WARRANT TO
PURCHASE COMMON STOCK
| Number
of Shares: |
________
shares1 Each holder of Series A Preferred will
be entitled to purchase 71.43 common shares for each $1,000 in aggregate
liquidation value attributable to the shares of Series A Preferred held by
such holder, disregarding fractional shares
|
| Warrant
Price: |
$8.00
per share
|
| Issuance
Date: |
March
____, 2005
|
| Expiration
Date: |
March
____, 2013
|
1 Each holder
of Series A Preferred will be entitled to purchase 71.43 common shares for each
$1,000 in aggregate liquidiation value attributable to the shares of Series A
Preferred held by such holder, disregarding fractional shares.
FOR VALUE RECEIVED,
_____________________
or its registered assigns
(hereinafter called the “
Holder”) is entitled to purchase from Franklin
Covey Co., a Utah corporation (the “
Company”), the above referenced
number of shares of
the Company’s Common Stock (the “
Common Stock”), at
the Warrant Price referenced above, all subject to adjustment from time to time
as described herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions contained herein. This Warrant is
issued pursuant to the terms of that certain Preferred Stock Amendment and
Warrant Issuance Agreement dated as of
November 29, 2004 (the “
Amendment
Agreement”).
I. TERM AND EXERCISE
1.1
Term.
This Warrant is exercisable in whole or in part (but not as to any fractional
share of Common Stock), from time to time, at any time after the first
anniversary of the Issuance Date and prior to 5:00 p.m. on the Expiration
Date set forth above, provided, that prior to the commencement of such period
the Company shall have caused a registration statement covering the issuance of
the shares of Common Stock issuable upon exercise of this Warrant to have become
or declared effective by the Securities and Exchange Commission and during such
period such registration statement shall have remained continuously
effective.
1.2 Procedure
for Exercise of Warrant.
(a) The
Holder may exercise this Warrant by delivering the following to the principal
office of
the Company in accordance with Section 4.1 hereof: (i) a duly executed
Notice of Exercise in substantially the form attached as
Exhibit A and
(ii) this Warrant. If the Notice of Exercise delivered to
the Company indicates
that the Holder has elected to exercise this Warrant by paying the exercise
price in cash, and if the Fair Market Value (as defined in Section 1.2(b)) is
greater than the Warrant Price as of the day of exercise, then
the Company may
elect to require the Holder to exercise this Warrant using the net exercise
method set forth in Section 1.2(b) if
the Company provides written notice to the
Holder (in accordance with Section 4.1) within five business days following its
receipt of the Notice of Exercise (a “
Company Net Exercise Election”). If
the Holder has elected to pay the exercise price of this Warrant in cash and the
Company fails to make a timely Company Net Exercise Election, the Holder may,
after such fifth business day, deliver payment of the Warrant Price in cash,
certified or official bank check payable to the order of
the Company, or wire
transfer of funds to
the Company’s account (or any combination of any of the
foregoing) in the amount of the Warrant Price for each share being
purchased.
(b) If
the Fair Market Value is greater than the Warrant Price as of the day of
exercise, the Holder may elect to receive, or if
the Company makes a Company Net
Exercise Election, the Holder will receive, without the payment by the Holder of
any additional consideration and subject to the provisions of
Section 1.2(c), shares of Common Stock equal to the value of the
“spread”
on the shares (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of
the Company in accordance with Section 4.1,
together with the Notice of Exercise, in which event
the Company shall issue to
the Holder hereof a number of shares of Common Stock computed using the
following formula:
|
X |
= |
the
number of shares of Common Stock to be Issued to the Holder pursuant to
this net exercise
|
|
Y |
= |
the
number of shares of Common Stock purchasable under the Warrant or, if only
a portion of the Warrant is being exercised, that portion of the Warrant
requested to be exercised
|
|
FMV |
= |
the
Fair Market Value (as of the date of such calculation) of one share of
Common Stock
|
|
WP |
= |
the
Warrant Price (as adjusted as of the date of such
calculation) |
For purposes of this Warrant, the “
Fair Market Value” of one
share of the Common Stock as of a particular date shall be determined as
follows: (i) if traded on a national securities exchange or through the Nasdaq
Stock Market, the Fair Market Value shall be deemed to be the volume weighted
average trading price of the Common Stock on such exchange for the most recent
five trading days immediately prior to the date of exercise indicated in the
Notice of Exercise; (ii) if traded over-the-counter only and not on the Nasdaq
Stock Market, the Fair Market Value shall be deemed to be the average of the
closing bid and asked prices over the most recent five trading days immediately
prior to the date of exercise indicated in the Notice of Exercise; and (iii) if
there is no active public market, the Fair Market Value shall be the fair market
value of the Common Stock as of the date of exercise, as determined in good
faith by the Board of Directors of
the Company;
provided, that any such
five trading day period referenced above shall be extended by the number of
trading days during such period on which trading in
the Company’s Common Stock
is suspended by, or not traded on, the securities exchange, Nasdaq Stock Market
or over-the-counter market on which the Common Stock is then listed or
traded.
