral in
favor of any person, other than Collateral Agent, except for liens permitted by
the Loan Documents, including without limitation the Permitted Exceptions, (d)
Debtor will keep the Collateral in good order and repair, normal wear and tear
excepted, and will not use the same in violation of law, (e) Debtor will permit
Collateral Agent, or its designee, upon reasonable prior notice, to enter upon
any portion of the premises where any Collateral may be located for purposes of
inspection of the Collateral; provided, however, that inspection by Collateral
Agent (or by Collateral Agent’s inspector) of the Collateral or any portion
thereof is for the sole purpose of protecting the security of Collateral Agent
and is not to be construed as a representation by Collateral Agent that there
has been compliance with applicable law or any other requirement or condition
and Debtor may make or cause to be made such other independent inspections as
Debtor may desire for its own protection, and nothing contained herein shall be
construed as requiring Collateral Agent to oversee or supervise the Collateral,
(f) Debtor will pay promptly when due all taxes, assessments, governmental
charges and levies upon the Collateral or incurred in connection with the use or
operation of such Collateral or incurred in connection with this Agreement, (g)
Debtor will continue to operate its business in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials
or substances, and (h) unless such action would result in a Material Adverse
Change (without taking into consideration subsections (iii) and (iv) of the
definition of Material Adverse Change), Debtor may sell or otherwise dispose, or
offer to sell or otherwise dispose, of the Collateral or any interest therein
except that Debtor shall not sell or otherwise dispose of, or offer to sell or
otherwise dispose of, all or a substantial part of the Collateral other than to
Borrower or a Guarantor.
 
11.  Insurance.
 
11.1  Maintenance of Insurance. Debtor will maintain with financially sound and
reputable insurers insurance with respect to its properties and business against
such casualties and contingencies as shall be in accordance with general
practices of businesses engaged in similar activities in similar geographic
areas. All such insurance policies shall (a) be in such minimum amounts that
Debtor will not be deemed a co-insurer under applicable insurance laws,
regulations and policies, (b) be issued by an insurance company licensed to do
business in the state where the property is located having a rating of “A-” VIII
or better by A.M. Best Co., in Best’s Rating Guide, (c) name “JPMorgan Chase
Bank, N.A., any and all subsidiaries as their interest may appear” as additional
insureds on all liability insurance, (d) be endorsed to show that Borrower’s
insurance shall be primary and all insurance carried by Collateral Agent is
strictly excess and secondary and shall not contribute with Borrower’s
insurance, (e) be evidenced by a certificate of insurance to be provided to
Collateral, (f) include either policy or binder numbers on the Accord form, and
(g) otherwise shall be in such amounts, contain such terms, be in such forms and
be for such periods as may be reasonably satisfactory to Collateral Agent. In
addition, all such insurance shall be payable to Collateral Agent as loss payee.
Without limiting the foregoing, Debtor will (x) keep all of its physical
property insured with casualty or physical hazard insurance on an “all risks”
basis, with broad form flood and earthquake coverages and electronic data
processing coverage, with a full replacement cost endorsement and an “agreed
amount” clause in an amount equal to 100% of the full replacement cost of such
property, (y) maintain all such workers’ compensation or similar insurance as
may be required by law, and (z) maintain, in amounts and with deductibles equal
to those generally maintained by businesses engaged in similar activities in
similar geographic areas, general public liability insurance against claims of
bodily injury, death or property damage occurring, on, in or about the
properties of Debtor; and business interruption insurance.
 
11.2  Insurance Proceeds. The proceeds of any casualty insurance in respect of
any casualty loss of any of the Collateral shall, subject to the rights, if any,
of other parties with an interest having priority in the property covered
thereby, (a) so long as no Event of Default has occurred and is continuing, be
disbursed to Debtor for direct application by Debtor solely to the repair or
replacement of Debtor’s property so damaged or destroyed, and (b) in all other
circumstances, be held by Collateral Agent as cash collateral for the
Obligations. Collateral Agent may, at its reasonable option which option shall
be exercised within ten (10) Business Days of receipt of such proceeds, disburse
from time to time all or any part of such proceeds so held as cash collateral,
upon such terms and conditions as Collateral Agent may reasonably prescribe, for
direct application by Debtor solely to the repair or replacement of Debtor’s
property so damaged or destroyed, or Collateral Agent may ratably distribute to
each Secured Party all or any part of such proceeds for application to the
Obligations.
 
