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Exhibit 10.1
 

 
THIRD MODIFICATION AGREEMENT
 
This THIRD MODIFICATION AGREEMENT (the “Modification Agreement”) is made
effective as of November 11, 2009, by and among FRANKLIN COVEY CO., a Utah
corporation (“Borrower”), whose address is 2200 West Parkway Blvd., Salt Lake
City, Utah 84119, each undersigned Guarantor, and JPMORGAN CHASE BANK, N.A., a
national banking association (“Lender”), whose address is 201 South Main Street,
Suite 300, Salt Lake City, Utah 84111.
 
RECITALS:
 
A. Lender has previously extended to Borrower a revolving line of credit loan
(the “Loan”) in the maximum principal amount of TWENTY-FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00), as reduced from time to time, pursuant to a Revolving
Line of Credit Agreement dated as of March 14, 2007 (as amended and modified
from time to time, the “Loan Agreement”), and evidenced by a Secured Promissory
Note dated March 14, 2007 (as amended and modified from time to time, the
“Note”).  Capitalized terms used herein without definition shall have the
meanings given to such terms in the Loan Agreement and Note.
 
B. Repayment of the Loan is guaranteed pursuant to the terms of a Repayment
Guaranty dated as of March 14, 2007 (as amended and modified from time to time,
the “Guaranty”), executed by FRANKLIN DEVELOPMENT CORPORATION, a Utah
corporation, FRANKLIN COVEY TRAVEL, INC., a Utah corporation, and FRANKLIN COVEY
CLIENT SALES, INC., a Utah corporation (individually and collectively, as the
context requires, and jointly and severally, “Guarantor”), in favor of Lender.
 
C. The Loan Agreement, Note, Guaranty, and all other agreements, documents, and
instruments governing, evidencing, securing, guaranteeing or otherwise relating
to the Loan, as modified in this Modification Agreement, are sometimes referred
to individually and collectively as the “Loan Documents.”
 
D. Subject to the terms and conditions contained herein, Borrower and Lender now
desire to modify the Loan Documents to: (i) increase the interest rate
applicable under the Loan Documents from the LIBO Rate in effect from time to
time plus 2.00% per annum to the LIBO Rate in effect from time to time plus
3.50% per annum; (ii) modify the funded debt to EBITDAR ratio and the fixed
charge coverage ratio as set forth herein; (iii) modify certain provisions
regarding the expiration date of Letters of Credit issued under the Loan
Agreement; (iv) require the delivery of monthly financial statements as set
forth herein; and (v) make such other modifications as are set forth herein.
 
AGREEMENT:
 
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower, Guarantor and Lender agree as follows:
 
1. ACCURACY OF RECITALS.  Each of Borrower and each Guarantor acknowledges the
accuracy of the Recitals which are incorporated herein by reference.
 
2. MODIFICATION OF LOAN DOCUMENTS.  The Loan Documents are modified as follows:
 
(a) Interest Rate Increase.  The definition of “Interest Rate” set forth in
Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety
to read as follows:
 
“Interest Rate” means a variable rate equal to the LIBO Rate in effect from time
to time plus Three and One-Half Percent (3.50%) per annum.
 

 
 

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(b) Financial Covenants.
 
(1)           Funded Debt to EBITDAR Ratio.  Section 6.8(a) of the Loan
Agreement is hereby amended to provide that the funded debt to EBITDAR ratio
described therein shall not be greater than (A) 4.00 to 1.00 as of the end of
the fiscal quarter of Borrower ending on November 30, 2009, and (B) 3.75 to 1.00
as of the end of the fiscal quarter of Borrower ending on February 28, 2010.
 
(2)           Fixed Charge Coverage Ratio.  Section 6.8(b) of the Loan Agreement
is hereby amended to provide that the fixed charge coverage ratio described
therein shall not be less than (A) 1.25 to 1.00 as of the end of the fiscal
quarter of Borrower ending on November 30, 2009 and (B) 1.50 to 1.00 as of the
end of the fiscal quarter of Borrower ending on February 28, 2010.
 
