<SUBMISSION>
<ACCESSION-NUMBER>0000886206-02-000048
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>10
<PERIOD>20020831
<FILING-DATE>20021127
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>FRANKLIN COVEY CO
<CIK>0000886206
<ASSIGNED-SIC>2780
<IRS-NUMBER>870401551
<STATE-OF-INCORPORATION>UT
<FISCAL-YEAR-END>0831
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-11107
<FILM-NUMBER>02843854
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2200 W PKWY BLVD
<CITY>SALT LAKE CITY
<STATE>UT
<ZIP>84119-2331
<PHONE>8018177171
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2200 W PARKWAY BLVD
<CITY>SALT LAKE CITY
<STATE>UT
<ZIP>84119
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>FRANKLIN QUEST CO
<DATE-CHANGED>19940218
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>fy02_10k.htm
<DESCRIPTION>ANNUAL REPORT ON FORM 10-K FY2002
<TEXT>
<HTML>
<HEAD>
<TITLE></title>
</head>
<BODY>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECURITIES
AND EXCHANGE COMMISSION</FONT><br>
<FONT FACE="Times New Roman, Times, Serif" SIZE=1>
                                               Washington, D.C. 20549</FONT></H1>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM
10&#150;K</FONT></H1>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
ANNUAL  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE  ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31,
         2002</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
ACT OF 1934 FOR THE  TRANSITION  PERIOD FROM<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> to
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
</table>

<p align=center><IMG SRC="fclogo.jpg" ALT="fclogo" height=75 width=300></p>
<br><H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><u>&nbsp;&nbsp;&nbsp;
Franklin Covey Co.&nbsp;&nbsp;&nbsp;</u></font><br>
<FONT FACE="Times New Roman, Times, Serif" SIZE=1>
                                 (Exact name of registrant as specified in its charter)</FONT></H1>
<br>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utah </FONT><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1-11107  </FONT><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;87-0401551 </FONT><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
(State or other jurisdiction of incorporation)</FONT></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
(Commission File No.)  </FONT></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(IRS Employer Commission File No.)</FONT></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
</tr></table>


<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>2200 West Parkway Boulevard<BR>
<u>Salt Lake City, Utah 84119&#150;2331</u></font><br>
<FONT FACE="Times New Roman, Times, Serif" SIZE=1> (Address of principal executive offices, including zip code)</FONT></H1>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3> Registrant's telephone number,
including area code:  (801) 817-1776</FONT></H1>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         Securities registered pursuant to Section 12(b) of the Act:</font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Title of Each Class</FONT><HR></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name of Each Exchange on Which Registered </FONT><HR></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<b>Common Stock, $.05 Par Value</b></FONT></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<b>New York Stock Exchange</b></FONT></td>
</tr></table>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 Securities registered pursuant to Section 12(g) of the Act:   None</FONT></TD>
</tr></table>
<br>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES <u>&nbsp;&nbsp;X&nbsp;&nbsp;</u> NO <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S&#150;K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10&#150;K or any amendment to
this Form 10&#150;K.<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate market value of the Common Stock held by non&#150;affiliates of the
Registrant on November 22, 2002, based upon the closing sale price of the
Common Stock of $1.95 per share on that date, was approximately $30,958,428.
Shares of the Common Stock held by each officer and director and by each person
who may be deemed to be an affiliate of the Registrant have been excluded. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of November 22, 2002, the Registrant had 20,008,625 shares of Common Stock
outstanding. </FONT></P>

 <h1 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                    DOCUMENTS INCORPORATED BY REFERENCE</font></h1>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Parts of the
Registrant&#146;s Proxy Statement for the Registrant&#146;s Annual Meeting of
Shareholders, which is scheduled to be held on January 24, 2003, are
incorporated by reference in Part III of this Form 10-K. </FONT></P>
<br><br><br>

<H2 ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3>INDEX TO FORM
10&#150;K</FONT></H2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#PartI">PART I</A></font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item1Business">Item 1.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Business">Business</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#General">General</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Recent_Acquisitions">Recent Acquisitions and Divestitures</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#FC_Products">Franklin Covey Products</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#paperplanners">Paper Planners</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#electronic_solutions">Electronic Solutions</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#binders">Binders</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#personal_development">Personal Development and Accessory Products</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#TrainingandProductivity">Training and Productivity Solutions for Organizations</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#TrainingandEducation">Training and Education Programs</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#PersonalCoaching">Personal Coaching</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#SalesandMarketing">Sales and Marketing</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#RetailStores">Retail Stores</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#catalogecomm">Catalog/e-Commerce</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#OtherChannels">Other Channels</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#OganizationalSolutions">Organizational Sales Group</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</font></td>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#International">International Sales</A></font></td>
</tr></table>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#StrategicDistributionAlliances">Strategic Distribution Alliances</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Clients">Clients </A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Competition">Competition</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Training">Training</A></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Products">Products</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Manufacturing">Manufacturing and Distribution</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Trademarks">Trademarks, Copyrights and Intellectual Property</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Employees">Employees</A></font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item2">Item 2.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Properties</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item3">Item 3.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Legal Proceedings</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item4">Item 4.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Submission of Matters to a Vote of Security Holders</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#PartII">PART II</A></font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item5">Item 5.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Market for the Registrant's Common Stock and Related Shareholder Matters</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item6">Item 6.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Selected Financial Data</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item7">Item 7</A>.</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Management's Discussion and Analysis of Financial Condition and Results of Operations</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item7a">Item 7a</A>.</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Quantitative and Qualitative Disclosures About Market Risk</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item8">Item 8.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Financial Statements and Supplemental Data</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#changes_in_accounting">Item 9.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#PartIII">PART III</A></font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item10">Item 10.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Directors and Executive Officers of the Registrant</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item11">Item 11.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Executive Compensation</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item12">Item 12.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Security Ownership of Certain Beneficial Owners and Management</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A HREF="#Item13">Item 13.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Certain Relationships and Related Transactions</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Item 14.</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Controls and Procedures</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(a)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Evaluationofdisclosure">Evaluation of Disclosure Controls and Procedures</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(b)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#ChangesinInternalControls">Changes in Internal Controls</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#PartIV">PART IV</A> </font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Item15">Item 15.</A></font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Exhibits15">Exhibits, Financial Statement Schedules and Reports on Form 8-K</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(a)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Documents_filed">Documents Filed</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>1.</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Financial_stmts">Financial Statements</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>2.</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Exhibit_list">Exhibit List</A></font></td>
</tr></table>


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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(b)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#Reports_on_8k">Reports on Form 8-K</A></font></td>
</tr></table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(c)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#exhibits">Exhibits</A></font></td>
</tr></table>

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<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>(d)</font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#exhibits">Financial Statement Schedules</A></font></td>
</tr></table>

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<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#SIGNATURES">SIGNATURES</A></font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#CERTIFICATIONS">CERTIFICATIONS OF THE CEO AND CFO </A></font></td>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A HREF="#ExhibitIndex">EXHIBIT INDEX</A></font></td>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;</font></td>
</tr></table>

<br>
<br><br><br>
<br><br>
<h1 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=4>
<A NAME="PartI">Part I</A></font></h1>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A NAME="Item1Business">Item 1.  </A><A NAME="Business">Business</A></font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="General">General</A></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Franklin
Covey Co. (the &#147;Company&#148;, &#147;we&#148;, &#147;us&#148;,
&#147;our&#148; or &#147;FranklinCovey&#148;) is an international learning and
performance solutions company dedicated to helping organizations and individuals
to become measurably more effective. To achieve that goal, we provide training
and education programs, educational materials, publications, assessment and
measurement instruments, implementation processes and application tools. We have
organized our business to serve two main customer segments: organizations and
individual consumers. We offer solutions for organizations through a combination
of assessment instruments, including the xQ (Execution Quotient&#153;) Profile
and the 7 Habits Profile, training courses including FOCUS: Achieving Your
Highest Potential; Aligning Goals for Results; 7 Habits of Highly Effective
People and other offerings, and implementation tools based on the FranklinCovey
Planning System including the FranklinCovey Planner, PDA&#146;s (Personal
Digital Assistants) devices like PALM&#174;, PlanPlus for Microsoft
Outlook&#174;, wireless communication organizers, the Tablet PC and other tools.
We measure the impact of training investments through pre- and post- assessment
profiles and Return on Investment analysis. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As  noted  above,  one  of our  mainstay  tools  that  assist  our  clients  in  implementing
effectiveness  training is the  FranklinCovey  Planning  System.  The  FranklinCovey  Planning System typically
implements our  principle-based  training and learning by using tools such as the  FranklinCovey  Planner.  The
original  FranklinCovey  Planner  consists of a paper-based,  two-page per day planning  system combined with a
seven-ring  binder, a variety of planning aids,  weekly,  monthly and annual calendars and personal  management
sections.  The  FranklinCovey  Planner  can  also be  purchased  in  one-page  per  day or  two-page  per  week
versions.  We also offer various  forms and  accessories  that allow our clients to expand and customize  their
FranklinCovey  Planner. A significant  percentage of FranklinCovey Planner users continue to purchase a renewal
planner each year,  creating  substantial  recurring sales. We have also developed the  FranklinCovey  Planning
System in  electronic  formats  such as desktop  software,  as an add-on to PDA's,  such as the  popular  PALM&reg;&nbsp;
Computing organizer,  Compaq's&reg;&nbsp;iPAQ&#153;&nbsp;Pocket PC&reg;,  Handspring's&#153;&nbsp;Trio&reg;&nbsp;and wireless communication and planning
devices.  To enhance  capabilities  within  organizations,  we have  produced an extension  for the most widely
installed  corporate email and scheduling  software,  Microsoft Outlook&reg;,  called PlanPlus&#153;,  that incorporates
FranklinCovey  Planning  productivity  principles into the Outlook calendar system.  FranklinCovey  markets the
FranklinCovey  Planner and accessory  products directly to organizations and individuals,  through its catalog,
its retail stores, its e-commerce  Internet site at  <u>www.franklincovey.com</u>  and through  third-party  channels.
The   FranklinCovey   Planning  System  is  now  also  available  for  the  recently   introduced   Tablet  PC through
FranklinCovey TabletPlanner software.  The software was developed in partnership  with
Agilix Labs and  includes  the  following  features:  screen  views  similar to the  paper-based  FranklinCovey
Planner,  natural handwriting interface,  the full FranklinCovey  Planning System with appointment  scheduling,
prioritized daily and master tasks and daily notes,  digital  note-taking and  synchronization  with Outlook Exchange and an eBinder concept allowing the collection of all important documents
into one place.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
principles we teach in our curriculum have also been published in book and
audiotape form. Books sold by the Company include <I>The 7 Habits of Highly
Effective People</I>&#174;<I>, Principle&#150;Centered Leadership, First Things
First, The 7 Habits of Highly Effective Families, Nature of Leadership </I>and
<I>Living the 7 Habits, </I>all by Stephen R. Covey, <I>The 10 Natural Laws of
Time and Life Management,</I> <I>What Matters Most</I> and <I>The Modern
Gladiator</I> by Hyrum W. Smith, <I>The Power Principle</I> by Blaine Lee,
<I>The 7 Habits of Highly Effective Teens</I> by Sean Covey and <I>Business
Think</I> by Dave Marcum and Steve Smith. These books, as well as audiotape and
CD audio versions of many of these products, are sold through general retail
channels, as well as through our own catalog, our e-commerce web site at
<U>www.franklincovey.com</U> and our more than 180 domestic and international
retail stores. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
noted above, we provide effectiveness solutions to organizations in business,
industry, government entities, communities, to schools and educational
institutions, and to individuals. We sell services to organizations and schools
through our own direct sales forces. We then deliver training services to
organizations, schools and individuals in one of five ways: </FONT></P>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FranklinCovey  consultants  provide  on-site  consulting  or training  classes for  organizations  and
         schools.  In these  situations,  our  consultant  can tailor the  curriculum to our client's  specific
         business and objectives.    </font></td>
<td width=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also  conduct  public  seminars  in more  than 200  cities  throughout  the  United  States,  where
         organizations  can send their  employees in smaller  numbers.  These public seminars are also marketed
         directly to  individuals  through our  catalog,  e-commerce  web-site,  retail  stores,  and by direct
         mail.    </font></td>
<td width=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our programs are also designed to be  facilitated  by licensed  professional  trainers and managers in
         client  organizations,  reducing  dependence on our professional  presenters,  and creating continuing
         revenue  through  royalties  and  as  participant  materials  are  purchased  for  trainees  by  these
         facilitators.    </font></td>
<td width=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also  offer  The 7 Habits  of Highly  Effective  People&reg; training  course  in  online  and  CD-ROM
         formats.  This self-paced  e-learning  alternative  provides the flexibility  that many  organizations
         need to meet the needs of  various  worker  groups,  managers  or  supervisors  who can't get away for
         extended classroom training and executives who need a series of working sessions over several weeks.   </font></td>
<td width=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Through  FranklinCovey  Coaching LLC we offer  follow-on  coaching to help  individuals  implement the
         training  principles  they have  learned in the training  seminar or course they have taken.  Personal
         coaches  interact  with  individuals  on regular  basis to review  principles  and help set goals that
         eventually aligns behavior to the principles taught in the training.   </font></td>
<td width=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
fiscal 2002, we provided products and services to 90 of the Fortune 100 and more
than 75 percent of the Fortune 500 companies. We also provide products and
services to a number of U.S. and foreign governmental agencies, including the
U.S. Department of Defense, as well as numerous educational institutions.
Approximately 350,000 individuals were trained during the year ended August 31,
2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
also provide products, consulting and training services internationally, either
through directly operated offices, or through licensed providers. At August 31,
2002, we had direct operations in Canada, Japan, Australia, Mexico, Brazil and
the United Kingdom. We also had licensed operations in 52 countries. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="Recent_Acquisitions">Recent Acquisitions and Divestitures</A></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
September 2000, we entered into a joint venture agreement with American
Marketing Systems to form Franklin Covey Coaching, LLC. The joint venture
agreement required our coaching programs to achieve specified earnings
thresholds beginning in fiscal 2002 or the joint venture agreement
could be terminated at the option of AMS. However, due to unfavorable economic
conditions and other factors, the Company&#146;s coaching programs did not
achieve the fiscal 2002 earnings threshold requirement. As a result of
unfavorable financial performance during fiscal 2002 and performance
expectations in future periods, AMS exercised its option to terminate the
existing joint venture agreement effective August 31, 2002. Under the provisions
of a new partnership agreement, we may receive additional payments totaling up
to $3.2 million from AMS and FCC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
December 2001, we sold the stock of Premier School Agendas, a Bellingham,
Washington based wholly owned subsidiary and Premier School Agendas Ltd., based in Canada (collectively "Premier") to School Specialty (NASDAQ: SCHS) of
Greenville, Wisconsin, for approximately $152.5 million plus the retention of
Premier&#146;s working capital, which was received in the form of a $4.0 million
promissory note from the purchaser. Prior to the sale closing, we also received cash distributions from Premier's working capital that totaled approximately
$7 million.  We still maintain the rights to sell our
Student Achievement Workshop into schools and school districts. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unless
the context requires otherwise, all references to the &#147;Company&#148;,
&#147;we&#148;, &#147;us&#148;, &#147;our&#148; or to &#147;FranklinCovey&#148;
herein refer to Franklin Covey Co. and each of its operating divisions and
subsidiaries. The Company&#146;s principal executive offices are located at 2200
West Parkway Boulevard, Salt Lake City, Utah 84119-2331 and its telephone number
is (801) 817-1776. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="FC_Products">FranklinCovey Products</A></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An
important principle taught in our productivity training is to have only one
personal productivity system and to have ones&#146; information in that one
system. Based upon that principle, we developed the FranklinCovey Planner as one
of the basic tools for implementing the principles of our time management
system. The original FranklinCovey Planner consists of a paper-based
FranklinCovey planning system, a binder in which to carry it, various planning
aids, weekly, monthly and annual calendars as well as personal management
sections. We offer a broad line of renewal planners, forms and binders for the
FranklinCovey Planner in various sizes and styles. For those clients who use
digital or electronic productivity systems, we also offer a wide variety of
electronic solutions incorporating the same principles as the original
FranklinCovey Planner. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="paperplanners">Paper
Planners.</A></U></B><U></U> Paper planner renewals are available for the
FranklinCovey Planner in various sizes and styles and consist of daily or weekly
formats, appointment schedules, task lists, monthly calendars, daily expense
records, daily record of events, and personal management pages for an entire
year. The paper planner renewal are offered in a number of new offerings to
appeal to various customer segments. The Master Pack, which includes personal
management tabs and pages, a guide to using the planner, a pagefinder and weekly
compass cards completes a FranklinCovey Planner. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="electronic_solutions">Electronic</A>
Solutions</U></B><U></U>. We also offer time and life management methodology
within a complete Personal Information Management (&#147;PIM&#148;) system
through the FranklinCovey Planner Software program. This system can be used in
conjunction with the paper-based FranklinCovey Planner, electronic handheld
organizers or used as a stand-alone planning and information management system.
The FranklinCovey Planner Software permits users to generate and print data on
FranklinCovey paper that can be inserted directly into the FranklinCovey
Planner. The program operates in the Windows&#174; 95, 98, 2000 and NT operating
systems. The FranklinCovey Planner Software includes all necessary software,
related tutorials and reference manuals. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
also offer PlanPlus&#153; for Microsoft&#174; Outlook&#174;, software designed
to operate as an extension to Microsoft&#146;s Outlook&#174; software. This is
intended especially for our corporate clients that have already standardized on
Microsoft&#174; for group scheduling, but wish to make the FranklinCovey
Planning System available to their employees without creating the need to
support two separate systems. As this kind of extension proves its value in the
market, the FranklinCovey Planner Software extension model will be expanded to
other platforms. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
are an OEM provider of the PALM&#174; Computing organizer that includes the
FranklinCovey Planner Software when sold through our FranklinCovey channels. The
PALM&#174; has become another successful planning tool offered through all of
our channels. In an effort to combine the functionality of paper and the
capabilities of the PALM&#174;, we introduced products that can add paper-based
planning to these electronic planners as well as binders and carrying cases
specific to the PALM&#174;. We have also expanded the handheld line to include
other electronic organizers with the FranklinCovey Planner software such as the
iPAQ&#153; Pocket PC from Compaq&#174; and the Trio&#153; by Handspring&#174;. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
also provide <I>The 7 Habits of Highly Effective People</I>&#174; training
course in online and CD-ROM versions. This new edition delivers the rich,
compelling content from the 3-day classroom workshop in a flexible self-paced
version via the Internet or CD-ROM that is available when and where employees
need it. The Online Edition is presented in a multi-media format with video
segments, mouseovers, a learning journal, interactive exercises, and other
techniques. Included with the course is a 360&deg; profile and e-Coaching. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
FranklinCovey Planning System is now also available for the recently introduced
Tablet PC through FranklinCovey TabletPlanner software.  The software was developed in partnership with
Agilix Labs and includes the following features: screen views similar to the
paper-based FranklinCovey Planner, natural handwriting interface, the full
FranklinCovey Planning System with appointment scheduling, prioritized daily and master
tasks and daily notes, digital note-taking and synchronization with Outlook Exchange, and eBinder concept allowing
the collection of all important documents into one place. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u><A NAME="binders">Binders.</A></u></b>
To further  customize the  FranklinCovey  Planning  System,  we offer binders and electronic
organizer accessories  (briefcases,  portfolios,  wallets/purses,  etc.) in a variety of materials,  styles and
FranklinCovey  Planner sizes.  These materials  include high quality leathers,  fabrics,  synthetics and vinyls
in a variety of color and design  options.  Binder styles include  zipper  closures,  snap  closures,  and open
formats with pocket  configurations  to  accommodate  credit  cards,  business  cards,  checkbooks,  electronic
devices and writing instruments.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="personal_development">Personal
Development</A> and Accessory Products</U></B><U></U>. To supplement our principal
products, we offer a number of accessories and related products, including
books, videotapes and audio cassettes focused on time management, leadership,
personal improvement and other topics. We also market a variety of
content&#150;based personal development products. These products include books,
audio learning systems such as multi-tape, CD&#146;s and workbook sets, CD-ROM
software products, calendars, posters and other specialty name brand items. We
offer numerous accessory forms through our Forms Wizard software, which allows
customization of forms, including check registers, spreadsheets, stationery,
mileage logs, maps, menu planners, shopping lists and other information
management and project planning forms. Our accessory products and forms are
generally available in all the FranklinCovey Planner sizes. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="TrainingandProductivity">Training and Productivity Solutions for Organizations</A></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FranklinCovey
is a leading provider of effectiveness training, productivity tools and
assessment services for organizations including corporations, Government,
education and non-profit firms. These services are marketed and delivered
world-wide through our Organizational Strategic Business Unit (OSBU), which
consists of talented consultants, selected through a competitive and demanding
process, and sales professionals. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FranklinCovey
currently employs 105 training consultants in major metropolitan areas of the
United States, with an additional 16 training consultants outside of the United
States. Our training consultants are selected from a large number of experienced
applicants. These consultants generally have several years of training and/or
consulting experience and are known for their excellent presentation skills.
Once selected, the training consultant goes through a rigorous training program
including multiple live presentations. The training program ultimately results
in the Company&#146;s certification of the consultant. FranklinCovey believes
that the caliber of its training consultants has helped build its reputation for
providing high quality seminars. The OSBU can also help organizational clients
diagnose inefficiencies in their organization and design the core components of
a client&#146;s organizational solutions. The new xQ Survey is an exclusive
FranklinCovey assessment tool that gathers, from an employee perspective, how
well organizational goals are understood and are being carried out. The survey
questions, administered through a Web-based system, probe for details to uncover
underlying focus and teamwork barriers or issues. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FranklinCovey&#146;s
OSBU is organized in geographic regional sales teams in order to assure that
both the consultant and the client sales professional participate in the
development of new business and the assessment of client needs. Consultants are
then entrusted with the actual delivery of content, seminars, processes and
other solutions. Consultants follow up with client service teams, working with
them to develop lasting client impact and ongoing business opportunities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="TrainingandEducation">Training</A>
and Education Programs</U></B><U></U>. We offer a range of training programs
designed to measurably improve the effectiveness of individuals and
organizations. Our programs are oriented to address personal, interpersonal,
managerial and organizational needs. In addition, we believe that our learning
process provides an engaging and behavior-changing experience, which frequently
generates additional business. During fiscal year 2002, more than 350,000
individuals were trained using the Company&#146;s curricula in its single and
multiple&#150;day workshops and seminars. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our
single&#150;day <I>FOCUS: Achieving Your Highest Priorities </I>workshop teaches
productivity skills integrated with a powerful planning system to help
individuals clarify, focus on, and execute their highest priorities, both
personally and professionally. This seminar is conducted by our training
consultants for employees of clients and in public seminars throughout the
United States and in many foreign countries. The single-day <I>Aligning Goals
for Results</I> workshop helps managers identify the highest priorities for
their teams and then lead those teams to execute tasks day-after-day. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
also deliver multiple-day workshops, primarily in the Leadership area. Included
in these offerings is the three&#150;day 7 Habits workshop based upon the
material presented in <I>The 7 Habits of Highly Effective People</I>&#174;. The
7 Habits workshop provides the foundation for continued client relationships and
generates more business as the content and application tools are delivered
deeper into the client&#146;s organization. Additionally, a three&#150;day <I>4
Roles of Leadership</I> course is offered, which focuses on the managerial
aspects of client needs. FranklinCovey Leadership Week consists of a
five&#150;day session focused on materials from FranklinCovey&#146;s<I> The 7
Habits of Highly Effective People</I>&#174; and <I>The 4 Roles of Leadership
</I>courses. FranklinCovey Leadership Week is reserved for supervisory level
management of our corporate clients. As a part of the week&#146;s agenda,
executive participants plan and design strategies to successfully implement key
organizational goals or initiatives. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
addition to providing consultants and presenters, we also train and certify
client facilitators to teach selected FranklinCovey workshops within their
organizations. We believe client&#150;facilitated training is important to our
fundamental strategy of creating pervasive on-going client impact and revenue
streams. After having been certified, clients can purchase manuals, profiles,
planners and other products to conduct training workshops within their
organization, generally without us repeating the sales process. This creates
programs which have an on-going impact on our customers and which generate
annuity&#150;type revenues. This is aided by the fact that curriculum content in
one course leads the client to additional participation in other Company
courses. Since 1988, we have trained more than 19,000 client facilitators.
Client facilitators are certified only after graduating from one of our
certification workshops and completing post&#150;course certification
requirements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
regularly sponsor public seminars in cities throughout the United States and in
several foreign countries. The frequency of seminars in each city or country
depends on the concentration of our clients, the level of promotion and
resulting demand, and generally ranges from semi&#150;monthly to quarterly. Our
smaller institutional clients often utilize the public seminars to train their
employees. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
April 2002, we introduced <I>The 7 Habits of Highly Effective People</I>&#174;
training course in online and CD-ROM versions. The needs for reaching more
employees faster and more inexpensively are the key drivers behind the growth of
e-learning in the marketplace. The new 7 Habits Online Edition addresses that
need, offering a flexible alternative to classroom training. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="PersonalCoaching">Personal</A>
Coaching</U></B><U></U>. We offer post-seminar training in the form of personal
coaching through an entity called Franklin Covey Coaching, LLC. The entity
employs 41 coaches that interact with clients on the telephone to help them
implement the training principles learned from the seminar they have taken. The
entity offers personal coaching for some of our curriculum as well as seminars
offered by other training companies. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="SalesandMarketing">Sales and Marketing</A></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following table sets forth, for the periods indicated, the Company&#146;s
revenue for each of its principal distribution channels: </FONT></P>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>2002</b></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>2001</b></font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>2000</b></font></TD>
</tr></table>
<HR SIZE=1 COLOR=BLACK NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Consumer Strategic Business Unit</b></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retail Stores</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$122,496</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$156,299</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$163,304</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Catalog/e-Commerce</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;63,291</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;90,450</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;110,543</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,921</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,881</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;27,919</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr>&nbsp;&nbsp;</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></TD>
<TD WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total CSBU</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;190,708</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;254,630</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;301,766</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr>&nbsp;&nbsp;</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></TD>
<TD WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Organizational Strategic Business Unit</b></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Organizational Solutions Group</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;97,519</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;134,450</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;169,986</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>International</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;44,771</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;50,701</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;50,878</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr>&nbsp;&nbsp;</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></TD>
<TD WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total OSBU</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;142,290</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;185,151</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;220,864</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=top>
<TD WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr>&nbsp;&nbsp;</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></TD>
<TD WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=top>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Total</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$332,998</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$439,781</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$522,630</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=37%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr>&nbsp;&nbsp;</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><hr></TD>
<TD WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We market products and
services to organizations, schools and individuals both domestically and
internationally through FranklinCovey retail stores, catalogs,
<U>www.franklincovey.com</U>, our organizational and educational sales forces
and other distribution channels. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="RetailStores">Retail
Stores</A></U></B><U></U>. Beginning in late 1985, we began a retail strategy by
opening retail stores in areas of high client density. The initial stores were
generally located in lower traffic destination locations. We have since revised
our strategy by locating retail stores in high-traffic retail centers, primarily
large shopping centers and malls, to serve existing clients and to attract
increased numbers of walk-in clients. Our retail stores average approximately
2,000 square feet. Our retail strategy focuses on providing high quality client
service at the point of sale. We believe this approach increases client
satisfaction as well as the frequency and volume of purchases. At August 31,
2002, FranklinCovey had 173 domestic retail stores located in 37 states and the
District of Columbia and 10 international stores. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
believe that our retail stores serve as attractive distribution centers for
existing clients and also encourage walk&#150;in traffic and impulse buying and
that store clients are a source of participants for FranklinCovey&#146;s public
seminars. The stores also provide the opportunity to assess client reaction to
new product offerings and to test-market new products. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
believe that our retail stores have an upscale image consistent with our
marketing strategy. Products are attractively presented and displayed with an
emphasis on integration of related products and accessories. Stores are staffed
with a manager, an assistant manager and additional sales personnel as needed.
These sales associates have been trained to use the original FranklinCovey
Planner, as well as its various electronic versions, enabling them to assist and
advise clients in selection and use of our products. During peak periods,
additional personnel are added to promote prompt and courteous client service.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="catalogecomm">Catalog/e-Commerce</A></U></B><U></U>. We periodically mail catalogs to our
clients, including a fall catalog, holiday catalog, catalogs timed to coincide
with planner renewals and catalogs related to special events, such as store
openings or new product offerings. Catalogs may be targeted to specific
geographic areas or user groups as appropriate. Catalogs are typically printed
in full color with an attractive selling presentation highlighting product
benefits and features. During fiscal 2001, we entered into a long-term contract
with EDS of Dallas, Texas, to provide a large part of our customer relationship
management (CRM) in servicing our Catalog and e-Commerce customers. We use EDS
to maintain a client service department, which clients may call toll-free, 24
hours a day, Monday through Saturday, to inquire about a product or to place an
order. Through a computerized order entry system, client representatives have
access to client preferences, prior orders, billings, shipments and other
information on a real-time basis. Each of the more than 227 customer service
representatives has the authority to immediately solve client service problem.
The integrated CRM system provided by EDS allows orders from our customers to be
processed quickly through its warehousing and distribution systems. Client
information stored within the order entry system is also used for additional
purposes, including target marketing of specific products to existing clients
and site selection for Company retail stores. We believe that the order entry
system helps assure client satisfaction through both rapid delivery and accurate
order shipment. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="OtherChannels">Other</A>
Channels</U></B><U></U>. We have an alliance with the At-A-Glance group to sell
our products through the contract stationer channel. At-A-Glance wholesales
other products to contract stationer businesses such as Boise Cascade, Office
Express and Staples, which then sell office products through catalog order entry
systems to businesses and organizations. </font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="OganizationalSolutions">Oganizational Solutions</A>
Group</U></B><U></U>. Our sales professionals market training, consulting and
measurement services to institutional clients and public seminar clients. We
employ 92 sales professionals and business developers located in six major
metropolitan areas throughout the United States who sell integrated offerings to
institutional clients. We also employ an additional 53 sales professionals and
business developers outside of the United States in six countries. Our sales
professionals have selling experience prior to employment by the Company and are
trained and evaluated in their respective sales territories. Sales professionals
typically call upon persons responsible for corporate employee training, such as
corporate training directors or human resource officers. Increasingly, sales
professionals also call upon line leaders. Our sales professionals work closely
with training consultants in their territories to schedule and tailor seminars
and workshops to meet specific objectives of institutional clients. We also
employ 105 training consultants throughout the United States who present
institutional and public seminars in their respective territories and an
additional 16 training consultants outside of the United States. Training
consultants work with sales professionals and institutional clients to
incorporate a client&#146;s goals, policies and objectives in seminars and
present ways that employee goals may be aligned with those of the institution.
Public seminars are planned, implemented and coordinated with training
consultants by a staff of marketing and administrative personnel at the
Company&#146;s corporate offices. These seminars provide training for
organizations and the general public and are also used as a marketing tool for
attracting corporate and other institutional clients. Corporate training
directors are often invited to attend public seminars to preview the seminar
content prior to engaging FranklinCovey to train in-house employees. Smaller
institutional clients often enroll their employees in public seminars when a
private seminar is not cost effective. In the public seminars, attendees are
also invited to provide names of potential persons and companies who may be
interested in our seminars and products. These referrals are generally used as
prospects for our sales professionals. We also provide The 7 Habits of Highly
Effective Teens as a workshop or as a year-long curriculum to schools and school
districts and other organizations working with youth. Based on upon the <I>7
Habits of Highly Effective Teens</I> book, it helps to teach students and
teachers better studying skills, learning habits, and interpersonal development.
In December 2001, we sold the stock of Premier Agendas to School Specialty for
approximately $152.5 million plus the retention of Premier&#146;s working
capital, which was received in the form of a $4.0 million promissory note from
the purchaser. Pursuant to a license from FranklinCovey, Premier is expected to
continue to expose over 20 million K-12 students to FranklinCovey&#146;s
world-renowned <I>7 Habits </I>content. We retained the educator leadership and
effectiveness training portion of Premier&#146;s business.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="International">International
Sales</A><I></I></U><I>.</I></B><I></I> We provide products, training and printing
services internationally through Company-owned and licensed operations. We have
Company-owned operations and offices in Australia, Brazil, Canada, Japan, Mexico
and the United Kingdom. We also have licensed operations in Argentina, Bahamas,
Belgium, Bermuda, Bulgaria, Chile, China, Colombia, Croatia, Czech Republic,
Denmark, Ecuador, Egypt, Estonia, Finland, France, Germany, Greenland, Hong
Kong, Hungary, India, Indonesia, Israel, Italy, Korea, Latvia, Lebanon,
Lithuania, Luxembourg, Malaysia, Nigeria, Netherlands, Norway, Panama,
Philippines, Poland, Portugal, Puerto Rico, Saudi Arabia, Singapore, Slovak
Republic, Slovenia, South Africa, Spain, Sweden, Taiwan, Thailand,
Trinidad/Tobago, Turkey, UAE, Uruguay, and Venezuela. We operate retail
operations in Canada, Hong Kong, Japan, Mexico, Singapore and Taiwan. Our seven
most popular books, <I>The 7 Habits of Highly Effective People</I>&#174;,
<I>Principle&#150;Centered Leadership, The 10 Natural Laws of Time and Life
Management,</I> <I>First Things First, The Power Principle, The 7 Habits of
Highly Effective Families and The 7 Habits of Highly Effective Teens </I>are
currently published in multiple languages. </font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The international operations
generated $47.8 million in revenue for the year ended August 31, 2002. After
grossing up royalties from licensed operations to their actual sales level,
total sales generated in the international operations were $66.5
million.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><A NAME="StrategicDistributionAlliances">Strategic Distribution Alliances</A></B></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have created strategic
alliances with innovative and respected organizations in an effort to develop
effective distribution of our products and services. The principal distribution
alliances currently maintained by FranklinCovey are: <U>Simon &amp; Schuster</U>
and <U>Saint Martin&#146;s Press</U> in publishing books for the Company;
<U>Lumicore</U> to promote and facilitate Dr. Covey&#146;s personal appearances
and teleconferences; <U>Nightingale&#150;Conant</U> to market and distribute
audio and video tapes of the Company&#146;s book titles; <U>MeadWestvaco </U>to
market and distribute selected FranklinCovey Planners and accessories through
the At-A-Glance catalog office supply channels; <U>PALM&#174; Computing</U> to
serve as the official training organization for its <U>PALM&#174; </U>Computing
products and distribution agreements with Hewlett Packard and Acer in connection
with the Tablet PC.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="Clients">Clients</A></B></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have a relatively broad base of institutional
and individual clients. We have more than 2,000 institutional clients consisting
of corporations, governmental agencies, educational institutions and other
organizations. We believe our products, workshops and seminars encourage strong
client loyalty. Employees in each of our distribution channels focus on
providing timely and courteous responses to client requests and inquiries.
Institutional clients may choose to receive assistance in designing and
developing customized forms, tabs, pagefinders and binders necessary to satisfy
specific needs.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><A NAME="Competition">Competition</A></B></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="Training">Training</A></U></B><U></U>. Competition in
the performance skills organizational training and education industry is highly
fragmented with few large competitors. We estimate that the industry represents
more than $6 billion in annual revenues and that the largest traditional
organizational training firms have sales in the $100 to 150 million range. Based
upon FranklinCovey&#146;s fiscal 2002 organizational sales of approximately $142
million, we believe we are a leading competitor in the organizational training
and education market. Other significant competitors in the training market are
Development Dimensions International, Achieve Global (formerly Zenger Miller),
Organizational Dynamics Inc., Provant, Forum Corporation, EPS Solutions and the
Center for Creative Leadership. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U><A NAME="Products">Products.</A></u></b>  The  paper-based  time  management and personal  organization  products market is intensely
competitive  and  subject  to  rapid  change.   FranklinCovey  competes  directly  with  other  companies  that
manufacture  and market  calendars,  planners,  personal  organizers,  appointment  books,  diaries and related
products  through  retail,  mail order and other direct sales  channels.  In this market,  several  competitors
have strong name  recognition.  We believe our principal  competitors  include  DayTimer,  At-A-Glance  and Day
Runner.  We also compete with companies that market  substitutes for paper-based  products,  such as electronic
organizers,  software PIMs and hand-held computers.  Our FranklinCovey  Planner Software competes directly with
numerous other PIMs. Many of  FranklinCovey's  competitors have  significant  marketing,  product  development,
financial and other  resources.  An emerging  potential  source of  competition  is the appearance of calendars
and  event-planning  services  available at no charge on the Web. There is no indication that the current level
of features has proven to be attractive to the traditional  planner customer as a stand-alone  service,  but as
these products evolve and improve, they could pose a competitive threat.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Given
the relative ease of entry in FranklinCovey&#146;s product and training markets,
the number of competitors could increase, many of whom may imitate our methods
of distribution, products and seminars, or offer similar products and seminars
at lower prices. Some of these companies may have greater financial and other
resources than us. We believe that the FranklinCovey Planner and related
products compete primarily on the basis of user appeal, client loyalty, design,
product breadth, quality, price, functionality and client service. We also
believe that the FranklinCovey Planner has obtained market acceptance primarily
as a result of the concepts embodied in the FranklinCovey Planner, the high
quality of materials, innovative design, our attention to client service, and
the strong loyalty and referrals of our existing clients. We believe that our
integration of training services with products has become a competitive
advantage. Moreover, we believe that we are a market leader in the United States
among a small number of integrated providers of productivity and time management
products and services. Increased competition from existing and future
competitors could, however, have a material adverse effect on our sales and
profitability. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="Manufacturing">Manufacturing</A> and Distribution</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
manufacturing operations of FranklinCovey consist primarily of printing,
collating, assembling and packaging components used in connection with our paper
product lines. We operate our central manufacturing services out of Salt Lake
City. We have also developed partner printers, both domestically and
internationally, who can meet our quality standards, thereby facilitating
efficient delivery of product in a global market. We believe this has positioned
us for greater flexibility and growth capacity. Automated production, assembly
and material handling equipment are used in the manufacturing process to ensure
consistent quality of production materials and to control costs and maintain
efficiencies. By operating in this fashion, we have gained greater control of
production costs, schedules and quality control of printed materials. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During
fiscal 2001, we entered into a long-term contract with EDS to provide
warehousing and distribution services of our product line. EDS maintains a
facility at the Company&#146;s headquarters as well as at other locations
throughout North America. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Binders
used for our products are produced from either leather, simulated leather,
tapestry or vinyl materials. These binders are produced by multiple and
alternative product suppliers. We currently enjoy good relations with our
suppliers and vendors and with the exception of strikes affecting dock workers
do not anticipate any difficulty in obtaining the required binders and materials
needed for our business. We have implemented special procedures to ensure a high
standard of quality for binders, most of which are manufactured by suppliers in
the United States, Europe, Canada, Korea, Mexico and China. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
also purchase numerous accessories, including pens, books, videotapes,
calculators and other products, from various suppliers for resale to our
clients. These items are manufactured by a variety of outside contractors
located in the United States and abroad. We do not believe that we are entirely
dependent on any one or more of such contractors and consider our relationships
with such suppliers to be good. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="Trademarks">Trademarks</A>, Copyrights and Intellectual Property</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
seek to protect our intellectual property through a combination of trademarks,
copyrights and confidentiality agreements. We claim rights for more 120
trademarks in the United States and have obtained registration in the United
States and many foreign countries for many of our trademarks, including
<I>FranklinCovey, The 7 Habits of Highly Effective People</I>&#174;<I>,
Principle&#150;Centered Leadership</I>, <I>Aligning Goals for Results</I>,
<I>FOCUS: Achieving Your Highest Priorities</I>, <I>FranklinCovey Planner</I>,
<I>PlanPlus</I>, and <I>The Seven Habits</I>. We consider our trademarks and
other proprietary rights to be important and material to our business. Each of
the marks set forth in italics above is a registered mark or a mark for which
protection is claimed. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
own all copyrights on our planners, books, manuals, text and other printed
information provided in our training seminars, the programs contained within
FranklinCovey Planner Software and its instructional materials, and our software
and electronic products, including audio tapes and video tapes. We license
rather than sell all facilitator workbooks and other seminar and training
materials in order to limit its distribution and use. FranklinCovey places
trademark and copyright notices on its instructional, marketing and advertising
materials. In order to maintain the proprietary nature of our product
information, FranklinCovey enters into written confidentiality agreements with
certain executives, product developers, sales professionals, training
consultants, other employees and licensees. Although we believe the protective
measures with respect to our proprietary rights are important, there can be no
assurance that such measures will provide significant protection from
competitors. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="Employees">Employees</A></b></font>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
of August 31, 2002, FranklinCovey had 2,081 full and part&#150;time associates,
including 472 in sales, marketing and training; 971 in customer service and
retail; 158 in production operations and distribution; and 480 in administration
and support staff. During fiscal 2002, the Company outsourced a significant part
of its information technology services, customer service, distribution and
warehousing operations to EDS. A number of the Company&#146;s former employees involved
in these operations are now employed by EDS to provide those services to
FranklinCovey. None of FranklinCovey&#146;s associates
are represented by a union or other collective bargaining group. Management
believes that its relations with its associates are good. FranklinCovey does not
currently foresee a shortage in qualified personnel needed to operate the
Company&#146;s business. </FONT></P>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item2">Item 2</A>. Properties</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Franklin Covey&#146;s
principal business operations and executive offices are located in Salt Lake
City, Utah. The following is a summary of our owned or leased properties. Our
facility lease agreements are accounted for as operating leases, which expire at
various dates through the year 2016. </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S Administrative Offices:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salt Lake City, UT (8 locations) - 3 leased<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provo, Utah (2 locations) - both leased<BR></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>International Administrative Offices:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canada (1 location)<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Latin America (3 locations) - all leased<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Asia Pacific (2 locations) - both leased<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Europe (1 location) - leased</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales Offices:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;United States (9 locations) - all leased</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Distribution Facilities:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asia Pacific (2 locations) - both leased<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canada (1 location)<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Latin America (1 location) - leased</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing Facilities:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;United States (2 locations)</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retail Stores:</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;United States (173 locations) - all leased<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canada (6 locations) - all leased<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Latin America (4 locations) - all leased</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company considers its existing facilities sufficient for its current and
anticipated levels of operations in the upcoming fiscal year.</font></p>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item3">Item 3</A>. Legal Proceedings</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As part of the sale of
Premier Agendas, we retained certain outstanding legal claims against Premier.
Subsequent to August 31, 2002, we settled these outstanding claims for
approximately $0.8 million, which increased the recorded gain from the sale of
Premier as we had accrued $3.5 million for the potential liability related to
these claims. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, the
Company received a subpoena from the Securities and Exchange Commission
(&#147;SEC&#148;) seeking documents and information relating to our management
stock loan program and previously announced, and later withdrawn, tender offer. We
have provided the documents and information requested by the SEC, including the
testimony of our Chief Executive Officer and other key employees. The Company
has cooperated, and will continue to cooperate, fully in providing requested
information to the SEC. The SEC has stated that the formal inquiry is not an
indication that the SEC has concluded that there has been a violation of any law
or regulation. The Company believes that we have complied with the laws and
regulations applicable to our management loan program and withdrawn tender
offer. </FONT></P>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item4">Item 4</A>. Submission of Matters to a Vote of Security Holders</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No matters were submitted
to a vote of security holders during the fourth quarter of our fiscal year ended
August 31, 2002. </FONT></P>


