Exhibit 10.6


    
      

    

     

    Exhibit
      10.6

     

    

      


       

      REVOLVING
        LINE OF CREDIT AGREEMENT

       

      by
        and
        between

       

      ZIONS
        FIRST NATIONAL BANK,

      a
        national banking association,

       

      as
        Lender,

       

      and

       

      FRANKLIN
        COVEY CO.,

      a
        Utah
        corporation,

       

      as
        Borrower

       

      Dated
        as
        of March 14, 2007

      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      REVOLVING
        LINE OF CREDIT AGREEMENT

       

      THIS
        REVOLVING
        LINE OF CREDIT AGREEMENT
        is made
        as of March 14, 2007, by and between FRANKLIN
        COVEY CO.,
        a Utah
        corporation (“Borrower”),
        whose
        address is 2200 West Parkway Blvd., Salt Lake City, Utah 84119, and ZIONS
        FIRST NATIONAL BANK,
        a
        national banking association (“Lender”),
        whose
        mailing address is 10 East South Temple, Suite 200, Salt Lake City, Utah
        84133.

       

      RECITALS:

       

      A. Borrower
        has applied to Lender for a revolving line of credit loan to finance Borrower’s
        general corporate purposes, including Borrower’s working capital needs, the
        redemption of Borrower’s common or preferred stock, or other Borrower purposes,
        and for other uses approved by Lender, upon the terms and subject to the
        conditions set forth herein.

       

      B. Based
        on
        the foregoing and upon the terms and subject to the conditions set forth
        herein,
        Lender is willing to extend the requested revolving line of credit loan to
        Borrower.

       

      NOW,
        THEREFORE, in consideration of the covenants and conditions herein contained,
        the parties agree as follows:

       

       

      ARTICLE
        1

       

      DEFINITIONS

       

      1.1  Definitions.
        As used
        herein, the following terms shall have the meanings set forth
        below:

       

      “Account
        Control Agreement”
means
        that certain Account Control Agreement of even date herewith by and among
        Borrower, Guarantor, Collateral Agent and Chase.

       

      “Advance”
means
        a
        disbursement of Loan proceeds.

       

      “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 managers of a Person, if the Person
        is a
        limited liability company or limited partnership.

       

      “Agreement”
means
        this Revolving Line of Credit Agreement, as the same may be amended and
        supplemented from time to time.

       

      “Authorized
        Representative”
means,
        for any Person, the person or persons designated by that Person to take any
        and
        all actions on the part of that Person under any of the Loan Documents or
        in
        connection with the Loan.

       

      “Average
        Quarterly Outstanding Balance”
means
        the aggregate sum of the outstanding and unpaid balance of the Loan for each
        day
        during a calendar quarter (or portion thereof) with respect to which the
        Unused
        Commitment Fee is being computed, divided by the number of days in that calendar
        quarter (or portion thereof).

       

      “Borrower”
has
        the
        meaning set forth in the introductory paragraph of this Agreement, together
        with
        its successors and permitted assigns.

       

      “Borrower
        Operating Documents”
means
        the Articles of Incorporation of Borrower, as filed with the predecessor
        filing
        office to the Utah Department of Commerce, Division of Corporations and
        Commercial Code on December 2, 1983, and the Amended and Restated Bylaws
        of
        Borrower, dated effective as of January 11, 2002, and all modifications and
        amendments to those documents, pursuant to which Borrower has been formed
        and
        exists.

       

      “Business
        Day”
means
        a
        day other than a Saturday, Sunday or any other day on which Lender’s branch
        located at 80 West Broadway, Salt Lake City, Utah is authorized or obligated
        to
        close.

       

      “Capital
        Expenditures”
means
        expenditures for fixed or capital assets as determined in accordance with
        GAAP.

       

      “Change
        of Control”
(a)
        means the closing of a sale or other disposition of all or substantially
        all of
        Borrower’s or Guarantor’s assets; (b) shall be deemed to have occurred at such
        time as a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2)
        of the Securities Exchange Act of 1934, as amended) becomes the “beneficial
        owner” (as defined in Rule 13d3 under the Securities Exchange Act of 1934, as
        amended), directly or indirectly, of more than fifty percent (50%) of the
        total
        voting power of all classes of stock then outstanding of Borrower entitled
        to
        vote in the election of directors; or (c) Borrower’s or Guarantor’s merger into
        or consolidation with any other entity, or any other reorganization or transfer,
        directly or indirectly, of the ownership interests in Borrower or Guarantor,
        in
        which the holders of the outstanding ownership interests in Borrower or
        Guarantor immediately prior to such transaction receive or retain, in connection
        with such transaction on account of their ownership interests, ownership
        interests representing less than fifty percent (50%) of the voting power
        of the
        entity surviving such transaction; provided,
        however,
        that a
        Change of Control shall not include a merger effected exclusively for the
        purpose of changing the domicile of Borrower or Guarantor or a merger of
        a
        Guarantor into Borrower or another Guarantor.

       

      “Chase”
        means
        JPMorgan Chase Bank, N.A.

       

      “Chase
        Loan”
means
        that certain revolving line of credit in the maximum principal amount of
        up to
        EIGHTEEN MILLION AND NO/100 DOLLARS ($18,000,000.00).

       

      “Chase
        Loan Documents”
means
        any agreements, documents, instruments or guaranties, now or hereafter
        governing, evidencing, guarantying or securing the obligations of Borrower
        with
        respect to the Chase Loan, as such agreements, documents, instruments and
        guaranties may be amended, modified, extended, renewed, or supplemented from
        time to time.

       

      “Closing
        Date”
means
        the date upon which Borrower, Guarantor and Lender have executed and delivered
        each of the Loan Documents and each of the conditions precedent and other
        requirements in Article 4
        have
        been satisfied or waived, as determined by Lender in its sole and absolute
        discretion.

       

      “Code”
means
        the Internal Revenue Code of 1986, as amended, and any successor statute
        promulgated in replacement thereof, together with all temporary, final and
        other
        Treasury Regulations promulgated under the Code.

       

      “Collateral”
means
        all of Borrower’s and Guarantor’s assets and proceeds thereof, including,
        without limitation, the personal property subject to the Security Agreement,
        including proceeds, products, interest on and investments thereof from time
        to
        time, and all other property, interests in property, and rights to property
        securing any or all of Borrower’s and Guarantor’s payment and other obligations
        under the Loan Documents from time to time.

       

      “Collateral
        Agent”
means
        JPMORGAN
        CHASE BANK, N.A.,
        a
        national banking association, not in its individual capacity, but solely
        as
        collateral agent for Lender and Chase.

       

      “Consolidated
        Entities”
means
        Borrower and any Subsidiaries thereof, including, without limitation,
        Guarantor.

       

      “Covenant
        Compliance Certificate”
means
        a
        Covenant Compliance Certificate in form and substance satisfactory to Lender,
        which shall be in substantially the form attached hereto as Exhibit
        A
        from
        Borrower to Lender certifying compliance with the financial covenants set
        forth
        in Section
        6.8
        of this
        Agreement, together with such other supporting documents and information
        as
        Lender may require from time to time in accordance herewith.

       

      “Default
        Interest Rate”
means
        a
        rate of interest equal to the lesser of (a) the aggregate of THREE PERCENT
        (3%)
        per annum plus the Interest Rate, or (b) the highest rate legally permissible
        under applicable Requirements of Law. The Default Interest Rate shall change
        from time to time as and when the Interest Rate changes.

       

      “Early
        Termination Fee”
means,
        as of the date of any early termination of the Loan by Borrower pursuant
        to
Section
        2.6(c),
        an
        amount equal to the sum of (a) the Unused Commitment Fee for the portion
        of the
        calendar quarter that has passed as of such date and (b) using a discount
        rate
        of seven percent (7%), the net present value of the aggregate amount of future
        Unused Commitment Fees which would have been due (assuming an Average Quarterly
        Outstanding Balance of $0.00) for each calendar quarter (or portion thereof)
        remaining in the term of the Loan after the date Borrower terminates the
        Loan.

       

      “EBITDAR”
shall
        have the meaning given in Section
        6.8(a).

       

      “ERISA”
means
        the Employee Retirement Income Security Act of 1974, as amended, and any
        successor statute of similar import, together with the regulations thereunder,
        in each case as in effect from time to time. References to sections of ERISA
        shall be construed to also refer to any successor sections.

       

      “ERISA
        Affiliate”
means
        any corporation, partnership, or other trade or business (whether or not
        incorporated) that is, along with Borrower or Guarantor, a member of a
        controlled group of corporations or a controlled group of trades or businesses,
        as described in sections 414(b) and 414(c), respectively, of the Code or
        section
        4001 of ERISA, or a member of the same affiliated service group within the
        meaning of section 414(m) of the Code.

       

      “Event
        of Default”
means
        the occurrence of any of the events listed in Section
        7.1
        and the
        expiration of any applicable notice and cure period provided in said
        section.

       

      “Financing
        Statement”
means
        one or more UCC financing statements and/or addenda thereto, to be prepared
        by
        Collateral Agent, naming Borrower and/or Guarantor, as applicable, as debtor,
        in
        favor of Collateral Agent, as secured party, and perfecting Collateral Agent’s
        security interest in the Collateral now owned or hereafter acquired by Borrower
        and Guarantor, in form and substance satisfactory to Collateral Agent, to
        be
        filed with the Utah Department of Commerce, Division of Corporations and
        Commercial Code and in such other offices for recording or filing such
        statements in such jurisdictions as Collateral Agent shall desire to perfect
        Collateral Agent’s liens and security interest or reflect such interest in
        appropriate public records.

       

      “Franklin
        Covey Mexico”
        means
        FRANKLIN COVEY MEXICO, INC.,
        a Utah
        corporation.

       

      “GAAP” shall
        have the meaning given in Section
        1.3.

       

      “Governmental
        Authority”
means
        the government of the United States of America, any other nation or any
        political subdivision thereof, whether state or local, and any agency,
        authority, instrumentality, regulatory body, court, central bank or other
        entity
        exercising executive, legislative, judicial, taxing, regulatory or
        administrative powers or functions of or pertaining to government.

       

      “Guarantor”
means,
        individually and collectively, as the context requires, and jointly and
        severally, all present and future domestic Subsidiaries of Borrower, including,
        without limitation, FRANKLIN
        COVEY PRINTING, INC.,
        a Utah
        corporation (“Printing”),
        FRANKLIN
        DEVELOPMENT CORPORATION,
        a Utah
        corporation (“Development”),
        FRANKLIN
        COVEY TRAVEL, INC.,
        a Utah
        corporation (“Travel”),
        FRANKLIN
        COVEY CATALOG SALES, INC.,
        a Utah
        corporation (“Catalog”),
        FRANKLIN
        COVEY CLIENT SALES, INC.,
        a Utah
        corporation (“Client”),
        FRANKLIN
        COVEY PRODUCT SALES,
        a Utah
        corporation (“Product”),
        FRANKLIN
        COVEY SERVICES, L.L.C.,
        a Utah
        limited liability company (“Services”),
        and
FRANKLIN
        COVEY MARKETING, LTD.,
        a Utah
        limited partnership (“Marketing”).

       

      “Guarantor
        Loan Documents”
means
        the Guaranty and any other guaranties, agreements, documents, or instruments
        now
        or hereafter executed by Guarantor evidencing, guarantying, securing or
        otherwise related to the obligations of Guarantor or the Loan, as the Guaranty
        and such other guaranties, agreements, documents, and instruments may be
        amended, modified, extended, renewed, or supplemented from time to
        time.

       

      “Guarantor
        Operating Documents”
means
        the articles of incorporation, articles of organization, certificate of
        partnership, bylaws, operating agreements and limited partnership agreements
        of
        Guarantor, as applicable, and all modifications and amendments to those
        documents, pursuant to which Guarantor has been formed and exists.

       

      “Guaranty”
means
        that certain Repayment Guaranty executed by Guarantor, as the same may be
        amended, modified, supplemented and restated from time to time.

       

      “Indebtedness”
means,
        as to any Person (a) indebtedness created, issued, incurred or assumed by
        such
        Person for borrowed money or evidenced by bonds, debentures, notes or similar
        instruments; (b) all obligations of such Person to pay the deferred purchase
        price of property or services; (c) all indebtedness secured by a lien on
        any
        asset of such Person whether or not such indebtedness is assumed by such
        Person;
        (d) all obligations, contingent or otherwise, of such Person directly or
        indirectly guaranteeing any indebtedness or other obligation of any other
        Person
        or in any manner providing for the payment of any indebtedness or other
        obligation of any other Person or otherwise protecting the holder of such
        indebtedness against loss (excluding endorsements for collection or deposit
        in
        the ordinary course of business); (e) the amount of all reimbursement
        obligations and other obligations of such Person (whether due or to become
        due,
        contingent or otherwise) in respect of letters of credit, bankers’ acceptances,
        surety or other bonds (but excluding surety or other bonds in favor of
        Governmental Authorities) and similar instruments; (f) all obligations under
        leases capitalized in accordance with GAAP; and (g) all other obligations
        that
        would be included as liabilities on a balance sheet prepared in accordance
        with
        GAAP.

       

      “Intercreditor
        Agreement”
means
        that certain Intercreditor Agreement of approximately even date herewith
        by and
        among Collateral Agent, Lender and Chase, as the same may be amended, modified,
        supplemented or restated from time to time.

       

      “Interest
        Period”
means
        each period commencing on the first day of a calendar month and ending on
        the
        first day of the next succeeding calendar month; provided,
        however,
        that
        (i) the first Interest Period shall commence on the Closing Date; and (ii)
        any
        Interest Period that would otherwise extend past the Maturity Date shall
        end on
        the Maturity Date.

       

      “Interest
        Rate”
means
        a
        variable rate equal to the LIBO Rate in effect from time to time plus One
        and
        One-Tenth Percent (1.10%) per annum.

       

      “Lender”
means
        ZIONS
        FIRST NATIONAL BANK,
        a
        national banking association whose address is as set forth in the introductory
        paragraph of this Agreement, its successors and assigns.

       

      “Letter
        of Credit”
means
        a
        written agreement by Lender to honor drafts or other demands for payment
        in
        compliance with the conditions specified in a letter of credit extended by
        Lender pursuant to this Agreement, on such form(s) of letter of credit as
        customarily issued by Lender and on such terms as Lender shall require in
        its
        reasonable discretion.

       

      “Letter
        of Credit Limit”
means
        the aggregate issued and committed amount of SEVEN MILLION AND NO/100 DOLLARS
        ($7,000,000.00).

       

      “LIBO
        Rate”
means,
        with respect to any Interest Period, the rate per annum quoted by Lender
        as
        Lender’s LIBOR rate based upon quotes from the London Interbank Offered Rate
        from the British Bankers Associates Interest Settlement Rates, as quoted
        for
        U.S. Dollars by Bloomberg or other comparable pricing services selected by
        Lender. This definition of Lender’s LIBOR rate is to be strictly interpreted and
        is not intended to serve any purpose other than providing an index to determine
        the Interest Rate. Lender’s LIBOR rate may not necessarily be the same as the
        quoted offer side in the Eurodollar time deposit market by any particular
        institution or service applicable to any interest period. It is not the lowest
        rate at which Lender may make loans to any of its customers, either now or
        in
        the future. 