(c) If
either the Holder or
the Company elects that this Warrant will be exercised
using the net exercise method set forth in Section 1.2(b), then the
Company, at its option, may further elect, in connection with such net exercise,
to (i) issue to the Holder the number of shares of Common Stock that would be
issuable pursuant to Section 1.2(b) or (ii) pay to the Holder a cash amount
equal to the Fair Market Value of the number of shares of Common Stock that
otherwise would be issuable pursuant to Section 1.2(b) (the “
Cash
Spread”).
1.3 Effective
Date of Exercise; Delivery of Certificate.
(a) In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder if otherwise permitted under this Warrant, together
with any other securities or other property which the Holder is entitled to
receive upon exercise of this Warrant (including, without limitation, the Cash
Spread if
the Company has elected to pay to the Holder the Cash Spread pursuant
to Section 1.2(c)), shall be delivered to the Holder hereof, at
the Company’s
expense, within a reasonable time after the rights represented by this Warrant
shall have been so exercised; and, unless this Warrant has expired or has been
exercised in full, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder hereof.
(b) The
person in whose name any certificate for shares of Common Stock is issued upon
exercise of this Warrant shall for all purposes be deemed to have become the
holder of record of such shares on the date on which the Warrant was surrendered
and payment of the Warrant Price was received by
the Company, irrespective of
the date of delivery of such certificate, except that, if the date of such
surrender and payment is on a date when the stock transfer books of
the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.
1.4
Fractional
Shares. This Warrant may not be exercised for fractional shares, and no
fractional share of any class or series of
the Company’s capital stock shall be
issued upon exercise of the Warrant.
II. ADJUSTMENTS
2.1
Subdivision
or Combination of Shares. In case
the Company shall at any time subdivide
its outstanding Common Stock into a greater number of shares, the Warrant Price
in effect immediately prior to such subdivision shall be proportionately reduced
and the number of shares obtainable upon exercise of this Warrant shall be
proportionately increased. Conversely, in case the outstanding Common Stock of
the Company shall be combined into a smaller number of shares, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased and the number of shares obtainable upon exercise of this Warrant
shall be proportionately decreased.
