UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of
1934
Date of Report
(Date of earliest event reported): March 4, 2005
FRANKLIN COVEY
CO.
(Exact name of
registrant as specified in its charter)
Utah
|
1-11107 |
87-0401551 |
(State or
other jurisdiction of incorporation) |
(Commission
File
Number) |
(IRS
Employer
Identification
No.) |
2200 West Parkway
Boulevard
Salt Lake City,
Utah 84119-2099
(Address of
principal executive offices including zip code)
(Registrant’s
telephone number, including area code) (801) 817-1776
(Former name or
former address, if changed since last report) Not Applicable
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
|
____ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
|
____ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Item
1.01 Entry into
a Material Definitive Agreement
As previously
disclosed, Franklin Covey Co. (the “Company”) entered into a Preferred Stock
Amendment and Warrant Issuance Agreement (the “Amendment Agreement”) with
Knowledge Capital Investment Group (“Knowledge Capital”) on November 29, 2004.
Under the terms of the Amendment Agreement, the Company and Knowledge Capital
agreed, subject to the satisfaction or waiver of certain conditions, including
receiving all required shareholder approvals, to recapitalize the outstanding
shares of Series A Preferred Stock by bifurcating the Series A Preferred Stock
into two separate securities: (1) new Series A Preferred Stock that, among other
things, is no longer convertible into shares of Common Stock and (2) new
eight-year warrants (the “Warrants”) to purchase shares of the Company’s Common
Stock (collectively, the “Recapitalization”).
On March 8, 2005,
upon satisfaction of all conditions set forth in the Amendment Agreement, the
Recapitalization closed. In connection with the closing, the Company and
Knowledge Capital entered into:
| · |
the Amended
and Restated Shareholders Agreement attached hereto as Exhibit 99.1 (the
“Restated Shareholders Agreement”); |
| · |
the Amended
and Restated Registration Rights Agreement attached hereto as Exhibit 99.2
(the “Restated Registration Rights Agreement”);
and |
| · |
the Amended
and Restated Monitoring Agreement attached hereto as Exhibit 99.3 (the
“Restated Monitoring Agreement”). |
Additionally, at
the closing, the Company issued to Knowledge Capital the Warrant attached hereto
as Exhibit 99.4 to purchase of 5,913,402 shares of the Company’s Common Stock.
In accordance with the Amendment Agreement, the Company will issue Warrants,
each substantially in the form attached hereto as Exhibit 99.5, to the holders
of Series A Preferred Stock other than Knowledge Capital as well. Each of
these agreements and instruments is described in more detail below in this Item
1.01 of this Current Report on Form 8-K. The Recapitalization, including
the issuance of the Warrants, was, and, for Warrants not yet issued, will be,
made pursuant to an exemption from registration under Section 3(a)(9) of the
Securities Act of 1933, as amended.
Further, as part
of the Recapitalization, the Company has filed with the Utah Division of
Corporations and Commercial Code Articles of Restatement amending and restating
its Articles of Incorporation (the “Restated Articles”) to, among other things,
eliminate the convertibility of the Series A Preferred Stock into Common Stock
and to otherwise amend the designations, voting powers, preferences and
relative, participating, optional and other special rights, qualifications,
limitations and restrictions of the Series A Preferred Stock and the Series B
Preferred Stock and to make other miscellaneous changes to the articles of
incorporation. Such amendments are described in more detail in Item 3.03 of this
Current Report on Form 8-K below. The Restated Articles are attached hereto as
Exhibit 99.6.
1. Restated
Shareholders Agreement
In addition to the
description of Knowledge Capital’s contractual rights under the Restated
Shareholders Agreement described in Item 3.03 of this Current Report on Form 8-K
below, which is incorporated herein by reference, any merger, consolidation,
combination, recapitalization or reorganization or any disposition of all or
substantially all the Company’s properties and assets would, with certain
exceptions, require the approval of Knowledge Capital so long as it owns 880,000
shares of Series A Preferred Stock. The Restated Shareholders Agreement
also contains provisions, comparable to the provisions of the previously
outstanding Series A Preferred Stock, requiring that as long as Knowledge
Capital is entitled to designate at least two directors of the Company, approval
by an 80 percent Board vote would be required for incurrence of certain
indebtedness, major divestitures or acquisitions by the Company, unless certain
financial tests are met. The Restated Shareholders Agreement continues to
provide that, subject to certain exceptions, Knowledge Capital may not acquire
more than 25 percent of the total voting power of the Company, unless the
acquisition is approved by the members of the Board who are not designees of
Knowledge Capital.