       

      “Lien
        or Encumbrance”
and
        “Liens
        and Encumbrances”
means
        any assignment as security, conditional sale for security purposes, grant
        in
        trust, lien, mortgage, pledge, security interest, title retention arrangement,
        other encumbrance, or other interest or right securing the payment of money
        or
        the performance of any other liability or obligation, whether voluntarily
        or
        involuntarily created and whether arising by agreement, document, or instrument,
        under any law, ordinance, regulation, or rule (federal, state, or local),
        or
        otherwise.

       

      “Loan”
means
        the revolving line of credit loan from Lender to Borrower described in this
        Agreement.

       

      “Loan
        Amount”
means
        the amount of up to SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00), plus
        any
        sum in addition thereto advanced by Lender in its sole and absolute discretion
        in accordance with the Loan Documents, to be disbursed pursuant to the terms
        and
        conditions of this Agreement.

       

      “Loan
        Documents”
means
        the documents described in Section
        4.1(i),
        any
        International Swap and Derivatives Association Master Agreement (and any
        confirmation related thereto and any other Swap Agreement), and any other
        guaranties, agreements, documents, or instruments now or hereafter evidencing,
        guarantying or securing the Obligations of Borrower hereunder, as this
        Agreement, the other documents described in Section
        4.1,
        and
        such other agreements, documents, and instruments may be amended, modified,
        extended, renewed, or supplemented from time to time.

       

      “Loan
        Party”
means
        Borrower, Guarantor and each other Person that from time to time is or becomes
        obligated to Lender or Collateral Agent under any Loan Document or grants
        any
        Lien or Encumbrance to Lender or Collateral Agent with respect to any
        Collateral.

       

      “Material
        Adverse Change”
means
        any change in the assets, liabilities, financial condition, or results of
        operations of Borrower or Borrower and Guarantor on an aggregate basis, or
        any
        other event or condition with respect to Borrower or Borrower and Guarantor
        together, that materially and adversely affects any of the following: (i)
        the
        likelihood of performance by Borrower or Borrower and Guarantor together
        of any
        Obligations or the ability of Borrower or Borrower and Guarantor together
        to
        perform such Obligations, (ii) the legality, validity or binding nature of
        any of the Obligations of Borrower or Guarantor, (iii) any Lien or Encumbrance
        securing any of such Obligations, or (iv) the priority of any Lien or
        Encumbrance securing any of such Obligations.

       

      “Maturity
        Date”
means
        the date which is exactly thirty-six (36) months from the date of the
        Note.

       

      “Multiemployer
        Plan”
means
        a
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA which is
        maintained for employees of Borrower or Guarantor.

       

      “Note”
means
        the Secured Promissory Note of approximately even date herewith executed
        by
        Borrower and payable to Lender, as such note may be amended, modified, extended,
        renewed, supplemented or restated from time to time.

       

      “Obligations”
means,
        as the context requires, the duties and obligations of Borrower and/or Guarantor
        under the Loan Documents from time to time, including without limitation,
        any
        and
        all obligations, contingent or otherwise, whether now existing or hereafter
        arising, of Borrower to Lender arising under or in connection with Swap
        Agreements.

       

      “Occupational
        Safety and Health Law”
means
        the Occupational Safety and Health Act of 1970, as amended, and any other
        federal, state or local statute, law, ordinance, code, rule, regulation,
        order
        or decree regulating, relating to or imposing liability or standards of conduct
        concerning employee health and/or safety.

       

      “Other
        Loans”
        means
        any loan, financing arrangement or extension of credit to Borrower or its
        Subsidiaries, including, without limitation, Guarantor, from Lender, any
        Affiliate of Lender, or from Chase or J.P. Morgan Chase & Co. or any of
        their Affiliates.

       

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

       

      “PBGC”
means
        the Pension Benefit Guaranty Corporation and any entity succeeding to any
        or all
        of its functions under ERISA.

       

      “Permitted
        Exceptions”
means
        the following: (a) the sale, transfer, or other disposition of any Collateral
        that is (i) consumed or worn out in ordinary usage and that is promptly replaced
        with similar items of equal or greater value or (ii) sold in the ordinary
        course
        of business; (b) the Loan Documents; (c) purchase money liens on items of
        the
        Collateral; (d) Liens or Encumbrances granted to Chase or Collateral Agent
        pursuant to the Chase Loan Documents in respect of which Lender or Collateral
        Agent shares or is otherwise granted a first priority security interest with
        Chase on a pari
        passu
        basis
        pursuant to and as set forth in the Intercreditor Agreement; (e) Liens and
        Encumbrances against Borrower or Guarantor set forth on Schedule
        5.6
        in
        effect on the Closing Date; (f) covenants, restrictions, rights,
        rights-of-way, easements and minor irregularities and encumbrances in title
        which do not materially interfere with the business or operations of Borrower
        or
        Guarantor as presently conducted; (g) Liens and Encumbrances arising by statute
        in connection with worker’s compensation and unemployment insurance (other than
        Liens and Encumbrances arising under ERISA), good faith cash deposits in
        connection with tenders, contracts or leases to which Borrower or Guarantor
        is a
        party or other cash deposits required to be made in the ordinary course of
        business (provided in each case that the obligation is not for borrowed money
        and that the obligation secured is not overdue or, if overdue, is being
        contested in good faith); (h) mechanics’, workmen’s, materialmen’s,
        landlords’, carriers’ or other similar Liens and Encumbrances arising in the
        ordinary course of Borrower’s or Guarantor’s business with respect to
        obligations which are not due or which are being contested in good faith;
        (i)
        the pledge of assets for the purpose of securing an appeal, stay or discharge
        in
        the course of any legal proceeding, provided that the aggregate amount of
        liabilities of Borrower and Guarantor secured by a pledge of Collateral,
        including interest and penalties thereon, if any, shall not be in excess
        of
        $2,000,000 at any one time outstanding; and (j) any interest or title of a
        lessor under any operating lease to Borrower or Guarantor.

       

      “Person”
means
        any natural person, any unincorporated association, any corporation, any
        partnership, any joint venture, any limited liability company, any trust,
        any
        other legal entity, or any Governmental Authority.

       

      “Pledged
        Securities”
means
        all of the shares of the common stock of Guarantor (other than Services and
        Marketing) owned and pledged by Borrower, together with all dividends therefrom
        (whether in cash or in equity securities), all stock splits or reissuances
        thereof, all distributions thereon or in respect thereof, all rights with
        respect thereto, including voting and appraisement rights, all investments
        thereof, interest thereon and proceeds thereof, all securities, cash or other
        assets in replacement thereof.

       

      “Quarterly
        Payment Date”
means
        the last day of each of March, June, September and December of each calendar
        year until the Maturity Date, unless any such day is not a Business Day,
        in
        which case the Quarterly Payment Date shall be the next succeeding Business
        Day.

       

      “Reimbursement
        Obligations” shall
        have the meaning given in Section
        3.2(a).

       

      “Reportable
        Event”
has
        the
        meaning given to such term in ERISA, but shall not include any event for
        which
        the thirty (30) day reporting requirement has been waived by the
        PBGC.

       

      “Request
        for Advance”
means
        a
        completed, written Request for Advance and Pledge in form and substance
        satisfactory to Lender, which shall be in substantially the form attached
        hereto
        as Exhibit
        B
        from
        Borrower to Lender requesting an Advance from Lender, together with such
        other
        documents and information as Lender may require from time to time in accordance
        herewith.

       

      “Requirements
        of Law” means
        (a)
        the organizational documents of an entity and (b) any law, regulation,
        ordinance, code, decree, treaty, ruling or determination of an arbitrator,
        court
        or other Governmental Authority, or any Executive Order issued by the President
        of the United States, in each case applicable to or binding upon such Person
        or
        to which such Person, any of its property or the conduct of its business
        is
        subject.

       

      “Security
        Agreement”
means
        that certain Security Agreement of even date herewith by and between Borrower
        and Guarantor, as debtor, and Collateral Agent, as secured party, with respect
        to all of the assets of Borrower and Guarantor.

       

      “Stock
        Pledge Agreement”
means
        that certain Pledge and Security Agreement of even date herewith by and between
        Borrower, as pledgor, and Collateral Agent, pledging all of the shares of
        each
        Guarantor other than Services and Marketing.

       

      “Subsidiary”
means,
        with respect to any Person (the “parent”)
        at any
        date, any corporation, limited liability company, partnership, association
        or
        other entity (a) of which securities or other ownership interests representing
        more than 50% of the equity or more than 50% of the ordinary voting power
        or, in
        the case of a partnership, more than 50% of the general partnership interests
        are, as of such date, owned, controlled or held, or (b) that is, as of such
        date, otherwise controlled, directly or indirectly, by the parent or one
        or more
        subsidiaries of the parent. As used in this definition, “control”
means
        the possession, directly or indirectly, of the power to direct or cause the
        direction of the management or policies of a Person, whether through the
        ability
        to exercise voting power, by contract or otherwise.

       

      “Swap
        Agreement”
        means
        any
        interest rate swap, cap, collar, foreign exchange, or similar hedging agreement
        between Lender or its Affiliate and Borrower.

       

      “Transfer”
means
        (a) the granting of any Lien or Encumbrance on the Collateral or any part
        thereof to any Person, except the security interests in favor of Lender or
        Collateral Agent, the Permitted Exceptions and other matters which have been
        approved in writing by Lender; (b) any sale, transfer, conveyance, lease
        or
        vesting of the Collateral or any part thereof or interest therein to or in
        any
        Person, whether voluntary, involuntary, by operation of law, or otherwise,
        except the Permitted Exceptions, which would result in a Material Adverse
        Change
        (without taking into consideration subsections (iii) and (iv) of the definition
        of Material Adverse Change); (c) any Change of Control; or (d) the execution of
        any agreements to do any of the foregoing, except the Permitted
        Exceptions.

       

      “Unused
        Commitment Fee”
means,
        with respect to each calendar quarter (or portion thereof) during the term
        of
        the Loan, an amount equal to (i) the Loan Amount minus
        (ii) the
        Average Quarterly Outstanding Balance for such calendar quarter (or portion
        thereof) with respect to which the Unused Commitment is being computed, with
        the
        resulting number being multiplied
        by
        ONE
        QUARTER OF ONE PERCENT (0.25%) per annum (i.e., 0.0625% per quarter). If
        the
        Unused Commitment Fee is being computed for less than a full calendar quarter,
        the percentage used in the preceding sentence will be computed on a daily
        basis
        for the number of days for which the fee is being computed.

       

      “Zions
        Account”
means
        an account established by Borrower with Lender into which Lender and Chase
        shall
        advance proceeds of the Loan and the Chase Loan, respectively.

       

      1.2  Interpretation.
        Unless
        the context of this Agreement otherwise clearly requires, the following rules
        of
        construction shall apply to this Agreement and each of the other Loan
        Documents:

       

      (a)  Number;
        Inclusion.
        References to the plural include the singular, the plural, the part and the
        whole; “or” has the inclusive meaning represented by the phrase “and/or”; and
“including” has the meaning represented by the phrase “including without
        limitation”.

       

      (b)  Documents
        Taken as a Whole.
        The
        words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this
        Agreement or any other Loan Document refer to this Agreement or such other
        Loan
        Document as a whole and not to any particular provision of this Agreement
        or
        such other Loan Document.

       

      (c)  Headings.
        The
        section and other headings contained in this Agreement or the other Loan
        Documents and the Table of Contents (if any) preceding this Agreement or
        the
        other Loan Documents are for reference purposes only and shall not control
        or
        affect the construction of this Agreement or the other Loan Documents or
        the
        interpretation thereof in any respect.

       

      (d)  Implied
        References to This Agreement.
        Article, section, subsection, clause, schedule and exhibit references are
        to
        this Agreement unless otherwise specified.

       

      (e)  Persons.
        Reference to any Person includes such Person’s successors and assigns but, if
        applicable, only if such successors and assigns are permitted by this Agreement
        or the other Loan Documents, as the case may be.

       

      (f)  Modifications
        to Documents.
        Reference to any agreement (including this Agreement and any other Loan Document
        together with the schedules and exhibits hereto or thereto), document or
        instrument means such agreement, document or instrument as amended, modified,
        replaced, substituted for, superseded or restated.

       

      1.3  Accounting
        Terms.
        For
        purposes of this Agreement, all accounting terms not otherwise defined herein
        or
        in the Recitals shall have the meanings assigned to them in conformity with
        generally accepted accounting practices and principles (“GAAP”),
        consistently applied. In the event that GAAP changes during the term of this
        Agreement such that the covenants contained in Section
        6.8
        would
        then be calculated in a different manner or with different components, (a)
        Borrower and Lender agree to amend this Agreement in such respects as are
        necessary to conform those covenants as criteria for evaluating the Consolidated
        Entities’ financial condition to substantially the same criteria as were
        effective prior to such change in GAAP and (b) the Consolidated
        Entities shall be deemed to be in compliance with the covenants contained
        in Section
        6.8
        following any such change in GAAP if and to the extent that the Consolidated
        Entities would have been (and would continue to be) in compliance therewith
        under GAAP as in effect immediately prior to such change.

       

      1.4  Actions
        by Lender.
        Unless
        otherwise expressly provided in this Agreement, all determinations, consents,
        approvals, disapprovals, calculations, requirements, requests, acts, actions,
        elections, selections, opinions, judgments, options, exercise of rights,
        remedies or indemnities, satisfaction of conditions or other decisions of
        or to
        be made by Lender under this Agreement or any of the other Loan Documents
        shall
        be made in the reasonable discretion of Lender. Any reference to Lender’s “sole
        and absolute discretion” or similar phrases has the meaning represented by the
        phrase “sole and absolute discretion, acting in good faith”.

       

      1.5  Knowledge
        of Borrower.
        As used
        herein and in any other Loan Document, the phrase “to the knowledge of
        Borrower,” “to the knowledge of Guarantor” or such similar phrases shall mean to
        the actual, conscious knowledge of Borrower’s Chief Executive Officer, Chief
        Financial Officer or Treasurer.

       

       

      ARTICLE
        2

       

      THE
        LOAN

       

      2.1  Agreement
        to Lend and Borrow.
        

       

      (a)  Agreement
        to Lend and Borrow.
        Subject
        to the terms and conditions of this Agreement and the other Loan Documents,
        Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender
        from time to time prior to the Maturity Date, Advances of the proceeds of
        the
        Loan up to the Loan Amount. Lender’s commitment to make Advances shall be
        decreased at the same time and in the same amount as the aggregate stated
        amount
        of any outstanding Letters of Credit.

       

      (b)  Revolving
        Nature of Loan.
        Prior
        to the Maturity Date, the Loan Amount may be drawn, repaid, and drawn again,
        on
        a revolving basis, in unlimited repetition so long as (i) the aggregate of
        all
        outstanding Advances does not exceed, at any time, the Loan Amount, and (ii)
        no
        Event of Default has occurred and is continuing. Although the outstanding
        principal balance of the Note may be zero from time to time, the Loan Documents
        will remain in full force and effect until the Maturity Date or all obligations
        of Borrower or Guarantor relating to the Loan are indefeasibly paid and
        performed in full, whichever is later. Borrower shall have the right to
        terminate the Loan upon Borrower’s specific written direction and attendant
        payment in full to Lender of all Obligations with respect to the Loan,
        including, without limitation, the Early Termination Fee. Upon the occurrence
        and during the continuance of any Event of Default, Lender may suspend or
        terminate its commitment to make Advances of the proceeds of the Loan without
        notice to Borrower or further act on the part of Lender.