<!-- MARKER PAGE="sheet: 3; page: 3" -->

<h1 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=4><u>
<A NAME="PartII">Part II</A></u></font></h1>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item5">Item 5</A>. Market for the Registrant's Common Stock and Related Shareholder Matters</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s common
stock is listed and traded on the New York Stock Exchange (&#147;NYSE&#148;)
under the symbol &#147;FC.&#148; The following table sets forth, for the periods
indicated, the high and low sale prices for the Company&#146;s common stock, as
reported on the NYSE Composite Tape, for the fiscal years ended August 31, 2002
and 2001. </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low</font></TD>
</tr></table>
<HR SIZE=1 COLOR=BLACK NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Fiscal Year ended August 31, 2002:</b></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fourth Quarter<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third Quarter<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second Quarter<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First Quarter</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 3.10<br>&nbsp;&nbsp;&nbsp;3.70<br>&nbsp;&nbsp;&nbsp;6.30<br>&nbsp;&nbsp;&nbsp;7.00</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 1.95<br>&nbsp;&nbsp;&nbsp;2.18<br>&nbsp;&nbsp;&nbsp;3.10<br>&nbsp;&nbsp;&nbsp;2.04</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Fiscal Year ended August 31, 2001:</b></FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fourth Quarter<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third Quarter<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second Quarter<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First Quarter</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 7.40<br>&nbsp;&nbsp;&nbsp;8.75<br>&nbsp;&nbsp;&nbsp;9.00<br>&nbsp;&nbsp;&nbsp;9.75</font></td>
<td width=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ 4.36<br>&nbsp;&nbsp;&nbsp;6.16<br>&nbsp;&nbsp;&nbsp;6.81<br>&nbsp;&nbsp;&nbsp;6.44</font></TD>
</tr></table>
<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company did not pay or
declare dividends on its common stock during the fiscal years ended August 31,
2002 and 2001. The Company currently anticipates that we will retain all
available funds to finance our future growth and business expansion. The Company
does not intend to pay cash dividends on our common stock in the foreseeable
future. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of November 22, 2002 the
Company had 20,008,625 shares of its common stock outstanding, held by
approximately 350 shareholders of record. </FONT></P>


<!-- MARKER PAGE="sheet: 4; page: 4" -->

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item6">Item 6</A>.  Selected Financial Data</font></h2>

<p><Font Face="Times New Roman, Times, Serif" SIZE=2><b>Financial Highlights</b></font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>August 31,</i></b></FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2002</i></b></FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2001</i></b></font></td>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2000</i></b></font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>1999</i></b></font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>1998</i></b></font></TD>
</tr></table>
<HR SIZE=1 COLOR=BLACK NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>In thousands, except per share data</i></b></FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Income Statement Data</b></FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales<br>Net Income (Loss) from Continuing Operations<br>Income (Loss) Attributable to Common Shareholders<br>
Diluted Earnings (Loss) Per Share</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$332,998<br>&nbsp;&nbsp;(96,466)<br>(109,266)<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5.49)</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$439,781<br>&nbsp;&nbsp;(13,196)<br>&nbsp;&nbsp;(19,236)<br>&nbsp;&nbsp;&nbsp;&nbsp;(0.95)</font></td>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$522,630<br>&nbsp;&nbsp;&nbsp;&nbsp;(7,472)<br>&nbsp;&nbsp;(12,414)<br>&nbsp;&nbsp;&nbsp;&nbsp;(0.61)</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$509,351<br>&nbsp;&nbsp;(14,689)<br>&nbsp;&nbsp;(10,647)<br>&nbsp;&nbsp;&nbsp;&nbsp;(0.51)</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$495,230<br>&nbsp;&nbsp;&nbsp;&nbsp;39,622<br>&nbsp;&nbsp;&nbsp;&nbsp;40,058<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.62</font></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Balance Sheet Data</b><br>Total Assets<br>Long-Term Obligations of Continuing Operations<br>
Shareholders' Equity</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>$304,738<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,303<br>&nbsp;&nbsp;234,555</FONT></TD>
<TD WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>$536,480<br>&nbsp;&nbsp;&nbsp;&nbsp;92,858<br>&nbsp;&nbsp;309,882</font></td>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>$592,479<br>&nbsp;&nbsp;&nbsp;&nbsp;65,139<br>&nbsp;&nbsp;374,053</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>$623,303<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,602<br>&nbsp;&nbsp;378,434</font></TD>
<td width=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>$597,277<br>&nbsp;&nbsp;126,075<br>&nbsp;&nbsp;341,654</font></TD>
</tr></table>
<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b><A NAME="Item7">Item 7</A>.  Management's Discussion and Analysis of Financial Condition and Results of Operations</b></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>OVERVIEW</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following
management&#146;s discussion and analysis is intended to provide a summary of
the principal factors affecting the results of operations, liquidity and capital
resources, and the critical accounting policies of Franklin Covey Co. (also
referred to as the &#147;Company&#148;, &#147;we&#148;, &#147;us&#148;, and
&#147;our&#148;, unless otherwise indicated) and subsidiaries. This discussion
and analysis should be read together with our consolidated financial statements
and related notes, which contain additional information regarding the accounting
policies and estimates underlying the Company&#146;s financial statements. Our
consolidated financial statements and related notes begin in Item 8 of this
report on Form 10-K. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Franklin Covey Co. is a
worldwide leader in providing integrated learning and performance solutions to
organizations and individuals designed to enhance productivity, leadership,
sales performance, communication, and other areas. Each solution set may include
products and services that encompass training and consulting, assessment, and
various application tools that are generally available in electronic or
paper-based formats. Our products and services are available through
professional consulting services, public workshops, retail stores, catalogs, and
the Internet at <U>www.franklincovey.com</U>. The Company&#146;s best-known
offerings include the Franklin Planner<SUP>TM</SUP>, our productivity workshop
entitled &#147;What Matters Most&#148;, and courses based upon the best-selling
book, <I>The</I> <I>7 Habits of Highly Effective People.</I> </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our fiscal year ends on
August 31, and unless otherwise indicated, fiscal 2003, fiscal 2002, fiscal
2001, and fiscal 2000, refer to the twelve-month periods ended or ending on
August 31, 2003, 2002, 2001, and 2000, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Key factors that influence
our operating results include the number of organizations that are active
customers; the number of people trained within those organizations; the sale of
personal productivity tools (including Franklin Planners, Personal Digital Assistants or "PDAs", binders, and
other related products); and our ability to manage operating costs necessary to
provide products and services to our clients. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The following is a summary of recent business acquisitions and divestitures:</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsequent to August 31,
2002, we purchased 20 percent of the common stock of Agilix Labs, Inc., a
Delaware corporation, for payments totaling $1.0 million in cash. Agilix
develops software applications for personal computers, including the new "Tablet PC." The Company may, upon the
achievement of specific objectives by Agilix, purchase another 10 percent of the
common stock of Agilix Labs, Inc. for $0.5 million. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2001, we
entered into a joint venture with American Marketing Systems (&#147;AMS&#148;)
to form Franklin Covey Coaching, LLC (&#147;FCC&#148;). The operating results of
this joint venture were reported as equity in the earnings of an unconsolidated
subsidiary in fiscal 2002 and fiscal 2001. Under terms of the joint venture
agreement, the Company&#146;s coaching programs were required to achieve
specified earnings thresholds beginning in fiscal 2002, or the joint venture
could be terminated at the option of AMS. Due to unfavorable sales performance
by our coaching programs during fiscal 2002, AMS terminated the existing joint
venture agreement as of August 31, 2002. Under terms of a new partnership
agreement that eventually terminates our interest in FCC, we received a $0.3
million payment and may receive an additional $3.2 million in payments from AMS
and FCC. For further information on Franklin Covey Coaching, LLC, refer to Note
5 in our consolidated financial statements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective December 21,
2001, we sold Premier Agendas, Inc. and Premier Agendas, Ltd. (collectively,
&#147;Premier&#148;), both wholly owned subsidiaries to School Specialty, Inc.,
a company that specializes in providing products and services to students and
schools. Premier provided productivity solutions to the educational industry,
including student and teacher planners. The sale price was $152.5 million in
cash plus the retention of Premier&#146;s working capital, which was received in
the form of a $4.0 million promissory note that was paid in full during fiscal
2002. Prior to the sale closing, we received cash distributions from
Premier&#146;s working capital that totaled approximately $7 million. Refer to
Note 7 in our consolidated financial statements for further information
regarding the sale of Premier. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During April 2001, we
purchased the Project Consulting Group for $1.5 million in cash. The Project
Consulting Group provides project consulting, project management, and project
management training services. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of February 28, 2000, we
sold the assets and substantially all of the business of our commercial printing
division of Publishers Press. We retained the printing operations necessary for
the production of our planners and other related products. For further
information regarding the sale of the commercial division of Publishers Press,
refer to Note 22 in our consolidated financial statements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 1999, the
Company purchased a majority interest in DayTracker.com (renamed
franklinplanner.com), an on-line provider of scheduling and calendaring
services. During the fourth quarter of fiscal 2002, we discontinued the on-line
planning services offered at franklinplanner.com and the results of operations
for franklinplanner.com were included as discontinued operations in our
consolidated financial statements. For further information regarding the
termination of franklinplanner.com operations, refer to Note 7 in our
consolidated financial statements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During September 1999, the
Company acquired the assets of the Professional Resources Organization (the Jack
Phillips Group) for $1.5 million in cash. The Professional Resources
Organization was a leading measurement assessment firm specializing in measuring
the impact and return on investment of training and consulting programs. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>RESULTS OF OPERATIONS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Segment Review</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following the sale of
Premier during fiscal 2002, we now have two reporting segments: the Consumer
Strategic Business Unit (&#147;CSBU&#148;) and the Organizational Strategic
Business Unit (&#147;OSBU&#148;). The operating results of Premier and our other
products and services designed for teachers and students were previously
reported in the Education Business Unit, which was dissolved during fiscal 2002.
Our remaining student and teacher programs and products are now classified with
the Organizational Strategic Business Unit results of operations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consumer Strategic
Business Unit</B> &#150; This business unit is focused on sales to individual
customers and includes the operating results of our 173 domestic retail stores,
10 international stores, catalog and e-Commerce operations, and other related
channels including wholesale sales and manufacturing operations. Although CSBU
sales primarily consist of products such as planners, binders, and handheld
electronic planning devices, virtually any component of our leadership and
productivity solutions can be purchased through CSBU channels. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Organizational Strategic
Business Unit &#150; </B>The OSBU is primarily responsible for the development,
marketing, sale, and delivery of productivity, leadership, sales performance,
and communication training solutions directly to organizational clients,
including other companies, the government and educational institutions. The OSBU
includes the financial results of the Organizational Solutions Group
(&#147;OSG&#148;) and our international operations, except for retail stores.
The organizational solutions group is responsible for the domestic sale and
delivery of productivity, leadership, sales performance, and communication
training solutions to corporations and includes sales of training seminars to
teachers and students, which were previously reported with the operating results
of Premier. The OSG is also responsible for the sale of productivity solutions
to wholesale customers and for consulting services that compliment our
productivity and leadership training solutions. The international sales group
includes our direct offices and licensee sale and delivery operations, including
catalog sales. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets
forth selected segment sales and consolidated operational data from continuing
operations for the periods indicated. For further reporting segment information,
refer to Note 21 in our consolidated financial statements. </FONT></P>


<!-- MARKER PAGE="sheet: 1; page: 1" -->


<PRE>
YEAR ENDED AUGUST 31,
______________________________________________________________
                                2002         2001        2000
______________________________________________________________
<i>Consumer Strategic</i>
   <i>Business Unit:</i>
     Retail stores         $ 122,496   $ 156,299    $ 163,304
     Catalog and
        eCommerce             63,291      90,450      110,543
     Other CSBU                4,921       7,881       27,919
                          ____________________________________
                             190,708     254,630      301,766
                          ____________________________________
<i>Organizational</i>
   <i>Strategic Business</i>
   <i>Unit:</i>
     OSG                      97,519     134,450      169,986
     International            44,771      50,701       50,878
                          ____________________________________
                             142,290     185,151      220,864
                          ____________________________________
Total sales                  332,998     439,781      522,630
Cost of sales                149,369     189,982      242,764
                          ____________________________________