The foregoing
summary of the Restated Shareholders Agreement is subject to, and qualified in
its entirety by, the Restated Shareholders Agreement attached to this Current
Report on Form 8-K as Exhibit 99.1 and incorporated herein by
reference.
2. Restated
Registration Rights Agreement
The Restated
Registration Rights Agreement, among other registration obligations, requires
the Company to use its best efforts to register the resale of all shares of
Common Stock and shares of Series B Preferred Stock issuable upon the
transfer and conversion of the Series A Preferred Stock held by Knowledge
Capital and certain permitted transferees of Knowledge Capital within
240 days following the initial filing of the registration statement
covering such shares. Any failure by the Company to cause such registration
statement to be declared effective within the specified time period would
require the Company to pay to Knowledge Capital and such permitted transferees a
penalty amount for each share equal to two percent per annum of the $25 face
value of the outstanding Series A and Series B Preferred Stock calculated based
upon the number of days that such registration statement has not been declared
effective. Additionally, the Company would have the obligation to use its best
efforts to register the resale of the shares of Common Stock Knowledge Capital
and certain permitted transferees could receive pursuant to the exercise of the
Warrant issued to Knowledge Capital at the closing of the Recapitalization,
provided the obligation to register the resale of such shares would be
conditioned upon the weighted average sales price of the Common Stock over the
previous ten trading days being at least 80 percent of the Warrant exercise
price.
The foregoing
summary of the Restated Registration Rights Agreement is subject to, and
qualified in its entirety by, the Restated Registration Rights Agreement
attached to this Current Report on Form 8-K as Exhibit 99.2 and incorporated
herein by reference.
3. Restated
Monitoring Agreement
The Restated
Monitoring Agreement provides that Hampstead Interests, LP, an affiliate of
Knowledge Capital, will continue to provide certain services to the Company in
order to assist the Company with the development of its strategic plan,
including acquisitions, divestitures, new development and financial matters, for
a fee of $100,000 per quarter, subject to reduction if Knowledge Capital
disposes of shares of Series A Preferred Stock. Under the Restated
Shareholders Agreement, designees of Knowledge Capital serving on the Company’s
Board of Directors will not be entitled to receive compensation for Board
service at any time when Hampstead Interests, LP is paid monitoring fees.
The foregoing
summary of the Restated Monitoring Agreement is subject to, and qualified in its
entirety by, the Restated Monitoring Agreement attached to this Current Report
on Form 8-K as Exhibit 99.3 and incorporated herein by reference.
4. Warrants
At the closing of
the Recapitalization, as described above, the Company issued to Knowledge
Capital a Warrant to purchase 5,913,402 shares of Common Stock for $8.00 per
share. Within ten days
following the closing of the Recapitalization, the Company will deliver to each
holder of Series A Preferred Stock as of the closing date other than Knowledge
Capital a transmittal letter. Upon the receipt by the Company of a completed and
executed transmittal letter from any such holder, within 10 days thereafter, the
Company will deliver to such holder a Warrant to purchase 71.43 shares of Common
Stock for each $1,000 of aggregate liquidation value attributable to the shares
of Series A Preferred Stock held by such holder as of the closing of
Recapitalization. All Warrants issued in connection with the Amendment Agreement
will have an exercise price of $8.00 per share and will expire on the eighth
anniversary of its issuance date.
All Warrants will
be exercisable at any time, in whole or in part, after the first anniversary of
their issuance date, so long as, except with respect to Knowledge Capital, a
registration statement covering the issuance of the shares of Common Stock
issuable upon exercise of the Warrants has been declared effective by the
Commission and remains continuously effective thereafter. Upon exercise of a
Warrant, Warrant holders may choose, or the Company may elect to require, any
Warrant exercise to be a net exercise in which the exercising holder would
receive fewer shares of Common Stock, depending on the fair market value of the
Common Stock at the time of exercise, than otherwise could be received upon an
exercise for cash. Further, the Company, at its election, may choose, in the
place of issuing any shares of Common Stock to such holder, to pay to any
Warrant holder completing a net exercise of a Warrant a cash amount equal to the
fair market value of the shares of Common Stock that otherwise would be issuable
to such holder in connection with such net exercise as opposed to issuing shares
of Common Stock to the exercising holder.