2.2 Dividends
in Common Stock, Other Stock or Property. If at any time or from time to
time the holders of Common Stock (or any shares of stock or other securities at
the time receivable upon the exercise of this Warrant) shall have received or
become entitled to receive, without payment therefor:
(a) Common
Stock, options (other than options to which Section 2.4 is applicable) or any
shares or other securities which are at any time directly or indirectly
convertible into or exchangeable for Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
(b) any
cash paid or payable other than as a regular cash dividend; or
(c) Common
Stock or additional shares or other securities or property (including cash) by
way of spin-off, split-up, reclassification, combination of shares or similar
corporate rearrangement (other than Common Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 2.1
above) and additional shares, other securities or property issued in connection
with a Change (as defined below) (which shall be covered by the terms of Section
2.3 below),
then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the cases referred to in clause (b) above and this
clause (c)) which such Holder would hold on the date of such exercise had such
Holder been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
2.3
Reorganization,
Reclassification, Consolidation, Merger and Sale. If any recapitalization,
reclassification or reorganization of the share capital of
the Company, or any
consolidation or merger of
the Company with another corporation or other entity,
or the sale of all or substantially all of its shares and/or assets or other
transaction (including, without limitation, a sale of substantially all of its
assets followed by a liquidation) shall be effected in such a way that holders
of Common Stock shall be entitled to receive shares, securities or other assets
or property (a
“Change”), then, as a condition of such Change, lawful and
adequate provisions shall be made by
the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the Common Stock
of
the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares, securities or other
assets or property as may be issued or payable with respect to or in exchange
for the number of shares of outstanding Common Stock which such Holder would
have been entitled to receive had such Holder exercised this Warrant immediately
prior to the consummation of such Change.
The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to give effect to the adjustments provided for
in this Article II including, without limitation, adjustments to the Warrant
Price and to the number of securities or property issuable upon exercise of the
new Warrant. The provisions of this Section 2.3 shall similarly apply to
successive Changes.
The Company will not effect any Change unless, prior to the
consummation thereof, the successor corporation (if other than
the Company)
resulting from such Change shall assume by written instrument the obligation to
deliver to such Holder such shares of stock, securities or assets, other than
cash, as, in accordance with the foregoing provisions, such Holder may be
entitled to purchase.
2.4
Rights
Offering. If, at any time or from time to time prior to the full exercise of
this Warrant,
the Company shall offer to all holders of Common Stock any rights,
options or warrants to acquire additional shares of capital stock of the
Company, then the Holder will be entitled to receive such rights, options or
warrants on the same terms they are offered to all holders of Common Stock as if
the Holder had exercised this Warrant in full immediately prior to the record
date for the offering of such rights, options or warrants.
2.5
Notice of Adjustment. Upon any adjustment of the
Warrant Price, then and in each such case
the Company shall give written notice
thereof, by first-class mail, postage prepaid, addressed to the Holder at the
address of such Holder as shown on the books of
the Company, which notice shall
state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares obtainable upon exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
2.6 Other Notices. In case at any time:
(a) the
Company shall declare any cash dividend or distribution to which Section 2.2
would be applicable;
(b) the
Company shall authorize the granting or issuance to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or other rights;
(c) the
Company obtains knowledge of any offer to purchase (including any tender offer)
any shares of any class of its stock from
the Company or the holders of such
shares;
(d) there
shall be any subdivision or combination of the Common Stock;
(e) there
shall be any recapitalization, reorganization or reclassification of the share
capital of
the Company, or any consolidation or merger of
the Company with, or
sale of all or substantially all of its assets to, another corporation or other
entity; or
(f) there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Company;
then, in any one or more of said cases,
the Company shall give, by
first-class mail, postage prepaid, addressed to the Holder at the address of
such Holder determined in accordance with the provisions of Section 4.1 (i) at
least 10 days’ prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription or purchase rights or for determining rights to vote in respect
of any such recapitalization, reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, (ii) in the case of any
such recapitalization, reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least 10 days’ prior written
notice of the date when the same shall take place, and (iii) promptly upon
obtaining knowledge of any such offer to purchase shares of any class of its
stock. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, such
notice in accordance with the foregoing clause (ii) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be, and such notice in accordance with the foregoing
clause (iii) shall also specify in reasonable detail the terms of the offer to
purchase.
III. OWNERSHIP AND TRANSFER
3.1
Ownership
of This Warrant.
The Company may deem and treat the person in whose name
this Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than
the Company)
for all purposes and shall not be affected by any notice to the contrary until
presentation of this Warrant for registration of any permitted transfers.
3.2
Rights
of Shareholder. This Warrant shall not entitle its holder to any of the
rights of a shareholder of
the Company until the Warrant shall have been
exercised and the shares of Common Stock or other securities to which Holder is
entitled pursuant to the exercise hereof shall have been issued.