(c) Letters of Credit.  The second sentence of Section 3.1(a) of the Loan
Agreement is hereby amended and restated as follows:
 
Unless otherwise approved by Lender, Letters of Credit (i) will expire on the
earlier of the date stated therein or thirty (30) days prior to the Maturity
Date; and (ii) will not exceed, in the aggregate stated amount outstanding at
any time, the lesser of (A) Letter of Credit Limit or (B) the difference between
the Loan Amount and the then outstanding principal balance of the Loan.
 
(d) Monthly Financial Statements.  Section 6.7 of the Loan Agreement is hereby
amended by adding the following as a new subsection (e):
 
(e)           Monthly Financial Statements.  Within thirty (30) days of the end
of each calendar month, the complete consolidated financial statements of the
Consolidated Entities which shall consist of a balance sheet, statements of
income, cash flow and retained earnings, and a schedule of contingent
liabilities as of the end of each such monthly period, such financial statements
to be certified as true and correct by the president or chief financial officer
of Borrower.
 
(e) Conforming Modifications.  Each of the Loan Documents is modified to be
consistent herewith and to provide that it shall be a default or an Event of
Default thereunder if Borrower shall fail to comply with any of the covenants of
Borrower herein or if any representation or warranty by Borrower herein or by
any guarantor in any related Consent and Agreement of Guarantor(s) is materially
incomplete, incorrect, or misleading as of the date hereof.  In order to further
effect certain of the foregoing modifications, Borrower and Guarantor agree to
execute and deliver such other documents or instruments as Lender reasonably
determines are necessary or desirable.
 
(f) References.  Each reference in the Loan Documents to any of the Loan
Documents shall be a reference to such document as modified herein or as
modified on or about the date hereof.
 
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.  The Loan Documents are
ratified and affirmed by Borrower and shall remain in full force and effect as
modified herein.  Any property or rights to or interests in property granted as
security in the Loan Documents shall remain as security for the Loan and the
obligations of Borrower in the Loan Documents.
 

 
 

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4. FEES AND EXPENSES.
 
(a) Fees and Expenses.  In consideration of Lender’s agreement to amend the Loan
Documents as set forth herein, and in addition to any other fees or amounts
payable by Borrower hereunder, Borrower has agreed to pay to Lender (i) all
legal fees and expenses incurred by Lender in connection herewith; and (ii) all
other costs and expenses incurred by Lender in connection with executing this
Modification Agreement and otherwise modifying the Loan Documents.  Borrower
acknowledges and agrees that such fees are fully earned and nonrefundable as of
the date this Modification Agreement is executed and delivered by the parties
hereto.
 
(b) Method of Payment.  Such fees shall be paid by Borrower to Lender on the
date hereof or at such later date as such fees, costs and expenses are incurred
by Lender.  Borrower and Lender agree and acknowledge that the foregoing shall
not relieve Borrower of its obligation to make future monthly payments of
interest and other amounts as required under the terms of the Loan.
 
5. BORROWER REPRESENTATIONS AND WARRANTIES.  Each of Borrower and Guarantor
represents and warrants to Lender:  (a) No default or event of default under any
of the Loan Documents as modified herein, nor any event, that, with the giving
of notice or the passage of time or both, would be a default or an event of
default under the Loan Documents as modified herein has occurred and is
continuing; (b) There has been no material adverse change in the financial
condition of Borrower or Guarantor or any other person whose financial statement
has been delivered to Lender in connection with the Loan from the most recent
financial statement received by Lender; (c) Each and all representations and
warranties of Borrower and Guarantor in the Loan Documents are accurate on the
date hereof; (d) Neither Borrower nor Guarantor has any claims, counterclaims,
defenses, or set-offs with respect to the Loan or the Loan Documents as modified
herein; (e) The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower and Guarantor, enforceable against Borrower and
Guarantor in accordance with their terms; (f) Each of Borrower and each
Guarantor is validly existing under the laws of the State of its formation or
organization, has not changed its legal name as set forth above, and has the
requisite power and authority to execute and deliver this Modification Agreement
and to perform the Loan Documents as modified herein; (g) The execution and
delivery of this Modification Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower and Guarantor; and (h) This Modification Agreement
has been duly executed and delivered on behalf of Borrower and Guarantor.
 
6. BORROWER AND GUARANTOR COVENANTS.  Each of Borrower and Guarantor covenants
with Lender:
 
(a) Each of Borrower and Guarantor shall execute, deliver, and provide to Lender
such additional agreements, documents, and instruments as reasonably required by
Lender to effectuate the intent of this Modification Agreement.
 