       

      (c)  Use
        of
        Proceeds.
        The
        proceeds of the Loan may be used by Borrower for its general working capital
        purposes or other Borrower purposes and to repurchase shares of Borrower’s
        preferred and common stock.

       

      2.2  Procedures
        for Advances.

       

      (a)  Requests
        for Advances.
        Each
        request for an Advance shall be in writing and in the form of a Request for
        Advance. Lender, at its option, may set a cutoff time, after which all requests
        for Advances will be treated as having been requested on the next succeeding
        Business Day. In addition to complying with the other requirements of this
        Agreement, each Request for Advance shall specify the date (which shall be
        a
        Business Day) and the amount of the requested Advance.

       

      (b)  Timing
        of Disbursement of Advances.
        Provided the conditions for the making of Advances contained herein are
        satisfied, Lender shall disburse each Advance no later than the first Business
        Day following the date of the receipt by Lender of a valid Request for Advance.
        Upon acceptance of a Request for Advance made hereunder, Lender will make
        the
        amount of each Advance available to Borrower by depositing immediately available
        funds into the Zions Account designated by Borrower in the Request for
        Advance.

       

      (c)  Authorized
        Persons.
        The
        persons initially authorized to request Advances are all Authorized
        Representatives of Borrower. At Lender’s request, Borrower shall provide Lender
        with documentation satisfactory to Lender indicating the names of those
        employees of Borrower authorized by Borrower to sign a Request for Advance
        and
        other documents, and Lender shall be entitled to rely upon such documentation
        until notified in writing by Borrower of any change(s) in the names of the
        employees so authorized.

       

      2.3  Conditions
        Precedent to Advances.
        The
        obligation of Lender to make Advances is subject to the fulfillment, to the
        satisfaction of Lender in its sole and absolute discretion, of each of the
        following conditions; provided,
        however,
        that
        Lender, in its sole and absolute discretion, may waive any of the following
        conditions:

       

      (a)  Lender
        shall have received a Request for Advance pursuant to Section
        2.2;

       

      (b)  No
        Event
        of Default shall exist and be continuing or shall result from such
        Advance;

       

      (c)  The
        amount of the requested Advance, together with the amount of all prior Advances
        then outstanding and the aggregate stated amount of all Letters of Credit
        then
        outstanding, shall not exceed the Loan Amount;

       

      (d)  The
        representations and warranties made by Borrower contained herein and in the
        other Loan Documents shall be true and correct in all material respects on
        and
        as of the date of such Advance with the same effect as if made on and as
        of the
        date of such Advance (except to the extent such representations and warranties
        expressly refer to an earlier date, in which case they shall be true and
        correct
        in all material respects as of such earlier date); and

       

      (e)  Borrower
        shall have provided such additional information and documents as Lender may
        reasonably request.

       

      Each
        Request for Advance submitted by Borrower hereunder shall constitute a
        representation and warranty by Borrower hereunder, as of the date of each
        such
        request and as of the date of each Advance, that the conditions in this
Section
        2.3
        are
        satisfied.

       

      2.4  Evidence
        of Indebtedness.
        The
        Loan shall be evidenced by the Note. Disbursements of the Loan shall be charged
        and funded under the Note. If there is any inconsistency between the Note
        and
        this Agreement, the provisions of this Agreement shall prevail.

       

      2.5  Interest.

       

      (a)  Rate.
        The
        advanced and unpaid balance of the Loan shall bear interest at the Interest
        Rate
        in effect from time to time. Each change in the Interest Rate will become
        effective for each Interest Period, without notice, on the date set forth
        in the
        definition of the term LIBO Rate set forth herein.

       

      (b)  Default
        Interest Rate.
        Upon the
        occurrence and during the continuance of an Event of Default hereunder or
        under
        any of the Loan Documents, at the option of Lender, the outstanding and unpaid
        principal balance of the Loan shall bear interest, payable on demand, at
        a rate
        per annum equal to the Default Interest Rate. Lender may also, at its option,
        from time to time, add any unpaid accrued interest to principal and such
        sum
        will bear interest therefrom until paid at the rate provided in this Agreement
        (including at the Default Interest Rate, as and when applicable). The
        application of the Default Interest Rate shall not be interpreted or deemed
        to
        extend any cure period set forth in this Agreement, or otherwise to limit
        any of
        Lender’s remedies under this Agreement or any of the other Loan
        Documents.

       

      (c)  Effective
        Rate.
        Borrower agrees to pay an effective rate of interest that is the sum of (i)
        the
        interest rate provided in this Agreement and (ii) any additional rate of
        interest resulting from any other charges or fees paid or to be paid in
        connection herewith that are determined to be interest or in the nature of
        interest. Any other provision of this Agreement or any of the other Loan
        Documents to the contrary notwithstanding, Lender and Borrower 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 Requirements of Laws of the State of
        Utah.
        In such event, if any holder of the Note shall collect monies which are deemed
        to constitute interest which would otherwise increase the effective interest
        rate on the Note to a rate in excess of the maximum rate permitted to be
        charged
        by applicable Requirements of Law, all such sums deemed to constitute interest
        in excess of such maximum rate shall, at the option of the holder, be credited
        to the payment of other amounts payable under the Loan Documents or returned
        to
        Borrower.

       

      (d)  Computation
        of Interest.
        Interest 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. 

       

      2.6  Payment
        of Principal and Interest; Application of Payments.

       

      (a)  Payments
        of Interest.
        Commencing on the Payment Date occurring in May, 2007, and continuing on
        each
        monthly Payment Date thereafter, installments of all accrued and outstanding
        interest shall be due and payable by Borrower to Lender.

       

      (b)  Payment
        at Maturity.
        The
        outstanding principal balance of the Loan, together with all unpaid accrued
        interest thereon, and all other amounts payable by Borrower with respect
        to the
        Note or pursuant to the terms of any other Loan Documents, shall be due and
        payable on the Maturity Date in lawful money of the United States of
        America.

       

      (c)  Early
        Termination.
        Borrower shall have the right to terminate the Loan at any time prior to
        the
        Maturity Date by (i) giving written notice of its intent to do so to Lender;
        (ii) paying the outstanding principal balance of the Loan, together with
        all
        unpaid accrued interest thereon, and all other amounts payable by Borrower
        with
        respect to the Note or pursuant to the terms of any other Loan Documents;
        and
        (iii) paying the Early Termination Fee.

       

      (d)  Application
        of Payments.
        Unless
        otherwise agreed to in writing or otherwise required by applicable Requirements
        of 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
        the occurrence and during the continuance of an Event of Default, Lender
        reserves the right to apply payments among principal, interest, late charges,
        collection costs and other charges at its sole and absolute
        discretion.

       

      (e)  No
        Deductions.
        All
        payments of principal or interest hereunder or under the Note shall be made
        (i)
        without deduction of any present and future taxes, levies, imposts, deductions,
        charges or withholdings, which amounts shall be paid by Borrower, and (ii)
        without any other set off. Borrower will pay the amounts necessary such that
        the
        gross amount of the principal and interest received by Lender is not less
        than
        that required hereby and by the Note.

       

      (f)  Late
        Charges.
        If any
        payment of interest or principal required pursuant to any provision of this
        Agreement is not received by Lender within ten (10) days after its due date,
        then, in addition to the other rights and remedies of Lender pursuant to
        this
        Agreement and the other Loan Documents, Borrower will be charged five percent
        (5.0%) of the regularly scheduled 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. Such late charge
        will be
        immediately due and payable and is in addition to any other costs, fees,
        and
        expenses that Borrower may owe as a result of such late payment.

       

      2.7  Manner
        and Time of Payment.
        All
        amounts payable by Borrower on or with respect to the Loan, or pursuant to
        the
        terms of any other Loan Documents, shall be paid without condition or
        reservation of right, in lawful money of the United States of America at
        80 West
        Broadway, Suite 200, Salt Lake City, Utah 84101, or at such other place as
        Lender may from time to time designate in writing, not later than 1:00 p.m.
        (Utah time), in same day funds, on the date due, and to such account of Lender
        as Lender may designate; funds received by Lender after that time shall be
        deemed to have been paid on the next succeeding Business Day. If any payment
        would otherwise be due on a day which is not a Business Day, the payment
        instead
        shall be due on the next succeeding Business Day and such extension of time
        shall be included in computing the interest due in respect of said
        payment.

       

      2.8  Guaranty.
        Payment
        of the Note and performance of Borrower’s obligations hereunder shall be
        unconditionally guaranteed by Guarantor pursuant to the Guaranty and secured
        by,
        among other things, the Security Agreement, which shall be a first priority
        security interest in and to all of the personal property assets of Borrower
        and
        Guarantor, as more fully described in the Security Agreement, subject to
        Permitted Exceptions.

       

      2.9  Security.
        Payment
        of the Note shall be secured by and/or guaranteed by, among other things,
        the
        following:

       

      (a)  the
        Guaranty;

       

      (b)  the
        Security Agreement, which shall secure the Obligations and the Guaranty and
        be a
        first priority security interest in and to all of the personal property assets
        of Borrower and Guarantor, as more fully described in the Security Agreement,
        subject to Permitted Exceptions; 

       

      (c)  the
        Stock
        Pledge Agreement, which shall secure the Obligations and be a first priority
        security interest in and to the Pledged Securities, subject to Permitted
        Exceptions; and

       

      (d)  the
        Account Control Agreement, which shall secure the Obligations and the Guaranty
        and perfect the security interest given to Collateral Agent in and to all
        of
        Borrower’s and Guarantor’s deposit accounts maintained with Zions.

       

      2.10  Fees
        and Expenses.

       

      (a)  Unused
        Commitment Fee.
        During
        the term hereof, Borrower shall pay to Lender the applicable Unused Commitment
        Fee on each Quarterly Payment Date. The Unused Commitment Fee shall be
        calculated on a quarterly basis and payable quarterly in arrears for the
        calendar quarter or portion thereof throughout the term of the Loan and on
        the
        Maturity Date.

       

      (b)  Early
        Termination Fee.
        As set
        forth in Section 2.6(c) above, Borrower shall pay to Lender the Early
        Termination Fee in the event Borrower elects to terminate the Loan prior
        to the
        Maturity Date.

       

      (c)  Additional
        Provisions Regarding Fees.
        The
        fees described in this Section
        2.10
        shall be
        payable in addition to, and not in lieu of, interest, expense reimbursements,
        indemnification and other Obligations. Borrower acknowledges that all fees
        and
        other amounts described in this Section 2.10
        have
        been fully earned by Lender at the time of payment and are non-refundable
        to
        Borrower in the event this Agreement is terminated or expires as provided
        herein. All fees specified or referred to in this Agreement shall bear interest,
        if not paid when due, at the Default Interest Rate. Borrower hereby authorizes
        Lender, at its sole option and direction, without prior notice to Borrower,
        to
        advance any of the fees provided for in this Section
        2.10 if
        not
        paid within ten (10) days of when due.

       

        

      ARTICLE
        3

       

      LETTERS
        OF CREDIT

       

      3.1  Issuance
        of Letters of Credit.
        Subject
        to the terms and conditions of this Agreement and the policies, procedures,
        and
        requirements of Lender for issuance of Letters of Credit in effect from time
        to
        time, and pursuant to one or more letter of credit agreements between Lender
        and
        Borrower, Lender agrees to issue, from time to time on or before the Maturity
        Date, Letters of Credit upon request by and for the account of Borrower.
        Letters
        of Credit
        (i)
        may
        expire after the Maturity Date if they are secured by cash collateral received
        by Lender no later than 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. Each reference in this Agreement
        to “issue” or “issuance” or other forms of such words in relation to Letters of
        Credit will also include any extension or renewal of a Letter of Credit.
        Requests for the issuance of a Letter of Credit will be processed by Lender
        in
        accordance with its policies, procedures, and requirements then in effect.
        Upon
        the occurrence and during the continuance of an Event of Default, Lender
        may
        suspend or terminate its agreement to issue Letters of Credit
        hereunder.

       

      3.2  Assumption
        of Risk and Liability.
        Borrower hereby assumes all risk of the acts or omissions of any holder of
        a
        Letter of Credit, and any beneficiary or transferee of a Letter of Credit
        with
        respect to its use of a Letter of Credit. Neither Lender nor any of its
        employees, officers, directors, agents or representatives shall be liable
        or
        responsible for:

       

      (a)  the
        use
        which may be made of a Letter of Credit or for any acts or omissions of Lender
        in connection therewith;

       

      (b)  the
        validity, sufficiency or genuineness of documents, or of any endorsements
        thereon, whether submitted in connection with a drawing under a Letter of
        Credit, or otherwise, even if such documents or endorsements should in fact
        prove to be in any or all respects invalid, insufficient, fraudulent, forged,
        inaccurate or untrue;

       

      (c)  payment
        by Lender against presentation of documents which do not strictly comply
        with
        the terms of a Letter of Credit, including failure of any such documents
        to bear
        reference or adequate reference to a Letter of Credit or the failure of any
        holder or beneficiary of a Letter of Credit to comply fully with conditions
        required in order to obtain honor of a drawing under a Letter of
        Credit;

       

      (d)  the
        validity or sufficiency of any instrument transferring or assigning or
        purporting to transfer or assign a Letter of Credit or the rights or benefits
        thereunder or proceeds thereof, in whole or in part, which may prove to be
        invalid or ineffective for any reason;

       

      (e)  omissions,
        interruptions, losses or delays in transmission or delivery of any messages
        by
        mail, cable, telegraph, telex, telephone, facsimile transmission or
        otherwise;

       

      (f)  any
        loss
        or delay in the transmission of any document or draft required in order to
        make
        a drawing under a Letter of Credit; or

       

      (g)  any
        other
        circumstances whatsoever in making or failing to make payment under a Letter
        of
        Credit.

        

      ARTICLE
        4

       

      LOAN
        CLOSING; INITIAL ADVANCE

       

      4.1  Conditions
        Precedent.
        Lender’s obligation to close the Loan and to disburse the initial Advance and to
        perform the remainder of its obligations under this Agreement are expressly
        conditioned upon the receipt and approval by Lender, in its sole and absolute
        discretion, of each of the following items and the satisfaction by Borrower
        of
        the following conditions on or before the Closing Date unless otherwise waived
        by Lender in its sole and absolute discretion:

       

      (a)  Borrower’s
        payment of all fees and costs payable under this Agreement;

       

      (b)  Receipt,
        review and approval by Lender of copies of the Borrower Operating Documents
        and
        the Guarantor Operating Documents;

       

      (c)  The
        representations and warranties of Borrower and/or Guarantor in Article
        5
        and
        elsewhere in the Loan Documents shall be true and correct in all material
        respects;

       

      (d)  No
        Event
        of Default shall exist and be continuing;

       

      (e)  Receipt,
        review and approval by Lender, in its sole discretion, of such financial
        statements and tax returns for Borrower and/or Guarantor as Lender may
        require;

       

      (f)  A
        determination by Lender that the Collateral provides an adequate loan-to-value
        coverage ratio for the Loan and all Other Loans which are secured by the
        Collateral;

       

      (g)  The
        original certificates representing the Pledged Securities, together with
        blank
        transfer powers in form and substance acceptable to Lender shall have been
        delivered to Lender;

       

      (h)  Receipt,
        review and approval by Lender of the policies of insurance required under
        Article
        6
        hereof;

       

      (i)  Borrower’s
        delivery to Lender of the following documents, in form and content satisfactory
        to Lender, duly executed (and acknowledged where necessary) by the appropriate
        parties thereto:

       

        (i)
        This Agreement;

       

        (ii)
        The Note;

       

        (iii)
        The Guaranty;

       

        (iv)
        The Security Agreement;

       

        (v)
        The Stock Pledge Agreement;

       

        (vi)
        The original certificates representing the Pledged Securities;

       

        (vii)
        Blank stock transfer powers executed by the holders of all Pledged Securities
        in
        favor of Collateral Agent;

       

        (viii)
        An acknowledgement and consent to the pledge of the Pledged Securities pursuant
        to the Stock Pledge Agreement from each issuer of the Pledged
        Securities;

       

        (ix)
        The Account Control Agreement;

       

        (x)
        The Financing Statements, which shall be duly filed with the Utah Department
        of
        Commerce, Division of Corporations and Commercial Code;

       

        (xi)
        A closing certificate from Borrower and each Guarantor;

       

        (xii)
        Resolutions of the directors, members, managers, or partners of Borrower
        and
        Guarantor, as applicable, approving the Loan Documents and the Guarantor
        Loan
        Documents; 

       

        (xiii)
        An opinion of legal counsel to Borrower and Guarantor;

       

        (xiv)
        True and correct copies of the Chase Loan Documents;

       

        (xv)
        The Intercreditor Agreement; and

       

        (xvi)
        Such other documents that Lender may require in its sole and absolute
        discretion.