The foregoing
summary of the Warrants is subject to, and qualified in its entirety by, the
Warrant attached as Exhibit 99.4 and the form of Warrant attached as Exhibit
99.5 to this Current Report on Form 8-K and incorporated herein by
reference.
Item
3.02 Unregistered
Sales of Equity Securities
The contents of
Item 1.01 above are incorporated herein by reference in their
entirety.
Item
3.03 Material
Modification to Rights of Security Holders
The following
table summarizes the rights, powers and limitations of the Common Stock, the
Series A Preferred Stock and the Series B Preferred Stock as modified by the
Restated Articles and, as it applies to Knowledge Capital and certain of its
permitted transferees, the Restated Shareholders Agreement as compared to the
Company’s Articles of Incorporation in effect prior to the filing of the
Restated Articles (the “Prior
Articles”) and in the
Stockholders Agreement dated June 2, 1999 between the Company and Knowledge
Capital (the “Stockholders
Agreement”). This summary
should be read in conjunction with, and is qualified in its entirety by
reference to, the complete text of the Restated Articles attached as Exhibit
99.6, as well as the Restated Shareholders Agreement attached as Exhibit 99.1,
and incorporated herein by reference.
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Description |
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Terms
Under the Prior Articles |
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Terms
Under the Restated Articles and
the
Restated Shareholders Agreement |
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Authorized
Capital Stock
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The
Company’s authorized capital stock consisted of 40,000,000 shares of
Common Stock, $0.05 par value per share, and 4,000,000 shares of Preferred
Stock, without par value, of which 1,500,000 shares were designated as
Series A Preferred Stock and 400,000 shares were designated as
Series B Preferred Stock.
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The number
of authorized shares of Preferred Stock have increased from 4,000,000 to
14,000,000, the number of authorized shares of Series A Preferred Stock
have increased from 1,500,000 to 4,000,000 and the number of authorized
shares of Series B Preferred Stock have increased from 400,000 to
4,000,000. The need for the increase in the authorized Preferred Stock and
the authorized Series A and Series B Preferred Stock arose
principally from the one-to-four forward split of the Series A
Preferred Stock described in more detail below and the Series A
Preferred Stock becoming convertible into shares of nonvoting
Series B Preferred Stock as described below.
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One-to-four
forward split of Series A Preferred Stock
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Prior to the
one-to-four forward split, there were 873,457.404 shares of Series A
Preferred Stock outstanding.
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The Restated
Articles provided for a one-to-four forward split of all outstanding
shares of Series A Preferred Stock. As a result of the one-to-four forward
split, there are now 3,493,783 shares of Series A Preferred Stock
outstanding (after elimination of all fractional shares).
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Voting
Rights
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Each holder
of Common Stock was entitled to one vote for each share of Common
Stock.
Each holder
of Series A Preferred Stock was entitled to eight votes for each whole
share of Series A Preferred Stock, with any fractional share of
Series A Preferred Stock held being entitled to fewer votes per share
depending upon the number of shares of Common Stock into which it could
have converted, on all matters submitted to a vote of shareholders,
including the election of directors.
Each share
of Series B Preferred Stock, although none was outstanding, was entitled
to no voting rights except as required by law.
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The holders
of Common Stock retain the same voting power they had prior to the
Recapitalization.
The voting
power of the shares of Series A Preferred Stock changed to two votes per
whole share as a result of the one-to-four forward split (with no
fractional shares of Series A Preferred Stock remaining outstanding
following the split), provided, that the voting power of any holder of
Series A Preferred Stock is offset by (x) the number of shares of Common
Stock acquired by such holder upon the exercise of any Warrant issued to
such holder under the Amendment Agreement and (y) the number of shares of
Common Stock purchasable upon exercise of a Warrant that such holder has
sold or transferred to another person. The net effect of such offsets is
to ensure that the aggregate Common Stock voting power of the holders of
Series A Preferred Stock and transferees of Warrants from such holders
does not increase beyond a number of votes equal to the number of votes
the holders of Series A Preferred Stock held prior to the
Recapitalization.