11.3  Continuation of Insurance. All policies of insurance shall provide for at
least thirty (30) days’ prior written cancellation notice to Collateral Agent.
In the event of failure by Debtor to provide and maintain insurance as herein
provided, Collateral Agent may, at its option, provide such insurance and charge
the amount thereof to Debtor. Debtor shall furnish Collateral Agent with
certificates of insurance and policies evidencing compliance with the foregoing
insurance provision.
 
12.  Collateral Protection Expenses; Preservation of Collateral.
 
12.1  Expenses Incurred by Collateral Agent or Secured Party. In Collateral
Agent’s or any Secured Party’s sole and absolute discretion, if Debtor fails to
do so, Collateral Agent or such Secured Party may discharge taxes and other
encumbrances (other than Permitted Exceptions) at any time levied or placed on
any of the Collateral, unless such taxes and encumbrances are being contested in
good faith, maintain any of the Collateral, make repairs thereto and pay any
necessary filing fees or insurance premiums. Debtor agrees to reimburse
Collateral Agent or such Secured Party on demand for all expenditures so made.
Neither Collateral Agent nor any Secured Party shall have any obligation to
Debtor to make any such expenditures, nor shall the making thereof be construed
as the waiver or cure of any Default or Event of Default.
 
12.2  Collateral Agent’s Obligations and Duties. Anything herein to the contrary
notwithstanding, Debtor shall remain obligated and liable under each contract or
agreement comprised in the Collateral to be observed or performed by Debtor
thereunder. Collateral Agent shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement or
the receipt by Collateral Agent of any payment relating to any of the
Collateral, nor shall Collateral Agent be obligated in any manner to perform any
of the obligations of Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by Collateral Agent in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to Collateral Agent or to which Collateral Agent may be entitled at any
time or times. Collateral Agent’s sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession, under
Section 9a-207 of the Uniform Commercial Code or otherwise, shall be to deal
with such Collateral in the same manner as Collateral Agent deals with similar
property for its own account.
 
13.  Securities and Deposits. Collateral Agent may at any time following and
during the continuance of an Event of Default, at its sole option, transfer to
itself or any nominee any securities constituting Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
Obligations. Whether or not any Obligations are due, Collateral Agent may
following and during the continuance of an Event of Default, demand, sue for,
collect, or make any settlement or compromise which it deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any other
security for the Obligations and during the continuance of an Event of Default,
any deposits or other sums at any time credited by or due from Collateral Agent
to Debtor may at any time be applied to or set off against any of the
Obligations. If Collateral Agent exercises such setoff right, Collateral Agent
exercising such right agrees promptly to notify Debtor after any such setoff and
application made by Collateral Agent; provided, however, that the failure to
give such notice shall not affect the validity of such setoff and application.
 
14.  Notification to Account Debtors and Other Persons Obligated on Collateral.
If an Event of Default shall have occurred and be continuing, Debtor shall, at
the request and option of Collateral Agent, notify account debtors and other
persons obligated on any of the Collateral of the security interest of
Collateral Agent in any account, chattel paper, general intangible, instrument
or other Collateral and that payment thereof is to be made directly to
Collateral Agent or to any financial institution designated by Collateral Agent
as Collateral Agent’s agent therefor, and Collateral Agent may itself, if an
Event of Default shall have occurred and be continuing, without notice to or
demand upon Debtor, so notify account debtors and other persons obligated on
Collateral. After the making of such a request or the giving of any such
notification, Debtor shall hold any proceeds of collection of accounts, chattel
paper, general intangibles, instruments and other Collateral received by Debtor
as trustee for Collateral Agent without commingling the same with other funds of
Debtor and shall turn the same over to Collateral Agent in the identical form
received, together with any necessary endorsements or assignments. Collateral
Agent shall ratably distribute to each Secured Party the proceeds of collection
of accounts, chattel paper, general intangibles, instruments and other
Collateral received by Collateral Agent, for application by each Secured Party
to the Obligations, such proceeds to be immediately credited after final payment
in cash or other immediately available funds of the items giving rise to them.
 