       

       

      ARTICLE
        5

       

      REPRESENTATIONS
        AND WARRANTIES

       

      5.1  Consideration.
        As an
        inducement to Lender to execute this Agreement and to disburse the proceeds
        of
        the Loan, Borrower represents and warrants to Lender that the following
        statements set forth in this Article
        5 are
        true,
        correct and complete as of the date hereof and will be true, correct and
        complete as of the Closing Date.

       

      5.2  Organization,
        Powers, Good Standing and Subsidiaries.

       

      (a)  Organization
        and Powers.
        Each of
        Borrower and Guarantor is either a corporation, a limited liability company,
        or
        a limited partnership duly organized and validly existing under the laws
        of the
        State of Utah. Borrower and Guarantor have all requisite power and authority,
        rights and franchises to own and operate their properties, to carry on their
        businesses as now conducted and as proposed to be conducted, and to enter
        into
        and perform this Agreement and the other Loan Documents. The address of
        Borrower’s chief executive office and principal place of business is 2200 West
        Parkway Blvd., Salt Lake City, Utah 84119.

       

      (b)  Good
        Standing.
        Borrower and Guarantor have made all filings and each is in good standing
        in the
        State of Utah, and in each other jurisdiction in which the character of the
        property it owns or the nature of the business it transacts makes such filings
        necessary or where failure to make such filings would result in a Material
        Adverse Change.

       

      (c)  Organizational
        Identification Number.
        The
        organizational identification number of Borrower and each Guarantor, as defined
        and contemplated by the Utah Uniform Commercial Code, is as set forth in
        the
        Financing Statement.

       

      (d)  Subsidiaries.
        Schedule
        5.2(d)
        attached
        hereto sets forth a complete list of Borrower and each of its Subsidiaries,
        including the percentage of voting stock in each Subsidiary owned, directly
        or
        indirectly, by Borrower.

       

      5.3  Authorization
        of Loan Documents.

       

      (a)  Authorization.
        The
        execution, delivery and performance of the Loan Documents (to which Borrower
        or
        Guarantor, respectively, is a party) by (i) Borrower are within Borrower’s
        corporate powers and have been duly authorized by all necessary action by
        Borrower and its directors and shareholders; and (ii) Guarantor are within
        Guarantor’s corporate, limited liability company or partnership powers and have
        been duly authorized by all necessary action by Guarantor and its directors,
        shareholders, members, managers and partners, as applicable.

       

      (b)  No
        Conflict.
        The
        execution, delivery and performance of the Loan Documents by Borrower will
        not
        violate (i) the Borrower Operating Documents; (ii) any legal requirement
        affecting Borrower or any of its properties except where a violation of such
        requirement would not result in a Material Adverse Change; or (iii) any
        agreement to which Borrower is bound or to which it is a party, except where
        a
        violation of any such agreement would not result in a Material Adverse Change,
        and will not result in or require the creation (except as provided in or
        contemplated by this Agreement) of any Lien or Encumbrance upon any of such
        properties. The execution, delivery and performance of the Guarantor Loan
        Documents by Guarantor will not violate (1) any provision of the Guarantor
        Operating Documents; (2) any legal requirement affecting Guarantor or any
        of
        Guarantor’s respective properties except where a violation of such requirement
        would not result in a Material Adverse Change; or (3) any agreement to which
        Guarantor is bound or to which Guarantor is a party, except where a violation
        of
        any such agreement would not result in a Material Adverse Change, and will
        not
        result in or require the creation (except as provided in or contemplated
        by this
        Agreement) of any Lien or Encumbrance upon any of such properties.

       

      (c)  Governmental
        and Private Approvals.
        All
        governmental or regulatory orders, consents, permits, authorizations and
        approvals required for the present use and operation of the Borrower’s business
        and the Collateral have been obtained and are in full force and effect, except
        where failure to obtain such orders, consents, permits, authorizations or
        approvals would not result in a Material Adverse Change. To the knowledge
        of
        Borrower, no additional governmental or regulatory actions, filings or
        registrations with respect to the Borrower’s business and the Collateral, and no
        approvals, authorizations or consents of any trustee or holder of any
        Indebtedness or obligation of Borrower or Guarantor are required for the
        due
        execution, delivery and performance by Borrower or Guarantor of their respective
        duties and obligations under the Loan Documents or the Guarantor Loan
        Documents.

       

      (d)  Binding
        Obligations.
        This
        Agreement and the other Loan Documents have been duly executed by Borrower,
        and
        are legally valid and binding obligations of Borrower, enforceable against
        Borrower in accordance with their terms, except as enforceability may be
        limited
        by bankruptcy, insolvency, reorganization, moratorium or similar Requirements
        of
        Laws affecting creditors’ rights generally and by general principles of equity.
        The Guarantor Loan Documents have been duly executed by Guarantor, and are
        the
        legally valid and binding obligations of Guarantor, enforceable against
        Guarantor in accordance with their terms, except as enforceability may be
        limited by bankruptcy, insolvency, reorganization, moratorium or similar
        Requirements of Laws affecting creditors’ rights generally and by general
        principles of equity.

       

      5.4  No
        Material Defaults.
        There
        exists no material violation of or material default by Borrower and, to the
        knowledge of Borrower, no event has occurred which, upon the giving of notice
        or
        the passage of time, or both, would constitute a material default, which
        in each
        case, would result in a Material Adverse Change, with respect to the terms
        of
        (a) any instrument evidencing or securing any Indebtedness of Borrower or
        Guarantor, (b) any instrument evidencing or securing any Indebtedness secured
        by
        the Collateral, (c) any agreement affecting the Collateral, (d)
        any
        license, permit, statute, ordinance, Requirements of Law, judgment, order,
        writ,
        injunction, decree, rule, or regulation of any Governmental Authority, or
        any
        determination or award of any arbitrator, to which Borrower, Guarantor or
        the
        Collateral is a party or may be bound, or (e) any document, instrument, or
        agreement by which Borrower, or any of its properties, is bound and, with
        respect to this clause (e),
        (i)
        which
        involves any Loan Document,
        (ii)
        which
        involves the Collateral and is not adequately covered by insurance,
        (iii)
        which
        might materially and adversely affect the ability of Borrower or Guarantor
        to
        perform its respective obligations under any of the Loan Documents or any
        other
        material document, instrument, or agreement to which it is a party,
        or
        (iv)
        which,
        subject to the Permitted Exceptions, might adversely affect the first priority
        of the liens created by this Agreement, the Security Agreement or any of
        the
        other Loan Documents. 

       

      5.5  Litigation;
        Adverse Facts.
        Except
        as disclosed on Schedule
        5.5
        attached
        hereto, there is no action, suit, investigation, proceeding, or arbitration
        (whether or not purportedly on behalf of Borrower or Guarantor) at law or
        in
        equity or before or by any foreign or domestic court or other governmental
        entity (a “Legal
        Action”),
        pending or, to the knowledge of Borrower, threatened in writing against or
        affecting the Collateral, Borrower or Guarantor, individually or in the
        aggregate in excess of $500,000, which would result in any Material Adverse
        Change. Neither Borrower nor Guarantor is (a) in violation of any applicable
        Requirements of Law which violation would result in a Material Adverse Change,
        (b) subject to, or in default with respect to, any other legal requirement
        that
        would result in a Material Adverse Change, or (c) in default with respect
        to any
        agreement to which Borrower or Guarantor is a party or to which either is
        bound
        where such default would result in a Material Adverse Change. There is no
        Legal
        Action pending or, to the knowledge of Borrower or Guarantor, threatened
        in
        writing against or affecting Borrower or Guarantor questioning the validity
        or
        the enforceability of this Agreement or any of the other Loan
        Documents.

       

      5.6  Title
        to Properties; Liens.
        Each of
        Borrower and Guarantor has good, sufficient, and legal title to the Collateral
        and all other properties and assets reflected in its most recent balance
        sheet
        delivered to Lender, except (a) for assets disposed of in the ordinary course
        of
        business since the date of such balance sheet, (b) for Permitted Exceptions
        and
        (c) where failure to have such title would not result in a Material Adverse
        Change. Borrower and/or Guarantor, as applicable, is the sole owner of the
        Collateral, and the Collateral is free from any adverse Lien or Encumbrance,
        security interest, or encumbrance of any kind whatsoever, excepting only
        Liens
        or Encumbrances and security interests in favor of Lender or Collateral Agent,
        Permitted Exceptions and other matters which have been approved in writing
        by
        Lender in its sole and absolute discretion. All Liens and Encumbrances against
        Borrower or Guarantor in effect on the Closing Date (and which are included
        as
        Permitted Exceptions under clause (e) of the definition of Permitted Exceptions)
        are set forth on Schedule
        5.6
        attached
        hereto.

       

      5.7  Disclosure.
        To the
        knowledge of Borrower, there is no fact that would result in a Material Adverse
        Change which has not been disclosed in this Agreement or in other documents,
        certificates, and written statements furnished to Lender in connection
        herewith.

       

      5.8  Payment
        of Taxes.
        All tax
        returns and reports of Borrower and Guarantor which are required to be filed
        by
        Borrower or Guarantor have been timely filed, and all taxes, assessments,
        fees,
        and other governmental charges upon Borrower or Guarantor, and upon their
        respective properties, assets, income, and franchises which are due and payable
        have been paid when due and payable, except, in each case, where failure
        to do
        so would not result in a Material Adverse Change. Borrower knows of no proposed
        tax assessment against it that would result in a Material Adverse Change,
        and
        neither Borrower nor Guarantor has contracted with any government entity
        in
        connection with such taxes. To the knowledge of Borrower, all tax returns
        and
        reports of Guarantor required to be filed have been timely filed, and all
        taxes,
        assessments, fees, and other governmental charges upon Guarantor and upon
        its
        properties, assets, income, and franchises which are due and payable have
        been
        paid when due and payable, except, in each case, where failure to do so would
        not result in a Material Adverse Change.

       

      5.9  Securities
        Activities.
        Neither
        Borrower nor Guarantor is engaged principally, or as one of its important
        activities, in the business of extending credit for the purpose of purchasing
        or
        carrying any margin stock (as defined within Regulations G, T, and U of the
        Board of Governors of the Federal Reserve System), and not more than twenty-five
        percent (25.0%) of the value of Borrower’s and/or Guarantor’s assets consists of
        such margin stock. No part of the Loan will be used to purchase or carry
        any
        margin stock or to extend credit to others for that purpose or for any other
        purpose that violates the provisions of Regulations U or X of said Board
        of
        Governors.

       

      5.10  Government
        Regulations.
        Neither
        Borrower nor Guarantor is subject to regulation under the Investment Company
        Act
        of 1940, the Federal Power Act, the Public Utility Holding Company Act of
        1935,
        or any other federal or state statute or regulation limiting its ability
        in
        incur Indebtedness for money borrowed.

       

      5.11  Rights
        to Property Agreements, Permits, and Licenses.
        Borrower and/or Guarantor is the true owner of all rights in and to all existing
        agreements, permits, and licenses relating to the Collateral, and will be
        the
        true owner of all rights in and to all future agreements, permits, and licenses
        relating to the Collateral, except, in each case, where failure to be such
        an
        owner would not result in a Material Adverse Change. Borrower’s and/or
        Guarantor’s interest in all such agreements, permits, and licenses is not
        subject to any present claim (other than the Permitted Exceptions, under
        the
        Loan Documents or as otherwise approved by Lender in its sole and absolute
        discretion), set-off, or deduction, other than in the ordinary course of
        business, which would result in a Material Adverse Change.

       

      5.12  Compliance
        with Laws.
        Borrower’s and Guarantor’s business does, and shall at all times, comply fully
        with all applicable Requirements of Law, except, in each case, where failure
        to
        comply would not result in a Material Adverse Change. The Collateral, and
        the
        uses to which the Collateral are and will be put, shall at all times comply
        fully with all applicable Requirements of Laws, except, in each case, where
        failure to comply would not result in a Material Adverse Change.

       

      5.13  Financial
        Condition.
        The
        financial statements and all financial data previously delivered to Lender
        in
        connection with the Loan or relating to Borrower or Guarantor are true, correct,
        and complete in all material respects. Such financial statements comply with
        the
        requirements of this Agreement and fairly present the financial position
        of the
        parties who are the subject thereof as of the date thereof. No Material Adverse
        Change has occurred and, except for this Loan and the Permitted Exceptions,
        no
        borrowings have been made by Borrower or Guarantor since the date thereof
        which
        are secured by, or might give rise to, a Lien or Encumbrance, security interest,
        or claim against the Collateral or the proceeds of the Loan or the Other
        Loans.

       

      5.14  Personal
        Property.
        Borrower and/or Guarantor is now, and shall continue to be, the sole owner
        of
        all personal property which constitutes a portion of the Collateral free
        from
        any adverse lien, security interest, or adverse claim of any kind whatsoever,
        except
        (a)
        Permitted Exceptions,
        (b)
        liens
        and security interests in favor of Lender or Collateral Agent, and
        (c)
        other
        matters which have been approved in writing by Lender in its sole and absolute
        discretion.

       

      5.15  Other
        Loan Documents.
        Each of
        the representations and warranties of Borrower or Guarantor contained in
        any of
        the other Loan Documents, the Guarantor Loan Documents or the agreements,
        guaranties, documents, or instruments now or hereafter evidencing, guarantying
        or securing the Indebtedness of Borrower or Guarantor under the Other Loans,
        as
        such agreements, guaranties, documents, and instruments may be amended,
        modified, extended, renewed, or supplemented from time to time, is true and
        correct in all material respects. All of such representations and warranties
        are
        incorporated herein for the benefit of Lender.