The holders
of Series B Preferred Stock have no Common Stock voting rights.
Additionally, upon any transfer of shares of Series A Preferred Stock,
except to a limited group of permitted transferees, such shares will
automatically convert into shares of Series B Preferred Stock without
Common Stock voting rights.
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Class
Voting on Certain Company Actions
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Neither the
holders of Common Stock nor the holders of Series B Preferred Stock were
entitled to class voting rights except as required by law. However, the
approval of a majority of the then-outstanding shares of Series A
Preferred Stock, voting as a separate class, was required for any proposed
Company action that would:
• amend, alter
or repeal the Prior Articles in a manner that would adversely affect the
powers, designations, preferences and relative rights of the Series A
Preferred Stock;
• issue any
shares of capital stock ranking prior or superior to, or on parity with,
the Series A Preferred Stock;
• subdivide or
otherwise change shares of Series A Preferred Stock into a different
number of shares, whether in a merger, consolidation, combination,
recapitalization, reorganization or otherwise;
• issue any
shares of Series A Preferred other than in accordance with the Prior
Articles;
• authorize or
effect any merger, consolidation, combination, recapitalization or
reorganization or any disposition of all or substantially all the
Company’s properties and assets (a “Business Combination”) unless the
holders of Series A Preferred Stock retain the same powers, preferences
and relative rights and limitations they had prior to such transaction;
or
• declare or
pay any dividend on, or repurchase any shares of, the Common Stock of the
Company to the extent the amount of such dividends or repurchases in the
last four full fiscal quarters completed exceeds ten percent of the
Company’s net income for such period, unless such action is approved by 80
percent of the members of the Board of Directors.
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None of the
holders of Common Stock, Series A Preferred Stock or Series B Preferred
Stock has any separate class voting rights, except as required by law.
However, the approval of a majority of the then-outstanding shares of the
Series A Preferred Stock and the Series B Preferred Stock, voting together
as one class, will be required for any proposed Company action described
in any of the first four bullets set forth in this table under “Terms
Under the Prior Articles—Class Voting on Certain Company Actions.” The
actions described in the fifth and sixth bullets no longer require such
class approval. However, under the Restated Shareholders Agreement, the
actions described in the fifth bullet concerning any Business Combination
will require the approval of Knowledge Capital so long as it owns 880,000
shares of Series A Preferred Stock.
Similarly,
under the Restated Shareholders Agreement, any dividends on and
repurchases of Common Stock for the last four full fiscal quarters by the
Company that collectively exceed ten percent of the Company’s net income
for such period, as described in the sixth bullet, will require the
approval of Knowledge Capital so long as it holds 880,000 shares of Series
A Preferred Stock. However, the Restated Shareholders Agreement will
include an exception to this requirement that may increase the Company’s
ability to pay dividends on or repurchase shares of Common Stock without
Knowledge Capital approval. The exception provides that if the Company
(i) has first redeemed at least $30 million of the face value of
shares of Series A Preferred Stock and (ii) maintains positive
net working capital and, for the last four full fiscal quarters, the
Company’s EBITDA, determined on a pro forma basis as set forth in the
Restated Shareholders Agreement, equals or exceeds at least two times the
Company’s fixed charges, also determined on a pro forma basis, as set
forth in the Restated Shareholders Agreement, then the Company may,
without Knowledge Capital’s consent, use cash in excess of 56.2 percent of
the liquidation value, including accrued and unpaid dividends,
attributable to the then-outstanding shares of Senior Preferred Stock to
pay dividends on or repurchase shares of Common Stock from persons who are
not affiliates of the Company, subject to the limitation that such
dividends (but not repurchases) do not exceed 25 percent of the Company’s
net income during the last 12 months.