15.  Power of Attorney.
 
15.1  Appointment and Powers of Collateral Agent. Debtor hereby irrevocably
constitutes and appoints Collateral Agent and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Debtor or in
Collateral Agent’s own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments that may be necessary or useful to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, hereby gives said attorneys the power and right, on behalf of Debtor,
without notice to or assent by Debtor, to do the following:
 
(a)  upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise dispose of or deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code and as fully and completely as
though Collateral Agent were the absolute owner thereof for all purposes, and to
do, at Debtor’s expense, at any time, or from time to time, all acts and things
which Collateral Agent deems necessary or useful to protect, preserve or realize
upon the Collateral and Collateral Agent’s security interest therein, in order
to effect the intent of this Agreement, all at least as fully and effectively as
Debtor might do, including, without limitation, (i) the filing and prosecuting
of registration and transfer applications with the appropriate federal, state,
local or other agencies or authorities with respect to trademarks, copyrights
and patentable inventions and processes, (ii) upon written notice to Debtor, the
exercise of voting rights with respect to voting securities, which rights may be
exercised, if Collateral Agent so elects, with a view to causing the liquidation
of assets of the issuer of any such securities, and (iii) the execution,
delivery and recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of conveyance
or transfer with respect to such Collateral;
 
(b)  to the extent that Debtor’s authorization given in Section 3 is not
sufficient, to file such financing statements with respect hereto, with or
without Debtor’s signature, or a photocopy of this Agreement in substitution for
a financing statement, as Collateral Agent may deem appropriate and to execute
in Debtor’s name such financing statements and amendments thereto and
continuation statements which may require Debtor’s signature; and
 
(c)  to file for record, at Borrower’s cost and expense and in Borrower’s name,
any notices that Collateral Agent considers necessary or desirable to protect
the Collateral.
 
15.2  Ratification by Debtor. To the extent permitted by law, Debtor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. This power of attorney is a power coupled with an interest and is
irrevocable.
 
15.3  No Duty on Collateral Agent. The powers conferred on Collateral Agent
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. Collateral Agent shall be
accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to Debtor for any act or failure to
act, except for Collateral Agent’s own gross negligence or willful misconduct.
 
16.  Rights and Remedies. If an Event of Default shall have occurred and be
continuing, Collateral Agent, without any other notice to or demand upon Debtor,
shall have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code and any additional rights and remedies
which may be provided to a secured party in any jurisdiction in which Collateral
is located, including, without limitation, the right to take possession of the
Collateral, and for that purpose Collateral Agent may, so far as Debtor can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. During continuance of an Event of
Default, Collateral Agent may in its discretion require Debtor to assemble all
or any part of the Collateral at such location or locations within the
jurisdiction(s) of Debtor’s principal office(s) or at such other locations as
Collateral Agent may reasonably designate. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Collateral Agent shall give to Debtor at least ten Business
Days prior written notice of the time and place of any public sale of Collateral
or of the time after which any private sale or any other intended disposition is
to be made. Debtor hereby acknowledges that ten Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, Debtor
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of Collateral Agent’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.
 
17.  Standards for Exercising Rights and Remedies. To the extent that applicable
law imposes duties on Collateral Agent to exercise remedies in a commercially
reasonable manner, Debtor acknowledges and agrees that it is not commercially
unreasonable for Collateral Agent (a) to fail to incur expenses reasonably
deemed significant by Collateral Agent to prepare Collateral for disposition or
otherwise to fail to complete raw material or work in process into finished
goods or other finished products for disposition, (b) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to fail to remove liens or
encumbrances on or any adverse claims against Collateral, (d) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other persons, whether or not in the
same business as Debtor, for expressions of interest in acquiring all or any
portion of the Collateral, (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or
credit enhancements to insure Collateral Agent against risks of loss, collection
or disposition of Collateral or to provide to Collateral Agent a guaranteed
return from the collection or disposition of Collateral, or (l) to the extent
deemed appropriate by Collateral Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist Collateral
Agent in the collection or disposition of any of the Collateral. Debtor
acknowledges that the purpose of this Section 17 is to provide non-exhaustive
indications of what actions or omissions by Collateral Agent would fulfill
Collateral Agent’s duties under the Uniform Commercial Code or other law of the
State of Utah or any other relevant jurisdiction in Collateral Agent’s exercise
of remedies against the Collateral and that other actions or omissions by
Collateral Agent shall not be deemed to fail to fulfill such duties solely on
account of not being indicated in this Section 17. Without limitation upon the
foregoing, nothing contained in this Section 17 shall be construed to grant any
rights to Debtor or to impose any duties on Collateral Agent that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section 17.
 