Gross margin                 183,629     249,799      279,866

Selling, general, and
   administrative            216,910     224,458      230,353
Stock option purchase
   and relocation costs                                11,227
Provision for losses on
   management stock  loan
   program                    24,775       1,052
Impairment of
   investment in
   unconsolidated
   subsidiary                 16,323
Loss on impaired assets       10,185         801        1,940
Restructuring cost
   reversals                                           (4,946)
Depreciation                  33,342      27,441       25,517
Amortization                   4,667      10,840       13,069
                          ____________________________________
Income (loss) from
   operations              $(122,573)  $ (14,793)   $   2,706
                          ____________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>FISCAL 2002 COMPARED WITH FISCAL 2001</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Sales</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our overall operating
performance was adversely affected by significant sales declines during fiscal
2002. The Company believes that difficult economic conditions in the United
States, which were worsened by the terrorist attacks that occurred on September
11, 2001, led to significantly reduced travel schedules for training in addition
to tightened budgets for productivity tool and supply expenditures, as our
corporate clients sought to decrease operating expenses. In addition, sales of
handheld electronic planning devices, which were especially popular during
fiscal 2001 and fiscal 2000, declined sharply in fiscal 2002 due to significant
reduction in demand for these devices. As a result of these and other factors,
we experienced significant sales declines compared to the prior year for both
training and productivity tools in our various channels. In an effort to improve
both product and training solution sales in future periods, the Company has developed and is
developing new training solutions specifically focused around our productivity
seminars, and has developed and is developing new personal and organizational software products for
our various channels. Additionally, the Company recently introduced &#147;Tablet
PCs&#148; and related planning software, which can be purchased through many of
our channels. Although the initial response to these products and seminars has
been favorable, there can be no assurance that these new products will be widely
accepted by our clients.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product sales, which
consist primarily of planners, binders, and handheld electronic planning devices
declined by $76.7 million, or 26 percent, from the prior year. The overall
decrease in product sales was significant to our retail store,
catalog/e-Commerce, and other consumer business unit channels. Retail store
sales were adversely affected by declining average sales dollars per transaction
combined with a decrease in consumer traffic and overall smaller number of
transactions. Of the $33.8 million decline in retail store sales, approximately
$25.0 million related to declines in the sales of handheld electronic planning
devices and related accessories. Of this decline, approximately $18.0 million
occurred during our first two quarters of fiscal 2002. Planner and binder sales
through our retail stores also decreased by a total of 12 percent compared to
the prior year. These product sales declines included a 14 percent decline
during the first two fiscal quarters compared to a eight percent decline during
the last two quarters of fiscal 2002. As a result of these sales trends,
comparable store (stores that have been open for over a year) retail sales
decreased by 28 percent compared to fiscal 2001. Comparable store sales
experienced a 31 percent decrease during the first two quarters versus a 24
percent decrease during our last two quarters of fiscal 2002. The sales
performance from new stores partially offset the decline in comparable store
sales, resulting in a 22 percent overall decrease in retail store sales during
fiscal 2002. As of August 31, 2002, we were operating 173 domestic retail stores
compared to 164 stores at August 31, 2001. Catalog/e-Commerce sales declined
primarily due to reduced call volume in the Company&#146;s catalog call center
operations, particularly during the first two quarters of fiscal 2002, and to
average order size, due primarily to declines in handheld electronic planning
device sales. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Training solution and
training product related sales decreased by $30.1 million, or 21 percent,
compared to the prior year, which was reflected in both domestic and foreign
training sales during fiscal 2002. The Company offers a variety of training
solutions, training related product, and consulting services focused on
productivity, leadership, sales performance, and communications. With the impact
of a weak domestic economy, which generally influences corporate, governmental,
and educational spending, training sales during fiscal 2002 decreased due to
reduced spending for both company facilitator led and on-site training programs.
Public program sales and training solution sales to teachers and students in the
education industry also decreased compared to fiscal 2001 sales levels. These
decreases were partially offset by sales performance seminars, which increased
compared to the prior year. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>International product and
training sales decreased slightly compared to the prior year primarily due to
decreased sales in Mexico, Canada, continental Europe, and Australia. These
declines were partially offset by increased sales from Brazil and the United
Kingdom. Sales in Japan and royalty revenues from licensee operations were
essentially flat compared to the prior year. During fiscal 2002, the continental
European direct office was converted to a licensee operation, which resulted in
reduced sales, but increased margins. The Company also attributes a portion of the decrease in
international sales to similar economic factors that had an adverse affect on
domestic product and training sales during fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Gross Margin</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross margin consists of
sales less cost of sales. Our cost of sales includes materials used in the
production of planners and related products, assembly and manufacturing labor
costs, direct costs of conducting seminars, freight, and certain other overhead
costs. Gross margin may be affected by, among other things, prices of materials,
labor rates, product sales mix, changes in product discount levels, production
efficiency, and freight costs. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s overall
gross margin during fiscal 2002 decreased to 55.1 percent of sales, compared to
56.8 percent in the prior year. The decline in overall gross margin was
primarily due to factors that adversely affected our gross margin during the
first and second quarters of fiscal 2002. During our seasonally strong sales
months in early fiscal 2002, manufacturers of handheld electronic planning
devices discounted many devices and accessories to promote sales.
These discounts affected the sale price of many of our handheld electronic
devices, resulting in narrower margins. We also experienced a shortage of
certain popular planner products due to the bankruptcy of one of our key
printing suppliers. This resulted in lost sales and backorders of high margin
products. When these backordered products were eventually shipped to customers,
we used more expensive overnight delivery methods, which costs could not be
passed on to our customers. The Company has also experienced a shift in our
product mix toward lower-margin binders and planners during fiscal 2002. As a
result of these and other related factors, our gross margin on product sales
declined to 50.0 percent compared to 51.6 percent during fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Training solution costs, as
a percentage of sales, increased due to a shift in the product mix of training
solutions sold in addition to lower attendance at corporate on-site and public
seminar events held during the year. The cancellation and postponement of
numerous seminars due to travel restrictions and declining travel subsequent to
the terrorist attacks of September 11, 2001, significantly affected the gross
margin of seminar sales during the first and second quarters of fiscal 2002.
Certain components of public seminar events are fixed, such as direct marketing
expenses, site fees, equipment rentals, and presenter costs. With a decline in
the average number of participants per public training seminar, the fixed costs
for the training seminar resulted in lower gross margins for the events. In
addition, some costs incurred for canceled seminars were not refundable. We also
developed a custom line of training products for a specific customer that had
significantly lower margins than the majority of our other training kits,
products, and accessories, thus negatively impacting our training gross margin.
These factors combined to reduce the training and service gross margin to 65.4
percent, compared to 67.8 percent in fiscal 2001. As part of our efforts to
improve operating results, we are actively seeking to reduce product and seminar
costs in order to improve overall gross margins. </FONT></P>


<!-- MARKER PAGE="sheet: 2; page: 2" -->

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Operating Expenses</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling, general, and
administrative (&#147;SG&amp;A&#148;) expenses of continuing operations
decreased $7.5 million, but due to decreased sales, increased as a percent of
sales to 65.1 percent, compared to 51.0 percent of sales in the prior year. The
decrease in SG&amp;A expenses was primarily due to specific initiatives
implemented to reduce operating expenses and exit non-core activities in order
to focus and align corporate strategy and improve overall profitability. These
cost reduction initiatives resulted in significantly decreased associate,
advertising, travel, and computer and office supply expenses, especially during
our third and fourth fiscal quarters, compared to the prior year. Partially
offsetting these cost reduction initiatives were severance costs, additional
retail store operation costs relating to new stores opened during the year, and
outsourcing implementation costs. In connection with our decision to exit
non-core and unprofitable activities, we have reduced our employee base during
fiscal 2002. As a result of these headcount reduction efforts, the Company
incurred and expensed $5.2 million of severance and related costs during fiscal
2002. During fiscal 2001, we entered into long-term outsourcing agreements with
Electronic Data Systems (&#147;EDS&#148;) to provide warehousing, distribution,
information systems, and call center operations. In addition to base charges for
services provided, we have incurred and expensed transition costs necessary to
operate under terms of the agreements. These charges are not expected to recur
and we expect to realize overall savings in these outsourced activities. During
fiscal 2002, the Company has implemented and continues to pursue various cost
reduction initiatives and believes that our efforts will continue to reduce
recurring SG&amp;A costs in fiscal 2003 and in future periods. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation expense in
continuing operations increased by $5.9 million compared to the prior year,
primarily due to the acquisition of computer software and hardware, and the
addition of leasehold improvements in new and remodeled retail stores. As the
Company continues to reduce capital expenditures, and recently purchased
computer hardware and software becomes fully depreciated in the next few years,
we expect depreciation charges to decline in future periods. Amortization
expense attributable to continuing operations decreased by $6.2 million,
primarily due to the adoption of SFAS No. 142, which prohibits goodwill
amortization and requires a fair value approach, with periodic assessments for
impairment, to value goodwill and indefinite-lived intangible assets. As a
result of adopting the provisions of SFAS No. 142, we wrote off all recorded
goodwill associated with our consumer business unit, organizations business
unit, and corporate services group, plus a portion of the Covey trade name
intangible asset, which has an indefinite life, from our balance sheet as of
September 1, 2001. Refer to Note 4 of our consolidated financial statements for
further information regarding the impact of adopting SFAS No. 142. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Provision for Losses on Management Stock Loans</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is now the
creditor for a loan program that provided certain management personnel with the
opportunity to purchase shares of our common stock. As a result of changes to
our line of credit agreement obtained in fiscal 2001, the Company is the
creditor on these loans, which are full recourse to the participants and are
recorded as a reduction to shareholders&#146; equity in our consolidated balance
sheets. In connection with these loans, we utilize a systematic methodology to
determine the level of reserves that are appropriate for potential losses
resulting from the management common stock loan program. A key factor considered
by our methodology is the current market value of the common stock held by the
participants, although the Company is precluded by certain rules and regulations from holding
the participants&#146; stock as collateral for the loans. Other factors considered by our methodology include: the liquid
net worth and earnings capacity of the participants; the inherent difficulties
and risks of pursuing collection actions against key employees; the probability
of sufficient participant repayment capability based upon the proximity to the
due date of the loans; and other business, economic, and participant factors
which may have an impact on the Company&#146;s ability to collect the loans. Based upon our
methodology, we recorded charges to operations totaling $24.8 million during
fiscal 2002 to increase the loan loss reserve. At August 31, 2002 and 2001, we
had aggregate loan loss reserves totaling $25.9 million and $1.1 million,
respectively, which reduce notes and interest receivable from related parties in
our consolidated balance sheets. Additionally, we discontinued recording
interest receivable and corresponding interest income on the loans during the
quarter ended May 25, 2002. However, the loan participants remain liable for
interest accrued over the full term of their loans, which is due when the loans
mature in March 2005. The inability of some or all participants to repay their
loans would have a significant adverse effect upon the financial position and
future cash flows of the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At August 31, 2002, the
participants&#146; loans plus accrued interest exceeded the value of the common
stock held by the participants by approximately $29.2 million. Should the value
of the common stock continue to be insufficient to cover the balance of the
loans outstanding during the loan term, the Company&#146;s loan loss reserve
methodology provides a basis to be fully reserved prior to the March 2005 loan
maturity date. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The establishment of
reserves for potential loan losses requires significant estimates and judgment
by the Company&#146;s management and these estimates and projections are subject
to change as a result of various economic factors, most of which are not within
the control of the Company. Based on the methodology in place as well as other
factors, charges or benefits may be reflected in our operating results in order
to increase or decrease the reserve for management stock loan losses in future
periods. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Impairment of Investment in an Unconsolidated Subsidiary</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 1,
2000, we entered into a joint venture agreement with American Marketing Systems
to form Franklin Covey Coaching, LLC (&#147;FCC&#148;). Each partner owned 50
percent of the joint venture and participated equally in its management. We
accounted for our investment in FCC using the equity method of accounting and
reported our share of the joint venture&#146;s net income as equity in earnings
of an unconsolidated subsidiary. Our share of the joint venture&#146;s earnings
totaled $4.3 million during fiscal 2002, compared to $2.1 million during fiscal
2001. The improvement was primarily due to increased sales of AMS coaching
programs and reduced amortization expense at FCC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The joint venture agreement
required the Company&#146;s coaching programs to achieve specified earnings
thresholds beginning in fiscal 2002 (the joint venture agreement did not contain
an earnings threshold requirement in fiscal 2001) or the existing joint venture
agreement could be terminated at the option of AMS. As a result of unfavorable
coaching program performance for our programs during fiscal 2002, AMS exercised
its option to terminate the existing joint venture agreement as of August 31,
2002. Based upon our coaching program performance throughout fiscal 2002, and
expected termination of our interest in FCC, we recognized $16.3 million of
impairment charges to our investment in FCC during the first two quarters of
fiscal 2002. The impairment charges were based upon currently available
information related to negotiations with AMS throughout fiscal 2002. Under the
provisions of a new partnership agreement that eventually terminates our
interest in FCC, we received a $0.3 million payment at the end of fiscal 2002,
may receive payments totaling $2.0 million during fiscal 2003, and may receive
an additional $1.2 million in payments from AMS and FCC. The new partnership
agreement payments are comprised of the following three components: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Ownership Change Payment
&#150; </B>On August 30, 2002, AMS paid the Company $0.3 million for our Class A
ownership shares in FCC and issued new Class B shares to the Company. The Class
B ownership shares prohibit the Company from active participation in the
management of FCC, but provide us the opportunity to receive and record a portion of
FCC&#146;s earnings during fiscal 2003 as described below. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>FCC Net Income
Recognition &#150; </B>During fiscal 2003, we will continue to recognize a
portion of FCC&#146;s net income through cash distributions made to the Company
up to a maximum of $2.0 million. As we receive these payments during fiscal
2003, we will first reduce our remaining investment in FCC to zero and recognize
the excess amount as a credit to operating expenses, rather than as equity in
the earnings of an unconsolidated subsidiary. Based upon current operating
trends at FCC, we anticipate receiving the entire $2.0 million of cash
distribution payments during fiscal 2003. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Contingent Program
Payment &#150; </B>The third component of the new partnership agreement is
contingent upon the earnings of our coaching programs during fiscal 2003 and
September 2003. If our coaching programs achieve earnings before interest,
taxes, depreciation, and amortization (&#147;EBITDA&#148;) greater than $1.2
million during the 13-month period ended September 30, 2003, then a final
payment will be made in October 2003 for the entire contingent program payment.
The contingent payment may not exceed $1.2 million, however, the contingent
payment may be reduced on a dollar-for-dollar basis if our coaching programs
fail to produce $1.2 million of EBITDA during the measurement period. We will
record the contingent program payment receivable as a component of other current
assets to the extent it is earned during the measurement period by our coaching
program financial results. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following receipt of the
new partnership agreement payments, we will have no further profit participation
in the earnings of FCC. Our remaining investment in Franklin Covey Coaching, LLC
totaled $0.6 million at August 31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Loss on Impaired Assets</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We regularly review our
long-lived assets for circumstances or events that indicate an asset may not be
recoverable. Our losses on impaired assets consisted of the following for the
periods indicated (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fiscal Year Ended<br>August 31,</i></b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<HR SIZE=1 COLOR=BLACK NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2002</i></b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2001</i></b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>2000</i></b></FONT></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>
<hr size=1 color=black noshade>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Covey trade name</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;4,000</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not receivable from sale of subsidiary</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2,282</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalized software development costs</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1,758</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;801</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;1,940</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Computer software</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1,097</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retail store assets</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1,001</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;</font><hr></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$10,185</FONT><hr SIZE=3 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;801</FONT><hr SIZE=3 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;1,940</font><hr SIZE=3 COLOR=BLACK NOSHADE></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fourth quarter
of fiscal 2002, we reassessed the carrying value of the Covey trade name, an
indefinite-lived intangible asset, under the provisions of SFAS No. 142. Due to
declining sales and estimated future sales associated with the Covey trade name,
we recorded a $4.0 million impairment charge to this asset. The value of the
Covey trade name will continue to be evaluated in future periods and may require
further impairment charges. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The note receivable from
the sale of a subsidiary became impaired when the purchaser declared bankruptcy
during the second quarter of fiscal 2002. The note receivable was guaranteed by
the parent company of the purchaser, however, the parent company also became
insolvent during fiscal 2002 and the possibility of recovery on the note
receivable appears remote. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon unfavorable
sales trends and projected sales information, we recorded total impairment
charges of $1.8 million for capitalized development costs related to software
products that produced less-than-expected sales volume. During fiscal 2001 and
2000, we recorded $0.8 million and $1.9 million, respectively, of impairment
charges for capitalized software development costs that were affected by
similarly unfavorable sales trends and estimated sales projections. We also
recorded a $1.1 million impairment charge related to a customer database
management software application, which was developed and installed by an
external company, and became obsolete when we selected a new database software
provider. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of projected
negative cash flows at certain of our retail stores, we recorded impairment
charges totaling $1.0 million to reduce the carrying value of the long-lived
assets, which primarily consisted of furniture, fixtures, and leasehold
improvements, of these stores to their estimated net realizable value at August
31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Interest Income and Expense</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income and expense
was primarily influenced by cash received from the sale of Premier, which
occurred on December 21, 2001, and the reduction of recorded interest income
from management stock loan program participants. The Company used a portion of
the proceeds from the sale of Premier to repay and terminate our existing term
note and line of credit agreement. In addition, during the third quarter of
fiscal 2002, we stopped recording interest income from participants of the
management loan program. The management stock loan program participants are
still liable for the interest expense on their loans, which are due in March
2005. Primarily as a result of these items, the Company&#146;s interest income
was essentially flat compared to the prior year and interest expense decreased
by $4.9 million compared to fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Income Taxes</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
effective income tax benefit rate applicable to our loss on continuing
operations was significantly reduced by the valuation allowances that were
recorded against our deferred income tax assets during fiscal 2002, due to
uncertainties surrounding the recovery of income tax assets against taxable
income in future periods. The Company does not anticipate recognizing income tax
benefits on its books from future losses, due to uncertainties associated with the utilization
of the operating loss carry-forwards in future periods. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Loss on Discontinued Operations</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, we sold
the operations of Premier Agendas and discontinued our on-line planning service
offered at franklinplanner.com. Under the applicable accounting rules, these
operations were classified as discontinued operations in our consolidated
financial statements. The operating results of Premier and franklinplanner.com
were recorded as discontinued operations, net of tax, and consisted of the
following for fiscal years 2000 through 2002 (in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
_______________________________________________________________
                          2002          2001          2000
_______________________________________________________________
Income (loss) from
  Premier operations,
  net of tax            $  (5,844)    $   5,190     $   4,486
Loss from franklin-
  planner.com
  operations, net of
  tax                      (1,740)       (3,077)       (1,423)
                      _________________________________________
Income (loss) from
  discontinued
  operations            $  (7,584)    $   2,113     $   3,063
                      _________________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The fiscal 2002 loss from
the operations of Premier covers only the period from September 1, 2001 through
December 21, 2001, the closing date of the sale, a period during which Premier
does not recognize significant sales. The operations of franklinplanner.com were
discontinued during the fourth quarter of fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Gain on Sale of Discontinued Operations</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective December 21,
2001, we sold the operations of Premier, a wholly owned subsidiary. Premier
provided productivity and leadership solutions to the educational industry,
including student and teacher planners. The sale price was $152.5 million in
cash plus the retention of Premier&#146;s working capital, which was received in the
form of a $4.0 million promissory note from the purchaser. Prior to the sale closing
we received cash distributions from Premier's working capital that totaled approximately $7 million.  The promissory note
was paid in June 2002. Additionally, we will receive $0.8 million of cash from
Premier related to income tax payments. The Company agreed not to sell student
planners containing the Company&#146;s &#147;7 Habits&#148; and &#147;What
Matters Most&#148; content directly to schools and school districts in the K
through 12 market subsequent to the closing of the sale. We recognized a pretax
gain of $99.9 million ($64.9 million after applicable taxes) on the sale of
Premier, which was recorded as a gain on the sale of discontinued operations in
our consolidated statement of operations for fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Cumulative Effect of Accounting Change</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 1,
2001, we adopted the provisions of SFAS No. 142, &#147;Goodwill and Other
Intangible Assets.&#148; The provisions of SFAS No. 142 prohibit the
amortization of goodwill and indefinite-lived intangible assets and require such
assets to be tested for impairment and to be written down to fair value, if
necessary. In order to assess the value of our goodwill and indefinite-lived
intangibles as of September 1, 2001, we engaged an independent valuation firm.
The valuation process assigned the Company&#146;s assets and liabilities to our
operating business units and then provided a fair market value of those assets
using a discounted cash flow model that also considered factors such as market
capitalization and appraised values of certain assets. Based upon the results of
the valuation, we expensed all of the goodwill assigned to the organizations
business unit, consumer business unit, and corporate support services, plus a
portion of the Covey trade name intangible asset, which has an indefinite life.
The write-off totaled $61.4 million after applicable tax benefits. Goodwill and
intangible assets assigned to the education business unit, which consisted
primarily of Premier, were not written down because the carrying value of that
business unit&#146;s assets exceeded their book value at the measurement date.
Remaining intangible assets were primarily generated from the merger with Covey
Leadership Center and were assigned to the OSBU. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Preferred Stock Dividends</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Preferred stock dividends
increased over the prior year due to the issuance of additional shares of
preferred stock during the first and second quarters of fiscal 2002 as payment
for accrued preferred dividends. The Company had the option to pay accrued
dividends with cash or additional shares of preferred stock until July 1, 2002.
Subsequent to that date, preferred stock dividends must be paid quarterly in
cash. Accordingly, the Company expects to pay all future preferred stock
dividends with cash. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>FISCAL 2001 COMPARED WITH FISCAL 2000</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Sales</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product sales from
continuing operations declined by $64.9 million, or 18 percent, compared to
fiscal 2000. The decline in product sales primarily affected the operational
results of the consumer strategic business unit, which includes retail stores,
catalog and eCommerce operations, and other related channels. Retail store sales
decreased primarily due to reduced consumer traffic during fiscal 2001, combined
with strong sales of handheld electronic planning devices and related
accessories in fiscal 2000. The Company attributes the decline in consumer
traffic to deteriorating general economic conditions in the United States that
began in late 2000, cannibalization of existing store sales by newly opened
stores, and slowing demand for various handheld electronic planning devices and
accessories. These factors combined to produce a 17 percent decrease in
comparable store sales, which was partially offset by the addition of 29 new
stores during fiscal 2001. The Company was operating 164 stores at August 31,
2001. Catalog/eCommerce sales declined primarily due to decreased call volume in
the Company&#146;s catalog operations. However, sales through the Company&#146;s
web site at <U>www.franklincovey.com</U> continued to increase compared to the
prior year and partially offset decreased catalog sales. Other CSBU sales
declined primarily due to declining wholesale sales and the sale of the
commercial division of Publishers Press. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Training and service sales
from continuing operations decreased by $18.0 million, or 11 percent, compared
to fiscal 2000. Our training seminars and consulting services are delivered
through the Organizational Solutions Group in the United States. OSG sales
decreased due to reduced on-site corporate leadership and productivity seminars,
corresponding reduced sales of associated training products, public program
sales, and the formation of Franklin Covey Coaching, LLC to deliver coaching
services. Public seminar sales declined due to an overall reduction in the
number of participants attending our public programs. The Company attributes the
decline in corporate and public seminar sales to economic conditions that appear
to have adversely affected corporate training spending during fiscal 2001. As a
result of the formation of the Franklin Covey Coaching, LLC joint venture, we no
longer recognize the sales of the Personal Coaching division, but only recognize
our share of net income from the joint venture. International sales were
essentially flat compared to fiscal 2000, with increased sales from Mexico and
Europe partially offset by sales decreases in Australia, Canada, New Zealand,
and at various licensee operations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Gross Margin</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2001, our
overall gross margin in continuing operations improved to 56.8 percent, compared
to 53.5 percent in fiscal 2000. Our gross margin improved primarily due to
reduced inventory costs resulting from improved procedures, the sale of the
commercial division of Publishers Press, increased sales of training and
services as a percent of total sales, and price increases on certain planner
products and seminars. Partially offsetting these factors was the formation of
Franklin Covey Coaching, LLC, which reduced our overall gross margin due to
financial reporting requirements that exclude the favorable gross margins of the
personal coaching business from our financial statements. Fiscal 2001 operating
results did not include sales and corresponding costs from the commercial
printing division of Publishers Press, which was sold effective February 28,
2000. Commercial printing sales had significantly lower margins than the
majority of our other products and services. As a result of improved inventory
procedures, the sale of the commercial printing operations of Publishers Press,
and price increases on certain planner products, our gross margin on product
sales improved to 51.6 percent of sales compared to 48.9 percent of sales in
fiscal 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2001, sales
of training and consulting services, which have gross margins significantly
higher than the majority of our products, increased as a percent of total sales.
In addition, we implemented numerous cost savings initiatives to offset the
overall decline in training and service sales. These factors combined to improve
the training and services gross margin to 67.8 percent of sales compared to 64.1
percent of sales in fiscal 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Operating Expenses</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our selling, general, and
administrative expenses in continuing operations decreased by $5.9 million, net
of stock option purchase and relocation costs, compared to fiscal 2000. However,
due to reduced sales volume, SG&amp;A expenses increased as a percent of sales
to 51.0 percent, compared to 44.1 percent in fiscal 2000. The decrease in
SG&amp;A expenses was primarily due to the formation of Franklin Covey Coaching,
LLC, reduced catalog and related promotion costs, reduced associate costs,
decreased international operating expenses, and cost reduction efforts in
various areas of the Company. Due to the formation of the FCC joint venture, we
no longer include the operating expenses of our Personal Coaching division,
which totaled $10.8 million during fiscal 2000, in our consolidated financial
statements. During fiscal 2001, we reduced certain catalog and promotional
expenses to improve the overall profitability of our catalog/eCommerce
operations in light of declining sales, especially from our catalog operation.
Due to declining sales volumes experienced during fiscal 2001, we also
implemented cost saving initiatives in various operating areas of the Company.
Partially offsetting these reductions were increased operating expenses
resulting from the Company&#146;s 29 additional retail stores that were opened
during fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation expense from
continuing operations increased by $1.9 million compared to fiscal 2000,
primarily due to the addition of leasehold improvements and fixtures in new
stores, the purchase of computer hardware and software, and the purchase of
manufacturing equipment. Amortization charges decreased $2.2 million, primarily
due to the contribution of personal coaching intangible assets to the Franklin
Covey Coaching, LLC, joint venture. The amortization of these contributed
intangibles was recorded in the operating results of Franklin Covey Coaching,
LLC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Equity in Earnings of Unconsolidated Subsidiary</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 1,
2000, the Company entered into a joint venture agreement with AMS to form
Franklin Covey Coaching, LLC. Each partner owned 50 percent of the joint venture
and participated equally in its management. We accounted for our investment in
Franklin Covey Coaching, LLC using the equity method of accounting and reported
our share of the joint venture&#146;s net income as equity in earnings of an
unconsolidated subsidiary. Our share of the joint venture&#146;s earnings
totaled $2.1 million during fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Interest Income and Expense</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In general, interest income
and expense was affected by our unfavorable operating performance during fiscal
2001, which resulted in higher debt balances and lower cash balances when
compared to fiscal 2000. In addition, interest expense increased due to larger
debt balances resulting from the Company&#146;s line of credit agreement signed
during the fourth quarter of fiscal 2001. The new line of credit agreement
included the management stock loan participants&#146; debt, which was previously
guaranteed by the Company. As a result, we paid interest on amounts borrowed to
acquire the loans. Interest is not due from the participants of the management
stock loan program until the loans mature in March 2005. The Company recognized
$2.5 million of additional interest income, which was recorded as a receivable
from the loan participants during fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Income Taxes</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our effective income tax
rate in fiscal 2001 was adversely affected by non-deductible goodwill
amortization, the effects of foreign losses, and the magnified effects of other
non-deductible items resulting from decreased taxable income. Amortization of
goodwill primarily resulting from the merger with Covey Leadership Center and
other acquisitions was not deductible for income tax purposes and had an adverse
effect on our effective tax rates in fiscal 2001 and 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Preferred Stock Dividends</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Preferred stock dividends
increased in fiscal 2001 over the prior year due to the issuance of additional
shares of preferred stock as payment for accrued dividends. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>QUARTERLY RESULTS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following tables set
forth selected unaudited quarterly consolidated financial data for the most
recent eight quarters. The quarterly consolidated financial data reflects, in
the opinion of management, all adjustments necessary to fairly present the
results of operations for such periods and was revised to include the
operational results of Premier and franklinplanner.com as discontinued
operations. Additionally, the following quarterly information for fiscal 2002
was revised to reflect the cumulative effect of adopting the provisions of SFAS
No. 142, which was retroactively recorded in our first quarter of fiscal 2002 as
required by SFAS No. 142. Results of any one or more quarters are not
necessarily indicative of continuing trends. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Quarterly Financial Information:</i></b></font></p>
<pre>


YEAR ENDED AUGUST 31, 2002
                                                             Q1          Q2          Q3           Q4
____________________________________________________________________________________________________________________________________
In thousands, except per share amounts
Sales                                                  $ 84,340     $ 103,326   $  71,091   $  74,241
Gross margin                                             47,487        56,765      39,305      40,072

SG&amp;A expense                                             56,361        58,557      49,688      52,304
Provision for losses on management stock loans            9,971         8,485         247       6,072
Impairment of investment in unconsolidated subsidiary     1,861        14,462
Loss on impaired assets                                                 4,518                   5,667
Depreciation                                              8,246         8,424       7,994       8,678
Amortization                                              1,328         1,043       1,125       1,171
Loss from operations                                    (30,281)      (38,722)    (19,750)    (33,820)
Equity in earnings of unconsolidated subsidiary             863         1,028       1,274       1,151
Loss before benefit for income taxes                    (35,799)      (36,387)    (18,323)    (31,670)
Loss from continuing operations                         (21,479)      (23,848)    (11,489)    (39,650)
Loss from discontinued operations, net of tax            (4,173)       (1,823)       (274)     (1,314)
Gain on sale of discontinued operations, net of tax                    60,774                   4,077
Net income (loss) before cumulative effect of
   accounting change                                    (25,652)       35,103     (11,763)    (36,887)
Cumulative effect of accounting change, net of tax      (61,386)
Net income (loss)                                       (87,038)       35,103     (11,763)    (36,887)
Preferred dividends                                      (2,130)       (2,183)     (2,184)     (2,184)
Net income (loss) attributable to common
   shareholders                                       $ (89,168)    $  32,920   $ (13,947)  $ (39,071)

Diluted income (loss) per share attributable to
common shareholders                                   $    (4.49)   $   1.66    $     (.70) $ (1.96)


YEAR ENDED AUGUST 31, 2001
____________________________________________________________________________________________________________________________________
                                                             Q1          Q2          Q3           Q4
____________________________________________________________________________________________________________________________________
In thousands, except per share amounts
Sales                                                 $ 125,616      $131,500     $88,035     $94,630
Gross margin                                             75,472        73,240      47,993      53,094
SG&amp;A expense                                             55,462        57,103      54,780      57,113
Provision for losses on management stock loans                                                  1,052
Depreciation                                              6,061         5,951       7,513       7,916
Amortization                                              2,789         2,711       2,682       2,658
Income (loss) from operations                            11,159         7,474     (17,283)    (16,143)
Equity in earnings of unconsolidated subsidiary             885           550         607          46
Income (loss) before provision for income taxes          10,750         7,061     (18,232)    (16,775)
Net income (loss)   from continuing operations            5,042         3,312     (10,028)    (11,522)
Income (loss) from discontinued operations, net of tax   (3,712)       (4,116)     (4,559)     14,500
Net income (loss)                                         1,330          (804)    (14,587)      2,978
Preferred dividends                                      (2,028)       (2,028)     (2,028)     (2,069)
Income (loss) available to common shareholders         $   (698)     $ (2,832)   $(16,615)   $    909

