Exhibit 10.7


    
      

    

     

    Exhibit
      10.7

     

    

      SECURED
        PROMISSORY NOTE

       

      
        
          	
                  $7,000,000.00

                	
                  Salt
                    Lake City, Utah

                
	 	
                  March
                    14, 2007

                


        

      

       

      1. PROMISE
        TO PAY.

       

      FOR
        VALUE RECEIVED, FRANKLIN COVEY CO.,
        a Utah
        corporation (“Maker”),
        with
        a business address of 2200 West Parkway Blvd., Salt Lake City, Utah 84119,
        promises to pay to the order of ZIONS
        FIRST NATIONAL BANK,
        a
        national banking association (“Holder”),
        at
        its office at 10 East South Temple, Suite 200, Salt Lake City, Utah, 84133,
        or
        at such other place as Holder may from time to time designate in writing,
        the
        principal sum of up to SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00),
        or so
        much thereof as shall from time to time be disbursed under that certain
        Revolving Line of Credit Agreement (as it may be amended, modified, extended,
        and renewed from time to time, the “Loan Agreement”)
        of
        even date herewith between Maker and Holder, together with accrued interest
        from
        the date of disbursement on the unpaid principal at the applicable rate as
        set
        forth in Section
        5
        hereof.
        This Secured Promissory Note (as it may be amended, modified, extended, and
        renewed from time to time, the “Note”)
        is
        issued pursuant to, entitled to the benefits of, and referred to as the “Note”
in the Loan Agreement. In the event of any inconsistency between the provisions
        of this Note and the provisions of the Loan Agreement, the Loan Agreement
        shall
        control.

       

      2. DEFINITIONS.

       

      The
        following terms shall have the following meanings when used herein. Capitalized
        terms used herein without definition shall have the meanings set forth in
        the
        Loan Agreement.

       

      “Affiliate”
of
        any
        Person means any other Person directly or indirectly controlling or controlled
        by or under direct or indirect common control with such Person. For the purposes
        of this definition, “control,” when used with respect to any Person, means the
        power to direct the management and policies of such Person, directly or
        indirectly, whether through the ownership of voting securities, by contract
        or
        otherwise; and the terms “controlling” and “controlled” have meanings
        correlative to the foregoing. The term “Affiliate” does not include the
        officers, directors, or employees of a Person, if the Person is a corporation,
        and does not include the employees or members of a Person, if the Person
        is a
        limited liability company or limited partnership.

       

      “Business Day”
means
        a
        day other than a Saturday, Sunday or any other day on which Holder’s branch
        located at 10
        East
        South Temple, Suite 200, Salt Lake City, Utah is
        authorized or obligated to close.

       

      “Default Interest Rate”
means
        a
        rate of interest equal to the lesser of (a) the aggregate of THREE PERCENT
        (3.0%) per annum plus the Interest Rate and (b) the highest rate legally
        permissible under applicable law. The Default Interest Rate shall change
        from
        time to time as and when the Interest Rate changes.

       

      “Interest Rate”
means
        an interest rate equal to the Interest Rate, as defined in Section 1.1 of
        the
        Loan Agreement.

       

      “Loan Documents”
has
        the
        meaning given to such term in the Loan Agreement.

       

      “Maturity Date”
means
        March 14, 2010.

       

      “Payment Date”
means
        the first (1st)
        day of
        each calendar month.

       

      3. MATURITY
        DATE.

       

      Absent
        the occurrence and continuance of an Event of Default hereunder or under
        any of
        the Loan Documents, the unpaid principal balance hereof, together with all
        unpaid interest accrued thereon, and all other amounts payable by Maker under
        the terms of the Loan Documents, shall be due and payable on the Maturity
        Date.
        If the Maturity Date should fall (whether by acceleration or otherwise) on
        a day
        that is not a Business Day, payment of the outstanding principal shall be
        made
        on the next succeeding Business Day and such extension of time shall be included
        in computing the interest included in such payment.