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Dividends
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Holders of
Series A Preferred Stock were entitled to cumulative dividends accruing at
the annual rate of ten percent. These dividends were payable quarterly in
preference to dividends on all other classes of the Company’s capital
stock. If these dividends were in arrears for any six or more quarters,
the number of the Company’s directors would have been increased by two and
the holders of Series A Preferred Stock, voting together as a separate
class, would have been entitled to fill the vacancies thereby created,
until such dividends were paid. Additionally, the holders of Series A
Preferred Stock were entitled to participate in dividends payable to
holders of Common Stock pro rata based upon the number of shares of Common
Stock into which the Series A Preferred Stock was
convertible.
Similarly,
the holders of Series B Preferred Stock, if any such shares had been
outstanding, would have been entitled to participate in dividends payable
to holders of Common Stock pro rata based upon the number of shares of
Common Stock into which the Series B Preferred Stock would have been
convertible.
Holders of
Common Stock were entitled to receive dividends as they might have been
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the rights of any holders of the Preferred
Stock, including the right that the holders of a majority of the
then-outstanding shares of Series A Preferred Stock had to consent to the
payment of any Common Stock dividends if (i) the aggregate amount of all
Common Stock dividends and repurchases in the last 12 months exceeded ten
percent of the Company’s net income for the last 12 months, and (ii) such
Common Stock dividends had not been approved by 80 percent of the
members of the Board of Directors.
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Holders of
the Series A and Series B Preferred Stock are entitled to receive the same
quarterly dividends the holders of Series A Preferred Stock were entitled
to receive under the Prior Articles calculated at an annual rate of ten
percent. These dividends will be cumulative from the date such shares are
initially issued, except that for any shares of Series B Preferred Stock
issued upon the conversion of shares of Series A Preferred Stock, such
date shall be the initial issuance date of such converted shares of Series
A Preferred Stock. The holders of the Series A and Series B Preferred
Stock retain the right to elect two additional directors, voting together
as a single class, if such dividends are in arrears for any six or more
quarters, until they are paid. If Knowledge Capital owns a majority of the
outstanding Series A Preferred Stock, such two additional directors will
be deemed to be directors designated by Knowledge Capital pursuant to its
rights to designate nominees to stand for election as directors under the
Restated Shareholders Agreement as described in more detail
below.
The holders
of Common Stock are entitled to receive dividends on the same terms they
were entitled to receive them under the Prior Articles. However, in
contrast to the provisions of the Prior Articles, the holders of the
Series A and Series B Preferred Stock are not entitled to participate in
Common Stock dividends on an as-converted basis.
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Liquidation
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Upon any
liquidation, dissolution or winding up of the Company, no distribution
would have been made to the holders of Common Stock until the holders of
Series A Preferred Stock had received in cash $100 per share plus
accrued and unpaid dividends. Holders of the Series B Preferred
Stock, if any had been outstanding, would not have been entitled to any
preferential distributions but would have been entitled to participate in
liquidating distributions to holders of shares of Common Stock on an
as-converted basis. The holders of Common Stock were entitled to all
remaining assets and funds available for distribution after all
preferential distributions had been paid to holders of Preferred
Stock.
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Holders of
Common Stock have the same rights upon liquidation they had under the
Prior Articles.
The rights
of the holders of the Series A and Series B Preferred Stock have
substantially the same rights the holders of Series A Preferred Stock had
under the Prior Articles, except that they are entitled to receive $25 per
share upon a liquidation, dissolution or winding up of the Company, plus
accrued and unpaid dividends, as a result of one-to-four forward
split.
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Preemptive
Rights
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Holders of
Common Stock and Series A Preferred Stock did not have, and holders of
Series B Preferred Stock, if any such shares had been outstanding, would
not have had, preemptive rights to purchase or subscribe for any stock or
other securities.
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None of the
holders of Common Stock or the Series A or Series B Preferred Stock has
preemptive rights.
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Conversion
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The Common
Stock was not convertible into any other class of capital
stock.
Each share
of Series A Preferred Stock was convertible, at the option of the holder,
into approximately 7.14 of shares of Common Stock, which amount was
determined by dividing $100 by the conversion price of $14. Such number of
shares of Common Stock issuable upon conversion of the Series A Preferred
Stock would have increased to the extent there were any accrued and unpaid
dividends on the Series A Preferred Stock. The conversion price would have
been adjusted for a subdivision, recapitalization or combination of the
Common Stock or if a dividend was determined to be paid to the holders of
Common Stock in the form of additional shares of Common Stock or rights to
acquire additional shares of Common Stock. The conversion price might also
have been adjusted if the Company had issued rights or warrants to acquire
additional shares of Common Stock to all holders of Common Stock at a
price per share less than the volume weighted average sales price of the
Common Stock as of the record date for such rights issuance based on a
weighted average adjustment formula.