(b) Each of Borrower and Guarantor fully, finally, and forever releases and
discharges Lender and its successors, assigns, directors, officers, employees,
agents, and representatives from any and all actions, causes of action, claims,
debts, demands, liabilities, obligations, and suits, of whatever kind or nature,
in law or equity, that either Borrower or Guarantor has or in the future may
have, whether known or unknown, (i) in respect of the Loan, the Loan Documents,
or the actions or omissions of Lender in respect of the Loan or the Loan
Documents and (ii) arising from events occurring prior to the date of this
Modification Agreement.
 
(c) Contemporaneously with the execution and delivery of this Modification
Agreement, Borrower has paid to Lender all of the internal and external costs
and expenses incurred by Lender in connection with this Modification Agreement
(including, without limitation, inside and outside attorneys, appraisal,
appraisal review, processing, title, filing, and recording costs, expenses, and
fees).
 

 
 

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(d) On or prior to the execution and delivery of this Modification Agreement,
each of Borrower and Guarantor shall have executed and delivered, or caused to
be executed and delivered, to Lender, each in form and substance satisfactory to
Lender, such other documents, instruments, resolutions, subordinations, and
other agreements as Lender may require in its sole discretion.
 
7. EXECUTION AND DELIVERY OF AGREEMENT BY LENDER.  Lender shall not be bound by
this Modification Agreement until (a) Lender has executed and delivered this
Modification Agreement to Borrower and Guarantor, (b) each of Borrower and
Guarantor has performed all of the obligations of Borrower and Guarantor under
this Modification Agreement to be performed contemporaneously with the execution
and delivery of this Modification Agreement, if any, and (c) Borrower has paid
all fees and costs required under Section 4 hereof.
 
8. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.  The Loan Documents as modified herein contain the complete
understanding and agreement of Borrower, Guarantor and Lender in respect of the
Loan and supersede all prior representations, warranties, agreements,
arrangements, understandings, and negotiations.  No provision of the Loan
Documents as modified herein may be changed, discharged, supplemented,
terminated, or waived except in a writing signed by the parties thereto.
 
9. BINDING EFFECT.  The Loan Documents, as modified herein, shall be binding
upon and shall inure to the benefit of Borrower, Guarantor and Lender and their
successors and assigns; provided, however, neither Borrower nor Guarantor may
assign any of its rights or delegate any of its obligations under the Loan
Documents and any purported assignment or delegation shall be void.
 
10. CHOICE OF LAW. THIS MODIFICATION 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 SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH OR, AT THE SOLE
OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY.  EACH OF THE PARTIES 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
ACCORDANCE WITH THIS SECTION.
 
11. COUNTERPART EXECUTION.  This Modification Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document.  Signature pages may be
detached from the counterparts and attached to a single copy of this
Modification Agreement to physically form one document. Receipt by the Lender of
an executed copy of this Modification Agreement by facsimile shall constitute
conclusive evidence of execution and delivery of the Modification by the
signatory thereto.
 
[Remainder of Page Intentionally Left Blank]

 
 

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DATED as of the date first above stated.
 

 
FRANKLIN COVEY CO.
a Utah corporation
 
By:
  /s/ Stephen D. Young 
Name:
Stephen D. Young
Title:
Chief Financial Officer
 
“Borrower”
 
 
 
FRANKLIN DEVELOPMENT CORPORATION
a Utah corporation
 
By:
  /s/ Stephen D. Young 
Name:
Stephen D. Young
Title:
Vice President
 
 
 
FRANKLIN COVEY TRAVEL, INC.
a Utah corporation
 
By:
  /s/ Stephen D. Young 
Name:
Stephen D. Young
Title:
Vice President
 
 
 
FRANKLIN COVEY CLIENT SALES, INC.
a Utah corporation
 
By:
  /s Stephen D. Young 
Name:
Stephen D. Young
Title:
Vice President
 
“Guarantor”

 
 

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JPMORGAN CHASE BANK, N.A.
a national banking association
 
By:
  /s/ Tony C. Nielsen 
Name:
Tony C. Nielsen
Title:
Senior Vice President
 
“Lender”