       

      4. REVOLVING
        LINE OF CREDIT.

       

      The
        Loan
        evidenced hereby is a revolving line of credit and Maker shall be entitled
        to
        reborrow amounts prepaid prior to the Maturity Date. Although the outstanding
        principal balance of this Note may be zero from time to time, this Note and
        the
        other Loan Documents will remain in full force and effect until the Maturity
        Date or until all obligations of Maker or Guarantor relating to the Loan
        are
        indefeasibly paid and performed in full, whichever is later. Upon the
        occurrence, and continuance, of any Event of Default, Holder may suspend
        or
        terminate its commitment to make Advances of the proceeds hereof without
        notice
        to Maker or further act on the part of Holder.

       

      5. INTEREST.

       

      
        	 	
                (a)

              	
                Absent
                  a continuing Event of Default hereunder or under any of the Loan
                  Documents, each Advance made hereunder shall bear interest at the
                  Interest
                  Rate in effect from time to time as determined in accordance with
                  the Loan
                  Agreement, subject to the limitations of Section
                  15
                  of
                  this Note. Interest on this Note shall be computed by applying
                  the ratio
                  of the annual Interest Rate over a year of three hundred sixty
                  (360) days,
                  multiplied by the outstanding principal balance, multiplied by
                  the actual
                  number of days the principal balance is
                  outstanding.

              


      

       

      
        	 	
                (b)

              	
                All
                  payments of principal and interest due hereunder shall be made
                  (i)
                  without deduction of any present and future taxes, levies, imposts,
                  deductions, charges or withholdings, which amounts shall be paid
                  by Maker,
                  and
                  (ii)
                  without any other set off. Maker will pay the amounts necessary
                  such that
                  the gross amount of the principal and interest received by Holder
                  is equal
                  to that required by this Note.

              


      

       

      
        	 	
                (c)

              	
                Interest
                  accruing hereunder shall be payable by Maker to Holder monthly,
                  the first
                  of which interest payments shall be payable on the Payment Date
                  occurring
                  in May 2007, and on each Payment Date thereafter as provided in
                  the Loan
                  Agreement. If any payment of interest to be made by Maker hereunder
                  shall
                  become due on a day which is not a Business Day, such payment shall
                  be
                  made on the next succeeding Business Day and such extension of
                  time shall
                  be included in computing the interest in such
                  payment.

              


      

       

      6. LAWFUL
        MONEY.

       

      Principal
        and interest are payable in lawful money of the United States of
        America.

       

      7. APPLICATION
        OF PAYMENTS; LATE CHARGE; DEFAULT RATE.

       

      
        	 	
                (a)

              	
                Unless
                  otherwise agreed to, in writing, or otherwise required by applicable
                  law,
                  payments will be applied first to accrued, unpaid interest, then
                  to any
                  unpaid collection costs, late charges and other charges, and any
                  remaining
                  amount to principal; provided however, upon a continuing Event
                  of Default,
                  Holder reserves the right to apply payments among principal, interest,
                  late charges, collection costs and other charges at its discretion.
                  All
                  prepayments shall be applied to the indebtedness owing hereunder
                  in such
                  order and manner as Holder may from time to time determine in its
                  reasonable discretion.

              


      

       

      
        	 	
                (b)

              	
                If
                  any payment required under this Note is not paid within ten (10)
                  days
                  after such payment is due, then, at the option of Holder, Maker
                  shall pay
                  a late charge equal to five percent (5.0%) of the amount of such
                  payment
                  or Twenty-Five and No/100 Dollars ($25.00), whichever is greater,
                  up to
                  the maximum amount of One Thousand Five Hundred and No/100 Dollars
                  ($1,500.00) per late charge to compensate Holder for administrative
                  expenses and other costs of delinquent payments. This late charge
                  may be
                  assessed without notice, shall be immediately due and payable and
                  shall be
                  in addition to all other rights and remedies available to
                  Holder.

              


      

       

      
        	 	
                (c)

              	
                Upon
                  a continuing Event of Default or upon maturity by acceleration,
                  Holder, at
                  its option, may also, if permitted under applicable law, do one
                  or both of
                  the following, in addition to any other right or remedy available
                  to
                  Holder: (i) increase the applicable interest rate on this Note
                  to the
                  Default Interest Rate, and (ii) add any unpaid accrued interest
                  to
                  principal and such sum will bear interest therefrom until paid
                  at the rate
                  provided in this Note (including any increased rate). The interest
                  rate
                  hereunder will not exceed the maximum rate permitted by applicable
                  law.
                  Application of the Default Interest Rate will not cure any Event
                  of
                  Default.