       

      5.16  Contracts;
        Labor Matters.
        Except
        as disclosed to Lender in writing (a) neither Borrower nor Guarantor is subject
        to any charge, corporate restriction, judgment, decree or order, which would
        result in a Material Adverse Change; (b) no labor contract to which Borrower
        or
        Guarantor is a party or is otherwise subject is scheduled to expire prior
        to the
        Maturity Date except to the extent that such expiration would not result
        in a
        Material Adverse Change; (c) neither Borrower nor Guarantor has, within the
        two-year period preceding the date of this Agreement, taken any action which
        would have constituted or resulted in a “plant closing” or “mass layoff” within
        the meaning of the Federal Worker Adjustment and Retraining Notification
        Act of
        1988 or any similar applicable federal, state or local Requirements of Law,
        and
        on the date hereof Borrower and Guarantor have no reasonable expectation
        that
        any such action is or will be required at any time prior to the initial Maturity
        Date; and (d) on the date of this Agreement (i) neither Borrower nor Guarantor
        is a party to any material labor dispute and (ii) there are no strikes or
        walkouts relating to any labor contracts to which Borrower or Guarantor is
        a
        party or is otherwise subject.

       

      5.17  ERISA.
        Each of
        Borrower and Guarantor is in compliance with ERISA in all material respects.
        No
        Reportable Event or Prohibited Transaction (as defined in ERISA) or termination
        of any Pension Plan has occurred and no written notice of termination has
        been
        filed with respect to any Pension Plan published or maintained by Borrower
        or
        Guarantor that is subject to ERISA. Neither Borrower nor Guarantor has incurred
        any material funding deficiency within the meaning of ERISA or any material
        liability to the PBGC in connection with any such plan established or maintained
        by Borrower or Guarantor. Neither Borrower nor Guarantor is a party to any
        Multiemployer Plan.

       

      5.18  Pension
        and Welfare Plans.
        Each
        Pension Plan of Borrower or Guarantor complies in all material respects with
        all
        applicable statutes and governmental rules and regulations; no Reportable
        Event
        has occurred and is continuing with respect to any Pension Plan; neither
        Borrower nor Guarantor nor any ERISA Affiliate has withdrawn from any
        Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” as
        defined in Sections 4203 or 4205 of ERISA, respectively; no steps have been
        instituted by Borrower or Guarantor to terminate any Pension Plan; no
        contribution failure has occurred with respect to any Pension Plan sufficient
        to
        give rise to a Lien or Encumbrance under Section 302(f) of ERISA; no condition
        exists or event or transaction has occurred in connection with any Pension
        Plan
        or Multiemployer Plan which could reasonably be expected to result in the
        incurrence by Borrower or Guarantor or any ERISA Affiliate of any material
        liability, fine or penalty; and neither Borrower nor Guarantor nor any ERISA
        Affiliate is a “contributing sponsor” as defined in Section 4001(a)(13) of ERISA
        of a “single-employer plan” as defined in Section 4001(a)(15) of ERISA which has
        two or more contributing sponsors at least two of whom are not under common
        control. Neither Borrower nor Guarantor has any contingent liability with
        respect to any Welfare Plan which covers retired or terminated employees
        and
        their beneficiaries.

       

      5.19  Occupational
        Safety and Health Matters.
        Except
        as disclosed to Lender in writing, Borrower and each property, operation
        and
        facility that Borrower may own, operate or control (a) complies in all respects
        with all applicable Occupational Safety and Health Laws, except to the extent
        the noncompliance would not result in a Material Adverse Change; (b) is not
        subject to any judicial or administrative proceeding alleging the violation
        of
        any Occupational Safety and Health Law; (c) has not received any written
        notice
        (i) that it may be in violation of any Occupational Safety and Health Law,
        (ii)
        threatening the commencement of any proceeding relating to allegedly unlawful,
        unsafe or unhealthy conditions, or (iii) alleging that it is or may be
        responsible for any response, cleanup, or corrective action, including but
        not
        limited to any remedial investigation/feasibility studies, under any
        Occupational Safety and Health Law; (d) to Borrower’s knowledge, is not the
        subject of federal or state investigation evaluating whether any investigation,
        remedial action or other response is needed to respond to any allegedly unsafe
        or unhealthful condition; (e) has not filed any notice under or relating
        to any
        Occupational Safety and Health Law indicating or reporting any potentially
        unsafe or unhealthful condition, and there exists no basis for such notice
        irrespective of whether or not such notice was actually filed; and (f) has
        no
        contingent liability in connection with any unsafe or unhealthful
        condition.

       

      5.20  Management
        Common Stock Loan Program.
        Schedule
        5.20
        attached
        hereto sets forth a description of Borrower’s management common stock loan
        program.

       

      ARTICLE
        6

       

      COVENANTS
        OF BORROWER

       

      6.1  Consideration.
        As an
        inducement to Lender to execute this Agreement and to disburse the Loan Amount,
        Borrower hereby covenants as set forth in this Article
        6,
        which
        covenants shall remain in effect so long as the Note shall remain unpaid,
        unless
        otherwise waived by Lender in its sole and absolute discretion.

       

      6.2  No
        Encumbrances.
        Neither
        Borrower nor Guarantor will permit any Lien or Encumbrance to be made or
        filed
        against the Collateral, or any portion thereof, except for Permitted Exceptions,
        or permit any receiver, trustee, or assignee for the benefit of creditors
        to be
        appointed to take possession of the Collateral or any portion
        thereof.

       

      6.3  Compliance
        with Laws.
        Borrower will comply and, to the extent Borrower is able, will cause Guarantor
        to comply with all Requirements of Laws and requirements of all Governmental
        Authorities having jurisdiction over Borrower, Guarantor or the Collateral,
        except to the extent that noncompliance would not result in a Material Adverse
        Change.

       

      6.4  Lender
        Inspections.
        Upon
        reasonable prior notice, throughout the term of the Loan and during normal
        business hours, Borrower shall permit Lender or Collateral Agent and Lender’s or
        Collateral Agent’s representatives, inspectors, and consultants to enter upon
        the premises where any Collateral may be located and inspect the Collateral,
        to
        audit, examine, and copy all contracts, records (including, but not limited
        to,
        financial and accounting records pertaining to the Loan or the Collateral)
        which
        are kept at such premises or at Borrower’s offices, and to discuss the affairs,
        finances, and accounts of Borrower with representatives of Borrower and,
        to the
        extent Borrower is able, will cause others to provide access to Lender or
        Collateral Agent and Lender’s or Collateral Agent’s representatives, inspectors,
        and consultants to audit, examine, and copy all contracts, books, documents
        and
        records.

       

      6.5  Intentionally
        Omitted.
        

       

      6.6  Ownership
        of Collateral.
        Borrower and/or Guarantor is and will be the sole owner of the Collateral
        (except as described in Section
        5.6),
        whether acquired before or after the Closing Date, free from any adverse
        Lien or
        Encumbrance, security interest, or adverse claim of any kind whatsoever,
        except
        for Permitted Exceptions, security interests and Liens or Encumbrances in
        favor
        of the interest of a lessor pursuant to a lease of personal property approved
        by
        Lender and the Liens or Encumbrances and security interests approved by Lender
        pursuant to the Loan Documents.

       

      6.7  Information
        and Statements.
        Borrower shall deliver to Lender the following:

       

      (a)  Annual
        Financial Statements.
        Within
        one hundred twenty (120) days of the end of its fiscal year, 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 such
        annual
        period, such financial statements to be audited by an independent certified
        public accountant of recognized standing acceptable to Lender in its reasonable
        discretion. Lender consents to the engagement of KPMG.

       

      (b)  Quarterly
        Financial Statements.
        Within
        sixty (60) days of the end of each fiscal quarter (other than the final quarter
        of a fiscal year), 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 quarterly period, such financial
        statements to be certified as true and correct by the president or chief
        financial officer of Borrower.

       

      (c)  Other
        Information.
        As soon
        as reasonably practicable, but in any event within thirty (30) days after
        a
        request therefor, such information concerning Borrower, Guarantor, any
        Subsidiaries thereof and the assets, business, financial condition, operations,
        property, prospects, and results of operations of Borrower, Guarantor and
        any
        other Subsidiaries thereof as Lender reasonably requests from time to
        time.

       

      (d)  Covenant
        Compliance Information.
        Notwithstanding anything in this Agreement to the contrary, Borrower will
        be
        required to timely deliver, as soon as reasonably practicable, but in any
        event
        within fifteen (15) days after a request therefor from Lender, such financial
        information as may be necessary to promptly and accurately calculate any
        financial ratio or covenant required under this Agreement, even if such
        information is not specifically enumerated herein. Any review of any
        Borrower-prepared financial statements used to test any financial ratio or
        covenant will not waive Lender’s rights to require further review or audit of
        such information or any rights if such further review or audit indicates
        financial information contrary to Borrower-prepared financial statements.
        Borrower agrees to deliver to Lender a Covenant Compliance Certificate at
        the
        same time as the delivery of the financial statements required pursuant to
        Sections
        6.7(a)
        and
(b).

       

      6.8  Financial
        Covenants.
        The
        Consolidated Entities shall not:

       

      (a)  Funded
        Debt to EBITDAR Ratio.
        Permit
        its ratio of (A) total liabilities, plus the net present value of payments
        under
        operating leases at a discount rate of seven percent (7%), but excluding
        (1)
        accounts arising from the purchase of goods and services in the ordinary
        course
        of business, (2) accrued expenses or losses, and (3) deferred revenues or
        gains,
        to (B) net income, plus amortization expense, depreciation expense, interest
        expense, income tax expense, and rents and operating lease payments, less
        extraordinary gains and losses (collectively, “EBITDAR”),
        for
        the twelve (12) month period then ending, to be greater than (x) 3.25 to
        1.00 as
        of the end of the fiscal quarter of Borrower ending on March 3, 2007, (y)
        3.00
        to 1.00 as of the end of the fiscal quarter of Borrower ending on June 2,
        2007,
        and (z) 2.75 to 1.00 as of the end of the fiscal quarter of Borrower ending
        on
        August 31, 2007 and each fiscal quarter thereafter.

       

      (b)  Fixed
        Charge Coverage Ratio.
        Permit
        its ratio of (A) net income before income tax expense, plus amortization
        expense, depreciation expense, interest expense, rent and operating lease
        payments, minus any distributions or dividends, for the twelve (12) month
        period
        then ending, to (B) prior period current maturities of long term debt and
        capital leases, interest expense, cash taxes paid, rent and operating lease
        payments, for the same such period, to be less than (x) 1.30 to 1.00 as of
        the
        end of the fiscal quarter of Borrower ending on March 3, 2007, (y) 1.35 to
        1.00
        as of the end of the fiscal quarter of Borrower ending on June 2, 2007, and
        (z)
        1.50 to 1.00 as of the end of the fiscal quarter of Borrower ending on August
        31, 2007 and each fiscal quarter thereafter.

       

      (c)  Capital
        Expenditures.
        Make
        Capital Expenditures, exclusive of curriculum development costs, in excess
        of
        (i) $11,000,000.00 for Borrower’s fiscal year ending on August 31, 2007 and (ii)
        $8,000,000.00 for each fiscal year of Borrower thereafter.

       

      (d)  Minimum
        Net Worth.
        Permit
        its Net Worth to be less than ONE HUNDRED THIRTY-THREE MILLION AND NO/100
        DOLLARS ($133,000,000.00); provided,
        however,
        the
        Consolidated Entities’ Net Worth may be less than such amount if Lender
        determines that the Consolidated Entities’ Net Worth has decreased to an amount
        less than $133,000,000.00 as a result of Borrower’s purchase of its outstanding
        common or preferred stock. As used in this Section
        6.8(d),
        the
        term “Net
        Worth”
means
        the Consolidated Entities’ total assets less
        total
        liabilities, in each case as determined in accordance with GAAP.

       

      Such
        covenant or any computations required to determine or test compliance with
        such
        covenant may be made by Lender at any time or times and in its sole and absolute
        discretion based on information available to Lender.

       

      6.9  Representations
        and Warranties.
        Until
        repayment of the Note and all other obligations secured by the Security
        Agreement, the representations and warranties of Article
        5
        shall
        remain true and complete in all material respects.

       

      6.10  Trade
        Names.
        Borrower and Guarantor shall promptly notify Lender in writing of any change
        in
        the legal, trade, or fictitious business names used by Borrower or Guarantor,
        or
        a change in the state of formation of Borrower or Guarantor, and shall, upon
        Lender’s request, authorize the preparation and filing of any additional
        financing statements and/or execute or cause to be executed any other
        certificates or documents necessary to reflect the change in legal, trade,
        or
        fictitious business names, or a change in state of formation.

       

      6.11  Intentionally
        Omitted.
        

       

      6.12  Notice
        of Litigation, Material Adverse Change or Event of Default.
        Borrower will give, or cause to be given, prompt written notice to Lender
        of (a)
        any action or proceeding which is instituted by or against Borrower or Guarantor
        in any federal or state court, or before any commission or other regulatory
        body, federal, state or local, foreign or domestic, or any such proceedings
        which are threatened in writing against Borrower or Guarantor which, if
        adversely determined, would result in a Material Adverse Change, (b) any
        other action, event, or condition of any nature which would result in a Material
        Adverse Change, and (c) any actions, proceedings, or written notices
        adversely affecting the Collateral, or Lender’s or Collateral Agent’s interest
        therein, except to the extent any such action, proceeding or notice would
        not
        result in a Material Adverse Change, and (d) the occurrence of an Event of
        Default.

       

      6.13  Intentionally
        Omitted.

       

      6.14  Maintenance
        of Business.
        Borrower and Guarantor shall maintain and preserve all rights and franchises
        material to their respective businesses.

       

      6.15  Material
        Agreements.
        Unless
        such actions would not result in a Material Adverse Change, Borrower shall
        not
        make, consent to, or permit any alteration, amendment, modification, release,
        waiver or termination of any material agreement to which it is a party without
        the prior written consent of Lender, which consent will not be unreasonably
        withheld or delayed.

       

      6.16  Right
        of Entry.
        Lender
        or Collateral Agent shall have the right, upon reasonable prior notice, to
        enter
        upon any portion of the premises where any Collateral may be located to verify
        compliance with the Loan Documents.

       

      6.17  Transfer
        of Assets.
        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), Borrower and Guarantor may sell, convey, transfer, assign or dispose
        of
        any properties or assets, or any right, title or interest therein, or any
        part
        thereof, or enter into any lease covering all or any portion thereof or an
        undivided interest therein, either voluntarily, involuntarily, or otherwise;
        provided,
        however,
        that
        neither Borrower nor Guarantor shall sell, transfer, lease, or otherwise
        dispose
        of all or any substantial part of the assets, business, operations, or property
        of Borrower or Guarantor, other than such a sale, transfer, lease or disposition
        to Borrower or another Guarantor.

       

      6.18  Dividends
        and Other Distributions.
        The
        Consolidated Entities may directly or indirectly declare or pay dividends
        to its
        shareholders, members, partners or others on or on account of any shares,
        membership interests, partnership interests or other securities of any of
        the
        Consolidated Entities, so long as no Event of Default has occurred and is
        continuing or would occur as a result of such declaration or
        payment.

       

      6.19  Change
        of Control.
        Without
        the prior written consent of Lender, which consent will not be unreasonably
        withheld or delayed, Borrower and Guarantor shall not cause, permit or suffer
        any Change of Control to occur.