Diluted income (loss) per share attributable to
common shareholders                                    $   (.03)     $   (.14)   $   (.84)   $   .05

</pre>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  Company's  quarterly  results of  operations  reflect  seasonal  trends that are primarily the result of customers who renew their
Franklin  Planners on a calendar year basis. OSG sales are moderately  seasonal because of the timing of corporate  training,  which is
not  typically  scheduled as heavily  during  holiday and  vacation  periods.  After the sale of Premier in fiscal  2002,  the seasonal
nature of our operations will reflect higher sales and  significantly  higher  operating  margins during the first and second quarters,
with declines in sales and income generally occurring during the third and fourth quarters of each fiscal year.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quarterly  fluctuations  may also be affected by other factors  including the sale of business units,  the introduction of new products
or  training  seminars,  the  addition  of new  institutional  customers,  the  introduction  of new  products,  the  timing  of  large
institutional orders, and the opening or closing of retail stores.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>LIQUIDITY AND CAPITAL RESOURCES</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Historically,  our  primary  sources  of  capital  have  been  net  cash  provided  by  operating  activities,   long-term  borrowings,
line-of-credit  financing,  asset sales, and the issuance of preferred and common stock.  Working capital  requirements  have also been
financed  through  short-term  borrowing,  line-of-credit  financing,  and asset sales.  During  fiscal 2002,  we used a portion of the
proceeds from the sale of Premier to retire the majority of our outstanding  debt and terminate our line of credit  agreement.  We have
not  sought to obtain a new line of credit  financing  agreement  subsequent  to this  transaction.  With  significantly  reduced  debt
balances and $47.0 million of cash at August 31, 2002, we believe that our liquidity  position is strong.  However,  the maintenance of
adequate  liquidity in future periods will be subject to the Company's  future investing and financing  activities,  and is dependent upon
the Company's ability to generate positive cash flows from operations and control capital expenditures.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Cash Flows From Operating Activities</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Primarily due to a significant  decline in sales and  resulting  operating  losses during fiscal 2002, we used $7.0 million of net cash
to fund  operating  activities  during fiscal 2002. We had  significant  adjustments to net loss to arrive at cash flows from operating
activities in fiscal 2002,  including $62.2 million from the gain on sale of Premier,  a $61.4 million charge from the adoption of SFAS
No. 142,  $42.1 million of  depreciation  and  amortization  charges,  and $24.8 million from  increases to the provision for potential
losses on our management  stock loan program.  Consistent  with prior years,  the primary source of cash from operating  activities was
the collection of accounts  receivable  from Premier sales,  which occur primarily  during our fourth fiscal  quarter.  The majority of
Premier's  accounts  receivable at August 31, 2001 were  collected  prior to the sale of Premier in December  2001.  The primary use of
operating cash was the payment of Premier's  accounts payable and accrued  liabilities,  which are seasonally high at August 31. Due to
the sale of Premier in fiscal  2002,  these cash flow trends in operating  activities  should  change in future  periods to reflect new
seasonal sales patterns.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due to unfavorable  cash flow trends from operating  activities over prior years, the Company has implemented  numerous  initiatives to
improve cash flows from operating  activities,  including  programs  designed to increase sales,  reduce  operating costs, and decrease
inventories  during  fiscal  2003 and in future  periods.  Although  the success of these  initiatives  is  dependent  upon a number of
factors,  many of which are not within our control,  the Company  believes  that we will be successful in improving our cash flows from
operating activities during future periods.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Cash Flows from Investing Activities and Capital Expenditures</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Primarily as a result of the sale of Premier,  we recorded  $152.5 million of cash provided by investing  activities  during year ended
August 31, 2002.  During  fiscal 2002, we received cash  proceeds  totaling  $156.5  million from the sale of Premier and received $4.3
million of cash  distributions  from our  investment  in Franklin  Covey  Coaching,  LLC.  These  investing  activity cash inflows were
partially  offset by $10.6 million of capital  expenditures  that occurred  during  fiscal 2002.  Our fiscal 2002 capital  expenditures
were used to purchase  computer  software,  computer  hardware,  leasehold  improvements in new and remodeled retail stores,  and other
machinery and equipment.  During fiscal 2002, we actively  sought to reduce  capital  spending and focus our  expenditures  on critical
equipment and projects and expect to continue to do so in future periods.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Cash Flows from Financing Activities</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash used for financing  activities  in fiscal 2002 was primarily  affected by our payment of substantially all of our debt balances and the
termination  of our line of credit  facilities.  We used net cash totaling  $113.9  million for financing  activities,  of which $109.4
million was used to repay debt.  We also used $4.9  million of cash to settle an interest  rate swap  instrument  and paid $4.4 million
of cash for preferred dividends during fiscal 2002.  Net cash used for financing activities during fiscal 2001 totaled $25.0 million.</font></p>

<!-- MARKER PAGE="sheet: 3; page: 3" -->

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Contractual Obligations</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has not structured any special purpose entities,  or participated in any commodity trading  activities,  which would expose
us to potential  undisclosed  liabilities or create  adverse  consequences  to our liquidity.  Required  contractual  payments  consist
primarily of payments to Electronic Data Systems  ("EDS") for  outsourcing  services  related to information  systems,  warehousing and
distribution,  and call center  operations;  rent expense for retail store and sales office space; cash payments for Series A Preferred
Stock dividends;  and mortgage  payments on certain  buildings and property.  Our expected  payments on these obligations over the next
five years are as follows (in thousands):</font></P>

<!-- MARKER PAGE="sheet: 4; page: 4" -->

<PRE>
                                                           Maturity (Fiscal Year)
                               _____________________________________________________________________________________________
Description                        2003         2004         2005          2006         2007       Thereafter      Total
____________________________________________________________________________________________________________________________

Minimum required payments to
   EDS for outsourcing services $  31,298    $ 31,431    $ 31,428       $  30,246    $ 28,919      $ 208,031     $  361,353
Minimum Lease payments             16,980      14,915      11,724           8,255       6,378         21,881         80,133
Series A Preferred Stock
   dividend payments                8,735       8,735       8,735           8,735       8,735            -           43,675
Debt principal payments               189          83          89              96         103          1,046          1,606
                               _____________________________________________________________________________________________
Total expected payments
  for contractual obligations    $  57,202     $ 55,164     $ 51,976     $  47,332     $ 44,135     $ 230,958    $  486,767
                               _____________________________________________________________________________________________
</PRE>

<!-- MARKER PAGE="sheet: 5; page: 5" -->

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Other Items</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is the creditor
for a loan program that provided certain management personnel with the
opportunity to purchase shares of our common stock. As a result of changes to
our line of credit agreement obtained in fiscal 2001, the Company is now the
creditor on these loans, which are full recourse to the participants and are
recorded as a reduction to shareholders&#146; equity in our consolidated balance
sheets. For further information regarding our management stock loan program,
refer to the analysis in the comparison of fiscal 2002 operating results
compared to fiscal 2001. The inability of some or all of the participants to
repay their loans would have a significant adverse effect upon the financial
position and future cash flows of the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Going forward, the Company
will continue to incur costs necessary for the operation and potential growth of
the business. We anticipate using cash on hand, cash provided by operating
activities on the condition that we can return to positive cash flows from
operations, and other financing alternatives, if necessary, for these
expenditures. Management anticipates that its existing capital resources should
be sufficient to enable the Company to maintain its current level of operations
for the upcoming fiscal 2003. However, the ability of the Company to maintain
adequate capital for our operations is dependent upon a number of factors,
including sales levels, our ability to contain costs, levels of capital expenditures,
and other factors. Some of the factors that
influence our operations are not within our control, such as economic conditions
and the introduction of competitive new technology and products. The Company
will also continue to monitor its liquidity and may pursue additional financing
alternatives, if required, to maintain sufficient resources for future growth
and capital requirements.  However, there can be no assurance such financing
alternatives will be available on terms acceptable to the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of our financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and revenues and expenses during the periods
presented. Management regularly evaluates its estimates and assumptions
including those related to allowances for doubtful accounts, sales returns and
allowances, inventory valuation, the valuation of long-lived assets, valuation
of its investment in Franklin Covey Coaching LLC, the calculation of the
reserve on our management stock loan program, and the establishment of valuation allowances on our deferred tax assets.  Management bases its estimates and
assumptions on historical experience, factors that are believed to be reasonable
under the circumstances, and requirements under generally accepted accounting
principles. Actual results may differ from these estimates under different
assumptions or conditions, including changes in the economy and other situations
that are not in the control of the Company, which may have an impact on these
estimates and our actual financial results. Management believes that accounting
for the following areas may involve a higher degree of judgment or complexity: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Allowance for Doubtful Accounts</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the normal course of
business, the Company extends credit to our customers based on financial and
other criteria. The Company maintains allowances for doubtful accounts based
upon estimated losses that result from the inability of customers to make
required payments. Management assesses the adequacy of its allowances through
analysis of the aging of accounts receivable at the date of the financial
statements, assessments of historical collection trends, and the impact of
current economic conditions. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Sales Returns and Allowances</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs associated with the
potential return of both products and services are recorded as a reduction of
sales and are recorded as an allowance for sales and returns. These costs are
based upon known returns, and trends related to the timing of returns. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Inventory Valuation</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are stated at
the lower of cost or market with cost determined using the first-in, first-out
method. We record reductions to our inventories that are equal to the difference
between the cost of the inventory and the estimated net realizable value of the
inventories. Our inventories are comprised primarily of dated calendar products
and other non-dated products such as binders, handheld electronic devices,
stationery, and other accessories. In order to value our dated calendar
products, the Company has developed a methodology that is based upon historical
sales trends of dated items. Non-dated inventory items are evaluated based upon
historical sales trends, technological obsolescence, new product introductions,
and other factors that influence estimated realizable value. Our management
regularly assesses the valuation of inventories by reviewing the costing of
inventory, the significance of slow-moving inventory, and the impact of current
economic conditions. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Valuation of Long-Lived Assets</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We review our long-lived
assets, including intangible assets and intangible assets deemed to have an
indefinite life, for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In evaluating the fair value and future benefits of such assets, we
perform an analysis of the expected discounted or undiscounted future net cash
flows of the assets, as appropriate, over the remaining amortization period. If
the carrying value of the asset exceeds the anticipated future cash flows from
the asset, the Company recognizes an impairment loss equal to the deficit.
Actual cash flows may differ materially from estimated future cash flows used
for the evaluation of long-lived assets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Valuation of Investment in Franklin Covey Coaching LLC</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 1,
2000, we entered into a joint venture agreement with American Marketing Systems
(&#147;AMS&#148;) to form Franklin Covey Coaching, LLC (&#147;FCC&#148;). Each
partner owned 50 percent of the joint venture and participated equally in its
management. The joint venture agreement required our coaching programs to
achieve specified earnings thresholds beginning in fiscal 2002 (the joint
venture agreement did not contain an earnings threshold requirement in fiscal
2001) or the joint venture agreement could be terminated at the option of AMS.
As a result of worse than expected performance from our programs during fiscal
2002, AMS terminated the existing joint venture agreement as of August 31, 2002.
As a result of this decision, we recognized impairment charges to our investment
in FCC totaling $16.3 million during fiscal 2002. These impairment charges were
based upon the expected termination of our interest in FCC and corresponding
expected cash payments and expected return of certain tangible assets. Prior to
the end of fiscal 2002 a new partnership agreement was obtained that could pay
the Company up to $3.5 million over the life of the agreement. For further
information regarding the new partnership agreement, refer to the equity in
earnings of unconsolidated subsidiary in the comparison of fiscal 2002 results
with fiscal 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Loan Loss Reserve on Management Stock Loan Program</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is the creditor
for a loan program that provided certain management personnel with the
opportunity to purchase shares of our common stock. These loans are full
recourse to the participants and are recorded as a reduction to
shareholders&#146; equity in the Company&#146;s consolidated balance sheets. In
order to assess the net realizable value of these loans, the Company utilizes a
systematic methodology for determining the level of loan loss reserves that are
appropriate for the management common stock loan program. A key factor
considered by the Company&#146;s methodology is the current market value of
common stock held by the participants. Other factors considered by the
methodology include: the liquid net worth and earnings capacity of the
participants; the inherent difficulties and risks of pursuing collection actions
against key employees; the probability of sufficient participant repayment
capability based upon the proximity to the due date of the loans; and other
business, economic, and participant factors which may have an impact on the
Company&#146;s ability to collect the loans. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon this
methodology, the Company recorded charges to operations totaling $24.8 million
during fiscal 2002 to increase the loan loss reserve. As of August 31, 2002, the
Company had an aggregate loan loss reserve totaling $25.9 million, which reduces
notes and interest receivable from related parties in our consolidated balance
sheets. For further information regarding the management stock loans and the
corresponding reserve for loan losses, refer to Note 14 of the notes to the
consolidated financial statements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Valuation Allowances on Deferred Tax Assets</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon the weight of available
evidence, and the nature and duration of various deferred tax assets, we determined that
it is more likely than not that the related benefits from deferred tax deductions and foreign tax carryforwards will not be realized.
Accordingly, we recorded the appropriate valuation allowances on our deferred tax assets during fiscal 2002.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>NEW ACCOUNTING PRONOUNCEMENTS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2001, the Financial
Accounting Standards Board (&#147;FASB&#148;) released SFAS No. 143,
&#147;Accounting for Asset Retirement Obligations.&#148; This statement
addresses the accounting treatment for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The provisions of the statement apply to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development, or normal operation of a long-lived asset. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company will adopt the provisions of SFAS No.
143 during fiscal 2003, but does not expect this statement to have a material
impact on our results of operations or financial position. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During June 2002, the FASB
issued SFAS No. 146, &#147;Accounting for Costs Associated with Exit or Disposal
Activities.&#148; This statement applies to costs associated with an exit
activity, including restructuring activities, or with the disposal of long-lived
assets. Exit activities can include eliminating or reducing product lines,
terminating employees and related contracts, and relocating plant facilities or
personnel. Under the provisions of SFAS No. 146, entities will be required to
record a liability for a cost associated with an exit or disposal activity when
that liability is incurred and can be measured at fair value. The provisions of
SFAS No. 146 are effective for exit activities initiated after December 31,
2002. We have not completed our analysis of the provisions of SFAS No. 146, but
we do not expect the guidelines found in this statement to have a material
impact upon our results of operations or financial position. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During July 2002, President
George W. Bush signed the Sarbanes-Oxley Act of 2002 (the &#147;Act&#148;) into
law. The Act prescribes, among other items, sweeping corporate governance and
oversight changes, new reporting responsibilities for internal controls, and
requires our Chief Executive Officer and Chief Financial Officer to certify the
accuracy of filed reports. The various provisions of the Act have phase-in
provisions and become effective at different times in the future. Subsequent to
the signing of the Act into law, we have been actively engaged in defining
policies and procedures that will bring the Company into compliance with the
provisions of the Act. Although the Act contains significant changes to
corporate governance, places greater emphasis on internal controls, and requires
certification of financial statements, we do not expect the provisions of the
Act to have a material impact upon the financial condition or the results of
operations of the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>REGULATORY COMPLIANCE</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is registered
in states that have a sales tax and collects and remits sales or use tax on
retail sales made through its stores and catalog sales. Compliance with
environmental laws or regulations has not had a material effect on the
Company&#146;s operations. </FONT></P>


<!-- MARKER PAGE="sheet: 6; page: 6" -->

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>INFLATION AND CHANGING PRICES</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inflation has not had a
material effect on our operations. However, future inflation may have an impact
on the price of materials used in planners and related products, including paper
and leather materials. The Company may not be able to pass on such increased
costs to our customers. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With the exception of
historical information (information relating to the Company&#146;s financial
condition and results of operations at historical dates or for historical
periods), the matters discussed in this Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations and elsewhere are
forward-looking statements that necessarily are based on certain assumptions and
are subject to certain risks and uncertainties. Such uncertainties include, but
are not limited to, unanticipated developments in any one or more of the
following areas: the risk that our revenues will continue to decline, our ability to reduce costs sufficiently to permit profitable operations
in connection with reduced revenues, the ability to maintain revenues at a
sufficient level to recognize anticipated benefits from the EDS outsourcing
agreements, unanticipated costs or capital expenditures, our ability to provide quality customer serivce
subsequent to recent and potential associate reductions, delays or outcomes relating to the
Company&#146;s restructuring plans, availability of financing sources,
dependence on products or services, the rate and consumer acceptance of new
product introductions, competition, the number and nature of customers and their
product orders, pricing, pending and threatened litigation, and other
factors which may adversely affect our business.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>While the Company has a
broad customer base, it is subject to variables over which it has no direct
control such as innovations in competing products, the general transition from
paper-based products to electronic or Internet based products, changing
corporate policies on the part of the Company&#146;s customers, and competition
from others in the industry. In addition, the Company is subject to changes in
costs of supplies necessary to produce its products and distribution of those
products. The Company&#146;s business is subject to seasonal variations
and international sales. Sales outside the United States potentially
present additional risks such as political, social, and economic instability, as
well as exchange rate fluctuations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The market price of the
Company&#146;s common stock has been and may remain volatile. In addition, the
stock markets in general have recently experienced increased volatility. Factors
such as quarter-to-quarter variations in revenues and earnings or the failure of
the Company to meet analysts&#146; expectations could have a significant impact
on the market price of the Company&#146;s common stock. In addition, the price
of the common stock can change for reasons unrelated to the performance of the
Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>These forward-looking
statements are based on management&#146;s expectations as of the date hereof,
and the Company does not undertake any responsibility to update any of these
statements in the future. Actual future performance and results will differ and
may differ materially from that contained in or suggested by these
forward-looking statements as a result of the factors set forth in this
Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in the Company&#146;s filings with the SEC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b><A NAME="Item7a">Item 7a</A>. Quantitative and Qualitative Disclosures about Market Risk</b></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>MARKET RISK OF FINANCIAL INSTRUMENTS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The principal financial
instrument risks to which the Company is exposed are fluctuations in foreign
currency rates and interest rates. The Company utilizes certain derivative
instruments to enhance its ability to manage risk. Derivative instruments are
entered into for periods consistent with related underlying exposures and do not
constitute positions that are independent of those exposures. In addition, we do
not enter into derivative instruments for speculative purposes, nor are we party
to any leveraged derivative instrument. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Foreign Exchange Sensitivity</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due to the nature of the
Company&#146;s global operations, we are involved in transactions that are
denominated in currencies other than the U.S. dollar, which creates exposure to
currency exchange rate risk. The Company regularly utilizes foreign currency
forward contracts to manage the volatility of certain intercompany and other
transactions that are denominated in foreign currencies. These forward contracts
are generally settled and renewed on a quarterly basis and do not meet specific
hedge accounting requirements. Corresponding gains and losses have been recorded
as a component of current operations, which offset gains and losses on the
underlying transactions. As a result of our use of foreign currency exchange
contracts, we recorded net losses totaling $0.3 million during fiscal 2002, net
gains of $0.2 million during fiscal 2001, and net losses totaling $0.2 million
during fiscal 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All of our foreign currency
exchange contracts were settled prior to August 31, 2002. However, the Company
intends to continue utilizing foreign currency exchange contracts in future
periods to offset potential foreign currency exchange risks. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Interest Rate Sensitivity</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is exposed to
fluctuations in U.S. interest rates primarily as a result of the cash that we
hold and our borrowing activities. Following payment and termination of our line
of credit facility during fiscal 2002, our remaining debt balances consisted
primarily of fixed-rate long-term mortgages on our buildings and property. The
following table summarizes the Company&#146;s debt obligations at August 31,
2002. For presentation purposes, the reported interest rates represent weighted
average rates, with the period end rate used for variable rate debt obligations
(dollars in thousands). </FONT></P>


<!-- MARKER PAGE="sheet: 7; page: 7" -->


<PRE>
                                                                     Maturity (Fiscal Year)
                                   ___________________________________________________________________________________________
Debt                                   2003            2004           2005           2006            2007        Thereafter
______________________________     ___________________________________________________________________________________________

Fixed rate debt                      $   166         $   83          $   89        $   96           $  103         $ 1,046
Average interest rate                   8.73%          7.32%           7.36%         7.40%            7.44%           7.57%
______________________________________________________________________________________________________________________________

Variable rate debt                   $    23
Average interest rate                   5.25%
______________________________________________________________________________________________________________________________
</PRE>

<!-- MARKER PAGE="sheet: 8; page: 8" -->

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At August 31, 2002, we were not party to any interest rate swap agreements or similar derivative instruments.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>EURO CURRENCY CONVERSION</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since the beginning of the
European Union&#146;s transition to its common currency, the Euro, on January 1,
1999 our foreign subsidiaries were able to generate billings and accept payments
from clients in both the Euro and legacy currencies. The European legacy
currencies remained legal tender through January 1, 2002. We did not experience
a material impact on our consolidated financial position, results of operations,
or cash flows resulting from the introduction of the Euro and the transition
process from the legacy currencies. </FONT></P>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A NAME="Item8">Item 8</A>.  Financial Statements and Supplemental Data</font></h2>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>INDEPENDENT AUDITORS' REPORT</font></h2>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<br>
Franklin Covey Co.:</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the
accompanying consolidated balance sheets of Franklin Covey Co. and subsidiaries as of August 31, 2002 and 2001, and the related
consolidated statements of operations and comprehensive loss, shareholders&#146;
equity, and cash flows for each of the years in the three year period ended August
31, 2002. These consolidated financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Franklin Covey Co. and subsidiaries
as of August 31, 2002 and 2001, and the results of their operations and their
cash flows for each of the years in the three year period ended August 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Notes 1 and
4 to the consolidated financial statements, the Company adopted Statement of
Financial Accounting Standards No. 142, &#147;Goodwill and Other Intangible
Assets&#148;, in the year ended August 31, 2002. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Salt Lake City, Utah<br>
November 19, 2002</font></p>


<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>FRANKLIN COVEY CO.<br>
CONSOLIDATED BALANCE SHEETS</font></h2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August 31,</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</font></td>
</tr></table>
<HR SIZE=2 COLOR=black NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>In thousands, except per share data</i></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ASSETS</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current assets:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;47,049</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;14,864</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, less allowance for doubtful
 accounts of $1,802 and $1,799, respectively</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21,117</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26,639</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39,091</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42,035</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes receivable</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,411</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,737</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,482</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,973</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets of discontinued operations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;   </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;117,252</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;120,739</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;226,911</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;75,928</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;103,715</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets, net</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95,955</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;118,302</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill, net</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;56,273</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment in unconsolidated subsidiary</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;642</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,910</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other long-term assets</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,474</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,369</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;304,738</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;536,480</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIABILITIES AND SHAREHOLDERS' EQUITY</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current liabilities:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;12,718</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;19,493</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39,069</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39,984</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,904</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;189</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,574</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of capital lease obligations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;380</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liabilities of discontinued operations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35,525</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;66,880</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;106,956</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Line of credit</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35,576</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt, less current portion</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,417</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;49,527</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,886</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,755</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26,784</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70,183 </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;226,598</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments and contingencies (Notes 8, 9, 10, 11, 12, 14, 22, and 24)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders' equity:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Preferred stock - Series A, no par value; convertible into common
stock at $14 per share; liquidation</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;preference totaling $89,530 at
August 31, 2002; 4,000 shares authorized, 873 shares and
831 shares issued,</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;respectively </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;87,203</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;82,995</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Common stock, $.05 par value; 40,000 shares
authorized, 27,056 shares issued </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,353</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,353</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additional paid-in capital</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;222,953</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;223,898</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Retained earnings</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;58,209</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;167,475</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notes and interest receivable related to financing common stock
purchases by related parties, net</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12,362)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(35,977)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accumulated other comprehensive loss</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(280)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,681)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Treasury stock at cost, 7,089 and 7,215 shares, respectively</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(122,521)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(124,395)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accumulated other comprehensive loss from discontinued operations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(786)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total shareholders' equity</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;234,555</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;309,882</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;304,738</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;536,480</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to consolidated financial statements.</font></p>

<!-- MARKER PAGE="sheet: 2; page: 2" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>FRANKLIN COVEY CO.<br>
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS</font></h2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YEAR ENDED AUGUST 31,</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2000</font></td>
</tr></table>
<HR SIZE=2 COLOR=black NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>In thousands, except per share data</i></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Products</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;221,641</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;298,306</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;363,182</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Training and services</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;111,357</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;141,475</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;159,448</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;332,998</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;439,781</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;522,630</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of sales (exclusive of stock option purchase costs totaling
   $2,113 in fiscal 2000):</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Products</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;110,791</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;144,391</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;185,517</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Training and services</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;38,578</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45,591</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;57,247</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;149,369</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;189,982</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;242,764</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross margin</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;183,629</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;249,799</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;279,866</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling, general, and administrative (exclusive of stock option purchase
and relocation</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;costs totaling $9,114 in fiscal 2000)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;216,910</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;224,458</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;230,353</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock option purchases and relocation costs</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,227</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provision for losses on management stock loans</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24,775</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,052</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impairment of investment in unconsolidated subsidiary</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,323</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss on impaired assets</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,185</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,940</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Restructuring cost reversals</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,946)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;33,342</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,441</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,517</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,667</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,840</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,069</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from operations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;(122,573)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14,793)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,706</font></td>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity in earnings of unconsolidated subsidiary</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,316</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,088</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,112</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,180</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,079</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,784)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,671)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,537)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss on settlement of interest rate swap</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,894)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income (expense), net</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;644</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(174)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from continuing operations before income taxes</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(122,179)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17,196)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,926)</font></td>
</tr></table>



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Benefit (provision) for income taxes</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,713</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,000</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,546)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from continuing operations</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(96,466)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13,196)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,472)</font></td>
</tr></table>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Income (loss) from discontinued operations, net of tax provision
(benefit) totaling $(4,055),</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$4,267, and $4,416, respectively</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,584)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,113</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,063</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gain on sale of discontinued operations, net of tax provision totaling $35,094</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;64,851</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss before cumulative effect of accounting change</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(39,199)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11,083)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,409)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cumulative effect of accounting change, net of tax benefit totaling $13,948</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(61,386)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(100,585)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11,083)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,409)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Preferred stock dividends</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,681)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,153)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,005)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Net loss attributable to common shareholders</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;&nbsp;(109,266)</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,236)</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12,414)</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss from continuing operations and preferred stock dividends per share:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5.29)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.06)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.76)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss attributable to common shareholders per share:</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5.49)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.95)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.61)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted weighted average number of common
and common equivalent shares</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,895</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,199</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,437</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>
<br>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COMPREHENSIVE LOSS:</font></h2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss attributable to common shareholders</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(109,266)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,236)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12,414)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market value of interest rate swap agreement, net of tax</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,786</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,786)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign currency translation adjustment</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;574</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(732)</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;660</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=1 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Comprehensive loss</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;(105,906)</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;&nbsp;&nbsp;&nbsp;(22,754)</b></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11,754)</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  </FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE>&nbsp;&nbsp;</TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font><HR SIZE=3 COLOR=Black NOSHADE></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to consolidated financial statements.</font></p>


<!-- MARKER PAGE="sheet: 3; page: 3" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>FRANKLIN COVEY CO.<br>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY</font></h2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Series A<br><u>Preferred Stock</U></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Common Stock</U></FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Treasury Stock</U></FONT></TD>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Additional<BR>Paid-In Capital</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Retained Earnings</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Notes and Interest Receivable</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deferred Compensation</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated Other Comprehensive Loss</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Shares</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amount</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total Share-Holders' Equity</font></td>
</tr></table>
<HR SIZE=2 COLOR=black NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><i>In thousands</i></FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at August 31, 1999</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;750</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;75,000</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;27,056</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;1,353</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;235,632</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;199,125</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;(320)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;(782)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(6,676)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;(131,574)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;378,434</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issuance of Series A preferred stock</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;42</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,092</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,092</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Preferred stock dividends</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,005)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,005)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Tax benefit from exercise of</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;affiliate stock options</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;557</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;557</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issuance of common stock from</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;treasury</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(10,441)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;925</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,404</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,963</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Purchase of treasury shares</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(688)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,482)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,482)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issuance of note receivable from</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;sale of common stock</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(894)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(894)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deferred Compensation</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;262</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;262</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cumulative translation adjustment</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;660</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;660</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dividends on Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock paid with additional</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;1,875</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,875</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net loss</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,409)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,409)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT><hr></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at August 31, 2000</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;811</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;80,967</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;27,056</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;1,353</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;225,748</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;186,711</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(894)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(58)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;(122)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(6,439)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;(119,652)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;374,053</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Preferred stock dividends</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,153)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,153)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Tax benefit from exercise of</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;affiliate stock options</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issuance of common stock from</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;treasury</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,875)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;165</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,712</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;837</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Purchase of treasury shares</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(941)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,455)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,455)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deferred compensation</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;58</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;58</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cumulative translation adjustment</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;(732)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(732)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Purchase of notes receivable and</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accrued interest receivable</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;related to purchases of</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common stock by related</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;parties, net</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(35,083)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(35,083)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dividends on Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock paid with additional</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;20</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,028</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,028</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Valuation of derivative financial</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;instrument</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(4,613)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,613)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Net loss</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(11,083)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(11,083)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT><hr></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at August 31, 2001</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;831</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;82,995</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;27,056</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;1,353</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;223,898</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;167,475</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;(35,977)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(5,467)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(7,215)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;(124,395)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;309,882</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Preferred stock dividends</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,681)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,681)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issuance of common stock from</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;treasury</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(1,445)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;151</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,947</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;502</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Purchase of treasury shares</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(25)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(73)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(73)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cumulative translation adjustment</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;574</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;574</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Dividends on Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock paid with additional</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Series A preferred</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;42</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;4,208</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,208</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Additions to reserve for</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; management loan losses</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;24,775</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;24,775</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Interest on participant loans</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;(1,160)</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,160)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Settlement of interest rate swap</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;4,613</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,613</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>CEO compensation contribution</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;500</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;500</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net loss</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;(100,585)</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;(100,585)</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT><hr></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>Balance at August 31, 2002</b></FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>&nbsp;873</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;&nbsp;87,203</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>&nbsp;&nbsp;&nbsp;27,056</b></font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;1,353</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;222,953</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;&nbsp;&nbsp;58,209</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;(12,362)</b></font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;(280)</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>&nbsp;(7,089)</b></FONT></TD>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;(122,521)</b></font></td>
<TD WIDTH=1%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=1><b>$&nbsp;234,555</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT><hr></TD>
</tr></table>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to consolidated financial statements.</font></p>