18.  No Waiver by Collateral Agent, etc. Collateral Agent shall not be deemed to
have waived any of its rights or remedies in respect of the Obligations or the
Collateral unless such waiver shall be in writing and signed by Collateral
Agent. No delay or omission on the part of Collateral Agent in exercising any
right or remedy shall operate as a waiver of such right or remedy or any other
right or remedy. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion. All rights and remedies
of Collateral Agent with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as Collateral Agent deems expedient.
 
19.  Suretyship Waivers by Debtor. Debtor waives demand, notice, protest, notice
of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect to both the
Obligations and the Collateral, Debtor assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of or failure to perfect any security interest in any Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as
Collateral Agent may deem advisable. Collateral Agent shall have no duty as to
the collection or protection of the Collateral or any income therefrom, the
preservation of rights against prior parties, or the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in Section 12.2.
Debtor further waives any and all other suretyship defenses.
 
20.  Marshalling. Collateral Agent shall not be required to marshal any present
or future collateral security (including but not limited to the Collateral) for,
or other assurances of payment of, the Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of its rights and remedies hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights and remedies, however existing or arising. To the
extent that it lawfully may, Debtor hereby agrees that it will not invoke any
law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of Collateral Agent’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, Debtor hereby irrevocably waives the benefits
of all such laws.
 
21.  Proceeds of Dispositions; Expenses. Debtor shall pay to Collateral Agent on
demand any and all expenses, including reasonable attorneys’ fees and
disbursements, incurred or paid by Collateral Agent in protecting, preserving or
enforcing Collateral Agent’s rights and remedies under or in respect of any of
the Obligations or any of the Collateral. After deducting all of said expenses,
the residue of any proceeds of collection or sale or other disposition of the
Collateral shall, to the extent actually received in cash, be distributed
ratably to each Secured Party, which shall be applied to the payment of the
Obligations in such order or preference as each Secured Party may determine,
proper allowance and provision being made for any Obligations not then due. Upon
the final payment and satisfaction in full of all of the Obligations and after
making any payments required by Sections 9-608(a)(1)(C) or 9a-615(a)(3) of the
Uniform Commercial Code, any excess shall be returned to Debtor. In the absence
of final payment and satisfaction in full of all of the Obligations, Debtor
shall remain liable for any deficiency.
 
22.  Overdue Amounts. Until paid, all amounts due and payable by Debtor
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Loan Documents.
 
23.  CHOICE OF LAW. THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
UTAH WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS MAY BE TRIED AND LITIGATED IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH OR, IN ANY OTHER COURT
IN WHICH A PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF DEBTOR AND
COLLATERAL AGENT WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ANY STATE OR FEDERAL COURT
LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH.
 
24.  WAIVER OF JURY TRIAL. EACH OF DEBTOR AND COLLATERAL AGENT HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED UPON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF DEBTOR AND COLLATERAL
AGENT (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
 
25.  WAIVER OF SPECIAL DAMAGES. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
DEBTOR SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST COLLATERAL AGENT,
ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF, THIS AGREEMENT OR ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY, THE TRANSACTIONS, THE LOAN OR THE USE OF THE PROCEEDS
THEREOF.
 
26.  MISCELLANEOUS WAIVERS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS
RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), DEBTOR IRREVOCABLY (A)
SUBMITS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING JURISDICTION
IN THE CITY OF SALT LAKE, COUNTY OF SALT LAKE AND STATE OF UTAH, AND (B) WAIVES
ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT,
WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER
SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE COLLATERAL AGENT FROM
BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A
PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A
PROCEEDING IN ANY OTHER JURISDICTION. DEBTOR FURTHER AGREES AND CONSENTS THAT,
IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE
LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY UTAH STATE OR UNITED STATES
COURT SITTING IN THE CITY OF SALT LAKE AND COUNTY OF SALT LAKE MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO DEBTOR AT
THE ADDRESS INDICATED IN THE GUARANTY OR THE LOAN AGREEMENT, AS THE CASE MAY BE,
AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF DEBTOR SHALL
REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER
THE SAME SHALL HAVE BEEN SO MAILED.
 