       

      6.20  Loans,
        Investments, Guaranties, Subordinations.
        From
        and after the date hereof, unless an Event of Default has occurred and is
        continuing or would occur as a result of such action, and provided that at
        any
        time the amounts involved do not exceed $1,000,000 in any individual case
        or
        $5,000,000 in the aggregate, the Consolidated Entities may, directly or
        indirectly (a) make loans or advances to other Persons, (b) purchase or
        otherwise acquire capital stock or other securities of other Persons, limited
        liability company interests or partnership interests in other Persons, or
        warrants or other options or rights to acquire capital stock or securities
        of
        other Persons or limited liability company interests or partnership interests
        in
        other Persons, (c) make capital contributions to other Persons, (d) otherwise
        invest in or acquire interests in other Persons, (e) guaranty or otherwise
        become obligated in respect of Indebtedness of other Persons, (f) subordinate
        claims against, or obligations of other Persons to, the Consolidated Entities
        to
        any other indebtedness of such Person, or (g) incur Indebtedness;
provided,
        however,
        that,
        for the avoidance of doubt, (1) if an Event of Default has occurred and is
        continuing or would occur as a result of the taking of any of the foregoing
        actions, or if the amounts involved exceed the caps specified in this Section,
        the Consolidated Entities may not do or take any of the actions listed in
        this
        Section without the prior written consent of Lender and (2) (A) the line
        of
        credit in the maximum principal amount of £100,000.00 incurred by Franklin Covey
        Europe, Ltd., (B) the line of credit in the maximum principal amount of
        CAN$500,000.00 incurred by Franklin Covey Canada, Ltd., and (C) the mortgage
        loan in the maximum principal amount of CAN$895,253.00 incurred by Franklin
        Covey Canada, Ltd., in each case incurred prior to and outstanding as of
        the
        Closing Date (and any refinance thereof up to the amounts stated in the
        foregoing clauses (A), (B) and (C)) shall not be subject to the caps specified
        in this Section. Notwithstanding the foregoing, the prior written consent
        of
        Lender shall not be required for (y) intercompany transactions between or
        among
        the Consolidated Entities or (z) unsecured trade payables incurred by the
        Consolidated Entities in the ordinary course of business.

       

      6.21  Acquisition
        of All or Substantially All Assets.
        Unless
        an Event of Default has occurred and is continuing or would occur as a result
        of
        such action, and provided that the amounts involved do not exceed $1,000,000
        in
        any individual case or $5,000,000 in the aggregate, Borrower and Guarantor
        may,
        directly or indirectly, acquire by purchase, lease, or otherwise all or
        substantially all of the assets of any other Person; provided,
        however,
        that,
        for the avoidance of doubt, (1) if an Event of Default has occurred and is
        continuing or would occur as a result of the taking of any of the foregoing
        actions, or if the amounts involved exceed the caps specified in this Section,
        Borrower or Guarantor may not do or take any of the actions listed in this
        Section without the prior written consent of Lender and (2) the amounts of
        any
        transactions entered into by any of the Consolidated Entities within sixty
        (60)
        days prior to the Closing Date shall be subject to the caps specified in
        this
        Section.

       

      6.22  Government
        Regulation.
        Borrower shall not (a) be or become subject at any time to any law, regulation,
        or list of any government agency (including, without limitation, the U.S.
        Office
        of Foreign Asset Control list) that prohibits or limits Lender from making
        any
        advance or extension of credit to Borrower or from otherwise conducting business
        with Borrower, or (b) fail to provide documentary and other evidence of
        Borrower’s identity as may be requested by Lender at any time to enable Lender
        to verify Borrower’s identity or to comply with any applicable law or
        regulation, including, without limitation, Section 326 of the USA Patriot
        Act of
        2001, 31 U.S.C. Section 5318.

       

      6.23  Intentionally
        Omitted.

       

      6.24  Disposition
        of Franklin Covey Mexico.
        The
        sale of Franklin Covey Mexico (whether by asset sale, merger, or otherwise)
        shall have closed no later than the date which is nine (9) months after the
        Closing Date. Borrower agrees that if the foregoing has not occurred by such
        date, Borrower shall cause Franklin Covey Mexico to guaranty the Loan and
        to
        pledge all of its assets to Lender as security for such guaranty, and to
        deliver
        to Lender the equivalent of such agreements, documents, instruments,
        certificates and information as have been required to be delivered by each
        Guarantor as of the date hereof under any of the Loan Documents.

       

      6.25  Additional
        Guarantors.
        Upon
        the formation of any domestic Subsidiary of Borrower, Borrower shall cause
        such
        Subsidiary to be added as a Guarantor under the Guaranty.

       

      ARTICLE
        7

       

      EVENTS
        OF DEFAULT AND REMEDIES

       

      7.1  Events
        of Default.
        The
        occurrence of any one or more of the following shall constitute an Event
        of
        Default under this Agreement:

       

      (a)  Failure
        by Borrower or Guarantor to pay any monetary amount within ten (10) days
        of the
        date when due under any Loan Document.

       

      (b)  Failure
        by Borrower or Guarantor to perform or comply with the provisions of
Sections
        6.2,
        6.6,
        6.7,
        6.8,
        6.10,
        6.17,
        6.18,
        6.19,
        6.20,
        6.21,
        or
6.24.

       

      (c)  Except
        as
        otherwise provided in this Section
        7.1,
        any
        failure by Borrower or Guarantor to perform any obligation not involving
        the
        payment of money, or to comply with any other term or condition applicable
        to
        Borrower or Guarantor under any Loan Document and the expiration of thirty
        (30)
        days after written notice of such failure by Lender to Borrower or
        Guarantor.

       

      (d)  The
        occurrence of a Material Adverse Change.

       

      (e)  Any
        representation or warranty by Borrower or Guarantor in any Loan Document
        is
        materially false, incorrect, or misleading as of the date made.

       

      (f)  Borrower
        or Guarantor (i) is unable or admits in writing Borrower’s or Guarantor’s
        inability to pay Borrower’s or Guarantor’s monetary obligations as they become
        due, (ii) fails to pay when due any monetary obligation, whether such obligation
        be direct or contingent, to any person in excess of $1,000,000, unless such
        obligation is being contested in good faith by Borrower or Guarantor, as
        determined by Lender in its reasonable discretion, (iii) makes a general
        assignment for the benefit of creditors, or (iv) applies for, consents to,
        or
        acquiesces in, the appointment of a trustee, receiver, or other custodian
        for
        Borrower or Guarantor or the property of Borrower or Guarantor or any part
        thereof, or in the absence of such application, consent, or acquiescence,
        a
        trustee, receiver, or other custodian is appointed for Borrower or Guarantor
        or
        the property of Borrower or Guarantor or any part thereof, and such appointment
        is not discharged within sixty (60) days.

       

      (g)  Commencement
        of any case under the Bankruptcy Code, Title 11 of the United State Code,
        or
        commencement of any other bankruptcy arrangement, reorganization, receivership,
        custodianship, or similar proceeding under any federal, state, or foreign
        Requirements of Law by or against Borrower or Guarantor and with respect
        to any
        such case or proceeding that is involuntary, and such case or proceeding
        is not
        dismissed with prejudice within sixty (60) days of the filing
        thereof.

       

      (h)  A
        final
        judgment or decree for monetary damages or a monetary fine or penalty (not
        subject to appeal or as to which the time for appeal has expired) is entered
        against Borrower or Guarantor by any Government Authority, which together
        with
        the aggregate amount of all other such judgments or decrees against Borrower
        or
        Guarantor that remain unpaid or that have not been discharged or stayed,
        exceeds
        $250,000, and such judgment or decree is not paid and discharged or stayed
        or
        appealed within thirty (30) days after the entry thereof.

       

      (i)  The
        dissolution of Borrower or Guarantor or the commencement of any action or
        proceeding which seeks as one of its remedies the dissolution of Borrower
        or
        Guarantor.

       

      (j)  All
        or
        any material part of the Collateral of Borrower or Guarantor is attached,
        levied
        upon, or otherwise seized by legal process, and such attachment, levy, or
        seizure is not quashed, stayed, or released within twenty (20) days of the
        date
        thereof.

       

      (k)  The
        occurrence of any Transfer, unless Lender delivers to Borrower its prior
        written
        consent to such Transfer.

       

      (l)  Guarantor
        shall take any action to repudiate its Guaranty, or the Guaranty shall otherwise
        cease to be in full force and effect.

       

      (m)  The
        occurrence of any default and the failure to cure such default during applicable
        cure periods, if any, or an Event of Default, as such term is defined in
        any
        other Loan Document.

       

      (n)  Any
        failure, breach or default under the Other Loans, it being the intention
        and
        agreement of Lender and Borrower to cross-default the Loan and the Other
        Loans.

       

      (o)  The
        occurrence or existence of any default, event of default or other similar
        condition or event (however described) with respect to a Swap
        Agreement.

       

      7.2  Remedies.

       

      (a)  Notwithstanding
        any provision to the contrary herein or in any of the other Loan Documents,
        upon
        the happening, and during the continuance, of any Event of Default under
        this
        Agreement, Lender’s obligation to make Advances or to issue Letters of Credit
        shall abate and Lender shall, at its option, have the remedies provided herein
        and in any other Loan Document, including, without limitation, the option
        to
        declare all outstanding indebtedness to be immediately due and payable without
        presentment, demand, protest or notice of any kind, and the following remedies:
        (i) Lender may, at its option, apply any of Borrower’s or Guarantor’s funds in
        its possession to the outstanding indebtedness under the Note whether or
        not
        such indebtedness is then due; (ii) Lender or Collateral Agent may exercise
        all
        rights and remedies available to them under any or all of the Loan Documents;
        and (iii) Lender shall have the right to perform Borrower’s obligations under
        this Agreement. All sums expended by Lender or Collateral Agent for such
        purposes shall be deemed to have been disbursed to and borrowed by Borrower
        and
        evidenced by the Note and secured by the Security Agreement.

       

      (b)  Borrower
        hereby constitutes and appoints Lender, or an independent contractor selected
        by
        Lender, during the continuance of an Event of Default, as its true and lawful
        attorney-in-fact with full power of substitution for the purposes of performance
        of Borrower’s obligations under this Agreement in the name of Borrower. It is
        understood and agreed that the foregoing power of attorney shall be deemed
        to be
        a power coupled with an interest which cannot be revoked until repayment
        of the
        Loan.

       

      (c)  In
        addition to any other rights and remedies of Lender, if an Event of Default
        exists and is continuing, Lender is authorized at any time and from time
        to time
        during the continuance of the Event of Default, without prior notice to Borrower
        (any such notice being waived by Borrower to the fullest extent permitted
        by
        law) to set-off and apply any and all deposits or deposit accounts (general
        or
        special, time or demand, provisional or final) at any time held by Lender
        to or
        for the credit or the account of Borrower against any and all obligations
        of
        Borrower under the Loan Documents, now or hereafter existing, irrespective
        of
        whether or not Lender shall have made demand under this Agreement or any
        other
        Loan Document and although such amounts owed may be contingent or unmatured.
        If
        Lender exercises such setoff right, Lender exercising such right agrees promptly
        to notify Borrower after any such setoff and application made by Lender;
        provided,
        however,
        that
        the failure to give such notice shall not affect the validity of such setoff
        and
        application. 

        

      ARTICLE
        8

       

      MISCELLANEOUS

       

      8.1  Assignment.
        Borrower shall not assign any of its rights under this Agreement.

       

      8.2  Notices.
        All
        notices, requests, demands and consents to be made hereunder to the parties
        hereto shall be in writing and shall be delivered by hand or sent by registered
        mail or certified mail, postage prepaid, return receipt requested (except
        for
        any notice address which is a post office box, in which case notice may be
        given
        by first class mail), through the United States Postal Service to the addresses
        shown below, or such other address which the parties may provide to one another
        in accordance herewith. Such notices, requests, demands and consents, if
        sent by
        mail, shall be deemed given two (2) Business Days after deposit in the United
        States mail, and if delivered by hand, shall be deemed given when
        delivered.

       

      To
        Lender:         
Zions
        First National Bank

      10
        East
        South Temple, Suite 200

      Salt
        Lake
        City, Utah 84133

      Attn:
        Donald Rands

       

      with
        a
        copy to:    Callister
        Nebeker & McCullough

      10
        East
        South Temple, Suite 900

      Salt
        Lake
        City, Utah 84133

      Attn:
        Bradley E. Morris, Esq.

       

      To
        Borrower:        Franklin
        Covey Co.

      2200
        West
        Parkway Blvd.

      Salt
        Lake
        City, Utah 84119

      Attn:
        Richard Putnam

       

      with
        a
        copy to:    Dorsey
        & Whitney LLP

      170
        South
        Main Street, Suite 900

      Salt
        Lake
        City, Utah 84101

      Attn:
        Nolan S. Taylor, Esq.

       

      8.3  Intentionally
        Omitted.

       

      8.4  Inconsistencies
        with the Loan Documents.
        In the
        event of any inconsistencies between the terms of this Agreement and any
        terms
        of any of the Loan Documents, the terms of this Agreement shall govern and
        prevail.

       

      8.5  No
        Waiver.
        No
        waiver by Lender of any Event of Default or conditions or covenants contained
        herein (including, without limitation, with respect to the making of Advances)
        shall extend to any subsequent or other Event of Default or conditions or
        covenants contained herein or impair any consequence of such subsequent Event
        of
        Default or conditions or covenants contained herein.

       

      8.6  Lender
        Approval of Instruments and Parties.
        All
        proceedings taken in accordance with transactions provided for herein, and
        all
        surveys, appraisals, and documents required or contemplated by this Agreement
        and the persons responsible for the execution and preparation thereof shall
        be
        satisfactory to and subject to approval by Lender. Lender’s counsel shall be
        provided with copies of all documents which they may reasonably request in
        connection with the Agreement.

       

      8.7  Lender
        Determination of Facts.
        Lender
        shall at all times be free to establish independently, to its satisfaction,
        the
        existence or nonexistence of any fact or facts, the existence or nonexistence
        of
        which is a condition of this Agreement.

       

      8.8  Incorporation
        of Preamble, Recitals and Exhibits.
        The
        preamble, recitals, and exhibits hereto are hereby incorporated into this
        Agreement.

       

      8.9  Payment
        of Expenses.
        Borrower
        shall pay or cause to be paid all taxes and assessments and all expenses,
        charges, costs, and fees provided for in this Agreement or relating to the
        Loan
        or the Collateral, including, without limitation, any fees incurred for
        recording or filing any of the Loan Documents, fees of any consultants,
        reasonable fees and expenses of Lender’s or Collateral Agent’s counsel in
        negotiating, documenting, administering and enforcing the Loan, whether prior
        to
        or after the Closing Date, documentation and processing fees, printing,
        photostating and duplicating expenses, air freight charges, escrow fees,
        costs
        of inspections of the Collateral, and premiums of hazard insurance policies
        and
        surety bonds. Borrower hereby authorizes Lender to disburse the proceeds
        of the
        Loan to pay such expenses, charges, costs, and fees notwithstanding that
        Borrower may not have requested a disbursement of such amount. Lender may
        make
        such disbursements notwithstanding the fact that the Loan is not “in balance” or
        that Borrower is in default under the terms of this Agreement or any other
        Loan
        Document. Such disbursement shall be added to the outstanding principal balance
        of the Note. The authorization hereby granted shall be irrevocable, and no
        further direction or authorization from Borrower shall be necessary for Lender
        to make such disbursements. However, the provision of this Section
        8.9
        shall
        not prevent Borrower from paying such expense, charges, costs, and fees from
        its
        own funds. All such expenses, charges, costs, and fees shall be Borrower’s
        obligation regardless of whether or not Borrower has requested and met the
        conditions for an Advance. The obligations on the part of Borrower under
        this
Section 8.9
        shall
        survive the closing of the Loan and the repayment thereof. Borrower hereby
        authorizes Lender, in its sole and absolute discretion, to pay such expenses,
        charges, costs, and fees at any time by a disbursement of the Loan.