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<HR SIZE=5 COLOR=GRAY NOSHADE>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>FRANKLIN COVEY CO.<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS</font></h2>

<PRE>
YEAR ENDED AUGUST 31,                                                                  2002              2001             2000
--------------------------------------------------------------------------- ----------------- ---------------- -----------------
In thousands

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                     $(100,585)        $ (11,083)       $  (4,409)
     Adjustments to reconcile net loss to net cash provided
         by (used for) operating activities:
           Depreciation and amortization                                             42,052            47,873           48,805
           Gain on sale of discontinued operations, net of tax                      (64,851)
           Cumulative effect of accounting change, net of tax                        61,386
           Provision for losses on management stock loan program                     24,775             1,052
           Impairment of investment in unconsolidated subsidiary                     16,323
           Deferred income taxes                                                    (16,152)              637            1,562
           Loss on impaired assets                                                   10,185               801            1,940
           Loss on settlement of interest rate swap                                   4,894
           Equity in earnings of unconsolidated subsidiary                           (4,316)           (2,088)
           Payments for interest on management loan program                            (796)           (2,229)
           Other                                                                        160                58              262
           Changes in assets and liabilities, net of effects from
             acquisitions:
                Decrease in accounts receivable, net                                 51,124             5,610            4,639
                Decrease in inventories                                               3,413             8,303            3,943
                Increase in other assets                                             (4,167)           (1,151)         (13,282)
                Increase (decrease) in accounts payable
                   and accrued liabilities                                          (19,579)          (10,814)           5,804
                Decrease in accrued restructuring costs                                (582)           (2,648)         (11,040)
                Increase (decrease) in other long-term liabilities                   (1,256)             (144)           3,286
                Increase (decrease) in income taxes payable                          <u>(9,049)           (1,811)           9,113</u>
         <b>Net cash provided by (used for) operating activities                        <u>(7,021)           32,366           50,623</u></b>

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of discontinued operations                                  156,512
     Purchases of property and equipment, net of effects from
         acquisitions                                                               (10,594)          (27,027)         (24,523)
     Formation of joint venture, acquisition of businesses, and earnout
         payments                                                                                      (4,432)         (21,444)
     Cash distribution of earnings from unconsolidated subsidiary                     4,261             3,354
     Proceeds from sale of property and equipment, net                              <u>  2,327            15,096            7,032</u>
         <b>Net cash provided by (used for) investing activities                       <u>152,506           (13,009)         (38,935)</u></b>

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from short-term line of credit borrowings                                                12,388           21,061
     Principal payments on short-term line of credit borrowings                      (9,750)          (20,522)          (4,573)
     Proceeds from long-term debt and line of credit, net of effects
         from acquisitions                                                            4,370            33,951           76,308
     Principal payments on long-term debt, long-term line of credit, and
         capital lease obligations                                                  (99,661)          (38,323)        (109,502)
     Payment of interest rate swap liability                                         (4,894)
     Purchases of common stock for treasury                                             (73)           (7,455)          (5,483)
     Proceeds from issuance of common stock from treasury                               502             1,042            6,069
     Proceeds from issuance of Series A Preferred Stock, net                                                             4,092
     Payment of preferred stock dividends                                          <u>  (4,367)           (6,084)          (5,977)</u>
         <b>Net cash used for financing activities                                    <u>(113,873)          (25,003)         (18,005)</u></b>

     Effect of foreign currency exchange rates on cash and cash
         equivalents                                                               <u>     573              (732)             778</u>

     Net increase (decrease) in cash and cash equivalents                            32,185            (6,378)          (5,539)
     Cash and cash equivalents at beginning of the year                            <u>  14,864            21,242           26,781</u>
     <b>Cash and cash equivalents at end of the year                                  <u>$ 47,049         $  14,864        $  21,242</u></b>
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See accompanying notes to consolidated financial statements.</font></p>

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<HR SIZE=5 COLOR=GRAY NOSHADE>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>FRANKLIN COVEY CO.<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</font></h2>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>1.     NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Franklin Covey Co. (the
&#147;Company&#148;, &#147;we&#148;, &#147;our&#148;) provides integrated
training and performance enhancement solutions to organizations and individuals
in productivity, leadership, sales, communication, and other areas. Each
integrated solution may include components for training and consulting,
assessment, and other application tools that are generally available in
electronic or paper-based formats. Our products and services are available
through professional consulting services, public workshops, retail stores,
catalogs, and the Internet at <U>www.franklincovey.com</U>. The Company&#146;s
best-known offerings include the Franklin Planner<SUP>TM</SUP>, our productivity
workshop entitled &#147;What Matters Most&#148;, and courses based on the
best-selling book, <I>The</I> <I>7 Habits of Highly Effective People.</I> </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fiscal Year</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company utilizes a
modified 52/53 week fiscal year that ends on August 31 of each year.
Corresponding quarterly periods generally consist of 13-week periods that ended
on November 24, 2001, February 23, 2002, and May 25, 2002 during fiscal 2002.
Unless otherwise noted, references to fiscal 2003, fiscal 2002, fiscal 2001, and
fiscal 2000 apply to the 12 months ending or ended on August 31, 2003, 2002,
2001, and 2000, respectively. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Basis of Presentation</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying
consolidated financial statements include the accounts of the Company and our
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The results of Franklin
Covey Coaching, LLC, a 50 percent owned joint venture (Note 5), were accounted
for using the equity method in the accompanying consolidated financial
statements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due to the discontinued
operations presentation resulting from (1) the sale of Premier Agendas
(&#147;Premier&#148;), and (2) the termination of franklinplanner.com&#146;s
operations, the fiscal 2001 and fiscal 2000 presentations have been revised to
be comparable to the fiscal 2002 presentation. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Pervasiveness of Estimates</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Cash and Cash Equivalents</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. As of August 31, 2002, we had demand deposits at
various banks in excess of the $100,000 limit for insurance by the Federal
Deposit Insurance Corporation. Our cash equivalents totaled $28.2 million at
August 31, 2002. We had no significant cash equivalents as of August 31, 2001. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Trade Accounts Receivable</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Trade accounts receivable
were recorded at the invoiced amount and do not bear interest. The allowance for
doubtful accounts is our best estimate of the amount of probable credit losses
in the Company&#146;s existing accounts receivable. The Company determines the
allowance for doubtful accounts based upon historical write-off experience and
current economic conditions. We review the adequacy of our allowance for
doubtful accounts on a monthly basis. Balances past due over 90 days, which
exceed a specified dollar threshold, are reviewed individually for
collectibility. Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for recovery is
considered remote. We do not have any off-balance-sheet credit exposure related
to our customers. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Inventories</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories are stated at
the lower of cost or market, cost being determined using the first-in, first-out
method. Elements of cost in inventories generally include raw materials, direct
labor, manufacturing overhead, and freight in. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Property and Equipment</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our property and equipment
balances are stated at cost less accumulated depreciation or amortization.
Depreciation and amortization, which includes the amortization of assets
recorded under capital lease obligations, are generally calculated using the
straight-line method over the expected useful lives of the assets as follows: </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Description</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Useful Lives</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Buildings<br>Computer hardware and software<br> Machinery and equipment<br>
Furniture, fixtures and leashold</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;15-39 years<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3 years<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3-7 years</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;improvements</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5-7 years</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements are
amortized over the lesser of the useful economic life of the asset or the
contracted lease period. We charge expenditures for maintenance and repairs to
expense as incurred. Gains and losses resulting from the sale of property and
equipment are recorded in current operations except for significant infrequent
property sales, such as buildings and land, which are recorded as components of
other income and expense. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Goodwill and Intangible Assets</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 1, 2001, we
adopted the provisions of Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No. 142, &#147;Goodwill and Other Intangible Assets.&#148;
The provisions of SFAS No. 142 prohibit the amortization of goodwill and certain
intangible assets that are deemed to have indefinite lives. Goodwill and
indefinite-lived intangibles are required to be tested periodically for
impairment and written down, if necessary. Amortized intangible assets are
required to be tested for recoverability using undiscounted cash flows as
prescribed by SFAS No. 144, &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets.&#148; In connection with the implementation of SFAS No. 142,
the Company recognized a $61.4 million, net of tax, impairment charge to
operations that has been recorded as a cumulative effect of accounting change in
our consolidated statement of operations for fiscal 2002. For further
information regarding our goodwill and other intangible assets, refer to Note 4. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prior to the adoption of
SFAS No. 142, goodwill, which represents the excess of purchase price over the
fair value of net assets acquired, was amortized on a straight-line basis over
the expected periods to be benefited, not to exceed 40 years. Goodwill was
previously assessed for recoverability by determining whether the amortization
of the goodwill balance over its remaining life could be recovered through the
undiscounted future operating cash flows of the acquired entity. The amount of
goodwill impairment, if any, was measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company&#146;s average
cost of funds. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Long-Lived Assets</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, we
adopted SFAS No. 144, &#147;Accounting for the Impairment or Disposal of
Long-Lived Assets.&#148; Accordingly, we review our long-lived assets, such as
property and equipment and definite-lived intangibles subject to amortization,
for impairment whenever events or changes in circumstances may indicate that the
carrying value of an asset may not be recoverable. As required by SFAS No. 144,
we use an estimate of the future undiscounted net cash flows of the related
asset or group of assets over their remaining lives in measuring whether the
assets are recoverable. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized for the amount by which
the carrying amount exceeds the estimated fair value of the asset. Impairment of
long-lived assets is assessed at the lowest levels for which there are
identifiable cash flows that are independent of other groups of assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value, less the estimated costs to sell. In addition, depreciation of the asset
ceases. Losses on impaired assets are recorded as a separate component of
operating expenses in our consolidated statements of operations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Restricted Investments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our restricted investments
consist of investments in mutual funds that are held in a &#147;rabbi
trust&#148; and are restricted for payment to the participants of the
Company&#146;s deferred compensation plan (Note 17). We account for our
restricted investments using SFAS No. 115, &#147;Accounting for Certain
Investments in Debt and Equity Securities.&#148; As required by this statement,
we determine the proper classification of investments at the time of purchase
and reassess such designations at each balance sheet date. At August 31, 2002
and 2001, our restricted investments were classified as trading securities and
recorded as a component of other long-term assets in our consolidated balance
sheets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with SFAS No.
115, our unrealized losses on restricted investments, which were immaterial for
fiscal years 2002, 2001, and 2000 were recognized in the accompanying
consolidated statements of operations for fiscal years 2002, 2001, and 2000 as a
component of selling, general, and administrative expense. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Accrued Liabilities</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The significant components
of our accrued liabilities from continuing operations were as follows for the
periods indicated (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August 31,</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued EDS outsourcing costs<br>Accrued compensation<br>Unearned revenue<br>
Other accrued liabilities</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;5,766<br>&nbsp;&nbsp;&nbsp;5,253<br>&nbsp;&nbsp;&nbsp;3,899<br>&nbsp;24,151</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;2,817<br>&nbsp;&nbsp;&nbsp;5,949<br>&nbsp;&nbsp;&nbsp;4,250<br>&nbsp;26,968</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=24%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$39,069</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$39,984</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=26%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Foreign Currency Translation and Transactions</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Translation adjustments
result from translating our foreign subsidiaries&#146; financial statements into
United States dollars. The balance sheet accounts of our foreign subsidiaries
were translated into U.S. dollars using the exchange rate in effect at the
balance sheet date. Revenues and expenses were translated using average exchange
rates during the year. The resulting translation gains or losses were recorded
as a component of accumulated other comprehensive loss in shareholders&#146;
equity. Transaction gains and losses were reported in current operations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Derivative Instruments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We account for derivative
instruments in accordance with SFAS No. 133, &#147;Accounting for Derivative
Instruments and Hedging Activities&#148; and as modified by SFAS No. 138,
&#147;Accounting for Certain Derivative Instruments and Certain Hedging
Activities.&#148; During the normal course of business, the Company is exposed
to risks associated with foreign currency exchange and interest rate
fluctuations. In order to hedge our exposure to these elements, we have made
limited use of derivative instruments. The fair value of each derivative that
qualifies for hedge accounting is recognized in the balance sheet at its fair
value. Changes in the fair value of derivative instruments that are not
designated as hedge instruments are immediately recognized in our consolidated
statements of operations. At August 31, 2002, the Company was not a party to any
derivative instrument. For further information on our use of derivative
instruments, refer to Note 10. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Revenue Recognition</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We recognize product
revenue when title and risk of loss are transferred to customers based upon
terms of the sale, which is generally upon shipment or delivery of the product.
We recognize training and service revenue upon presentation of the training
seminar, delivery of consulting services, or shipment of training manuals.
Revenue is recognized as the net amount to be received after deducting estimated
amounts for discounts and product returns. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Shipping and Handling Fees and Costs</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All shipping and handling
fees billed to customers were recorded as a component of sales. All costs
incurred related to shipping and handling of products or training services were
recorded as a component of cost of sales. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Retail Store Pre-Opening Costs</i></b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-opening costs associated with new retail stores were charged to expense as incurred.</font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Advertising Costs</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs for newspaper,
television, radio, and other advertising were expensed as incurred or recognized
over the period of expected benefit for direct response and catalog advertising.
Direct response advertising costs consist primarily of printing and mailing
costs for catalogs and seminar mailers that were charged to expense over the
period of projected benefit, which ranges from three to 12 months. Total
advertising costs in continuing operations were $30.3 million, $31.9 million,
and $36.2 million for the years ended August 31, 2002, 2001, and 2000,
respectively. Our prepaid catalog and seminar mailer costs reported in other
current assets were $5.4 million and $5.2 million at August 31, 2002 and 2001,
respectively. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Research and Development Costs</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company expenses
research and development costs as incurred in accordance with generally accepted
accounting principles in the United States. During fiscal 2002, 2001, and 2000,
we expensed $4.9 million, $3.9 million, and $6.2 million, respectively, of
research and development costs which were recorded as a component of selling,
general, and administrative expenses in our consolidated financial statements. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Income Taxes</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The provision for income
taxes has been determined using the asset and liability approach of accounting
for income taxes. Under this approach, deferred income taxes represent the
future tax consequences expected to occur when the reported amounts of assets
and liabilities are recovered or paid. The provision for income taxes represents
income taxes paid or payable for the current year plus the change in deferred
taxes during the year. Deferred income taxes result from differences between the
financial and tax bases of our assets and liabilities and are adjusted for
changes in tax rates and tax laws when changes are enacted. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon the weight of available evidence, and the nature and duration of various deferred tax assets, we
determined that it is more likely than not that the related benefits from deferred tax deductions and foreign tax carryforwards will not be realized.
Accordingly, we recorded the appropriate valuation allowances on our deferred tax assets during fiscal 2002. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Comprehensive Income/Loss</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comprehensive income/loss
includes charges and credits to equity accounts that were not the result of
transactions with shareholders. Comprehensive income/loss is comprised of net
loss attributable to common shareholders and other comprehensive income/loss
items. Our comprehensive income and losses consisted of changes in the fair
value of derivative instruments and changes in the cumulative foreign currency
translation adjustments. The changes in cumulative foreign currency translation
adjustments were not adjusted for income taxes as they relate to specific
indefinite investments in foreign subsidiaries. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Stock-Based Compensation</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We account for stock-based
compensation and awards using the intrinsic-value based method of accounting as
outlined in Accounting Principles Board (&#147;APB&#148;) Opinion 25 and related
interpretations. Under the intrinsic-value methodology, no compensation cost is
recognized for stock option awards granted at, or above, the fair market value
of the stock on the date of grant. Restricted stock awards result in the
recognition of deferred compensation, which was recorded as a reduction of
shareholders&#146; equity and was amortized to operating expense over the
vesting period of the stock award. We amortized deferred stock compensation over
the vesting period of each award using the straight-line method. At August 31,
2002, there were no remaining unamortized restricted stock awards. For further
information on our stock-based compensation plans, refer to Note 13. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Recent Accounting Pronouncements</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In June 2001, the Financial
Accounting Standards Board (&#147;FASB&#148;) released SFAS No. 143,
&#147;Accounting for Asset Retirement Obligations.&#148; This statement
addresses the accounting treatment for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The provisions of the statement apply to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development, or normal operation of a long-lived asset. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company will adopt the provisions of SFAS No.
143 during fiscal 2003, but does not expect this statement to have an impact on
our operations or financial position. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During June 2002, the FASB
issued SFAS No. 146, &#147;Accounting for Costs Associated with Exit or Disposal
Activities.&#148; This statement applies to costs associated with an exit
activity, including restructuring activities, or with the disposal of long-lived
assets. Exit activities can include eliminating or reducing product lines,
terminating employees and related contracts, and relocating plant facilities or
personnel. Under the provisions of SFAS No. 146, entities will be required to
record a liability for a cost associated with an exit or disposal activity when
that liability is incurred and can be measured at fair value. The provisions of
SFAS No. 146 are effective for exit activities initiated after December 31,
2002. We have not completed our analysis of the provisions of SFAS No. 146, but
we do not expect the guidelines found in this statement to have a material
impact upon our operations or financial position. </FONT></P>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>2.     INVENTORIES</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories of continuing operations were comprised of the following (in thousands):</font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August 31,</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;2002</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;2001</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finished goods<br>Work-in-process<br>Raw Materials</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;30,615<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,141<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,335</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;30,659<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,507<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,869</FONT><hr></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;39,091</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;42,035</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>3.     PROPERTY AND EQUIPMENT</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment of continuing operations were comprised of the following (in thousands):</font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August 31,</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Land and improvements<br>Buildings<br>Machinery and equipment<br>Computer hardware and software<br>Furniture, fixtures, and leasehold improvements</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;2,111<br>&nbsp;&nbsp;&nbsp;&nbsp;35,534<br>&nbsp;&nbsp;&nbsp;&nbsp;32,912<br>&nbsp;&nbsp;&nbsp;&nbsp;71,767<br>&nbsp;&nbsp;&nbsp;&nbsp;57,487</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;4,982<br>&nbsp;&nbsp;&nbsp;&nbsp;34,146<br>&nbsp;&nbsp;&nbsp;&nbsp;35,220<br>&nbsp;&nbsp;&nbsp;&nbsp;81,774<br>&nbsp;&nbsp;&nbsp;&nbsp;58,166</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;199,811<br>&nbsp;(123,883)</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;214,288<br>&nbsp;(110,573)</FONT><hr></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$&nbsp;75,928</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>$103,715</b></FONT><hr SIZE=2 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain land and buildings represent collateral for mortgage debt obligations (Note 8).</font></p>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>4.     INTANGIBLE ASSETS AND GOODWILL</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During June 2001,  the FASB  issued  SFAS No. 141,  "Business  Combinations",  and SFAS No. 142,  "Goodwill  and Other
Intangible  Assets." The new reporting  provisions of SFAS No. 142 prohibit the  amortization  of goodwill and certain
intangible  assets that are deemed to have indefinite  lives and requires such assets to be tested and written down to
fair value,  if necessary.  The new standards also  prescribe  valuation  procedures for intangible  assets subject to
amortization  that are  consistent  with the  guidelines  found in SFAS No. 144,  "Accounting  for the  Impairment  or
Disposal of  Long-Lived  Assets." We elected to adopt the  provisions  of SFAS No. 141 and SFAS No. 142 during  fiscal
2002.</font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our intangible assets were comprised of the following for the periods indicated (in thousands):</font></p>

<pre>
                                 Gross                        Net
                                Carrying    Accumulated     Carrying
August 31, 2002                  Amount     Amortization   Amount of
                                                          Intangibles
________________________________________________________________________________
<b><i>Amortized Intangible Assets:</i></b>
License rights                  $  27,000     $  (3,669)    $  23,331
Curriculum                         62,320       (22,853)       39,467
Customer lists                     18,874        (8,799)       10,075
Trade names                     <u>    1,277        (1,195)           82</u>
                                  109,471       (36,516)       72,955
<b><i>Unamortized Intangible Asset:</i></b>
Covey trade name               <u>    27,857        (4,857)       23,000</u>
Balance at August 31, 2002     <b><u> $ 137,328     $ (41,373)    $  95,955</u></b>
</pre>
<pre>
August 31, 2001
________________________________________________________________________________
<b><i>Amortized Intangible Assets</i></b>
License rights                  $  27,000     $  (2,869)    $  24,131
Curriculum                         63,086       (20,962)       42,124
Customer lists                     18,874        (7,784)       11,090
Trade names                     <u>    1,277        (1,007)          270</u>
                                  110,237       (32,622)       77,615
<b><i>Unamortized Intangible Asset:</i></b>
Covey trade name                <u>   45,544        (4,857)       40,687</u>
Balance at August 31, 2001      <b><u>$ 155,781     $ (37,479)    $ 118,302</u></b>
</pre>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our aggregate amortization
expense from continuing operations for the years ended August 31, 2002 and 2001
totaled $4.7 million and $10.8 million, respectively. Estimated amortization
expense from continuing operations for the next five years is expected to be as
follows (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Year Ending<br>August 31,&nbsp;</b></FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<br>2004<br>2005<br>2006<br>2007</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$4,384<br>&nbsp;&nbsp;4,011<br>&nbsp;&nbsp;4,011<br>&nbsp;&nbsp;3,188<br>&nbsp;&nbsp;3,131</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We review our amortized
intangible assets for impairment whenever events or circumstances indicate that
the carrying amount of the asset may not be realizable. We assess our amortized
intangible assets using estimated future undiscounted cash flows as prescribed
by SFAS No. 144. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We elected to adopt the
provisions of SFAS No. 142 on September 1, 2001 and hired an independent
valuation firm to assess the value of our goodwill and indefinite-lived
intangibles in accordance with the new measurement requirements of SFAS No. 142.
The valuation process assigned the Company&#146;s assets to our operating
business units and then determined the fair market value of those assets using a
discounted cash flow model that also considered factors such as market
capitalization and the appraised values of certain assets. Based upon the
results of the valuation, the goodwill assigned to the Organizational Strategic
Business Unit, Consumer Strategic Business Unit, and corporate support group,
plus a portion of the Covey trade name intangible asset were impaired. The
resulting write-off from the adoption of SFAS No. 142 totaled $75.3 million
($61.4 after applicable tax benefits). We also reduced the amortization period
of certain amortized intangible assets in accordance with SFAS No. 142. The
impairment loss was comprised of the following items (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amount</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impaired goodwill<br>Impaired Covey trade name intangible asset</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;61,682<br>&nbsp;&nbsp;&nbsp;13,652</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total SFAS No. 142 adoption impairment loss</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;75,334</FONT><hr SIZE=3 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the
adoption of SFAS No. 142, we recorded a $13.7 million impairment charge to the Covey trade name
intangible, which has an indefinite life and is no longer amortized. As required
by SFAS No. 142, the carrying amount of the Covey trade name was reassessed at
August 31, 2002, and based upon the same valuation methodology used in the
adoption of SFAS No. 142, an additional $4.0 million was impaired. The
additional impairment was recorded as a component of loss on impaired assets
(Note 15) in our consolidated statement of operations for the fiscal year ended
August 31, 2002. The Covey trade name intangible asset was valued using the
present value of estimated royalties derived from trade name related revenues,
which consist primarily of training seminars and related items. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill and intangible
assets assigned to the Education Business Unit, which consisted primarily of
Premier, were not written down because the fair values of that business
unit&#146;s assets exceeded their carrying amounts at the measurement date. The
changes in the net carrying amount of goodwill for the year ended August 31,
2002 were as follows (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Organizations<br>Strategic<br>Business<br>Unit</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consumer<br>Strategic<br>Business<br>Unit</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporate/<br>Education<br>Business<br>Unit</font><hr></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at September 1, 2001<br>Impairment loss from adoption of SFAS No. 142
<br>Goodwill written off related to sale of Premier</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; 45,684<br>&nbsp;&nbsp;&nbsp;(45,684)<br>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; 10,589<br>&nbsp;&nbsp;&nbsp;(10,589)<br>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; 44,368<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,409)<br>&nbsp;&nbsp;&nbsp;(38,959)</font><hr></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at August 31, 2002</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; -</FONT><hr SIZE=3 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; -</FONT><hr SIZE=3 COLOR=BLACK NOSHADE></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp; -</font><hr SIZE=3 COLOR=BLACK NOSHADE></td>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If the provisions of SFAS
No. 142 were in effect at September 1, 1999, and the adjustment was the same as
in fiscal 2002, the following unaudited pro forma financial results would have
occurred. Amounts presented below were adjusted to reflect Premier and
franklinplanner.com as discontinued operations for comparability to amounts
reported in the accompanying consolidated statement of operations for fiscal
2002 (in thousands). </FONT></P>

<PRE>
<I>Fiscal Year Ended
August 31,
___________________________________________________________________
(Unaudited)                   2002          2001          2000</I>
___________________________________________________________________
Reported loss from
  continuing
  operations before
  income tax benefit        $(122,179)    $ (17,196)    $  (1,926)
Add back: Goodwill
  amortization                                6,449         6,702
Add back: Indefinite-
  lived intangible
  amortization                                1,139         1,139
Deduct: Revised
  estimated useful life
  amortization                                 (262)         (262)
                        ___________________________________________
Adjusted income
  (loss) from continuing
  operations before
  income tax benefit         (122,179)       (9,870)        5,653
Adjusted income tax
  benefit (provision)          25,713         1,641        (8,048)
                        _________________________________________
Adjusted loss from
  continuing
  operations                  (96,466)       (8,229)       (2,395)
Adjusted income
  (loss) from
  discontinued
  operations, net of
  tax                          (7,584)        6,482         6,997
Gain on sale of
  discontinued
  operations, net of
  tax                          64,851
                        _________________________________________
Adjusted net income
  (loss)                      (39,199)       (1,747)        4,602
Preferred dividends            (8,681)       (8,153)       (8,005)
                        _________________________________________
Net loss attributable
to common shareholders      $ (47,880)    $  (9,900)    $  (3,403)
                        _________________________________________

<i><b>Basic and Diluted Earnings per
Share (Unaudited):</b></i>
Reported loss from
  continuing
  operations and
  preferred stock
  dividends                 $    (5.29)   $    (1.06)   $     (.76)
Goodwill amortization                            .32           .33
Indefinite-lived
  intangible
  amortization                                   .06           .05
Revised estimated
  useful life
  amortization                                  (.01)         (.01)
Income tax adjustment                           (.12)         (.12)
                        ___________________________________________
Adjusted loss from
  continuing
  operations                    (5.29)         (.81)         (.51)
Adjusted income
  (loss) from
  discontinued operations        (.38)          .32           .34
Gain on sale of
  discontinued
  operations, net of
  tax                            3.26
                        __________________________________________
Adjusted net loss
  attributable to
  common shareholders       $   (2.41)    $    (.49)    $    (.17)
                       ___________________________________________
Basic and diluted
  weighted average
  number of common
  shares outstanding           19,895        20,199        20,437
                        _________________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preceding  unaudited pro forma  schedules  were adjusted to reflect  applicable tax rates as though the provisions
of SFAS No. 142 were effective  September 1, 1999.  Amortization  expense excluded from discontinued  operations under
the  provisions  of SFAS No.  142  totaled  $5.4  million  and $4.8  million  in fiscal  2001 and 2000.  The  adjusted
discontinued operations tax provisions were $5.3 million and $5.2 million for fiscal 2001 and 2000, respectively.</font></p>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>5.       INVESTMENT IN UNCONSOLIDATED SUBSIDIARY</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective  September 1, 2000, we entered into a joint venture  agreement with American  Marketing  Systems  ("AMS") to
form  Franklin  Covey  Coaching,  LLC ("FCC").  Each partner  owned 50 percent of the joint  venture and  participated
equally  in its  management.  We  accounted  for our  investment  in FCC using the  equity  method of  accounting  and
reported our share of the joint  venture's  net income as equity in the earnings of an  unconsolidated  subsidiary  in
our  consolidated  financial  statements.  The Company's share of FCC's earnings totaled $4.3 million and $2.1 million
for the fiscal years ended August 31, 2002 and 2001,  respectively.  Summarized  financial  information  for FCC as of
and for the years ended August 31, 2002 and 2001 was as follows (in thousands):</font></p>