3.3
Replacement
of Warrant. On receipt of evidence reasonably satisfactory to
the Company of
the loss, theft, destruction, or mutilation of this Warrant and (a) in the case
of loss, theft, or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to
the Company or (b) in the case of
mutilation, on surrender and cancellation of this Warrant,
the Company shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount. The Holder shall reimburse
the Company for all reasonable expenses
incidental to replacement of this Warrant.
3.4
Transfer
of Warrant. Subject to Section 3.5 below, the Warrant shall be freely
transferable, subject to compliance with all applicable laws, including, but not
limited to, the Securities Act of 1933, as amended (the
“Act”). If, at the time
of the surrender of this Warrant in connection with any transfer of this
Warrant, this Warrant shall not be registered under the Act,
the Company may
require, as a condition of allowing such transfer, that the Holder of this
Warrant furnish to
the Company a written opinion of counsel (which counsel shall
be reasonably acceptable to
the Company, provided, that any law firm having at
least 100 lawyers, including associates and partners, shall be deemed
acceptable) to the effect that such transfer is exempt from or not subject to
the registration requirements of Section 5 of the Act. Transfer of this Warrant
and all rights hereunder, in whole or in part, in accordance with the foregoing
provisions, shall be registered on the books of
the Company to be maintained for
such purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 1.2 or the office or agency designated by the
Company pursuant to Section 4.1, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment,
the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. Following a transfer that complies with the requirements
of this Section 3.4, the Warrant may be exercised by a new Holder for the
purchase of shares of Common Stock regardless of whether
the Company issued or
registered a new Warrant on the books of
the Company.
3.5
Right
of First Refusal. Subject to the terms and conditions specified in this
Article III, the Holder hereby grants to
the Company a right of first refusal
(the
“Right of First Refusal”) with respect to any future sale, transfer or
assignment by the Holder of this Warrant and the rights granted hereunder, in
whole or in part. Each time the Holder proposes to offer this Warrant and the
rights granted hereunder, in whole or in part, for sale, transfer or assignment
(the
“Offered Warrant”), the Holder will first make an offering of the Offered
Warrant to
the Company in accordance with the following provisions:
(a)
Notice.
The Holder will deliver notice (the “
Offer Notice”) to
the Company
stating (i) its bona fide intention to offer the Offered Warrant, and (ii) the
price and terms upon which it proposes to offer the Offered Warrant; and
(b)
Mechanics.
Within 20 days after its receipt of the Offer Notice (the “
Election
Period”),
the Company may elect to purchase or obtain, at the price and on
the terms specified in the Offer Notice, the Offered Warrant. If
the Company
elects to exercise its Right of First Refusal, the parties shall consummate the
sale of the Offered Warrant within 20 days after
the Company received the Offer
Notice. In the event that
the Company does not elect to purchase or obtain the
Offered Warrant as specified in the Offer Notice within the Election Period, the
Holder may, during the 90 calendar days following the expiration of the Election
Period, sell the Offered Warrant to any person or persons at a price not less
than 90% of the price, and upon terms no more favorable than those specified in
the Offer Notice. If the Holder does not sell the Offered Warrant within such
90-calendar day period, then the right of first offer provided pursuant to this
Section 3.5 will be deemed to be revived and the Offered Warrant will not be
offered unless again reoffered to
the Company in accordance with this Section
3.5. If, on the other hand, the Holder does sell the Offered Warrant to any
person or persons within such 90-calendar day period and as otherwise provided
in this Section 3.5, then
the Company shall issue to such person or persons a
new Warrant that shall not be subject to this Section 3.5.
IV. MISCELLANEOUS PROVISIONS.
4.1
Address
for Notices. Any notice or other document required or permitted to be given
or delivered to the Holder shall be delivered or forwarded to the Holder at the
address set forth in the Transmittal Letter (as such term is defined in the
Amendment Agreement) delivered to
the Company by the Holder pursuant to the
Amendment Agreement, or to such other address or number as shall have been
furnished to
the Company in writing by the Holder in accordance with this
Section 4.1. Any notice or other document required or permitted to be given or
delivered to
the Company shall be delivered or forwarded to
the Company at 2200
West Parkway Boulevard,
Salt Lake City,
Utah 84119, Attention: Val J.