       

      8.10  Disclaimer
        by Lender.
        Lender
        shall not be liable to any contractor, subcontractor, supplier, laborer,
        architect, engineer, or any other party for services performed or materials
        supplied in connection with the Collateral. Neither Lender nor Collateral
        Agent
        shall be liable for any debts or claims accruing in favor of any such parties
        against Borrower or others or against the Collateral. Borrower is not and
        shall
        not be an agent of Lender or Collateral Agent for any purpose. Neither Lender
        nor Collateral Agent is a joint venture partner with Borrower in any manner
        whatsoever. Prior to default by Borrower under this Agreement and the exercise
        of remedies granted herein, neither Lender nor Collateral Agent shall be
        deemed
        to be in privity of contract with any contractor or provider of services
        to the
        Collateral, nor shall any payment of funds directly to a contractor,
        subcontractor, or provider of services be deemed to create any third party
        beneficiary status or recognition of same by Lender or Collateral Agent.
        Approvals granted by Lender or Collateral Agent for any matters covered under
        this Agreement shall be narrowly construed to cover only the parties and
        facts
        identified in any written approval or, if not in writing, such approvals
        shall
        be solely for the benefit of Borrower.

       

      8.11  Indemnification.
        TO THE
        FULLEST EXTENT PERMITTED BY LAW, BORROWER AGREES TO PROTECT, INDEMNIFY, DEFEND
        AND SAVE HARMLESS LENDER OR COLLATERAL AGENT, THEIR DIRECTORS, OFFICERS,
        AGENTS,
        ATTORNEYS, AND EMPLOYEES FOR, FROM, AND AGAINST ANY AND ALL LIABILITY, EXPENSE,
        OR DAMAGE OF ANY KIND OR NATURE AND FOR, FROM, AND AGAINST ANY SUITS, CLAIMS,
        OR
        DEMANDS, INCLUDING REASONABLE ATTORNEY’S FEES AND EXPENSES ON ACCOUNT OF ANY
        MATTER OR THING OR ACTION, WHETHER IN SUIT OR NOT, ARISING OUT OF THIS
        AGREEMENT, OR IN CONNECTION HEREWITH, EXCLUDING HOWEVER, ANY MATTERS ARISING
        OUT
        OF AN INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ANY MATTERS
        ARISING AFTER EITHER OF LENDER OR COLLATERAL AGENT HAS TAKEN TITLE TO OR
        POSSESSION OF THE COLLATERAL. Upon receiving knowledge of any suit, claim,
        or
        demand asserted by a third party that Lender or Collateral Agent believes
        is
        covered by this indemnity, Lender or Collateral Agent, as the case may be,
        shall
        give Borrower notice of the matter and an opportunity to defend it, at
        Borrower’s sole cost and expense, with legal counsel satisfactory to Lender or
        Collateral Agent, as the case may be. Lender or Collateral Agent, as the
        case
        may be, may also require Borrower to so defend the matter. The obligations
        on
        the part of Borrower under this Section
        8.11
        shall
        survive the closing of the Loan and the repayment thereof.

       

      8.12  Titles
        and Headings.
        The
        headings at the beginning of each section of this Agreement are solely for
        convenience and are not part of this Agreement. Unless otherwise indicated,
        each
        reference in this Agreement to a section or an exhibit is a reference to
        the
        respective section herein or exhibit hereto.

       

      8.13  Number
        and Gender.
        In this
        Agreement the singular shall include the plural and the masculine shall include
        the feminine and neuter gender and vice versa, if the context so
        requires.

       

      8.14  Brokers.
        Borrower and Lender represent to each other that neither of them knows of
        any
        brokerage commissions or finders’ fee due or claimed with respect to the
        transaction contemplated hereby. Borrower and Lender shall indemnify and
        hold
        harmless the other party for, from and against any and all loss, damage,
        liability, or expense, including costs and reasonable attorney fees, which
        such
        other party may incur or sustain by reason of or in connection with any
        misrepresentation by the indemnifying party with respect to the
        foregoing.

       

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

       

      8.16  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 BORROWER AND LENDER
        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.

       

      8.17  Disbursements
        in Excess of Loan Amount.
        In the
        event the total disbursements by Lender exceed the amount of the Loan, to
        the
        extent permitted by the laws of the State of Utah, the total of all
        disbursements shall be secured by the Collateral. All other sums expended
        by
        Lender pursuant to this Agreement or any other Loan Documents shall be deemed
        to
        have been paid to Borrower and shall be secured by, among other things, the
        Collateral.

       

      8.18  Participations;
        Assignments.
        Lender
        shall have the right at any time to sell, assign, transfer, negotiate, or
        grant
        participations in all or any part of the Loan or the Note to one or more
        participants. Borrower hereby acknowledges and agrees that any such disposition
        will give rise to a direct obligation of Borrower to each such participant.
        Lender may at any time, without the consent of Borrower, assign all or any
        portion of its rights under this Agreement and the Note to a Federal Reserve
        Bank. Borrower shall have the right, without any obligation to pay the Early
        Termination Fee, to terminate the Loan prior to the Maturity Date within
        ninety
        (90) days after receiving written notice from Lender that it intends to assign
        or grant participations in the Loan, provided that Borrower otherwise complies
        with the requirements of Section
        2.6(c)
        hereof.

       

      8.19  Counterparts.
        This
        Agreement may be executed in any number of counterparts each of which shall
        be
        deemed an original, but all such counterparts together shall constitute but
        one
        agreement. Borrower and Lender agree and acknowledge that facsimile signature
        pages will be acceptable and shall be conclusive evidence of execution of
        any
        Loan Document, resolution or other agreement relating to the Loan.

       

      8.20  Time
        is of the Essence.
        Time is
        of the essence of this Agreement.

       

      8.21  Attorneys’
        Fees.
        Borrower agrees to pay all costs of administration, enforcement and collection
        and preparation for any Event of Default or any action taken by Lender or
        Collateral Agent (including, without limitation, reasonable attorney’s fees),
        whether or not any action or proceeding is brought (including, without
        limitation, all such costs incurred in connection with any bankruptcy,
        receivership, or other court proceedings (whether at the trial or appellate
        level)), together with interest thereon from the date of demand at the Default
        Interest Rate.

       

      8.22  Jury
        Waiver.
        EACH
        PARTY HERETO 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 ON CONTRACT, TORT OR ANY OTHER THEORY).
        EACH
        PARTY HERETO (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.

       

      8.23  Waiver
        of Special Damages. TO
        THE
        EXTENT PERMITTED BY APPLICABLE LAW, BORROWER SHALL NOT ASSERT, AND HEREBY
        WAIVES, ANY CLAIM AGAINST LENDER, 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.

       

      8.24  MISCELLANEOUS
        WAIVERS.
        TO THE
        FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY WAIVES ANY AND
        ALL
        RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT,
        ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
        (EACH, A “PROCEEDING”),
        BORROWER 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
        LENDER 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. BORROWER 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
        BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE
        UPON RECEIPT; EXCEPT
        THAT IF
        BORROWER SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE
        FIVE
        (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

       

      8.25  Integration.
        The
        Loan Documents contain the complete understanding and agreement of Borrower
        and
        Lender and supersede all prior representations, warranties, agreements,
        arrangements, understandings, and negotiations. PURSUANT
        TO UTAH
        CODE ANNOTATED
        SECTION 25-5-4, BORROWER IS NOTIFIED THAT THE
        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.

       

      8.26  Binding
        Effect.
        The
        Loan Documents will be binding upon, and inure to the benefit of, Borrower
        and
        Lender and their respective successors and assigns. Borrower may not delegate
        its obligations under the Loan Documents.

       

      8.27  Survival.
        The
        representations, warranties, and covenants of Borrower and the Loan Documents
        shall survive the execution and delivery of the Loan Documents and the making
        of
        the Loan.

       

      8.28  Exchange
        of Information.
        Borrower
        agrees that Lender may exchange financial information about Borrower and
        Guarantor with its affiliates and other related entities, its participants
        and
        prospective participants, and purchasers or potential purchasers of the Loan.
        Borrower agrees that Lender may at any time sell, assign, or transfer one
        or
        more interests or participations in all or any part of its rights or obligations
        in and to this Agreement and the other Loan Documents to one or more purchasers
        whether or not related to or affiliated with Lender. Borrower hereby authorizes
        Lender, at its sole discretion and without notice to or consent of Borrower
        or
        Guarantor, to disclose to Chase or Collateral Agent on a confidential basis
        any
        information, financial or otherwise, which it may possess concerning Borrower
        or
        Guarantor.

       

      8.29  Regulation
        FD.
        Lender
        acknowledges that it is aware, and Lender 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 Lender by Borrower
        or any Person acting on Borrower’s behalf. This Section
        8.29
        is a
        confidentiality agreement for purposes of Regulation FD promulgated under
        the
        Securities Exchange Act of 1934.

       

      8.30  USA
        PATRIOT ACT NOTIFICATION.
        Required Notice:

       

      USA
        PATRIOT ACT.
        The
        Lender hereby notifies Borrower that pursuant to the requirements of the
        USA
        Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
        (the “Act”),
        it is
        required to obtain, verify and record information that identifies Borrower,
        which information includes the name and address of Borrower and other
        information that will allow Lender to identify Borrower in accordance with
        the
        Act.

       

      8.31  Exhibits
        and Schedules.
        The following exhibits and schedules to this Agreement are fully incorporated
        herein as if set forth at length:

       

      Exhibit
        A
        - Form of Covenant Compliance Certificate

      Exhibit
        B
        - Form of Request for Advance

      Schedule
        5.2(d) - Subsidiaries

      Schedule
        5.5 - Litigation

      Schedule
        5.6 - Existing Liens and Encumbrances

      Schedule
        5.20 - Management Loan Program

        

      ARTICLE
        9

       

      COLLATERAL
        RELEASES

       

      9.1  Full
        Release.
        Unless
        either of Lender or Collateral Agent otherwise consents in writing, the
        Collateral or any part thereof shall not be released from the Lien and
        Encumbrance of the Security Agreement until all Indebtedness and Obligations
        of
        Borrower and Guarantor under the Loan Documents have been indefeasibly paid
        and
        performed in full.

       

      [Remainder
        of Page Intentionally Left Blank]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


       


      IN
        WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be duly
        executed and delivered 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

                "Borrower"

              


      

       

       

      
         

        
          	 	 	 
	 	ZIONS
                  FIRST NATIONAL BANK
	 
 	 
 	a national
                  banking association
 
	 	By:  	 /s/ DONALD RANDS
	 	
                  
Name:
                  Donald Rands
	 	
                  Title:
                    Vice Presient

                  "Lender"

                


        

         

      

      
      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      EXHIBIT
        A

       

      FORM
        OF COVENANT COMPLIANCE CERTIFICATE

       

      COVENANT
        COMPLIANCE CERTIFICATE

       

      To: Zions
        First National Bank

      10
        East
        South Temple, Suite 200

      Salt
        Lake
        City, Utah 84133

       

      For
        the
        [Quarter/Fiscal
        Year]
        Ending:
        _______________, 20___ (the “Reporting
        Period”).

       

      FRANKLIN
        COVEY CO.,
        a Utah
        corporation (“Borrower”),
        makes
        this certification to ZIONS
        FIRST NATIONAL BANK,
        a
        national banking association (“Lender”),
        under
        that certain Revolving Line of Credit Agreement dated March 14, 2007 (the
        “Loan
        Agreement”)
        by and
        between Borrower and Lender. Capitalized terms used herein without definition
        shall have the meanings given to such terms in the Loan Agreement.

       

      The
        undersigned hereby certifies to Lender that as reported on the most recent
        financial statements described below and submitted herewith to Lender, Borrower
        is in full and compliance with each and every financial covenant set forth
        in
        the Loan Agreement and each other covenant set forth in the Loan Agreement.
        The
        financial covenant requirements compared to the actual results are determined
        to
        be as follows, which results are further described on the Line of Credit
        Covenant Calculations set forth on Schedule
        1
        attached
        hereto, each of which Borrower certifies to be true and correct:

       

      Funded
        Debt to EBITDAR Ratio Covenant.
        The
        Consolidated Entities shall not permit its ratio of (A) total liabilities,
        plus
        the net present value of operating leases at a discount rate of seven percent
        (7%), but excluding (1) accounts arising from the purchase of goods and services
        in the ordinary course of business, (2) accrued expenses or losses, and (3)
        deferred revenues or gains, to (B) net income, plus amortization expense,
        depreciation expense, interest expense, income tax expense, and rents and
        operating lease payments, less extraordinary gains and losses (collectively,
        “EBITDAR”),
        for
        the twelve (12) month period then ending, to be greater than (x) 3.25 to
        1.00 as
        of the end of the fiscal quarter of Borrower ending on March 3, 2007, (y)
        3.00
        to 1.00 as of the end of the fiscal quarter of Borrower ending on June 2,
        2007,
        and (z) 2.75 to 1.00 as of the end of the fiscal quarter of Borrower ending
        on
        August 31, 2007 and each fiscal quarter thereafter.

       

       

      
        	 	Maximum
                Ratio for Reporting Period:	 	
              
	 	 	 	 
	 	Actual
                Ratio for Reporting Period: 	 	
              
	 	 	 	 
	 	In Compliance: Yes
                 ̈ No
                 ̈	 	 
	 	 	 	 


      

       

      Fixed
        Charge Coverage Ratio Covenant.
        The
        Consolidated Entities shall not permit its ratio of (A) net income before
        income
        tax expense, plus amortization expense, depreciation expense, interest expense,
        rent and operating lease payments, minus any distributions or dividends,
        for the
        twelve (12) month period then ending, to (B) prior period current maturities
        of
        long term debt and capital leases, interest expense, cash taxes paid, rent
        and
        operating lease payments, for the same such period, to be less than (x) 1.30
        to
        1.00 as of the end of the fiscal quarter of Borrower ending on March 3, 2007,
        (y) 1.35 to 1.00 as of the end of the fiscal quarter of Borrower ending on
        June
        2, 2007, and (z) 1.50 to 1.00 as of the end of the fiscal quarter of Borrower
        ending on August 31, 2007 and each fiscal quarter thereafter.

       

      
         

        
          	 	Maximum
                  Ratio for Reporting Period =	 	
                
	 	 	 	 
	 	Actual
                  Ratio for Reporting Period =	 	
                
	 	 	 	 
	 	In Compliance: Yes
                   ̈ No
                   ̈	 	 
	 	 	 	 


        

      

      
      

      Capital
        Expenditures Covenant.
        The
        Consolidated Entities shall not make Capital Expenditures, exclusive of
        curriculum development costs, in excess of (i) $11,000,000.00 for Borrower’s
        fiscal year ending on August 31, 2007 and (ii) $8,000,000.00 for each fiscal
        year of Borrower thereafter.

       

      
         

        
          	 	Maximum
                  Capital Expenditures for Reporting Period:	 	$
	 	 	 	 
	 	Actual
                  Capital Expenditures for Reporting Period: 	 	$
	 	 	 	 
	 	In Compliance: Yes
                   ̈ No
                   ̈	 	 
	 	 	 	 


        

      

       

      Minimum
        Net Worth Covenant.
        The
        Consolidated Entities shall not permit its Net Worth to be less than ONE
        HUNDRED
        THIRTY-THREE MILLION AND NO/100 DOLLARS ($133,000,000.00); provided,
        however,
        the
        Consolidated Entities’ Net Worth may be less than such amount if Lender
        determines that the Consolidated Entities’ Net Worth has decreased to an amount
        less than $133,000,000.00 as a result of Borrower’s purchase of its outstanding
        common or preferred stock. As used in Section
        6.8(d) of
        the
        Loan Agreement, the term “Net
        Worth”
means
        the Consolidated Entities’ total assets less
        total
        liabilities, in each case as determined in accordance with GAAP.