If any
shares of Series B Preferred Stock had been outstanding, such shares would
have been convertible, at the option of the holder, into ten shares of
Common Stock at any time after March 1, 2005. The Company would have had
the right to require conversion upon a change in control of the Company or
a merger, consolidation or sale of all or substantially all its assets or
a liquidation or dissolution of the Company or an underwritten public
offering of the Company’s capital stock. The number of shares of Common
Stock into which shares of Series B Preferred Stock could have been
converted would have been adjusted for any subdivision, recapitalization
or combination of the Company’s Common Stock.
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The Senior
Preferred Stock is not convertible into shares of Common Stock, and the
Common Stock is not convertible into any other class of capital stock.
However, the Series A Preferred Stock will be converted into shares of
Series B Preferred Stock upon any transfer of such shares by a holder
other than transfers to affiliates, five percent equity holders, immediate
family members and trusts for the benefit of such holder.
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Redemption
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Neither the
Common Stock nor the Series B Preferred Stock was redeemable.
The Series A
Preferred Stock was redeemable by the Company in two ways. First, had
there been less than 100,000 shares of Series A Preferred Stock
outstanding (prior to the one-to-four forward split) and the volume
weighted sales price of the Common Stock had exceeded 120 percent of the
then-applicable conversion price of the Series A Preferred Stock for
at least 30 consecutive trading days, then the Company could have
redeemed, upon 30 days prior notice to the holders of Series A
Preferred Stock, all then-outstanding shares of Series A Preferred
Stock at a price equal to 105 percent of the liquidation value of the
Series A Preferred Stock (including accrued and unpaid dividends).
Second, had the volume weighted sales price of the Common Stock exceeded
130 percent of the volume weighted sales price for at least
60 consecutive trading days, then the Company could have redeemed,
upon 15 business days prior notice to the holders of Series A
Preferred Stock, all then-outstanding shares of Series A Preferred
Stock at a price equal to 104 percent of the liquidation value of the
Series A Preferred Stock.
The Prior
Articles also provided that if certain transactions occurred that were
solely within the Company’s control, including a change in control or a
transaction that would lower the Company’s credit rating, the Company
would have offered, within 30 days after such transaction occurs, to
purchase each then-outstanding share of Series A Preferred Stock for the
amount equal to the greater of (i) the amount that the holders of shares
of Series A Preferred Stock would have received had they converted such
shares into Common Stock immediately before such transaction or (ii) 101
percent of the liquidation value of such shares (including 101 percent of
accrued and unpaid dividends to the date of payment).
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The Common
Stock continues to be non-redeemable.
The Senior
Preferred Stock is not redeemable at the election of the holders of shares
of Series A Preferred Stock and is only be redeemable by the Company at
its option at any time during the first year following the closing at a
price per share equal to the liquidation value plus accrued and unpaid
dividends and then again after the sixth anniversary of the closing at 101
percent of the liquidation value plus accrued and unpaid
dividends.
Under the
Restated Shareholders Agreement, the Company is entitled to repurchase
from Knowledge Capital (or its transferees who assume Knowledge Capital’s
obligations with respect to this redemption right) up to the number of
shares of Series A Preferred Stock (or Series B Preferred Stock held by
such transferees upon conversion of shares of Series A Preferred Stock)
having an aggregate liquidation value of $30 million at any time at a
price per share calculated based upon a percentage of the liquidation
value of such shares that increases annually in one percentage point
increments during the first four years following completion of the
Recapitalization from 100 percent of the liquidation value in the
first year to 103 percent of the liquidation value in the fourth
year.
Additionally,
under the Restated Shareholders Agreement, in the event of a change in
control of the Company, which is solely within the Company’s control, the
Company will, within 30 days after such change in control, offer to
purchase each then-outstanding share of Series A and Series B Preferred
Stock held by Knowledge Capital or any of certain permitted transferees
for a cash amount per share equal to 101 percent of the liquidation value
of such shares in addition to all accrued and unpaid dividends on the
Series A and Series B Preferred Stock to the date of payment.