<PRE>
August 31,
_____________________________________________________________
                                 2002             2001
_____________________________________________________________
Net sales                    $     26,392      $     21,591
Gross profit                       18,331            14,192
Net income                          9,935             5,936

Current assets               $      7,718      $      5,296
Long-term assets                   17,385            17,315
                           __________________________________
     Total assets            $     25,103      $     22,611
                           __________________________________

Current liabilities          $      8,626      $      6,157
Long-term liabilities                  67               174
                           __________________________________
     Total liabilities       $      8,693      $      6,331
                           __________________________________

Members' equity              $     16,410      $     16,280
                           __________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The joint venture agreement
required the Company&#146;s coaching programs to achieve specified earnings
thresholds beginning in fiscal 2002 (the joint venture agreement did not contain
an earnings threshold requirement in fiscal 2001) or the existing joint venture
agreement could be terminated at the option of AMS. Based upon available
information, the Company&#146;s management believed that the required earnings
threshold in fiscal 2002 could be reached through increased business from
existing coaching programs and the creation of new programs. However, due to
unfavorable economic conditions and other factors, the Company&#146;s coaching
programs did not produce $3.2 million in earnings as required for fiscal 2002.
As a result, AMS exercised its option to terminate the existing joint venture
agreement effective August 31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon our coaching
program performance throughout fiscal 2002, and expected termination of our
interest in FCC, we recognized $16.3 million of impairment charges to our
investment in FCC during the first two quarters of fiscal 2002. The impairment
charges were based upon currently available information related to negotiations
with AMS throughout fiscal 2002. Under the provisions of a new partnership
agreement that eventually terminates our interest in FCC, we received a $0.3
million payment at the end of fiscal 2002, will receive payments totaling $2.0
million during fiscal 2003, and may receive an additional $1.2 million in
payments from AMS and FCC. The new partnership agreement payments are comprised
of the following three components: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Ownership Change Payment
&#150; </B>On August 30, 2002, AMS paid the Company $0.3 million for our Class A
ownership shares in FCC and issued Class B shares to us. The Class B ownership
shares prohibit the Company from active participation in the management of FCC,
but provide us the opportunity to receive a portion of FCC&#146;s earnings as
described below. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>FCC Net Income
Recognition &#150; </B>During fiscal 2003, we will continue to recognize a
portion of FCC&#146;s net income and receive cash distributions totaling $2.0
million. As the Company receives these payments during fiscal 2003, we will
first reduce our remaining investment in FCC to zero and recognize the excess
amount as an offset to operating expenses, rather than as equity in the earnings
of an unconsolidated subsidiary. Based upon current operating trends at FCC, we
anticipate receiving the entire $2.0 million of cash distribution payments
during fiscal 2003. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Contingent Program
Payment &#150; </B>The third component of the new partnership agreement is
contingent upon the earnings of our coaching programs during fiscal 2003 and
September 2003. If our coaching programs achieve earnings before interest,
taxes, depreciation, and amortization (&#147;EBITDA&#148;) greater than $1.2
million during the 13 month period ended September 30, 2003, then a final
payment will be made in October 2003, for the entire contingent program payment.
The contingent payment may not exceed $1.2 million, however, the contingent
payment may be reduced on a dollar-for-dollar basis if our coaching programs
fail to produce $1.2 million of EBITDA during the measurement period. We will
record the contingent program payment receivable as a component of other current
assets to the extent it is earned during the measurement period by our coaching
program financial results. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Following receipt of the
new partnership agreement payments, we will have no further profit participation
in the earnings of FCC. As of August 31, 2002, our remaining net investment in
Franklin Covey Coaching, LLC totaled $0.6 million. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>6.     CAPITALIZED COMPUTER SOFTWARE COSTS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the normal course of
business, we develop productivity and leadership training software products for
sale to customers through our various distribution channels. We capitalize costs
associated with the development of software products in accordance with SFAS No.
86, &#147;Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed&#148; and related pronouncements. Capitalized computer
software development costs totaled $3.8 million and $3.6 million at August 31,
2002 and 2001, respectively. Capitalized computer software costs were recorded
as a component of other long-term assets in our consolidated balance sheets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalized computer
software costs are generally amortized based upon units sold, with a maximum
useful life of two years from the software release date. We review our
capitalized computer software costs for impairment whenever circumstances
indicate that the carrying amount of the asset may not be realizable. We assess
current product sales trends as well as estimates of future sales and
corresponding undiscounted cash flows as prescribed by SFAS No. 144.
Amortization of capitalized computer software costs is recorded as a component
of cost of sales and impaired computer software costs were recorded as a
separate component of operating expenses in the accompanying consolidated
statements of operations. Total amortization expense and impairment charges were
as follows for the periods indicated (in thousands): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Fiscal Year Ended<br>August 31,</i></FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br>&nbsp;</font><hr></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</FONT><hr></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2000</font><hr></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization expense<br>Impairment charges</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;1,678<br>&nbsp;&nbsp;&nbsp;1,758</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;1,117<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;2,156<br>&nbsp;&nbsp;&nbsp;1,940</font></td>
</tr></table>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsequent to the software  product  release date,  costs for  maintenance,  including  minor upgrades are expensed as
incurred.</font></p>


<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>7.       DISCONTINUED OPERATIONS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, we sold the operations of Premier Agendas and  discontinued  our on-line  planning service offered
at  franklinplanner.com.  Under the  provisions of SFAS No. 144,  these  operations  were  classified as  discontinued
operations in our consolidated  financial statements.  The operating results of Premier and  franklinplanner.com  were
recorded as  discontinued  operations,  net of tax, in the  accompanying  consolidated  statements of  operations  and
consisted of the following (in  thousands).  The operating  results of Premier during fiscal 2002 include results from
September 1, 2001 through  December 21,  2001,  the closing date of the sale, a period  during which  Premier does not
recognize significant sales.  The operations of franklinplanner.com were discontinued during August 2002.</font></p>

<PRE>
Fiscal Year Ended
August 31,
________________________________________________________________
                          2002          2001          2000
________________________________________________________________
Income (loss) from
  Premier operations,
  net of tax              $  (5,844)    $   5,190     $   4,486
Loss from franklin-
  planner.com
  operations, net of
  tax                        (1,740)       (3,077)       (1,423)
                      __________________________________________
Income (loss) from
  discontinued
  operations              $  (7,584)    $   2,113     $   3,063
                      __________________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The income tax provision
(benefit) attributable to Premier and franklinplanner.com operations was as
follows for the periods indicated (in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
_______________________________________________________________
                          2002          2001          2000
_______________________________________________________________
Tax provision
  (benefit) from
  Premier Agendas         $  (3,033)    $   6,074     $   5,251
Tax benefits from
Franklinplanner-
  .com operations            (1,022)       (1,807)         (835)
                      _________________________________________
Tax provision
  (benefit) from
  discontinued
  operations              $  (4,055)    $   4,267     $   4,416
                      _________________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The carrying amounts of
assets and liabilities for Premier and franklinplanner.com, which were disclosed
as discontinued operations in our consolidated balance sheet at August 31, 2001,
were as follows (in thousands): </FONT></P>

<PRE>
                        Premier     franklin-
    Description         Agendas     planner.com        Total
_________________________________________________________________
Accounts
  receivable,             $  52,188                   $  52,188
  net
Inventories                   3,138                       3,138
Other current assets          2,091     $      12         2,103
Property and
  equipment, net              6,866         1,727         8,593
Intangible assets, net        6,266           596         6,862
Goodwill, net                38,959         5,409        44,368
                      ___________________________________________
  Total assets of
  discontinued
  operations              $ 109,508     $   7,744     $ 117,252
                      ___________________________________________

Line of credit            $   9,750                   $   9,750
Accounts payable              7,178                       7,178
Current portion of
  long-term debt and
  capital lease
  obligations                 1,720                       1,720
Income taxes payable          4,219                       4,219
Other current
  liabilities                 8,005     $     182         8,187
Long-term debt,
  less current portion          413                         413
Deferred income
  taxes                       4,058                       4,058
                      __________________________________________
Total liabilities
  of discontinued
  operations              $  35,343     $     182     $  35,525
                      ___________________________________________

Cumulative
  translation
  adjustment              $    (786)                  $    (786)
                      ___________________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional information
regarding the sale of Premier Agendas and the termination of franklinplanner.com
is provided below. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Sale of Premier Agendas</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective December 21,
2001, we sold Premier Agendas, Inc., a wholly owned subsidiary located in
Bellingham, Washington, and Premier School Agendas Ltd., a wholly owned
subsidiary organized in Ontario, Canada, (collectively, &#147;Premier&#148;) to
School Specialty, Inc., a Wisconsin-based company that specializes in providing
products and services to students and schools. Premier provided productivity and
leadership solutions to the educational industry, including student and teacher
planners. The sale price was $152.5 million in cash plus the retention of
Premier&#146;s working capital, which was received in the form of a $4.0 million
promissory note from the purchaser. Prior to the sale closing, we received cash
distributions from Premier&#146;s working capital that totaled approximately
$7.0 million. The Company received full payment on the promissory note plus
accrued interest during June 2002. Additionally, we will receive $0.8 million of
cash from Premier related to estimated income tax payments and tax benefits from
net operating losses. The Company has agreed not to sell student planners
containing the Company&#146;s &#147;7 Habits&#148; and &#147;What Matters
Most&#148; content directly to schools and school districts in the K through 12
market subsequent to the closing. We recognized a pretax gain of $99.9 million
($64.9 million after applicable taxes) on the sale of Premier, which was
recorded as a gain on the sale of discontinued operations in the consolidated
statement of operations for fiscal 2002. As part of the sale of Premier, the
Company retained responsibility for certain outstanding legal claims against
Premier, which were settled subsequent to August 31, 2002 (Note 11). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The operating results of
Premier were historically included in the education segment for segment
reporting purposes (Note 21). The Company recorded the following operating
results for Premier for the periods indicated (in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
_________________________________________________________________
                          2002          2001          2000
_________________________________________________________________
Sales                   $   5,329     $  85,438     $  79,985
Pretax income (loss)       (8,877)       11,264         9,737
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under terms of the
Company&#146;s then-existing credit facilities, we used $92.3 million of the
proceeds from the sale of Premier to pay off and terminate our term loan and
revolving credit line (Note 8). </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Termination of franklinplanner.com</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fourth quarter
of fiscal 2002, we discontinued the on-line planning services provided at
franklinplanner.com. The Company acquired franklinplanner.com during fiscal 2000
and we intended to sell on-line planning as a component of our productivity
solution for both organizations and individuals. However, due to competitors
that offered on-line planning at no charge and other related factors, the
Company was not able to produce a profitable business plan for the operations of
franklinplanner.com. Although we were unable to generate revenue from the
on-line planning services available at franklinplanner.com, we considered an
on-line planning tool an essential component of our overall product offerings
and continued to operate franklinplanner.com during fiscal 2001 and fiscal 2002.
However, due to operating results recorded during fiscal 2002, and the need to
reduce operating expenses, combined with new technology product offerings,
franklinplanner.com was terminated during late fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The operating results of
franklinplanner.com were historically included as a component of corporate
expenses for segment reporting purposes (Note 21). The Company recorded the
following operating results for franklinplanner.com during the periods indicated
(in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
_________________________________________________________________
                          2002          2001          2000
_________________________________________________________________
Sales                   $    none     $    none     $    none
Pretax loss                (2,762)       (4,884)       (2,258)
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>8.     DEBT</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As required by the terms of
our credit agreement that was obtained during fiscal 2001, we used $92.3 million
of the proceeds from the sale of Premier (Note 7) to pay all amounts outstanding
on our existing term loan and line of credit agreements. As a result of this
prepayment, the existing line of credit agreement was terminated and the Company
has not sought to obtain a new credit agreement. Following the payment and
termination of these debt instruments, our remaining debt consists primarily of
long-term mortgages on our buildings and property. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Lines of Credit</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the payment
and termination of our line of credit agreement as described above, we did not
have any outstanding line of credit debt at August 31, 2002. At August 31, 2001,
we had $35.6 million outstanding on a $45.6 million long-term line of credit
facility, which is included in the liabilities of continuing operations, and
$9.8 million outstanding on a short-term line of credit through Premier, which
is included in the liabilities of discontinued operations in our consolidated
balance sheet for August 31, 2001. The weighted average interest rate on the
short-term line of credit debt was 5.1 percent at August 31, 2001. The weighted
average interest rate on the long-term line of credit facility was 6.4 percent
as of August 31, 2001. Commitment fees associated with the lines of credit prior
to their termination totaled $0.1 million during fiscal 2002. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Long-Term Debt</i></b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our long-term debt in continuing operations was comprised of the following items (in thousands):</font></p>
<pre>
AUGUST 31,
________________________________________________________________
                                            2002         2001
________________________________________________________________
Mortgage payable in monthly
  installments of $14 CDN, including
  interest at 5.75% through January
  2015, secured by real estate           $     855          907

Mortgage payable in monthly
  installments of $8 including
  interest at 9.9% through October
  2014, secured by real estate                 639          665

Note payable to bank, payable in
  quarterly installments of $44,
  including interest at 10%, through
  January 2003, secured by software             89

Note payable to bank, payable in
  monthly installments of $23, plus
  interest at prime plus .5%,
  payable through September 2002,
  secured by real estate                        23          305

Term note payable to bank, with
  interest at LIBOR plus 2.5%,
  secured by real estate,
  inventories, and receivables paid
  in full during December 2001                           56,211

Note payable in annual
  installments of $3,000 plus
  interest at 8%, unsecured and paid
  in full during December 2001                            3,000

Contract and license agreement
  payable in monthly installments of
  $7, paid in full during October 2001                       13
________________________________________________________________
                                             1,606       61,101

Less current portion                          (189)     (11,574)
________________________________________________________________
Long-term debt, less current
  portion                                $   1,417    $  49,527
________________________________________________________________

</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future maturities of long-term debt at August 31, 2002 were as follows (in thousands):</font></p>
<pre>
YEAR ENDING
AUGUST 31,
________________________________________________________________
2003                                               $      189
2004                                                       83
2005                                                       89
2006                                                       96
2007                                                      103
Thereafter                                              1,046
                                                ________________
                                                   $    1,606
                                                ________________
</PRE>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>9.     LEASE OBLIGATIONS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Capital Leases</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, we paid
in full our remaining capital lease obligations. Our assets that were purchased
through capital lease arrangements were comprised primarily of office furniture
and equipment and had a total cost basis of $3.1 million and $4.0 million, with
accumulated amortization of $2.2 million and $2.6 million at August 31, 2002 and
2001, respectively. Amortization of capital lease assets was included as a
component of depreciation expense in our consolidated statements of operations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Operating Leases</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the normal course of
business, we lease retail store and office space under noncancelable operating
lease agreements. The majority of our retail stores lease space in or around
shopping centers or malls and other areas that generally have significant consumer traffic.
We also rent office space, primarily for regional sales administration offices,
in commercial office complexes that are conducive to administrative operations.
These operating lease agreements generally contain renewal options that may be
exercised at our discretion after completion of the base rental term. In
addition, many of the rental agreements provide for regular increases to the
base rental rate at specified intervals, which usually occurs on an annual
basis. At August 31, 2002, our operating leases have remaining terms that range
from one to fourteen years. The following table summarizes our future minimum
lease payments under operating leases at August 31, 2002 (in thousands): </FONT></P>

<PRE>
YEAR ENDING
AUGUST 31,
________________________________________________________________
2003                                              $    16,980
2004                                                   14,915
2005                                                   11,724
2006                                                    8,255
2007                                                    6,378
Thereafter                                             21,881
                                                ________________
                                                  $    80,133
                                                ________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We recognize lease expense
on a straight-line basis over the life of the lease agreement and contingent
rent expense as it is incurred. Total rental expense in continuing operations
for operating leases was $18.9 million, $18.5 million, and $16.5 million, for
the years ended August 31, 2002, 2001, and 2000, respectively. Additionally,
certain retail store leases contain terms that require additional, or
contingent, rental payments based upon the realization of specified sales
thresholds. Our contingent rental payments were insignificant during fiscal 2002
and totaled $0.4 million and $0.3 million during fiscal 2001 and fiscal 2000,
respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company exited certain
leased office space in Provo, Utah during fiscal 2000. In connection with
leaving the office space, we obtained a noncancelable sublease agreement for the
majority of our remaining lease term on the buildings. The sublease agreement
for the office space expires in March 2007 and contains renewal provisions that
allow the subleasee to extend the sublease agreement, at its option, until March
2013, the date the original lease agreement terminates. As part of our
restructuring accrual, the Company has reserved for the difference between our
lease payments on the exited buildings and the payments to be received from the
subleasee (Note 16). Future minimum lease payments due to the Company from the
subleasee as of August 31, 2002 were as follows (in thousands): </FONT></P>

<PRE>
YEAR ENDING
AUGUST 31,
________________________________________________________________
2003                                              $     1,901
2004                                                    1,958
2005                                                    2,017
2006                                                    2,077
2007                                                    1,232
                                                ________________
                                                  $     9,185
                                                ________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total sublease payments to
the Company were $2.0 million, $2.2 million, and $0.6 million in fiscal 2002,
fiscal 2001, and fiscal 2000, respectively. Sublease payments were recorded as
reductions to selling, general, and administrative expenses in our consolidated
statements of operations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>10.    FINANCIAL INSTRUMENTS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fair Value of Financial Instruments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The book value of our
financial instruments approximates fair value. However, the fair values of our
financial instruments were based on a variety of factors and assumptions.
Accordingly, the fair values may not represent the actual values of the
financial instruments that could have been realized as of August 31, 2002 or
2001, or that will be realized in the future and do not include expenses that
could be incurred in an actual sale or settlement. The following methods and
assumptions were used to determine the fair values of our financial instruments,
none of which were held for trading or speculative purposes: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cash and Cash
Equivalents &#150; </B>The carrying amounts of cash and cash equivalents
approximate their fair values due to the short maturity of these instruments. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Accounts Receivable
&#150; </B>The carrying value of accounts receivable approximate their fair
value due to the short-term maturity and expected collection of these
instruments. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Other Assets &#150;
</B>Our other assets, including the investment in an unconsolidated subsidiary
and notes receivable, were recorded at the net realizable value of estimated
future cash flows from these instruments. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Debt &#150; </B>The fair
values of our debt balances were estimated by using discounted cash flow
analyses based upon market rates available to us for similar debt with the same
remaining maturities. Debt balances at August 31, 2002 consisted primarily of
mortgage debt on various buildings used by the Company. The majority of our debt
at August 31, 2001 was comprised of variable-rate debt, which was paid in full
during fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Interest Rate Swap
Agreement &#150; </B>The fair value of our interest rate swap agreement
outstanding at August 31, 2001 was based upon quoted market prices and fair
value information obtained from the third-party bank, which acted as
counterparty to the agreement. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Derivative Instruments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the normal course of
business, we are exposed to interest rate and foreign currency exchange risks.
To manage risks associated with interest rates and foreign currencies, we have
made limited use of derivative financial instruments. Derivatives are financial
instruments that derive their value from one or more underlying financial
instruments. As a matter of policy, our derivative instruments are entered into
for periods consistent with related underlying exposures and do not constitute
positions that are independent of those exposures. In addition, we do not enter
into derivative contracts for trading or speculative purposes, nor are we party
to any leveraged derivative instrument. The notional amounts of derivatives do
not represent actual amounts exchanged by the parties to the instrument and,
thus, are not a measure of the exposure to the Company through our use of
derivatives. The Company enters into derivative agreements with highly rated
counterparties and we do not expect to incur any losses resulting from
non-performance by other parties. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Interest Rate Risk
Management</B> &#150; Generally, under interest rate swaps, the Company agrees
with a counterparty to exchange the difference between fixed-rate and
floating-rate interest amounts calculated by reference to a contracted notional
amount. When appropriate, we designate interest rate swap agreements as hedges
of risks associated with specific assets, liabilities, or future commitments,
and these contracts are monitored to determine whether the underlying agreements
remain effective hedges. The interest rate differential on interest rate swaps
is recognized as a component of interest expense or income over the term of the
agreement. We do not make extensive use of interest rate swap agreements in the
normal course of business. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with our
management stock loan program (Note 14), the Company entered into an interest
rate swap agreement. As a result of the credit agreement obtained in fiscal
2001, the notes receivable from loan participants, corresponding debt, and
interest rate swap agreement were recorded on the Company&#146;s consolidated
balance sheet at August 31, 2001. Under terms of our then existing credit
agreement, we were obligated to use a portion of the proceeds from the sale of
Premier to retire all outstanding debt, including the amount related to the
management common stock loan program. As a result of this transaction, the
underlying obligation of the interest rate swap agreement was transformed from a
hedge instrument to a speculative instrument, which we settled during the second
quarter of fiscal 2002 for a payment of $4.9 million in cash. At August 31,
2001, the fair value of this agreement was a $4.6 million liability ($2.8
million net of tax), which was recorded as a component of other long-term
liabilities and accumulated comprehensive loss in our consolidated balance sheet
for fiscal 2001. The interest rate differential totaled $0.6 million during
fiscal 2002 prior to settlement and totaled $0.1 million during fiscal 2001. The
Company had no interest rate swap agreements or similar derivative contracts in
place at August 31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Foreign Currency
Exposure</B> &#150; The Company has international operations and during the
normal course of business we are exposed to foreign currency exchange risks as a
result of transactions that are denominated in currencies other than the United
States dollar. During fiscal 2002, we utilized foreign currency forward
contracts to manage the volatility of certain intercompany financing
transactions that are denominated in foreign currencies. Our foreign exchange
contracts did not meet specific hedge accounting requirements and corresponding
gains and losses were recorded as a component of current operations, which
offset the gains and losses on the underlying transactions, in the accompanying
consolidated statements of operations. As a result of our use of foreign
currency exchange contracts, we recorded net losses totaling $0.3 million during
fiscal 2002, net gains totaling $0.2 million during fiscal 2001, and net losses
totaling $0.2 million during fiscal 2000. All of our foreign currency exchange
contracts were settled prior to August 31, 2002. However, the Company intends to
continue utilizing foreign currency exchange contracts in future periods to
offset potential foreign currency exchange risks. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>11.    COMMITMENTS AND CONTINGENCIES</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>EDS Contract</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2001, we
entered into long-term outsourcing agreements with Electronic Data Systems
(&#147;EDS&#148;) to provide warehousing, distribution, information systems, and
call center operations. Under terms of the outsourcing contracts and their
amendments, EDS operates our primary call center, provides warehousing and
distribution services, and supports the Company&#146;s information systems. The
outsourcing agreements expire at various dates through 2017 and have required
minimum payments totaling approximately $361.4 million, which are payable over
the lives of the agreements. During fiscal 2002, we paid $33.6 million to EDS
for services provided under terms of the outsourcing agreements. The following
schedule summarizes our required minimum payments to EDS for outsourcing
services over the lives of the agreements (in thousands): </FONT></P>

<PRE>
YEAR ENDING
AUGUST 31,
________________________________________________________________
2003                                              $    31,298
2004                                                   31,431
2005                                                   31,428
2006                                                   30,246
2007                                                   28,919
Thereafter                                            208,031
                                                ________________
                                                  $   361,353
                                                ________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Beginning in fiscal 2003,
the warehouse, distribution, and call center components of the contract will, to the extent volumes exceed contractual minimums, be
a variable charge, which will be based upon the number of actual transactions
processed, such as boxes shipped and agent hours. Total payments to EDS may
differ materially from required minimum payments if actual activity increases
over the term of the agreements. The outsourcing contract also contains early
termination provisions that we may exercise under certain conditions. However,
in order to exercise the early termination provisions, the Company would have to
pay specified penalties to EDS depending upon the circumstances of the contract
termination. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Purchase Commitments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has various
purchase commitments for materials, supplies, and other items incident to the
ordinary conduct of business. Individually and in aggregate, these commitments
are immaterial to the Company&#146;s operations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Legal Matters</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As part of the sale of
Premier Agendas (Note 7), the Company retained certain outstanding legal claims
against Premier. Subsequent to August 31, 2002 we settled these outstanding
claims for approximately $0.8 million, which increased the recorded gain from
the sale of Premier as we had accrued $3.5 million for the potential liability
related to these claims. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, the
Company received a subpoena from the Securities and Exchange Commission
(&#147;SEC&#148;) seeking documents and information relating to our management
stock loan program and previously announced, and withdrawn, tender offer. We
have provided the documents and information requested by the SEC, including the
testimony of our Chief Executive Officer and other key employees. The Company
has cooperated, and will continue to cooperate, fully in providing requested
information to the SEC. The SEC has stated that the formal inquiry is not an
indication that the SEC has concluded that there has been a violation of any law
or regulation. The Company believes that we have complied with the laws and
regulations applicable to our management stock loan program and withdrawn tender
offer. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Acquisition Earnout Payments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the
acquisitions of Premier Agendas and our Personal Coaching Division in fiscal
1997, we were required to pay contingent earnout payments during fiscal 2001 and
fiscal 2000 to the prior owners of these entities. The contingent earnout
payments were based upon the achievement of specified earnings targets during
the measurement period defined in the respective acquisition agreements. These
contingent earnout payments were recorded as additions to the original purchase
price after considering factors found in Emerging Issues Task Force
(&#147;EITF&#148;) Issue No. 95-8, &#147;Accounting for Contingent Consideration
Paid to the Shareholders of an Acquired Enterprise in a Purchase Business
Combination.&#148; We considered factors involving terms of continuing
employment of key personnel, since the earnout payments were not automatically
forfeited upon termination of key management, factors involving reasons for
contingent payment provisions, such as the relative value of the original
purchase price to the value of the acquired entity, and factors regarding the
formula for determining the contingent payment. Based upon these factors, the
contingent earnout payments were recorded as additions to the original purchase
price rather than compensation expense. The Company paid the following
contingent earnout payments during the periods indicated (in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
________________________________________________________________
                                     2001              2000
________________________________________________________________
Personal Coaching            $      1,903      $      5,200
Premier Agendas                                      10,853
                           _____________________________________
Total contingent
  earnout payments           $      1,903      $     16,053
                           _____________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Contingent earnout payments
were recorded as goodwill when paid and were being amortized over the remaining
life of the original purchased goodwill prior to the adoption of SFAS No. 142.
At August 31, 2002, the Company had no non-compensatory contingent earnout
liabilities. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>12.    RELATED PARTY TRANSACTIONS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For fiscal 2002, our Chief
Executive Officer (&#147;CEO&#148;) decided to forgo his
salary, which totaled $0.5 million. In accordance with SEC reporting rules, we
recorded compensation expense for the unpaid salary and recorded a corresponding
increase to additional paid-in capital. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company pays both
Vice-Chairmen of the Board of Directors a percentage of the proceeds received
for seminars that are presented by them. During the fiscal years ended August
31, 2002, 2001, and 2000, we paid $1.9 million, $3.5 million, and $3.3 million,
respectively, to the Vice-Chairmen for these seminar presentations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company, under a
long-term agreement, leases buildings from a partnership that is partially owned
by a Vice-Chairman of the Board of Directors and certain officers of the
Company. We paid rental expense to the partnership totaling $2.1 million for
each of the fiscal years ended August 31, 2002, 2001, and 2000. These buildings
are currently being subleased to a third party. For more information regarding
these subleases, refer to Note 9. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As part of a preferred
stock offering to a private investor, an affiliate of the investor, who was then
a director of the Company, was named Chairman of the Board of Directors and CEO.
In addition, two affiliates of the investor were appointed to the Board of
Directors. In connection with the preferred stock offering, we pay an affiliate
of the investor $400,000 each year for monitoring fees. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, the
Company entered into a sabbatical and severance agreement with one of our
officers who was also a member of our Board of Directors. The agreement provides
for payments totaling $0.9 million through November 2004. The compensation cost
of this agreement was expensed in current operations during the year ended
August 31, 2002, as the Company will receive no benefit or future services for
the payments. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2002, we
entered into a consulting agreement with a member of our Board of Directors to
assist the Company with various projects and transactions, such as the sale of
Premier and new product offerings. Under terms of the consulting agreement, we
paid $0.2 million for services provided to the Company in fiscal 2002. The
consulting agreement expires in December 2003. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has licensed
certain intellectual property to a company in which a Vice-Chairman of the Board
of Directors is a principal shareholder. No license payments were required to be paid to the
Company during fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Premier, a subsidiary of
the Company that was sold during fiscal 2002, had trade accounts payable to
various companies that were partially owned by certain former owners of Premier
totaling $0.5 million at August 31, 2001. In addition, Premier had notes payable
to key employees and former key employees totaling $1.5 million as of August 31,
2001 (Note 7). The notes payable were used for working capital, were due upon
demand, and had interest rates that approximated prevailing market rates. These
payable amounts were included as a component of liabilities of discontinued
operations in the accompanying August 31, 2001 consolidated balance sheet. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fiscal year
ended August 31, 2000, the Company sold 121,250 shares of its common stock to a
former CEO of the Company for $0.9 million. In consideration for the common
stock, the Company received a non-recourse promissory note, due September 2003,
bearing interest at 10.0 percent. Additionally, all of the former CEO&#146;s
stock options were canceled and the issuance of common stock is being accounted
for using the variable method, due to its stock option characteristics. The note
receivable from the sale of this stock has been recorded as a component of notes
and interest receivable related to financing common stock purchases by related
parties, which is a reduction to shareholders&#146; equity in our consolidated
balance sheets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2000, we
actively sought to reacquire outstanding options to purchase shares of our
common stock. Included in the total number of option shares reacquired, the
Company purchased options for 150,000 shares of common stock from a
Vice-Chairman of the Board of Directors for $0.4 million. In addition, 358,000
option shares were purchased from two officers and one former officer of the
Company for a total of $0.8 million. These reacquired options were valued using
the Black-Scholes option-pricing model, which was the same valuation methodology
used by the Company to purchase other stock options during fiscal 2000 (Note
13). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fiscal year
ended August 31, 2000, we purchased 9,000 shares of our common stock for $0.1
million in cash, from a Vice-Chairman of the Board of Directors. All shares were
purchased at the existing fair market value on the dates of the transactions. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>13.    CAPITAL TRANSACTIONS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Preferred Stock</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Series A. </B>As of
August 31, 2002, we had issued 873,460 shares of our Series A preferred stock.
Series A preferred stock dividends accrue at an annual rate of 10.0 percent and
were payable quarterly in cash or additional shares of Series A preferred stock,
at the Company&#146;s option, until July 1, 2002 as allowed by the Series A
preferred stock agreement. Subsequent to that date, all future Series A
preferred stock dividends must be paid in cash. During fiscal 2002 and 2001, the
Company issued 42,088 shares and 20,277 shares, respectively, of Series A
preferred stock to existing preferred stock shareholders as payment for accrued
Series A preferred dividends. All other Series A preferred dividend payments
made during fiscal 2002 and 2001 were paid with cash. At August 31, 2002 and
2001, we had accrued $2.2 million and $2.1 million of Series A preferred
dividends, which were included as a component of other accrued liabilities in
our consolidated balance sheets. Our Series A preferred stock is convertible at
any time into the Company&#146;s common stock at a conversion price of $14.00
per share and ranks senior to our common stock. Series A preferred stock
shareholders generally have the same voting rights as common stock holders on an
&#147;as-converted&#148; basis. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Series B. </B>During
fiscal 2002, our Board of Directors authorized 400,000 shares of Series B
preferred stock. Series B preferred stock ranks junior to Series A preferred
stock and ranks equivalent to common stock as to liquidation rights. Series B
preferred stock has no voting rights, no preemptive or redemption rights, and
has no dividend rights. Each share of Series B preferred stock may be converted
into ten shares of our common stock subsequent to March 1, 2005. At August 31,
2002, no shares of Series B preferred stock have been issued. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Treasury Stock</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We sold 151,388, 164,496,
and 153,614 shares of our common stock held in treasury as a result of the
exercise of incentive stock options and the issuance of shares under the
Company&#146;s employee stock purchase plan for the fiscal years ended August
31, 2002, 2001, and 2000, respectively. These shares were sold for an aggregate
total of $0.5 million, $1.0 million, and $1.0 million, and had a cost of
approximately $1.9 million, $2.7 million, and $2.9 million, for the fiscal years
ended August 31, 2002, 2001, and 2000, respectively. During fiscal 2000, we sold
650,000 shares of treasury stock for use in our management stock loan program
(Note 14) for $5.1 million, which was our cost basis.  Additionally during fiscal 2000, the Company sold 121,250
shares of our common stock held in treasury to a former CEO of the Company for
$0.9 million. In consideration for the common stock, the Company received a
non-recourse promissory note, due September 2003 (Note 12). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Through August 31, 2000,
our Board of Directors had approved various plans for the purchase of up to
8,000,000 shares of the Company&#146;s common stock. Through November 25, 2000,
we had purchased 7,705,000 shares of our common stock under these
board-authorized plans. On December 1, 2000, our Board of Directors approved an
additional plan to purchase up to $8.0 million of the Company&#146;s common
stock. Through August 31, 2001, we purchased 888,000 shares for $7.1 million
under the terms of this plan. In connection with these Board authorized purchase
plans, the Company purchased an aggregate 900,000 shares for $7.2 million, and
688,000 shares for $5.5 million, during the fiscal years ended August 31, 2001
and 2000, respectively. No shares of our common stock were purchased during
fiscal 2002 in connection with any Board authorized purchase plan. However,
during fiscal 2002 and 2001, we purchased 25,000 shares and 41,000 shares of our
common stock with a corresponding cost of $0.1 million and $0.3 million,
respectively, for exclusive distribution to participants enrolled in our
employee stock purchase plan. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Tax Benefit from Exercise of Affiliate Stock Options</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fiscal years
ended August 31, 2001 and 2000, certain employees exercised affiliate stock
options (nonqualified stock options received from principal shareholders of the
Company), which resulted in tax benefits to the Company of $25,000 and $0.6
million, respectively, which were recorded as increases to additional paid-in
capital. There were no affiliate stock options exercised during fiscal 2002. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Stock Options</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s Board of
Directors has approved an incentive stock option plan whereby options to
purchase shares of common stock are issued to key employees at an exercise price
not less than the fair market value of our common stock at the date of grant.
The term, not to exceed ten years, and exercise period of each incentive stock
option awarded under the plan are determined by a committee appointed by our
Board of Directors. At August 31, 2002, we had approximately 855,000 shares
available for grant under the current incentive stock option plan. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A summary of nonqualified and incentive stock option activity is set forth below:</font></p>