27.  Miscellaneous. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon Debtor
and its respective successors and assigns, and shall inure to the benefit of
Collateral Agent and its successors and assigns. If any term of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby, and this Agreement shall be
construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein. Debtor acknowledges receipt of a copy of this
Agreement. All notices required or permitted hereunder shall be made in the
manner required or permitted by the Uniform Commercial Code and otherwise in
accordance with the terms and at the addresses set forth in the Chase Loan
Agreement and the Chase Guaranty. Debtor hereby authorizes Collateral Agent, at
its sole discretion and without notice to or consent of Debtor, to disclose to
Zions or Chase on a confidential basis any information, financial or otherwise,
which it may possess concerning Debtor. Collateral Agent acknowledges that it is
aware, and Collateral Agent will advise its directors, officers, employees,
agents and advisors (collectively, “Representatives”) who are informed as to the
matters which are the subject of this Agreement, that the United States
securities laws prohibit any Person who has received from an issuer material,
non-public information concerning such issuer from purchasing or selling
securities of such issuer or from communicating such information to any other
Person under circumstances in which it is reasonably foreseeable that such
Person is likely to purchase or sell securities. Lender further agrees that it
will keep, and it will advise its Representatives of its obligations to keep,
confidential any material non-public information disclosed to Collateral Agent
by Borrower or any Person acting on Borrower’s behalf. This Section is a
confidentiality agreement for purposes of Regulation FD promulgated under the
Securities Exchange Act of 1934.
 
[Remainder of Page Intentionally Left Blank]
 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, intending to be legally bound, Debtor has caused this
Agreement to be duly executed as of the date first above written.
 

        FRANKLIN COVEY CO.  
   
  a Utah corporation
    By:   /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer and Vice President of Investor Relations

 
 
 

        FRANKLIN COVEY PRINTING, INC.  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN DEVELOPMENT CORPORATION  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title:Vice President

 
 
 

        FRANKLIN COVEY TRAVEL, INC.  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN COVEY CATALOG SALES, INC.  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN COVEY CLIENT SALES, INC  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN COVEY PRODUCT SALES, INC.  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN COVEY SERVICES, L.L.C.  
   
  a Utah liability company
    By:  
FRANKLIN COVEY SERVICES, L.L.C.
        a  Utah corporation, its member
 
/s/ RICHARD PUTNAM
 

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer

 
 
 

        FRANKLIN COVEY CO.  
   
  a Utah corporation
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title: Treasurer and Vice President of Investor Relations

 
 
 

     
By:  
FRANKLIN COVEY DEVELOPMENT CORPORATION  
   
  a Utah corporation, its member
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam   Title:Vice President

 
 
 

        FRANKLIN COVEY CO.  
   
  a Utah corporation
 
By:  
FRANKLIN DEVELOPMENT CORPORATION     a Utah corporation, its general partner    
    By:    /s/ RICHARD PUTNAM  

--------------------------------------------------------------------------------

Name: Richard Putnam  
Title: Vice President
"Debtor"

 
 
 

        JPMORGAN CHASE BANK, N.A.  
   
  a national banking association
    By:    /s/ TONY C. NIELSEN  

--------------------------------------------------------------------------------

Name: Tony C. Nielsen  
Title: Senior Vice President
"Collateral Agent"

 

EXHIBIT A
 
DESCRIPTION OF PERSONAL PROPERTY
 
All of Debtor’s assets, including, without limitation, “Accounts,” “Cash
Proceeds,” “Chattel Paper,” “Collateral,” “Deposit Accounts,” “Electronic
Chattel Paper,” “Equipment,” “Fixtures,” General Intangibles,” “Goods,”
“Instruments,” “Inventory,” “Investment Property,” “Letter-of-credit Rights,”
“Noncash Proceeds,” and “Tangible Chattel Paper,” as defined in the Uniform
Commercial Code. Such assets include, without limitation:
 