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Right to
Designate Nominees to Stand for Election as Directors
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Under the
Stockholders Agreement, the Company was obligated to nominate three
designees of Knowledge Capital for election to the Board of Directors,
including the Chairman of the Board of Directors, and all such designees
had to be nominated to be elected in different classes. The Company was
obligated at each meeting of the shareholders of the Company at which
directors were elected to cause the Knowledge Capital designees to be
nominated for election and to solicit proxies in favor of such nominees
and vote all management proxies in favor of such nominees except for
proxies that specifically indicate to the contrary.
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Under the
Restated Shareholders Agreement, the Company is obligated to nominate for
election as directors up to three designees of Knowledge Capital described
as follows:
• two
designees so long as Knowledge Capital holds 1,760,000 shares of
Series A Preferred Stock;
• one designee
so long as Knowledge Capital holds at least 880,000 shares of Series A
Preferred Stock but less than 1,760,000 shares of Series A Preferred
Stock;
• one designee
so long as Knowledge Capital holds at least one share of Series A
Preferred Stock but less than 880,000 shares of Series A Preferred Stock
provided that such designee must be Donald J. McNamara, and Mr. McNamara,
who is currently a director designated by Knowledge Capital, must agree to
serve as such designee of Knowledge Capital; and
• in addition
to any directors Knowledge Capital may be entitled to designate as
described in the prior three bullets, one designee so long as Knowledge
Capital holds at least 1,000,000 shares of Common Stock.
All such
designees are required to be nominated for election as members of
different classes of directors. Additionally, so long as Knowledge Capital
owns a majority of the outstanding shares of Series A Preferred Stock, any
two persons elected as directors by the holders of shares of Series A and
Series B Preferred Stock if the Company is in arrears in the payment of
Series A Preferred Stock dividends for any six or more quarters (as
described above in more detail in this section) will be deemed to be
directors designated by Knowledge Capital pursuant to the Restated
Shareholders Agreement.
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Item
9.01 Financial
Statements and Exhibits
(c) Exhibits
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99.1 |
Restated
Shareholders Agreement, dated as of March 8, 2005, between the Company and
Knowledge Capital Investment Group. |
|
99.2 |
Restated
Registration Rights Agreement, dated as of March 8, 2005, between the
Company and Knowledge Capital Investment
Group. |
|
99.3 |
Restated
Monitoring Agreement, dated as of March 8, 2005, between the Company and
Hampstead Interests, LP. |
|
99.4 |
Warrant,
dated March 8, 2005, to purchase 5,913,402 shares of Common Stock issued
by the Company to Knowledge Capital Investment
Group. |
|
99.5 |
Form of
Warrant to purchase shares of Common Stock to be issued by the Company to
holders of shares of Series A Preferred Stock other than Knowledge Capital
Investment Group. |
|
99.6 |
Articles of
Restatement dated March 4, 2005 amending and restating the Company’s
Articles of Incorporation. |
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
| FRANKLIN COVEY CO. | |||
| Date: March 10, 2005 | |||
|
By: |
/s/ STEPHEN D. YOUNG | ||
|
Name: |
Stephen D. Young | ||
|
Title: |
Chief Financial Officer |
EXHIBIT
INDEX
|
99.1 |
Restated
Shareholders Agreement, dated as of March 8, 2005, between the Company and
Knowledge Capital Investment Group. |
|
99.2 |
Restated
Registration Rights Agreement, dated as of March 8, 2005, between the
Company and Knowledge Capital Investment
Group. |
|
99.3 |
Restated
Monitoring Agreement, dated as of March 8, 2005, between the Company and
Hampstead Interests, LP. |
|
99.4 |
Warrant,
dated March 8, 2005, to purchase 5,913,402 shares of Common Stock issued
by the Company to Knowledge Capital Investment
Group. |
|
99.5 |
Form of
Warrant to purchase shares of Common Stock to be issued by the Company to
holders of shares of Series A Preferred Stock other than Knowledge Capital
Investment Group. |
|
99.6 |
Articles of
Restatement dated March 4, 2005 amending and restating the Company’s
Articles of Incorporation. |