Christensen, General Counsel, Facsimile No.: (
801) 817-8723, or to such other
address or number as shall have been furnished to Holder in writing by the
Company.
4.2 Timing
of Notices. All notices, requests and approvals required by this Warrant
shall be in writing and shall be conclusively deemed to be given (a) when
hand-delivered to the other party; (b) when received if sent by facsimile at the
address and number set forth above, provided, that notices given by facsimile
shall not be effective unless either (i) a duplicate copy of such facsimile
notice is promptly given by depositing the same in the mail, postage prepaid and
addressed to the party as set forth below or (ii) the receiving party delivers a
written confirmation of receipt for such notice by any other method permitted
under this paragraph, and further provided, that any notice given by facsimile
received after 5:00 p.m. (recipient’s time) or on a non-business day shall be
deemed received on the next business day; (c) five business days after deposit
in the United States mail, certified, return receipt requested, postage prepaid,
and addressed to the party as set forth in Section 4.1 above; or (d) the next
business day after deposit with an international overnight delivery service,
postage prepaid, addressed to the party as set forth above with next business
day delivery guaranteed, provided, that the sending party receives confirmation
of delivery from the delivery service provider.
4.3 Governing
Law. This Warrant shall be governed by and construed in accordance with the
laws of the State of Utah as applied to agreements among Utah residents made and
to be performed entirely within the State of Utah, without giving effect to the
conflict of law principles thereof.
4.4 Waiver,
Amendments and Headings. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both parties (either generally or in a particular instance and either
retroactively or prospectively). The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
[Signature page follows.]
IN WITNESS WHEREOF,
the Company has caused this Warrant to be signed
by its duly authorized officer as of the Issuance Date.
| |
COMPANY: |
|
| |
|
|
| |
FRANKLIN
COVEY CO. |
|
| |
|
|
|
By: |
|
|
|
Name: |
|
|
|
Title: |
|
|
EXHIBIT A
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the
Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WARRANT
The undersigned hereby elects to purchase _______ shares of Common
Stock of Franklin Covey Co. (the “Company”) pursuant to the terms of the
attached Warrant [check one]:
|
[
] |
Cash
Exercise. The undersigned has delivered $_______, the aggregate
Warrant Price for _____ shares of the Company’s Common Stock purchased
herewith, in full in cash or by certified or official bank check or wire
transfer; |
|
[
] |
Net
Exercise. In exchange for the issuance of _______ shares of the
Company’s Common Stock, the undersigned hereby agrees to surrender the
right to purchase _______ shares of the Common Stock pursuant to the net
exercise provisions set forth in Section 1.2(b) of the
Warrant. |
Please issue a certificate or certificates representing such
shares in the name of the undersigned or in such other name as is specified
below and in the denominations as is set forth below:
| |
|
|
[Type name
of Holder as it should appear on the stock certificate]
|
|
| |
|
|
[Requested
denominations - if no denomination is specified, a single certificate will
be issued]
|
|
The initial address of such Holder to be entered on the books of
the Company shall be:
| |
By: |
|
| |
Print
Name: |
|
| |
Title: |
|
| |
Dated: |
|
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant for the purchase of shares of common stock of Franklin Covey Co. hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
common stock set forth below:
| |
|
| |
|
| |
|
|
(Name and
Address of Assignee) |
|
| |
|
|
(Number of
Shares of Common Stock) |
|
and does hereby irrevocably constitute and appoint ____________
attorney-in-fact to register such transfer on the books of
the Company,
maintained for the purpose, with full power of substitution in the premises.
|
Dated: |
|
|
| |
|
|
| |
|
|
| |
|
|
|
(Print Name
and Title) |
|
|
| |
|
|
|
(Signature) |
|
|
| |
|
|
|
(Witness) |
|
|
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the Warrant in every particular, without
alteration or enlargement or any change whatsoever.