<!-- MARKER PAGE="sheet: 6; page: 6" -->
<PRE>
                               Number of        Weighted Avg.
                                Options        Exercise Price
________________________________________________________________
<i><b>Outstanding at
  August 31, 1999</b></i>                 5,284,165        $ 19.10

Granted                             354,685           7.59
Exercised                           (22,334)          4.38
Repurchased                      (3,294,476)         22.54
Forfeited                          (574,033)         15.69
                                ________________
<i><b>Outstanding at
   August 31, 2000</b></i>                1,748,007          11.59

Granted:
    At market value                 203,000           7.44
    To the CEO                    1,602,000          14.00
Exercised                           (19,861)          5.97
Forfeited                           (93,117)          9.31
                                ________________
<i><b>Outstanding at
   August 31, 2001</b></i>                3,440,029          12.56

Granted                             101,000           4.93
Forfeited                          (496,748)         10.58
                                ________________
<b><i>Outstanding at
   August 31, 2002</i></b>                3,044,281        $ 12.63
                                ________________
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2001, the
Company&#146;s shareholders ratified a Board approved employment agreement for
our Chief Executive Officer (&#147;CEO&#148;). In connection with the employment
agreement, the CEO was granted 1.6 million options to purchase shares of our
common stock. The options will be fully exercisable on August 31, 2007, and will
be exercisable prior to August 31, 2007 only upon the achievement of specified
common stock prices ranging from $20.00 per share to $50.00 per share. The
options can only be exercised while the executive is employed as our CEO or
Chairman of the Board of Directors. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes exerciseable option information for the periods indicated:</font></p>
<pre>
<i><b>August 31,
________________________________________________________________
                                 2002         2001        2000</b></i>
________________________________________________________________
Exercisable options          1,019,457   1,039,672     757,656

Weighted average
  exercise price per
  share                       $ 12.48     $ 13.27      $ 14.83
</pre>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In an effort to reduce the
potentially dilutive effect of outstanding options on our capital structure, we
actively sought to reacquire outstanding stock options from both current and
former employees during fiscal 2000. The majority of option purchase costs were
incurred in connection with a tender offer made by the Company during the third
quarter of fiscal 2000 to purchase all outstanding options with an exercise
price of $12.25 or higher. The tender offer expired on May 3, 2000 with a total
of 2,319,000 options tendered. Under terms of the offer, we paid cash for the
outstanding options, which were priced using a market valuation methodology. The
total cost of the tender offer was $6.9 million. As a result of the tender offer
and previously purchased option shares, we purchased 3,294,476 option shares for
a total cost of $8.7 million in cash. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We apply the intrinsic
method of accounting for stock options and other stock-based compensation plans.
Accordingly, no compensation expense has been recognized for our stock option
plans or employee stock purchase plan in our consolidated statements of
operations. Had compensation cost for our stock option plans and employee stock
purchase plan been determined in accordance with the provisions of SFAS No. 123,
&#147;Accounting for Stock-Based Compensation,&#148; our net loss and
corresponding loss per share would have been the pro forma amounts indicated
below (in thousands, except per share data): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
________________________________________________________________
                                   2002        2001         2000
________________________________________________________________
Net loss attributable to
  common shareholders
  as reported                    $(109,266)   $(19,236)   $(12,414)
Net loss attributable to
  common shareholders
  pro forma                       (110,308)    (21,302)    (11,404)

Diluted loss per share as
  reported                         (5.49)       (.95)       (.61)
Diluted loss per share
  pro forma                        (5.89)      (1.10)       (.57)
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following information applies to our stock options outstanding at August 31, 2002:</font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A total of 1,107,201 options outstanding have exercise prices between $2.78 and
$11.83 per share, with a weighted average exercise price of $7.38 per share and
a weighted average remaining contractual life of 6.7 years. At August 31, 2002,
700,627 of these options were exercisable.</font> </TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The 1,602,000 outstanding options granted to our CEO in connection with a Board
and shareholder approved employment agreement have an exercise price of $14.00
per share, with a weighted average remaining contractual life of 8.0 years. At
August 31, 2002, none of these options were exercisable.</font> </TD>
</tr></table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The remaining 335,080 options outstanding have exercise prices between $14.69
and $34.50 per share, with a weighted average exercise price of $22.30 per share
and a weighted average remaining contractual life of 3.5 years. At August 31,
2002, 318,830 of these options were exercisable.</font> </TD>
</tr></table>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The weighted average fair
value of options granted under our stock option plans during the fiscal year
ended August 31, 2002 was $2.04 per share. During fiscal 2001, the weighted
average fair value was $3.07 per share for options granted at the market price
and $3.05 per share for options granted to the CEO. The weighted average fair
value of options granted during fiscal 2000 was $3.03 per share. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Black-Scholes
option-pricing model was used to calculate the weighted average fair value of
options granted using the following assumptions for grants in fiscal years 2002,
2001, and 2000: </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                 2002         2001        2000</i></b>
________________________________________________________________

Dividend yield                   None        None         None
Volatility                       59.4%       55.3%        55.3%
Expected life (years)             2.8         6.9          4.4
Risk free rate of
  return                          4.9%        5.7%         5.3%
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The estimated fair value of
options granted is subject to the assumptions made and if the assumptions were
to change, the estimated fair value amounts could be significantly different.
The weighted average fair value of stock options exercised during fiscal years
2001 and 2000 was $8.58 per share and $8.40 per share, respectively. No stock
options were exercised during fiscal 2002. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>14.    MANAGEMENT COMMON STOCK LOAN PROGRAM</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is the creditor
for a loan program that provided certain management personnel with the
opportunity to purchase shares of our common stock by borrowing on a
full-recourse basis from external lenders. The loan program closed during fiscal
2001 with 3,825,000 shares purchased for a total cost of $33.6 million, with the
loans guaranteed by the Company. Although interest accrues against the
participants over the life of the loans, no interest payments are due from
participants until the loans mature in March 2005. As part of the credit
agreement obtained in fiscal 2001 (Note 8), we acquired from the external
lenders the notes receivable from the loan participants and recorded them as a
reduction to shareholders&#146; equity. As a result, the Company is now the
creditor on these full-recourse notes from the participants of the loan program. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company utilizes a
systematic methodology for determining the level of reserves that are
appropriate for the management common stock loan program. A key factor
considered by our methodology is the current market value of common stock held
by the participants. Other factors considered by the methodology include: the
liquid net worth of the participants; the risks of pursuing collection actions
against key employees; the probability of sufficient participant repayment
capability based upon proximity to the due date of the loans; and other
business, economic, and participant factors which may have an impact on our
ability to collect the loans. Additionally, the Company may not hold the
participants&#146; shares of stock as collateral due to certain laws and
regulations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon our reserve
methodology, we recorded increases to the loan loss reserve totaling $24.8
million during fiscal 2002. As of August 31, 2002 and 2001, the Company had
aggregate loan loss reserves totaling $25.9 million and $1.1 million,
respectively, which reduce notes and interest receivable from financing common
stock purchases by related parties in our consolidated balance sheets. In
addition, we ceased recording interest receivable and corresponding interest
income on all participant loans during the quarter ended May 25, 2002. However,
the loan participants remain liable for interest accrued over the full term of
their loans, which is due when the loans mature in March 2005. At August 31,
2002, the participants&#146; loans plus recorded accrued interest exceeded the
value of the common stock held by the participants by $29.2 million. Should the
value of the common stock continue to be insufficient to cover the loans
outstanding during the loan term, our loan loss reserve methodology provides a
basis to be fully reserved prior to the March 2005 loan maturity date. However,
the inability of some or all participants to repay their loans would have a
significant adverse impact upon the financial position and future cash flows of
the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The establishment of
reserves for potential loan losses requires significant estimates and judgment
by the Company&#146;s management, and these estimates and projections are
subject to change as a result of various economic factors, most of which are not
within our control. As a result, the reserve for management stock loan losses
could fluctuate significantly in future periods. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>15.    LOSS ON IMPAIRED ASSETS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We regularly review our
long-lived assets for circumstances or events that indicate an asset may not be
realizable. Our losses on impaired assets consisted of the following for the
periods indicated (in thousands): </FONT></P>

<PRE>
Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000
________________________________________________________________

Covey trade name            $  4,000
Note receivable from
  sale of subsidiary           2,282
Capitalized software
  development costs            1,758    $    801     $  1,940
Computer software              1,097
Retail store assets            1,001
Other                             47
                          ______________________________________
                            $ 10,185    $    801     $  1,940
                          ______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Note 4, we
reassessed the carrying value of the Covey trade name, an indefinite-lived
intangible asset, under the provisions of SFAS No. 142. Due to declining sales
and estimated future sales associated with the Covey trade name, we recorded a
$4.0 million impairment charge during the fourth quarter of fiscal 2002. The
value of the Covey trade name will continue to be evaluated in future periods
and may require further impairment charges. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The note receivable from
the sale of a subsidiary became impaired when the purchaser declared bankruptcy
during the second quarter of fiscal 2002. The note receivable was guaranteed by
the parent company of the purchaser, however, the parent company also became
insolvent during fiscal 2002 and the possibility of recovery on the note
receivable appears remote. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We regularly review our
property and equipment and capitalized computer software costs for impairment
whenever circumstances indicate that the carrying amount of the asset may not be
realizable. Based upon unfavorable sales trends and projected sales information,
we recorded total impairment charges of $1.8 million for capitalized development
costs related to software products that produced less-than-expected sales
volume. During fiscal 2001 and 2000, we recorded $0.8 million and $1.9 million,
respectively, of impairment charges for capitalized software development costs
that were affected by similarly unfavorable sales trends and estimated sales
projections. We also recorded a $1.1 million impairment charge related to a
customer database management software application, which was developed and
installed by an external company, and became obsolete when we selected a new
database software provider. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of projected
negative cash flows at certain of our retail stores, we recorded impairment
charges totaling $1.0 million to reduce the book values of the long-lived assets
of these stores to their estimated net realizable value at August 31, 2002. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>16.    RESTRUCTURING COSTS</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fourth quarter
of fiscal 1999, our Board of Directors approved a plan to restructure the
Company&#146;s operations, reduce our workforce, and formally exit the majority
of our leased office space located in Provo, Utah. In connection with this
restructuring plan, we recorded a restructuring charge totaling $16.3 million.
Included in the restructuring charge were costs to provide severance and related
benefits, as well as costs to formally exit the leased office space. This
restructuring plan was substantially completed during fiscal 2000. The
components of the remaining restructuring accrual, which is included in other
accrued liabilities, are as follows (in thousands): </FONT></P>

<PRE>
                                         Leased
                                         Office
                           Severance   Space Exit
                             Costs        Costs       Total
                           _____________________________________

Accrued restructuring
  costs at August 31, 2001   $    301    $  2,211     $  2,512
Restructuring costs paid         (275)       (308)        (583)
                           _____________________________________
Accrued restructuring
  costs at August 31, 2002   $     26    $  1,903     $  1,929
                           _____________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At August 31, 2002, accrued
severance costs consisted of expected remaining severance and benefit payments
for terminated employees. Remaining accrued leased office space exit costs
represent the difference between base rental charges and the offsetting expected
sublease revenue receipts. The Company expects that the remaining restructuring
accrual will be sufficient to complete our restructuring plan. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The severance cost accrual
was established based upon estimates of factors such as expected time to find
other employment, expected benefit payments, and severance payment type.
However, primarily due to favorable economic conditions that decreased the
average time necessary for terminated employees to find new employment, we
reassessed our potential liability for remaining severance costs. Accordingly,
the Company reduced the severance accrual during fiscal 2000 by $4.9 million to
reflect the estimated remaining liability. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>17.    EMPLOYEE BENEFIT PLANS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Profit Sharing Plans</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have defined
contribution profit sharing plans for our employees that qualify under Section
401(k) of the Internal Revenue Code. These plans provide retirement benefits for
employees meeting minimum age and service requirements. Qualified participants
may contribute up to 15 percent of their gross wages, subject to certain
limitations. These plans also provide for matching contributions by the Company.
The matching contributions from continuing operations that were expensed during
the years ended August 31, 2002, 2001, and 2000, were $1.2 million, $1.5
million, and $1.7 million, respectively. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Employee Stock Purchase Plan</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an employee
stock purchase plan that offers qualified employees the opportunity to purchase
shares of our common stock at a price equal to 85 percent of the fair market
value of the common stock at the time of purchase. A total of 151,388, 144,035,
and 142,327, shares were issued under this plan for the fiscal years ended
August 31, 2002, 2001, and 2000, respectively. Shares available for issuance
under this plan at August 31, 2002 were 579,015. The Company accounts for its
employee stock purchase plan using the intrinsic method as defined in the
provisions of APB Opinion 25 and related interpretations. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Deferred Compensation Plan</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2000, we
established a deferred compensation plan that provides certain key officers and
employees the ability to defer a portion of their compensation until a later
date. The Company incurred and expensed charges totaling $0.2 million, $0.2
million, and $0.1 million during the fiscal years ended August 31, 2002, 2001,
and 2000, respectively, related to our deferred compensation plan. Deferred
compensation amounts used to pay benefits are held in a &#147;rabbi trust&#148;,
which invests in various mutual funds and/or our common stock as directed by the
plan participants. The trust assets are recorded in our consolidated balance
sheets because such amounts are subject to the claims of the Company&#146;s
creditors. The corresponding deferred compensation liability represents the
amounts deferred by participants plus any earnings or minus any losses on the
trust assets. The plan&#146;s assets totaled approximately $1.4 million and $3.1
million at August 31, 2002 and 2001, while plan liabilities totaled
approximately $1.9 million and $3.1 million for the corresponding periods. The
difference between plan assets and liabilities at August 31, 2002 was primarily
due to disbursements of plan assets to participants that left the Company. The
Company has paid these former participants and has recorded a $0.7 million
receivable from the plan for these distributions. The assets and liabilities of
the deferred compensation plan, including our receivable from the plan, were
recorded as components of other long-term assets and other long-term
liabilities, as appropriate, in the accompanying consolidated balance sheets. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>18.    INCOME TAXES</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The benefit (provision) for income taxes from continuing operations consisted of the following (in thousands):</font></p>
<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000</i></b>
________________________________________________________________
Current:
    Federal                 $ 21,982    $  5,531     $ (4,080)
    State                      2,434         533       (1,165)
    Foreign                   (1,027)     (1,545)      (1,655)
                          ______________________________________
                              23,389       4,519       (6,900)
                          ______________________________________

Deferred:
    Federal                   23,714        (421)       1,075
    State                      3,237         (98)         279
    Valuation allowance      (24,627)
                          ______________________________________
                               2,324        (519)       1,354
                          ______________________________________
                            $ 25,713    $  4,000     $ (5,546)
                          ______________________________________
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allocation of the total tax benefit (provision) is as follows (in thousands):</font></p>
<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000</i></b>
________________________________________________________________

Continuing
  operations                $ 25,713    $  4,000     $ (5,546)
Discontinued
  operations                   4,055      (4,267)      (4,416)
Gain on sale of
  discontinued
  operations                 (35,094)
Cumulative effect of
  change in accounting
  principle                   13,948
                          ______________________________________
                            $  8,622    $   (267)    $ (9,962)
                          ______________________________________

Comprehensive loss
  items:
  Tax effect from
     valuation of an
     interest rate swap
     agreement              $ (1,827)   $  1,827
                          ______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) from
continuing operations before the benefit or provision for income taxes consisted
of the following (in thousands): </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000</i></b>
________________________________________________________________

United States             $ (124,191)     $ (20,132)   $ (1,492)
Foreign                        2,012         2,936        (434)
                          ______________________________________
                          $ (122,179)    $ (17,196)   $ (1,926)
                          ______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The differences between
income taxes at the statutory federal income tax rate and income taxes reported
from continuing operations in the consolidated statements of operations were as
follows: </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                             2002         2001          2000</i></b>
________________________________________________________________
Federal statutory
  tax rate                    35.0%        35.0%       (35.0)%
State income
  taxes, net of
  federal effect               3.0          1.6         29.9
Deferred tax
  valuation
  allowance                  (18.2)
Intangible asset
  amortization                (0.5)        (7.0)       111.6
Effect of foreign
  losses and tax rate
  differential                 0.1         (1.2)       128.8
Other                          1.6         (5.1)        52.6
                          ______________________________________
                              21.0%        23.3%       287.9%
                          ______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon the weight of available evidence, and the nature and duration of various deferred tax assets, we
determined that it is more likely than not that the related benefits from deferred tax deductions and foreign tax carryforwards will not be realized.
Accordingly, we recorded the appropriate valuation allowances on our deferred tax assets during fiscal 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intangible asset
amortization consists of non-deductible amortization related to content and
goodwill generated by the fiscal 1997 merger with Covey Leadership Center and
certain other acquisitions. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fiscal year
ended August 31, 2000, the effect of foreign losses is primarily comprised of
losses sustained in Japan, Australia, and New Zealand for which no offsetting
tax benefit could be recognized due to uncertainties related to future taxable
income to offset such losses. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other items include various
non-deductible expenses, including certain meals, entertainment, and disallowed
compensation expenses, that occur in the normal course of business, but which
had a magnified effect on the tax rate due to decreased taxable income in fiscal
2001 and fiscal 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Significant components of
our deferred tax assets and liabilities of continuing operations were comprised
of the following (in thousands): </FONT></P>

<PRE>
<b><i>August 31,
________________________________________________________________
                                             2002         2001</i></b>
________________________________________________________________
Deferred income tax assets:
  Loan loss reserve on
     management stock loans            $   10,605   $      419
  Intangible asset amortization
     and impairment                         6,483
  Impairment of investment in
     Franklin Covey Coaching                5,382
  Property and equipment
     depreciation                           3,354
  Inventory and bad debt
     reserves                               3,115        4,098
  Foreign tax credit
     carryforward                           2,450
  Sales returns and
     contingencies                          1,588        2,676
  Restructuring and severance
     cost accruals                          1,411          975
  Vacation and other accruals                 829        1,498
  Deferred compensation                       722        1,340
  Interest and inventory
     capitalization                           485          463
  Reserves related to
     discontinued operations                  382
  Other                                       451          864
                                     ___________________________

Total deferred income tax assets           37,257       12,333
Less: valuation allowance                 (25,009)
                                     ___________________________
Net deferred income tax assets             12,248       12,333
                                     ___________________________

Deferred income tax liabilities:
  Intangibles and property
     and equipment step-ups               (12,171)     (24,083)
  Depreciation and
     amortization                                       (2,104)
  Other                                       (77)      (3,193)
                                     ___________________________
Total deferred income tax
liabilities                               (12,248)     (29,380)
                                     ___________________________
Net deferred income tax
  liabilities                          $     -      $  (17,047)
                                     ___________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The foreign tax credit
carryforward generated during fiscal 2002, which totals $2.5 million, expires on
August 31, 2007. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>19.    NET LOSS PER COMMON SHARE</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic earnings (loss) per
share (&#147;EPS&#148;) is calculated by dividing net loss attributable to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is calculated by dividing net loss by the weighted
average number of common shares outstanding, plus the assumed exercise of all
dilutive securities using the treasury stock or &#147;as converted&#148; method,
as appropriate. During periods of net loss from continuing operations, all
dilutive securities, including the effect of common shares from the issuance of
preferred stock on an &#147;as converted&#148; basis, are excluded from the
diluted EPS calculation. Significant components of the numerator and denominator
used for basic and diluted EPS were as follows for the periods indicated (in
thousands, except share and per share amounts): </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                 2002        2001        2000</i></b>
________________________________________________________________
Loss from continuing
  operations                  $(96,466)   $(13,196)   $ (7,472)
Preferred stock dividends       (8,681)     (8,153)     (8,005)
                             ___________________________________
Loss from continuing
  operations and preferred
  stock dividends             (105,147)    (21,349)    (15,477)
Income (loss) from
  discontinued operations,
  net of tax                    (7,584)      2,113       3,063
Gain on sale of discontinued
  operations, net of tax        64,851
                              __________________________________
Loss before cumulative
  effect of accounting change  (47,880)    (19,236)    (12,414)
Cumulative effect of
  accounting change, net of
  tax                          (61,386)
                              __________________________________
Net loss attributable to
  common shareholders        $(109,266)  $(19,236)   $(12,414)
                              __________________________________

Loss from continuing
  operations and preferred
  stock dividends per share:
     Basic and Diluted        $ (5.29)   $  (1.06)   $   (.76)
Income (loss) from
  discontinued operations,
  net of tax, per share:
     Basic and Diluted           (.38)        .11         .15
Gain from sale of
  discontinued operations,
  net of tax, per share:
     Basic and Diluted           3.26
                              __________________________________
Loss before cumulative
  effect of accounting
  change, net of tax,
  per share:
     Basic and Diluted          (2.41)       (.95)       (.61)
Cumulative effect of
  accounting change, net of
  tax, per share:
     Basic and Diluted          (3.08)
                              __________________________________
Net loss attributable to
  common shareholders per
  share:
     Basic and Diluted        $ (5.49)   $   (.95)   $   (.61)
                              __________________________________

Basic and diluted weighted-
  average shares
  outstanding                   19,895      20,199      20,437
                              __________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due to their antidilutive
effect, the following incremental shares from the effect of the preferred stock
on an &#147;as converted basis&#148; and options to purchase common stock have
been excluded from the diluted EPS calculation: </FONT></P>

<PRE>
<b><I>Fiscal Year Ended
August 31,
________________________________________________________________
                                  2002        2001        2000</I></B>
________________________________________________________________
Number of preferred shares
  on  an "as converted" basis  6,238,957   5,829,689   5,793,529
Common stock equivalents
  from the assumed exercise
  of stock options                            55,692      82,144
                              __________________________________
Total antidilutive shares
  excluded from the EPS
  calculation                  6,238,957   5,885,381   5,875,673
                              __________________________________
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>20.    STATEMENTS OF CASH FLOWS</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following supplemental disclosures are provided for the consolidated statements of cash flows (in thousands):</font></p>

<PRE>
<B><I>Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000</I></b>
________________________________________________________________
Cash paid (received)
  for:
  Income taxes             $  (4,599)  $   1,140    $    (250)
  Interest                     3,901       5,927        7,353
                        ________________________________________

  Fair value of
    assets acquired        $    -      $   4,432    $  21,444
  Cash paid for
    net assets                  -         (4,432)     (21,444)
                        ________________________________________
  Liabilities
    assumed from
    acquisitions           $    -      $    -       $    -
                        ________________________________________