              


      

       

      8. SECURITY;
        GUARANTY.

       

      This
        Note
        is secured by one or more liens and security interests upon the Collateral,
        as
        more particularly set forth in the Loan Agreement and other Loan Documents,
        and
        payments hereunder are unconditionally guaranteed by Guarantor pursuant to
        the
        Guaranty.

       

      9. EVENT
        OF DEFAULT.

       

      The
        occurrence of any of the following shall be deemed to be an event of default
        (“Event
        of Default”)
        hereunder:

       

      
        	 	
                (a)

              	
                Failure
                  by Maker to pay any monetary amount within ten (10) days of when
                  due under
                  any Loan Document; or

              


      

       

      
        	 	
                (b)

              	
                The
                  occurrence of any event of default under any of the other Loan
                  Documents.

              


      

       

      10. REMEDIES.

       

      Upon
        the
        occurrence, and during the continuance, of an Event of Default, then at the
        option of Holder, the entire balance of principal together with all accrued
        interest thereon, and all other amounts payable by Maker under the Loan
        Documents shall, without demand or notice, immediately become due and payable.
        Upon the occurrence of an Event of Default (and so long as such Event of
        Default
        shall continue), without notice or demand, the entire balance of principal
        hereof, together with all accrued interest thereon, all other amounts due
        under
        the Loan Documents, and any judgment for such principal, interest, and other
        amounts shall bear interest at the Default Interest Rate. Maker may also,
        at its
        election, add any unpaid accrued interest to principal and such sum will
        bear
        interest therefrom until paid at the Default Interest Rate. The Interest
        Rate
        under this Note will not exceed the maximum rate permitted by applicable
        law
        under any circumstances. No delay or omission on the part of Holder in
        exercising any right under this Note or under any of the other Loan Documents
        hereof shall operate as a waiver of such right and no application of the
        Default
        Interest Rate or addition of interest to principal shall constitute an election
        of remedies by Holder nor shall any such exercise of any right cure any Event
        of
        Default under the Loan Documents.

       

      11. WAIVER.

       

      
        	 	
                (a)

              	
                Maker,
                  endorsers, guarantors, and sureties of this Note hereby waive diligence,
                  demand for payment, presentment for payment, protest, notice of
                  nonpayment, notice of protest, notice of intent to accelerate,
                  notice of
                  acceleration, notice of dishonor, and notice of nonpayment, and
                  all other
                  notices or demands of any kind (except notices specifically provided
                  for
                  in the Loan Documents) and expressly agree that, without in any
                  way
                  affecting the liability of Maker, endorsers, guarantors, or sureties,
                  Holder may extend any maturity date or the time for payment of
                  any
                  installment due hereunder, otherwise modify the Loan Documents,
                  accept
                  additional security, release any Person liable, and release any
                  security
                  or guaranty. Maker, endorsers, guarantors, and sureties waive,
                  to the full
                  extent permitted by law, the right to plead any and all statutes
                  of
                  limitations as a defense.

              


      

       

      
        	 	
                (b)

              	
                TO
                  THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, MAKER SHALL NOT
                  ASSERT,
                  AND HEREBY WAIVES, ANY CLAIM AGAINST HOLDER, 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 NOTE OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
                  HEREBY,
                  THE LOAN OR THE USE OF THE PROCEEDS
                  THEREOF.

              


      

       

      12. CHANGE,
        DISCHARGE, TERMINATION, OR WAIVER.

       

      No
        provision of this Note may be changed, discharged, terminated, or waived
        except
        in a writing signed by the party against whom enforcement of the change,
        discharge, termination, or waiver is sought. No failure on the part of Holder
        to
        exercise and no delay by Holder in exercising any right or remedy under this
        Note or under the law shall operate as a waiver thereof.