(a)  All personal property, (including, without limitation, all goods, supplies,
equipment, furniture, furnishings, fixtures, machinery, inventory, construction
materials and software embedded in any of the foregoing) in which Debtor now or
hereafter acquires an interest or right, together with any interest of Debtor in
and to personal property which is leased or subject to any superior security
interest, and all books, records, leases and other agreements, documents, and
instruments of whatever kind or character, relating to such personal property;
 
(b)  All fees, income, rents, issues, profits, earnings, receipts, royalties,
and revenues which, after the date hereof and while any portion of the
Obligations remains unpaid or unperformed, may accrue from such personal
property or any part thereof, or which may be received or receivable by Debtor
from any hiring, using, letting, leasing, subhiring, subletting, subleasing,
occupancy, operation, or use thereof;
 
(c)  All of Debtor’s present and future rights to receive payments of money,
services, or property, including, without limitation, rights to receive capital
contributions or subscriptions from Debtor’s partners or shareholders, amounts
payable on account of the sale of partnership interests in Debtor or the capital
stock of Debtor, accounts and other accounts receivable, deposit accounts,
chattel paper (whether tangible or electronic), notes, drafts, contract rights,
instruments, general intangibles, and principal, interest, and payments due on
account of goods sold or leased, services rendered, loans made or credit
extended, together with title to or interest in all agreements, documents, and
instruments evidencing securing or guarantying the same;
 
(d)  All other intangible property (and related software) and rights relating to
the personal property described in Paragraph (a) above or the operation or use
thereof, including, without limitation, all governmental and private contracts,
agreements, permits, licenses, and approvals relating thereto, all names under
or by which such property may at any time be sold, marketed, operated or known,
all rights to carry on business under any such names, or any variant thereof,
all trade names and trademarks, copyrights, patents, trademark, patent and
copyright applications and registrations, patterns, designs, drawings, plans and
specifications, other proprietary information and intellectual property, and
royalties relating in any way thereto, and all goodwill and software in any way
relating thereto;
 
(e)  Debtor’s rights under all insurance policies covering the Personal
Property, or any other part of the Collateral, and any and all proceeds, loss
payments, and premium refunds payable regarding the same;
 
(f)  All causes of action, claims, compensation, and recoveries for any damage
to, destruction of, or condemnation or taking of the Personal Property, or any
other part of the Collateral, or for any conveyance in lieu thereof, whether
direct or consequential, or for any damage or injury to the Personal Property,
or any other part of the Collateral, or for any loss or diminution in value of
the Personal Property, or any other part of the Collateral;
 
(g)  All Debtor’s rights in proceeds of the Loan evidenced by the Note;
 
(h)  All of Debtor’s rights under any agreements affecting the Personal
Property, whether now existing or hereafter arising; and
 
(i)  All proceeds from sale or disposition of any of the aforesaid collateral.
 
As used in this Exhibit A the terms “Obligations,” “Note,” “Collateral,” and
“Personal Property” shall have the meanings set forth in the Security Agreement
to which this Exhibit A is attached.
 

 
EXHIBIT B
 
FINANCING STATEMENT INFORMATION
 
The Collateral Agent is:
 
JPMorgan Chase Bank, N.A.
80 West Broadway, Suite 200
Salt Lake City, Utah 84101
 
The Debtor is:
 
Name, Type of Organization and Jurisdiction
Address
Organizational Identification No.
Employer Identification No.
FRANKLIN COVEY CO., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
852657-0142
87-0401551
FRANKLIN COVEY PRINTING, INC., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
848770-0142
87-0401876
FRANKLIN DEVELOPMENT CORPORATION, a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
976652-0142
87-0448924
FRANKLIN COVEY TRAVEL, INC., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
1303276-0142
87-0555873
FRANKLIN COVEY CATALOG SALES, INC., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
1318674-0142
87-0561599
FRANKLIN COVEY CLIENT SALES, INC., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
1318682-0142
87-0561601
FRANKLIN COVEY PRODUCT SALES, INC., a Utah corporation
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
1318690-0142
87-0561600
FRANKLIN COVEY SERVICES, L.L.C., a Utah limited liability company
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
2028086-0160
87-0563642
FRANKLIN COVEY MARKETING, LTD., a Utah limited partnership
2200 West Parkway Blvd.
Salt Lake City, Utah 84119
2115011-0180
87-0563643

The Collateral is the Personal Property described on Exhibit A to the Security
Agreement.