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):
February
19, 2007
FRANKLIN
COVEY CO.
(Exact
name of registrant as specified in its charter)
Commission
File No. 1-11107
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Utah
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87-0401551
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(State
or other jurisdiction of incorporation)
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(IRS
Employer Identification Number)
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2099
(Address
of principal executive offices)(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:
[
] 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
$25.0
Million Revolving Line of Credit Agreement
On
March
14, 2007, Franklin Covey Co. (the Company) entered into long-term secured
revolving line-of-credit agreements with JPMorgan Chase Bank N.A. and Zions
First National Bank (the Credit Agreements). The Credit Agreements provide
a
total of $25.0 million of borrowing capacity to the Company at an interest
rate
equal to LIBOR plus 1.10 percent. The Credit Agreements expire on March 14,
2010
and the Company may draw on the line of credit, repay, and draw again, on
a
revolving basis, up to the maximum loan amount of $25.0 million so long as
no
event of default has occurred and is continuing. The Credit Agreements also
contain customary representations and guarantees as well as provisions for
repayment and liens.
The
Credit Agreements require the Company to be in compliance with specified
financial covenants, including: (i) a funded debt to earnings ratio; (ii)
a
fixed charge coverage ratio; (iii) a limitation on annual capital expenditures;
and (iv) a defined amount of minimum net worth. In the event of noncompliance
with these financial covenants and other defined events of default, the lenders
are entitled to certain remedies, including acceleration of the repayment
of
amounts outstanding on the Credit Agreements.
In
connection with the Credit Agreements, the Company entered into separate
Promissory Notes, a Security Agreement, Repayment Guaranty Agreements, and
a
Pledge and Security Agreement.
The
Company may use the proceeds from the Credit Agreements for general corporate
purposes and intends to use a portion of the revolving loan amount to redeem
the
remaining shares of outstanding Series A Preferred Stock as described in
Item
8.01 below.
The
foregoing description of the Credit Agreements does not purport to be complete
and is qualified in its entirety by reference to the text of the Credit
Agreements and information contained in the related Promissory Notes, Security
Agreement, Repayment Guaranty Agreements, and Pledge and Security Agreement,
which are filed as Exhibits 10.1 through 10.8 attached hereto.
Canadian
Line of Credit Agreement
In
addition to the Credit Agreements described above, on February 19, 2007,
the
Company obtained a CDN $500,000 (approximately $425,300) revolving line of
credit with Toronto-Dominion Bank through its wholly owned Canadian subsidiary
(the Canadian Line of Credit). The Canadian Line of Credit is a revolving
line
of credit similar to the Credit Agreements described above and bears interest
at
the Canadian prime rate. In connection with the Canadian Line of Credit,
the
interest rate on the previously existing mortgage agreement with
Toronto-Dominion Bank was reduced from Canadian prime plus one percent to
the
Canadian prime rate.
The
Canadian Line of Credit may be used for general corporate purposes and requires
the Company’s Canadian subsidiary to maintain a specified financial covenant for
minimum debt service coverage.
The
foregoing description of the Canadian Line of Credit does not purport to
be
complete and is qualified in its entirety by reference to the text of the
Canadian Line of Credit, which is filed as Exhibit 10.9 attached
hereto.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
The
information set forth above in Item 1.01 is incorporated herein by
reference.
Item
8.01 Other
Events
On
March
14, 2007, the Company announced that it had given formal notice to the
shareholders of its Series A Preferred Stock for the redemption of all remaining
shares of Series A Preferred Stock totaling $37.3 million, or approximately
1.5
million shares. The Company intends to redeem all remaining shares of its
Series
A Preferred Stock for $25 per share, plus accrued dividends through April
4,
2007, the anticipated redemption date. Due to the proximity of the anticipated
redemption date, the regular quarterly dividend payment due on March 15,
2007
will be paid to Series A Preferred Shareholders on the redemption date. The
redemption of Series A Preferred Stock will reduce the Company’s annual dividend
obligation by $3.7 million per year.
A
copy of
the press release announcing the foregoing items is attached hereto as exhibit
99.1 to this current report on Form 8-K and is incorporated herein by
reference.
Forward
Looking Statements
This
report contains statements which constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and other
federal securities laws, including information with respect to the Company’s
intended use of the proceeds from the Credit Agreements and the payment of
dividends. Forward-looking statements are based on the Company’s current
expectations and beliefs concerning future events and involve risks,
uncertainties, and assumptions. A number of risks, uncertainties, and other
important factors could cause actual results to differ materially from those
contained in any forward-looking statement. Such factors include, but are
not
limited to, the Company’s need to utilize the proceeds for other purposes and
other factors that are more particularly described in the Company’s filings with
the Securities and Exchange Commission, including information under the heading
“Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year
ended August 31, 2006, and in subsequently filed quarterly reports on Form
10-Q.
The Company believes that its forward-looking statements are reasonable;
however, undue reliance should not be placed on any forward-looking statements.
The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
developments, or otherwise.
Item
9.01 Financial
Statements and Exhibits
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10.1
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Revolving
Line of Credit Agreement ($18,000,000) by and between JPMorgan
Chase Bank,
N.A. and Franklin Covey Co. dated March 14,
2007.
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10.2
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Secured
Promissory Note between JPMorgan Chase Bank, N.A. and Franklin
Covey Co.
dated March 14, 2007.
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10.3
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Security
Agreement between Franklin Covey Co., Franklin Covey Printing,
Inc.,
Franklin Development Corporation, Franklin Covey Travel, Inc.,
Franklin
Covey Catalog Sales, Inc., Franklin Covey Client Sales, Inc., Franklin
Covey Product Sales, Inc., Franklin Covey Services LLC, Franklin
Covey
Marketing, LTD., and JPMorgan Chase Bank, N.A. and Zions First
National
Bank, dated March 14, 2007.
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10.4
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Repayment
Guaranty between Franklin Covey Co., Franklin Covey Printing, Inc.,
Franklin Development Corporation, Franklin Covey Travel, Inc.,
Franklin
Covey Catalog Sales, Inc., Franklin Covey Client Sales, Inc., Franklin
Covey Product Sales, Inc., Franklin Covey Services LLC, Franklin
Covey
Marketing, LTD., and JPMorgan Chase Bank N.A., dated March 14,
2007.
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10.5
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Pledge
and Security Agreement between Franklin Covey Co. and JPMorgan
Chase Bank,
N.A. and Zions First National Bank, dated March 14,
2007.
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10.6
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Revolving
Line of Credit Agreement ($7,000,000) by and between Zions First
National
Bank and Franklin Covey Co. dated March 14,
2007.
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10.7
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Secured
Promissory Note between Zions First National Bank and Franklin
Covey Co.
dated March 14, 2007.
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10.8
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Repayment
Guaranty between Franklin Covey Co., Franklin Covey Printing, Inc.,
Franklin Development Corporation, Franklin Covey Travel, Inc.,
Franklin
Covey Catalog Sales, Inc., Franklin Covey Client Sales, Inc., Franklin
Covey Product Sales, Inc., Franklin Covey Services LLC, Franklin
Covey
Marketing, LTD., and Zions First National Bank, dated March 14,
2007.
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10.9
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Credit
Agreement between Franklin Covey Canada, Ltd. and Toronto-Dominion
Bank
dated February 19, 2007.
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99.1
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Press
release dated March 14, 2007
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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.
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FRANKLIN
COVEY CO.
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Date:
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March
19, 2007
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By:
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/s/
STEPHEN D. YOUNG
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Stephen
D. Young
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Chief
Financial Officer
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