       

      13. ATTORNEYS’
        FEES.

       

      If
        this
        Note is not paid when due or if any Event of Default occurs, Maker promises
        to
        pay all costs of enforcement and collection and preparation therefor, including,
        but not limited to, reasonable attorneys’ fees, whether or not any action or
        proceeding is brought to enforce the provisions hereof (including, without
        limitation, all such costs incurred in connection with any bankruptcy,
        receivership, or other court proceedings (whether at the trial or appellate
        level)) or with regard to any arbitration or other dispute resolution
        proceeding.

       

      14. SEVERABILITY.

       

      If
        any
        provision of this Note is unenforceable, the enforceability of the other
        provisions shall not be affected and they shall remain in full force and
        effect.

       

      15. INTEREST
        RATE LIMITATION.

       

      Maker
        hereby agrees to pay an effective rate of interest that is the sum of the
        interest rate provided for herein, together with any additional rate of interest
        resulting from any other charges of interest or in the nature of interest
        paid
        or to be paid in connection with the Loan, including without limitation,
        the
        Origination Fee and any other fees to be paid by Maker pursuant to the
        provisions of the Loan Documents. Holder and Maker agree that none of the
        terms
        and provisions contained herein or in any of the Loan Documents shall be
        construed to create a contract for the use, forbearance or detention of money
        requiring payment of interest at a rate in excess of the maximum interest
        rate
        permitted to be charged by the laws of the State of Utah. In such event,
        if any
        holder of this Note shall collect monies which are deemed to constitute interest
        which would otherwise increase the effective interest rate on this Note to
        a
        rate in excess of the maximum rate permitted to be charged by the laws of
        the
        State of Utah, all such sums deemed to constitute interest in excess of such
        maximum rate shall, at the option of Holder, be credited to the payment of
        other
        amounts payable under the Loan Documents or returned to Maker.

       

      16. NUMBER
        AND GENDER.

       

      In
        this
        Note the singular shall include the plural and the masculine shall include
        the
        feminine and neuter gender, and vice versa.

       

      17. HEADINGS.

       

      Headings
        at the beginning of each numbered section of this Note are intended solely
        for
        convenience and are not part of this Note.

       

      18. CHOICE
        OF LAW.

       

      THIS
        NOTE
        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 NOTE 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 HOLDER, IN ANY OTHER COURT IN WHICH HOLDER SHALL INITIATE LEGAL OR EQUITABLE
        PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
        CONTROVERSY. EACH OF MAKER AND HOLDER 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
        18.

       

      19. INTEGRATION.

       

      The
        Loan
        Documents contain the complete understanding and agreement of Holder and
        Maker
        and supersede all prior representations, warranties, agreements, arrangements,
        understandings, and negotiations. PURSUANT
        TO UTAH
        CODE ANNOTATED
        SECTION 25-5-4, MAKER IS NOTIFIED THAT
        THIS NOTE AND OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
        BETWEEN
        THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR,
        CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
        UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

       

      20. COUNTERPARTS.

       

      This
        document may be executed and acknowledged in counterparts, all of which executed
        and acknowledged counterparts shall together constitute a single document.
        

       

      21. BINDING
        EFFECT.

       

      The
        Loan
        Documents will be binding upon, and inure to the benefit of, Holder, Maker,
        and
        their respective successors and assigns. Maker may not delegate its obligations
        hereunder or under the Loan Documents.

       

      22. TIME
        OF THE ESSENCE.

       

      Time
        is
        of the essence with regard to each provision of the Loan Documents as to
        which
        time is a factor.

       

      22. SURVIVAL.

       

      The
        representations, warranties, and covenants of Maker in the Loan Documents
        shall
        survive the execution and delivery of the Loan Documents and the making of
        the
        Loan.

       

      [Remainder
        of Page Intentionally Left Blank]

      
 

      
        
          
          

        

        
          
          

          
          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, Maker has executed and delivered this Note as of the day
        and
        year first above written.

       

      
        
          
            	 	 	 
	 	FRANKLIN
                    COVEY CO.
	 
 	 
 	a
                    Utah
                    corporation
 
	 	By:  	 /s/ RICHARD PUTNAM
	 	
                    
Name:
                    Richard Putnam
	 	
                    Title:
                      Treasurer and Vice President of Investor Relations

                    "Maker"