      
         

        
          	 	Minimum
                  Net Worth as of End of Reporting Period:	 	$
	 	 	 	 
	 	Actual
                  Net Worth as of End of Reporting Period:	 	$
	 	 	 	 
	 	In Compliance: Yes
                   ̈ No
                   ̈	 	 
	 	 	 	 


        

      

       

      In
        addition, the undersigned certifies to Lender that, during the period covered
        by
        the financial statements and through the date of this
        Certification:

       

      A. No
        Event
        of Default has occurred and is continuing.

       

      B. Borrower
        has not pledged any of its assets except as permitted in the Loan
        Agreement.

       

      C. There
        has
        been no change in GAAP or in the application thereof to the Consolidated
        Entities’ financial statements since the date of the audited financial
        statements referred to in Section
        6.7
        of the
        Loan Agreement which were last delivered to Lender.

       

      Dated
        as
        of _______________, 20___.

       

      Very
        truly yours,

       

      
        
          	 	 	 	 
	 	FRANKLIN
                  COVEY CO.	 
	 
 	 
 	a
                  Utah
                  corporation
 	 
	 	By:  	 	 
	
                   

                  Name:

                	
                	 
	
                   

                  Title:

                	
                   

                   

                	 


        

         

      

      
         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      SCHEDULE
        1

      TO
        COVENANT COMPLIANCE CERTIFICATE

       

      LINE
        OF CREDIT COVENANT CALCULATIONS

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      EXHIBIT
        B

       

      FORM
        OF REQUEST FOR ADVANCE

       

      [insert
        date]

       

      


      Zions
        First National Bank

      10
        East
        South Temple, Suite 200

      Salt
        Lake
        City, Utah 84133

       

      Request
        for Advance No.:_____________________

       

      Ladies/Gentlemen:

       

      Reference
        is made to the Revolving Line of Credit Agreement dated as of March 14, 2007
        (the “Loan
        Agreement”)
        between FRANKLIN
        COVEY CO.,
        a Utah
        corporation (“Borrower”),
        and
ZIONS
        FIRST NATIONAL BANK,
        a
        national banking association (“Lender”).
        Capitalized terms used but not otherwise defined herein shall have the meaning
        given them in the Loan Agreement.

       

      In
        accordance with Section
        2.2(a)
        of the
        Loan Agreement, the undersigned Borrower hereby requests that Lender make
        an
        Advance to us in the amount of $____________________. Borrower hereby certifies,
        as of the date hereof and as of the date the Advance requested hereby is
        made,
        that:

       

      (a) no
        Event
        of Default has occurred and is continuing nor will an Event of Default occur
        after giving effect to such Advance as a result of such Advance;

       

      (b) each
        of
        the representations and warranties made by Borrower in or pursuant to the
        Loan
        Documents is true and correct in all material respects on and as of such
        date as
        if made on and as of the date hereof (or, if any such representation or warranty
        is expressly stated to have been made as of a specific date, as of such specific
        date); and

       

      (c) Borrower
        has satisfied all conditions precedent and all other requirements for the
        Advance of the funds requested herein as provided in the Loan Agreement and
        other Loan Documents.

       

       

      
        
          
            	 	
                    Very
                      truly yours,

                  
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	FRANKLIN
                    COVEY CO.
	 
 	 
 	a
                    Utah
                    corporation
 
	 	By:  	 
	 	
                    
Name:
	 	
                    Title:

                  


          

           

           

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      SCHEDULE
        5.2(d)

       

      SUBSIDIARIES

       

      

       

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      SCHEDULE
        5.5

       

      LITIGATION

       

       

      epicRealm
        Licensing, LLC v. Franklin Covey Co., et al.,
        Case
        No. 2:05-CV-00356-DF-CMC in the United States District Court for the Eastern
        District of Texas, Marshall Division (has been consolidated with Case No.
        2:05-CV-00163-DF-CMC). In August 2005, epicRealm Licensing, LLC (epicRealm)
        filed an action against Borrower for patent infringement. The action alleges
        that Borrower infringed upon two of epicRealm’s patents that cover systems and
        methods for managing dynamic Web page generation requests from clients to
        a Web
        server that in turn uses a page server to generate a dynamic Web page using
        content retrieved from a data source. Borrower denies the patent infringement
        and believes that the epicRealm claims are invalid. This litigation is currently
        in the discovery phase and Borrower intends to vigorously defend the
        matter.

       

      
 

      SCHEDULE
        5.6

       

      EXISTING
        LIENS AND ENCUMBRANCES

       

       

      
        	
                Debtor

                 

              	
                Secured
                  Party

                 

              	
                Collateral

                 

              	
                Jurisdiction

                 

              	
                Filing
                  Date

                 

              	
                Filing
                  No.

                 

              
	
                Franklin
                  Covey Corporation

                 

              	
                Lease
                  Operations

                 

              	
                Equipment

                 

              	
                Utah

                 

              	
                04/10/2002

                 

              	
                184734200241

                 

              
	
                Franklin
                  Covey Company

                 

              	
                Inter-tel

                 

                Leasing,
                  Inc.

                 

              	
                Equipment

                 

              	
                Utah

                 

              	
                06/27/2002

                 

              	
                191497200239

                 

              
	
                Franklin
                  Covey Printing, Inc.

                 

              	
                Heidelberg
                  USA, Inc.

                 

              	
                Equipment

                 

              	
                Utah

                 

              	
                10/30/2006

                 

              	
                306412200696

                 

              
	
                Franklin
                  Covey Company, Inc.

                 

              	
                IOS
                  Capital, LLC

                 

              	
                Leased
                  Equipment

                 

              	
                Utah

                 

              	
                10/31/2002

                 

              	
                201520200221

                 

              
	
                Franklin
                  Covey Printing, Inc.

                 

              	
                Komori
                  America Corporation

                 

              	
                Equipment

                 

              	
                Utah

                 

              	
                01/10/2007

                 

              	
                311178200706

                 

              
	
                Franklin
                  Covey Co.

                 

              	
                Zions
                  First National Bank

                 

              	
                Account
                  #2918002 with Zions First National Bank

                 

              	
                Utah

                 

              	
                01/24/2007

                 

              	
                312076200702

                 

              


      

      
 

      SCHEDULE
        5.20

       

      MANAGEMENT
        COMMON STOCK LOAN PROGRAM

       

      During
        fiscal 2000, certain of our management personnel borrowed funds from an external
        lender, on a full-recourse basis, to acquire shares of our common stock.
        The
        loan program closed during fiscal 2001 with 3.825 million shares of common
        stock
        purchased by the loan participants for a total cost of $33.6 million, which
        was
        the market value of the shares acquired and distributed to loan participants.
        The Company initially participated on these management common stock loans
        as a
        guarantor to the lending institution. However, in connection with a new credit
        facility obtained during the fourth quarter of fiscal 2001, we acquired the
        loans from the external lender at fair value and are now the creditor for
        these
        loans. The loans in the management stock loan program historically accrued
        interest at 9.4 percent (compounded quarterly), are full-recourse to the
        participants, and were originally due in March 2005. Although interest accrues
        on the outstanding balance over the life of the loans, the Company ceased
        recording interest receivable (and related interest income) related to these
        loans during the third quarter of fiscal 2002. However, loan participants
        remain
        obligated to pay all accrued interest upon maturity of the
        loans.

       

      In
        May
        2004, our Board of Directors approved modifications to the terms of the
        management stock loans. While these changes had significant implications
        for
        most management stock loan program participants, the Company did not formally
        amend or modify the stock loan program notes. Rather, the Company chose to
        forego certain of its rights under the terms of the loans and granted
        participants the modifications described below in order to potentially improve
        their ability to pay, and the Company’s ability to collect, the outstanding
        balances of the loans. These modifications to the management stock loan terms
        applied to all current and former employees whose loans do not fall under
        the
        provisions of the Sarbanes-Oxley Act of 2002. Loans to the Company’s officers
        and directors (as defined by the Sarbanes-Oxley Act of 2002) were not affected
        by the approved modifications. During fiscal 2005 the Company collected $0.8
        million, which represented payment in full, from an officer and members of
        the
        Board of Directors that were required to repay their loans on the original
        due
        date of March 30, 2005.

       

      The
        May
        2004 modifications to the management stock loan terms included the
        following:

       

      
        	
                 

              	
                 

              	
                Waiver
                  of Right to Collect
                  - The
                  Company will waive its right to collect the outstanding balance
                  of the
                  loans prior to the earlier of (a) March 30, 2008, or (b) the date
                  after
                  March 30, 2005 on which the closing price of the Company’s stock
                  multiplied by the number of shares purchased equals the outstanding
                  principal and accrued interest on the management stock loans (the
                  Breakeven Date).

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Lower
                  Interest Rate
                  - Effective
                  May 7, 2004, the Company prospectively waived collection of all
                  interest
                  on the loans in excess of 3.16 percent per annum, which was the
“Mid-Term
                  Applicable Federal Rate” for May 2004.

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Use
                  of the Company’s Common Stock to Pay Loan
                  Balances
                  - The
                  Company may consider receiving shares of our common stock as payment
                  on
                  the loans, which were previously only payable in cash.

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Elimination
                  of the Prepayment Penalty
                  - The
                  Company will waive its right to charge or collect any prepayment
                  penalty
                  on the management common stock
                  loans.

              


      

      


      These
        modifications, including the reduction of the loan program interest rate,
        were
        not applied retroactively and participants remain obligated to pay interest
        previously accrued using the original interest rate. Also during fiscal 2005,
        our Board of Directors approved loan modifications for a former executive
        officer and a former director substantially similar to loan modifications
        previously granted to other loan participants in the management stock loan
        program as described above.

       

      Prior
        to
        the May 2004 modifications, the Company accounted for the loans and the
        corresponding shares using a loan-based accounting model that included guidance
        found in SAB 102, Selected
        Loan Loss Allowance Methodology and Documentation Issues;
        SFAS
        No. 114, Accounting
        by Creditors for Impairment of A Loan - an Amendment of FASB Statements No.
        5
        and 15;
        and
        SFAS No. 5, Accounting
        for Contingencies.
        However, due to the nature of the May 2004 modifications, the Company
        reevaluated its accounting for the management stock loan program. Based upon
        guidance found in EITF Issue 00-23, Issues
        Related to the Accounting for Stock Compensation under APB Opinion No. 25
        and
        FASB Interpretation No. 44,
        and
        EITF Issue 95-16, Accounting
        for Stock Compensation Agreements with Employer Loan Features under APB Opinion
        No. 25,
        we
        determined that the management common stock loans should be accounted for
        as
        non-recourse stock compensation instruments. While this accounting treatment
        does not alter the legal rights associated with the loans to the employees
        as
        described above, the modifications to the terms of the loans were deemed
        significant enough to adopt the non-recourse accounting model as described
        in
        EITF 00-23. As a result of this accounting treatment, the remaining carrying
        value of the notes and interest receivable related to financing common stock
        purchases by related parties, which totaled $7.6 million prior to the loan
        term
        modifications, was reduced to zero with a corresponding reduction in additional
        paid-in capital. Since the Company was unable to control the underlying
        management common stock loan shares, the loan program shares continued to
        be
        included in Basic earnings per share (EPS) following the May 2004
        modifications.

       

      We
        currently account for the management common stock loans as equity-classified
        stock option arrangements. Under the provisions of SFAS No. 123R, which we
        adopted on September 1, 2005, additional compensation expense will be recognized
        only if the Company takes action that constitutes a modification which increases
        the fair value of the arrangements. This accounting treatment also precludes
        us
        from reversing the amounts expensed as additions to the loan loss reserve,
        totaling $29.7 million, which were recognized in prior periods.

       

      During
        fiscal 2006, the Company offered participants in the management common stock
        loan program the opportunity to formally modify the terms of their loans
        in
        exchange for placing their shares of common stock purchased through the loan
        program in an escrow account that allows the Company to have a security interest
        in the loan program shares. The key modifications to the management common
        stock
        loans for the participants accepting the fiscal 2006 offer are as
        follows:

       

      


      
        	
                 

              	
                 

              	
                Modification
                  of Promissory Note
                  -
                  The management stock loan due date was changed to be the earlier
                  of (a)
                  March 30, 2013, or (b) the Breakeven Date as defined by the May
                  2004
                  modifications. The interest rate on the loans will increase from
                  3.16
                  percent compounded annually to 4.72 percent compounded
                  annually.

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Redemption
                  of Management Loan Program Shares
                  -
                  The Company will have the right to redeem the shares on the due
                  date in
                  satisfaction of the promissory notes as
                  follows:

              


      

      


      
        	
                 

              	
                ·

              	
                On
                  the Breakeven Date, the Company has the right to purchase and redeem
                  from
                  the loan participants the number of loan program shares necessary
                  to
                  satisfy the participant’s obligation under the promissory note. The
                  redemption price for each such loan program share will be equal
                  to the
                  closing price of the Company’s common stock on the Breakeven
                  Date.

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                ·

              	
                If
                  the Company’s stock has not closed at or above the breakeven price on or
                  before March 30, 2013, the Company has the right to purchase and
                  redeem
                  from the participants all of their loan program shares at the closing
                  price on that date as partial payment on the participant’s
                  obligation.

              


      

      


      The
        fiscal 2006 modifications were intended to give the Company a measure of
        control
        of the outstanding loan program shares and to facilitate payment of the loans
        should the market value of the Company’s stock equal the principal and accrued
        interest on the management stock loans. If a loan participant declines the
        offer
        to modify their management stock loan, their loan will continue to have the
        same
        terms and conditions that were previously approved in May 2004 by the Company’s
        Board of Directors and their loans will be due at the earlier of March 30,
        2008
        or the Breakeven Date. Consistent with the May 2004 modifications, stock
        loan
        participants will be unable to realize a gain on the loan program shares
        unless
        they pay cash to satisfy the promissory note obligation prior to the due
        date.
        As of the closing date of the extension offer, which was substantially completed
        in June 2006, management stock loan participants holding approximately 3,508,000
        shares, or 94 percent of the remaining loan shares, elected to accept the
        extension offer and placed their management stock loan shares into the escrow
        account.

       

      As
        a
        result of this modification, the Company reevaluated its accounting treatment
        regarding the loan shares and their inclusion in Basic EPS. Since the management
        stock loan shares held in the escrow account continue to have the same income
        participation rights as other common shareholders, the Company has determined
        that the escrowed loan shares are participating securities as defined by
        EITF
        03-06, Participating
        Securities and the Two-Class Method under FASB Statement No.
        128.
        As a
        result, the management loan shares will be included in the calculation of
        Basic
        EPS in periods of net income and excluded from Basic EPS in periods of net
        loss
        beginning in the fourth quarter of fiscal 2006, which was the completion
        of the
        escrow agreement modification.

       

      As
        a
        result of these loan program modifications, the Company hopes to increase
        the
        total value received from loan participants; however, the inability of the
        Company to collect all, or a portion, of these receivables could have an
        adverse
        impact upon our financial position and future cash flows compared to full
        collection of the loans.