  Tax effect of
    exercise of
    affiliate stock
    options                $    -      $      25    $     557
                        ________________________________________
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Non-Cash Investing and Financing Activities</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of August 31, 2002,
2001, and 2000, we had accrued preferred dividends totaling $2.2 million, $2.1
million, and $2.0 million, respectively. Prior to July 1, 2002, the Company had
the option to pay accrued dividends with cash or additional shares of preferred
stock. As required by the Series A Preferred Stock agreement, subsequent to July
1, 2002, all accrued preferred dividends must be paid with cash. Payments for
preferred stock dividends were as follows for the periods indicated (in
thousands): </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                              2002         2001        2000</i></b>
________________________________________________________________
Preferred stock
  dividends paid with
  cash                   $   4,367   $   6,084    $   5,977
Preferred stock
  dividends paid with
  additional
  shares of
  preferred stock            4,208       2,028        1,875
                         _______________________________________
Total preferred stock
  dividends paid         $   8,575   $   8,112    $   7,852
                         _______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the
credit agreement obtained during fiscal 2001 (Note 8), the Company acquired
$33.6 million of notes receivable from the participants in the management common
stock loan program, which loans were previously guaranteed by the Company. The
corresponding liability was recorded as a component of long-term debt in our
consolidated balance sheet for the fiscal year ended August 31, 2001. In
addition, the Company established a reserve against the notes receivable and
related interest receivable from the participants of the loan program and
incurred charges to increase the reserve totaling $24.8 million and $1.1 million
for the years ended August 31, 2002 and 2001, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 1, 2000, we
contributed substantially all of the assets of our Personal Coaching division to
Franklin Covey Coaching, LLC (Note 5), a joint venture formed to provide
coaching services. The carrying value of the assets contributed to form Franklin
Covey Coaching, LLC was $18.2 million, net of $0.3 million of cash contributed
to the joint venture. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the
acquisition of DayTracker.com (renamed franklinplanner.com) in December 1999
(Note 22), we issued $6.0 million of notes payable. The notes payable were due
and payable in annual installments through December 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During fiscal 2000, we sold
121,250 shares of our common stock to a former CEO of the Company in
consideration for a $0.9 million non-recourse promissory note. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At August 31, 2000, we had
accrued $0.7 million for earnout payments in connection with the acquisition of
certain entities. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>21.    SEGMENT INFORMATION</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Reportable Segments</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due to the sale of Premier
during fiscal 2002, we now have two reporting segments: the Consumer Strategic
Business Unit (&#147;CSBU&#148;) and the Organizational Strategic Business Unit
(&#147;OSBU&#148;). The operating results of Premier and our other products and
services designed for teachers and students were previously reported in the
Education Business Unit, which was dissolved in the second quarter of fiscal
2002. Our remaining teacher and student programs and products are now classified
in OSBU results of operations. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consumer Strategic
Business Unit</B> &#150; This business unit is focused on sales to individual
customers and includes the operating results of our 173 domestic retail stores,
10 international stores, catalog and e-Commerce operations, and other related
channels, including wholesale sales and manufacturing operations. Although CSBU
sales primarily consist of products such as planners, binders, and handheld
electronic planning devices, virtually any component of our leadership and
productivity solutions can be purchased through CSBU channels. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Organizational Strategic
Business Unit &#150; </B>The OSBU is primarily responsible for the development,
marketing, sale, and delivery of productivity, leadership, sales performance,
and communication training solutions directly to organizational clients,
including other companies, the government, and educational institutions. The
organizations business unit includes the financial results of the Organizational
Solutions Group (&#147;OSG&#148;) and our international operations, except for
retail stores. The organizational sales group is responsible for the domestic
sale and delivery of productivity, leadership, sales performance, and
communication training solutions to corporations and includes sales of training
seminars to teachers and students, which were previously reported with the
operating results of Premier. The organizational sales group is also responsible
for the sale of productivity solutions to wholesale customers and for consulting
services that compliment our productivity and leadership training solutions. Our
international operations are responsible for sales of training seminars and
products outside the United States, including international catalog sales. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our chief operating
decision maker is the CEO. Each of the reportable segments has a president and
chief operating officer who report directly to the CEO. The primary measurement
tools we use in segment performance analysis are earnings before interest,
taxes, depreciation, and amortization (&#147;EBITDA&#148;) and free cash flows,
which may not be calculated as similarly titled amounts presented by other
companies. Our consolidated EBITDA can be calculated as gross margin less
selling, general, and administrative expenses, stock option purchase and
relocation costs, provision for losses on management stock loans, impairment of
investment in unconsolidated subsidiary, loss on impaired assets, plus the
reversal of restructuring costs in fiscal 2000 and the equity in earnings of an
unconsolidated subsidiary. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company accounts for
its segment information on the same basis as the accompanying consolidated
financial statements. Prior year information has been revised in order to
conform to fiscal 2002 classifications. </FONT></P>


<!-- MARKER PAGE="sheet: 7; page: 7" -->
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<PRE>
SEGMENT INFORMATION
(in thousands)
                                                                    Organizational                        Corporate,
                          <u>Consumer Strategic Business Unit</u>        <u>Strategic Business Unit</u>                 Adjustments
<i>Year Ended</i>                            Catalog/      Other                                                  and
<i>August 31, 2002</i>            Retail    e-Commerce      CSBU            OSG      International   Education   Eliminations  Consolidated
____________________________________________________________________________________________________________________________________
Sales to external
  customers               $ 122,496     $ 63,291   $   4,921      $  97,519     $ 44,771                               $  332,998
Gross margin                 62,207       35,620      (2,862)        61,986       26,678                                  183,629
EBITDA                        1,288        6,480     (21,500)       (20,829)       6,499                   $(52,186)      (80,248)
Significant non-cash
  items:
  Provision for
     losses on
     management loan
     program                                                                                                 24,775        24,775
  Impairment of
     investment in
     unconsolidated
     subsidiary                                                      16,323                                                16,323
  Loss on impaired
     assets                   1,001        1,425       3,093          4,619           47                                   10,185
Depreciation                 10,180        3,593       2,303          2,006        1,389                     13,871        33,342
Amortization                                                          4,667                                                 4,667
Discontinued
  operations, net
  of tax                                                                                       $ (5,844)      (1,740)      (7,584)
Capital expenditures          2,573        4,039         140            445        1,149             98        2,150       10,594
Segment assets               30,989        2,894      12,779        102,307       22,702                     133,067      304,738

<i>Year Ended
August 31, 2001</i>
____________________________________________________________________________________________________________________________________
Sales to external
  customers               $ 156,299   $   90,450   $   7,881      $ 134,450     $ 50,701                               $  439,781
Gross margin                 79,637       50,922         453         86,312       32,475                                  249,799
EBITDA                       22,800       25,137     (17,121)        11,489       10,624                    $(27,353)      25,576
Depreciation                  8,424          867       2,804          1,838          879                      12,629       27,441
Amortization                    114                      816          9,335          537                          38       10,840
Significant non-cash
  items:
  Provision for
     losses on
     management loan
     program                                                                                                   1,052        1,052
  Loss on impaired
     assets                                              201            500                                      100          801
Discontinued
  operations, net
  of tax                                                                                       $  5,190       (3,077)       2,113
Capital expenditures         15,996        1,346       2,179          2,538        1,689          2,166        1,113       27,027
Segment assets               36,867        1,307      30,542        185,576       24,094        109,508      148,586      536,480

<i>Year Ended
August 31, 2000</i>
____________________________________________________________________________________________________________________________________
Sales to external
  customers               $ 163,304   $  110,543   $  27,919      $ 169,986     $ 50,878                               $  522,630
Gross margin                 86,021       54,247       2,592        104,277       32,729                                  279,866
Stock option purchase
  and relocation costs                                                                                      $ 11,227       11,227
EBITDA                       39,840       25,049     (16,024)        27,639        2,080                     (37,292)      41,292
Depreciation                  6,304          293       4,467          1,349          890                      12,214       25,517
Amortization                    607          324         816         10,630          686                           6       13,069
Discontinued
  operations, net
  of tax                                                                                       $  4,486       (1,423)       3,063
Significant non-cash
items:
  Loss on impaired
     assets                                               33          1,907                                                 1,940
  Restructuring
    charge reversals                                                                                          (4,946)      (4,946)
Capital expenditures          7,189          218       4,925          2,059        2,248          2,504        5,380       24,523
Segment assets               24,254          814      37,994        197,868       24,208        109,208      198,133      592,479
</PRE>

<!-- MARKER PAGE="sheet: 8; page: 8" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A reconciliation of reportable segment EBITDA to income (loss) from operations is presented below (in thousands):</font></p>
<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                              2002         2001        2000</i></B>
________________________________________________________________
Reportable segment
  EBITDA                   $(28,062)   $ 52,929     $ 78,584
Stock option purchases
  and relocation costs                               (11,227)
Provision for losses on
  management stock  loans   (24,775)     (1,052)
Restructuring costs                                    4,946
Corporate expenses          (27,411)    (26,301)     (31,011)
                          ______________________________________
Consolidated EBITDA         (80,248)     25,576       41,292
Depreciation                (33,342)    (27,441)     (25,517)
Amortization                 (4,667)    (10,840)     (13,069)
Interest income               3,112       3,180        1,079
Interest expense             (2,784)     (7,671)      (5,537)
Loss on interest rate
  swap agreement             (4,894)
Other income (expense),
  net                           644                     (174)
                          ______________________________________
Loss from continuing
  operations before
  income taxes            $(122,179)   $(17,196)    $ (1,926)
                          ______________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense and
interest income are primarily generated at the corporate level and are not
allocated to the reporting segments. Income taxes are likewise calculated and
paid on a corporate level (except for entities that operate within foreign
jurisdictions) and are not allocated to reportable segments. Due to the nature
of stock option purchase and relocation costs, they were not charged to
reportable segments during fiscal 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporate assets such as
cash, accounts receivable, and other assets are not generally allocated to
reportable segments for business analysis purposes. However, inventories,
goodwill, intangible assets, identifiable fixed assets, and certain other assets
are classified by segment. In connection with the implementation of SFAS No.
142, intangible assets generated from the merger with Covey Leadership Center
were assigned to the OSBU. The Covey goodwill and intangible assets were
previously classified with corporate assets. A reconciliation of segment assets
to consolidated assets is as follows (in thousands): </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                2002         2001        2000</i></b>
________________________________________________________________
Reportable segment
  assets of continuing
  operations               $171,671    $278,386     $285,138
Segment assets of
  discontinued
  operations:
  Premier Agendas                       109,508      109,208
  franklinplanner.com                     7,744        8,567
Corporate assets            133,806     144,511      197,257
Intercompany
  accounts receivable          (739)     (3,669)      (7,691)
                          ______________________________________
<b>Consolidated assets        $304,738    $536,480     $592,479</b>
                          ______________________________________
</PRE>
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Enterprise-Wide Information</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our revenues are derived
primarily from the United States. However, we also operate direct offices or
contract with licensees to provide products and services in various countries
throughout the world. Our consolidated revenues and long-lived assets from
continuing operations were as follows (in thousands): </FONT></P>

<PRE>
<b><i>Fiscal Year Ended
August 31,
________________________________________________________________
                                 2002        2001         2000</i></b>
________________________________________________________________
Sales:
    United States             $286,399    $387,924    $471,761
    Americas                    16,807      20,266      18,287
    Japan/Greater China         14,640      16,567      14,585
    Europe/Middle East           9,693       8,704       8,446
    Australia                    3,093       3,108       7,032
    Others                       2,366       3,212       2,519
                             ___________________________________
                              <b>$332,998    $439,781    $522,630</b>
                             ___________________________________


Long-Lived Assets:
    United States             $177,842    $296,807    $323,975
    Americas                     3,174       5,297       1,927
    Japan/Greater China          2,093       6,142       7,038
    Europe/Middle East             650         396         503
    Australia                      240         926       1,146
                             ___________________________________
                              <b>$183,999    $309,568    $334,589</b>
                             ___________________________________
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amounts reported under the
&#147;Americas&#148; caption include North and South America except the United
States. The Australia caption includes financial information from Australia, New
Zealand, and neighboring countries such as Indonesia and Malaysia. Intersegment
sales are immaterial and were eliminated in consolidation. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>22.    ACQUISITION AND DIVESTING ACTIVITIES</b></font></p>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fiscal 2002</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the second quarter
of fiscal 2002, we sold Premier Agendas, a wholly owned subsidiary located in
Bellingham, Washington, and Premier School Agendas Ltd., a wholly owned
subsidiary organized in Ontario, Canada, to School Specialty, Inc., a company
that specializes in providing products and services to students and schools. The
sale price was $152.5 million in cash plus the retention of Premier&#146;s
working capital, which was received in the form of a $4.0 million promissory
note from the purchaser. The Company received full payment on the promissory
note plus accrued interest during June 2002. Prior to the sale closing, we also
received cash distributions from Premier&#146;s working capital that totaled
approximately $7.0 million. Additionally, we will receive $0.8 million of cash
from Premier related to estimated income tax payments and tax benefits from net
operating losses. Under terms of the sale agreement, the Company has agreed not
to sell student planners containing the Company&#146;s &#147;7 Habits&#148; and
&#147;What Matters Most&#148; content directly to schools and school districts
in the K through 12 market subsequent to the sale closing. We recognized a
pretax gain of $99.9 million ($64.9 million after applicable taxes) on the sale
of Premier, which was recorded as a gain on the sale of discontinued operations
in our consolidated statement of operations for fiscal 2002. For additional
information related to the sale of Premier, refer to Note 7. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 1, 2000
(fiscal 2001), we entered into a joint venture agreement with American Marketing
Systems to form Franklin Covey Coaching, LLC. The joint venture agreement
required our coaching programs to achieve specified earnings thresholds
beginning in fiscal 2002 (the joint venture agreement did not contain an
earnings threshold requirement in fiscal 2001) or the joint venture agreement
could be terminated at the option of AMS. Based upon available information, the
Company&#146;s management believed that the required earnings threshold in
fiscal 2002 could be reached through increased business from existing coaching
programs and the creation of new programs. However, due to unfavorable economic
conditions and other factors, the Company&#146;s coaching programs did not
produce $3.2 million in earnings as required for fiscal 2002. As a result, AMS
exercised its option to terminate the existing joint venture agreement effective
August 31, 2002. Under the provisions of a new partnership agreement, we
received a $0.3 million payment at the end of fiscal 2002, will receive payments
totaling $2.0 million during fiscal 2003, and may receive an additional $1.2
million in payments from AMS and FCC. Further information on the operating
performance and new partnership agreement related to Franklin Covey Coaching,
LLC can be found in Note 5. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fiscal 2001</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During April 2001, we
purchased the Project Consulting Group for $1.5 million in cash. The Project
Consulting Group provides project consulting, project management, and project
methodology training services. The purchase was accounted for using the purchase
method of accounting and resulted in $1.5 million of goodwill and related
intangible assets. All of the goodwill generated from this acquisition, which
totaled $1.2 million, was written-off in connection with the adoption of SFAS
No. 142. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Fiscal 2000</i></b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of February 28, 2000,
the Company sold the assets and substantially all of the business of its
commercial printing division of Publishers Press. We retained the printing
operations necessary for the production of our planners and other related
products (now &#147;Franklin Covey Printing&#148;). The final sales price, after
adjustments under terms of the purchase agreement, was $13.4 million and
consisted of $11.0 million in cash and a $2.4 million note payable to the
Company over five years. Our net cash proceeds from the sale totaled $6.4
million and we recognized a $0.3 million gain from the sale of these assets,
which was included as a component of net other expense in our consolidated
statement of operations for the fiscal year ended August 31, 2000. During the
second quarter of fiscal 2002, the purchaser of the commercial division of
Publishers&#146; Press filed for bankruptcy. Although the note receivable was
secured by the parent company of the purchaser, difficult conditions in the
printing industry also left the parent company insolvent during fiscal 2002.
Accordingly, we expensed $2.3 million of the remaining note receivable in fiscal
2002. The impairment charge was recorded as a component of loss on impaired
assets in the accompanying consolidated statements of operations for the fiscal
year ended August 31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December 1999, the
Company purchased a majority interest in DayTracker.com (renamed
franklinplanner.com), an on-line provider of scheduling and calendar services.
The total purchase price was $11.0 million in cash and notes payable. The
acquisition was accounted for using the purchase method of accounting and
resulted in $9.0 million of goodwill and intangible assets that were being
amortized on a straight-line basis over five years. However, during the fourth
quarter of fiscal 2002, we discontinued the on-line planning services offered at
franklinplanner.com and the results of operations for franklinplanner.com were
included as discontinued operations in our consolidated financial statements.
For further information regarding the termination of franklinplanner.com
operations, refer to Note 7. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During September 1999, the
Company acquired the assets of the Professional Resources Organization (the Jack
Phillips Group) for $1.5 million in cash. The Professional Resources
Organization was a leading measurement assessment firm specializing in measuring
the impact and return on investment of training and consulting programs. The
acquisition was accounted for using the purchase method of accounting and
resulted in $1.5 million of goodwill and intangible assets. All of the goodwill
generated from this acquisition, which totaled $1.2 million, was written-off in
connection with the adoption of SFAS No. 142 during fiscal 2002. The purchase
agreement provides for bonus payments payable to Jack Phillips based upon the
achievement of specified financial goals. At August 31, 2002 we had $0.5 million
accrued for bonus payments to Jack Phillips. These bonus payments were expensed
as earned and were not considered as additions to the purchase price of the Jack
Phillips Group. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>23.    QUARTERLY FINANCIAL INFORMATION (UNAUDITED)</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The unaudited quarterly
financial information included in Item 7 of this report on Form 10-K is an
integral part of the consolidated financial statements. </FONT></P>

<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>24.    SUBSEQUENT EVENT</b></font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsequent to August 31,
2002, we purchased 20 percent of the common stock of Agilix Labs, Inc., a
Delaware corporation for payments totaling $1.0 million in cash. Agilix develops
software applications for personal computers. The Company may, upon the
achievement of specific objectives by Agilix, purchase another 10 percent of the
common stock of Agilix Labs, Inc. for $0.5 million. </FONT></P>

<A NAME="changes_in_accounting"></A>
<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Item  9. &nbsp;&nbsp; Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
     In June, 2002, the Company dismissed its former independent auditors, Arthur Andersen LLP, and engaged KPMG LLP.
  Additional information regarding this change in auditors is contained in the Company's report on Form 8-K filed
June 6, 2002 and amended July 10, 2002 and in the Company's definitive Proxy Statement for the annual
meeting of shareholders scheduled to be held on January 24, 2003, under the caption "Selection of Auditor." </FONT></P>

<h1 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=4>
                              <u><A NAME="PartIII">Part III</A></u></font></h1>
<br>
<A NAME="directors"></A>
<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item10">Item 10</A>. &nbsp;&nbsp;  Directors and Executive Officers of the Registrant</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by this Item is incorporated by reference to the sections
titled &#147;Election of Directors,&#148; &#147;Executive Officers&#148; and
&#147;Executive Compensation&#148; in the Company&#146;s definitive Proxy
Statement for the annual meeting of shareholders which is scheduled to be held
on January 24, 2003. The definitive Proxy Statement will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended. </FONT></P>
<A NAME="executive_comp"></A>
<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item11">Item 11</A>.&nbsp;&nbsp;   Executive Compensation</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by the Item is incorporated by reference to the sections
titled &#147;Election of Directors - Director Compensation&#148; and
&#147;Executive Compensation&#148; in the Company&#146;s definitive Proxy
Statement for the annual meeting of shareholders which is scheduled to be held
on January 24, 2003. </FONT></P>
<A NAME="security_ownership"></A>
<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item12">Item 12</A>.&nbsp;&nbsp; Security Ownership of Certain Beneficial Owners and Management</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by this Item is incorporated by reference to the section
titled &#147;Principal Holders of Voting Securities&#148; in the Company&#146;s
definitive Proxy Statement for the annual meeting of shareholders which is
scheduled to be held on January 24, 2003. </FONT></P>
<A NAME="certain_relationships"></A>
<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item13">Item 13</A>. &nbsp;&nbsp; Certain Relationships and Related Transactions</font></h2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information required by this Item is incorporated by reference to the section
titled &#147;Certain Relationships and Related Transactions&#148; in the
Company&#146;s definitive Proxy Statement for the annual meeting of shareholders
which is scheduled to be held on January 24, 2003. </FONT></P>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><A NAME="Item14">Item 14</A>. Controls and Procedures</font></h2>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="Evaluationofdisclosure">(a)</A></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Evaluation of Disclosure Controls and Procedures</u></FONT></TD>
</tr></table>

<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Our Chief Executive Officer
and Chief Financial Officer have reviewed and evaluated the effectiveness of our
disclosure controls and procedures (as defined in Securities Exchange Act of
1934 Rules 13a-14(c)) as of a date within 90 days before the filing date of this
annual report on Form 10-K. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective, timely providing them with material information
required to be disclosed in the reports we file or submit under the Securities
Exchange Act of 1934.</FONT></TD>
</tr></table>

<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><A NAME="ChangesinInternalControls">Changes in Internal Controls</A></u></FONT></TD>
</tr></table>

<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In October 2002, under the
terms and conditions of our outsourcing agreements with EDS, we began; but have
not yet completed, a significant transition of our warehouse, distribution, and
call center computer systems owned and operated by EDS. Concurrently, we are
also upgrading our primary finance and accounting software. We do not expect
these changes to negatively impact the effectiveness of our disclosure controls
and procedures.  This transition to new computer systems and software was not the result
of the review and evaluation by our Chief Executive Officer and Chief Financial Officer.</FONT></TD>
</tr></table>

<br>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Other than as set forth in the preceding paragraph, there have not been any significant changes in our
internal controls or in other factors that could significantly affect these controls subsequent to the date
of the review and evaluation.  There were no significant deficiencies or material weaknesses identified in the review
and evaluation, and therefore no corrective actions were taken.</FONT></TD>
</tr></table>

<H2 ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><u><A NAME="PartIV">Part IV</A></u></font></h2>



<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<A NAME="Item15">Item 15</A>. &nbsp;&nbsp; <A NAME="Exhibits15">Exhibits, Financial Statement Schedules and Reports on Form 8-K</A></font></h2>

<A NAME="Documents_filed"></A>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(a)&nbsp;&nbsp; <u>Documents Filed</u></font></p>
<A NAME="Financial_stmts"></A>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1.&nbsp;&nbsp;Financial Statements.&nbsp;&nbsp;The consolidated financial statements of the Company and Independent Auditors' Report thereon
included in the Annual Report to Shareholders on Form 10-K for the year ended August 31, 2002, are as follows:</font></p>
<ul>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Independent Auditor's Report</font><br>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Consolidated Balance Sheets at August 31, 2002 and 2001</font><br>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Consolidated Statements of Operations and Comprehensive Loss for the years ended August 31, 2002, 2001, and 2000</font><br>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Consolidated Statements of Shareholders' Equity for the years ended August 31, 2002, 2001 and 2000</font><br>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Consolidated Statements of Cash Flows for the years ended August 31, 2002, 2001 and 2000</font><br>
<li><FONT FACE="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</font>
</ul>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      2. &nbsp;&nbsp;  <A NAME="Exhibit_list">Exhibit List</A>.</font></p>



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit No.</font></p></td>
<TD WIDTH=50%><p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit</font></p></td>
<TD WIDTH=20%><p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Incorporated by Reference</font></p></td>
<TD WIDTH=20%><p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Filed Herewith</font></p></td>
</tr>
</table>
<hr>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revised Articles of Incorporation of the Registrant</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Bylaws of the Registrant</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.3</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles of Amendment to Revised Articles of Incorporation
of the Registrant (filed as Exhibit 2 to Schedule 13D)</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Specimen Certificate of the Registrant's Common Stock,
par value $.05 per share</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stockholder Agreements, dated May 11, 1999 and
June 2, 1999    (filed as Exhibits 1 and 3 to Schedule 13D)</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  4.3</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Registration Rights Agreement, dated June 2, 1999 (filed as
Exhibit 4 to Schedule 13D)</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  10.1</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated 1992 Employee Stock Purchase Plan</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  10.2</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>First Amendment to Amended and Restated 1992 Stock
Incentive Plan</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.3 </font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forms of Nonstatutory Stock Options </font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.4 </font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated 2000 Employee Stock Purchase Plan </font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6)</font></td>
</tr>
</table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.5 </font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Limited Liability Company Agreement of Franklin Covey
Coaching LLC, dated September 1, 2000</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.6 </font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agreement for Information Technology Services between each of
Franklin Covey Co., electronic Data Systems Corporation and EDS Information Services LLC, dated April 1, 2001</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.7 </font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional Services Addendum #1 to Agreement for Information
Technology Services between each of Franklin Covey Co., Electronic Data Systems Corporation and EDS
Information Services LLC, dated June 30, 2001</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.8</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment #2 to Agreement for Information Technology
Services between each of Franklin Covey Co., Electronic Data Systems Corporation and EDS Information Services LLC, dated June 30, 2001</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.9</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase Agreement By and Among Franklin Covey Co., Franklin Covey Canada
 Ltd., and 3956831 Canada Inc., dated November 13, 2001</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   10.10</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment to Purchase Agreement By and Among Franklin Covey Co., Franklin
Covey Canada Inc., dated December 2001</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.11</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Schedule TO Tender Offer Statement Under Section 14(D)(1) or 13(E)(1) of the Securities Exchange Act of 1934
for 7,333,333 shares of Franklin Covey Co. Common Stock at $6.00 per share, and related amendments (filed initially as Schedule TO-I with the Securities
and Exchange Commission on November 26, 2001, with related amendments on Schedule TO-I/A on November 28, 2001 and December 24, 2001)</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10)</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Limited Liability Company Agreement of Franklin Covey
Coaching, LLC</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr></table>

<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting Agreement with Krisak and Company</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr></table>

<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sabbatical and Severance Agreement with Stephen M. R. Covey</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr></table>

<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsidiaries of the Registrant</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Independent Auditors</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr>
</table>
<br>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.1</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Section 906 Certificates</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr>
</table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.2</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of KPMG LLP, Independent Auditors, on Consolidated Financial
 Statement Schedule for the years ended August 31, 2002, 2001, and 2000</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr>
</table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.3</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuation and Qualifying Accounts and Reserves.
Financial statement schedules other than the one identified above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes
thereto, or contained in this report.</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>**</font></td>
</tr>
</table>
<br>






<hr noshade align=left width=500>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Incorporated by reference to Registration Statement
on Form S-1 filed with the Commission on April 17, 1992, Registration No. 33-47283.</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Amendment No. 1 to Registration Statement on Form S-1 filed with the Commission on May 26, 1992,
Registration No. 33-47283.</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(3)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form 10-K filed November 27, 1992, for  the year ended August 31,1992.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Registration Statement on Form S-1 filed with the Commission on January 3, 1994, Registration No. 33-73728.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(5)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Schedule 13D(CUSIP No. 534691090 as filed with the Commission on June 2, 1999)
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(6)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form S-8 filed with the Commission on May 31, 2000, Registration No. 333-38172.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(7)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form 10-K filed November 29, 2000, for the year ended August 31, 2000.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(8)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form 10-Q filed July 10, 2001, for the quarter ended May 26, 2001.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(9)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form 10-K filed November 29, 2001, for the year ended August 31, 2001.
</font></td>
</tr>
</table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(10)</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Incorporated by reference to Report on Form 10-Q filed January 10, 2001, for the quarter ended November 24, 2001.
</font></td>
</tr>
</table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>**</font></td>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Filed herewith and attached to this report.</font></td>
</tr>
</table>
<br>
<A NAME="Reports_on_8k"></A>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(b)&nbsp;&nbsp; <u>Reports on Form 8-K</u></font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 (c)&nbsp;&nbsp; <u><A NAME="Exhibits">Exhibits</A></u></font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exhibits to this Report are attached following hereof.</font></p>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 (d)&nbsp;&nbsp; <u>Financial Statement Schedule</u></font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See herein.</font></p>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="SIGNATURES">SIGNATURES</A></FONT></H1>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on November&#160;25, 2002. </FONT></P>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                                                 FRANKLIN COVEY CO.</FONT></H1>



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By:&nbsp;&nbsp;/s/&nbsp;&nbsp;ROBERT A. WHITMAN</FONT><hr></TD>
</tr>
</table>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>

<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert A. Whitman, Chief Executive Officer and Chairman</FONT></TD>
</tr>
</table>
<br>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated. </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Signature</u></font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Title </u></font></td>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Date</u></font></td>
</tr></table>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  ROBERT A. WHITMAN</font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board and Chief Executive Officer</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert A. Whitman</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>

</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  HYRUM W. SMITH</font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice-Chairman of the Board</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Hyrum W. Smith</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ STEPHEN R. COVEY</font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice-Chairman of the Board</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stephen R. Covey</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ ROBERT H. DAINES </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert H. Daines </font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  E. J. "JAKE" GARN  </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>E. J. "Jake" Garn</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  DENNIS G. HEINER   </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dennis G. Heiner</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>


<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  BRIAN A. KRISAK    </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Brian A. Krisak</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  DONALD J. MCNAMARA</font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Donald J. McNamara</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  JOEL C. PETERSON </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joel C. Peterson</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>

<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  E. KAY STEPP       </font><hr></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</font></td>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>E. Kay Stepp</font></td>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></font></td>
</tr></table>
<br>
<hr>
<br>

<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><A NAME="CERTIFICATIONS">CERTIFICATIONS</A> OF THE CEO AND CFO</b></font></p>
<br><br>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Robert A. Whitman, certify that:</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. &nbsp;I have reviewed this annual report on Form 10-K of Franklin Covey Co.;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. &nbsp;Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. &nbsp;Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. &nbsp;The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
report is being prepared;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) &nbsp;presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. &nbsp;The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons performing the equivalent functions):</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in
internal controls; and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal controls; and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. &nbsp;The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: November 26, 2002</font></p>
<BR><BR>
<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  ROBERT A. WHITMAN
<BR><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Robert A. Whitman<br>
Chief Executive Officer</font></p>
<br><br><br><Br>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Stephen D. Young, certify that:</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. &nbsp;I have reviewed this annual report on Form 10-K of Franklin Covey Co.;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. &nbsp;Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. &nbsp;Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. &nbsp;The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
report is being prepared;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) &nbsp;presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. &nbsp;The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or persons performing the equivalent functions):</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) &nbsp;all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in
internal controls; and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) &nbsp;any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal controls; and</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. &nbsp;The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.</font></p>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: November 26, 2002</font></p>
<BR><BR>
<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  STEPHEN D. YOUNG
<BR><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Stephen D. Young<br>
Chief Financial Officer</font></p>

<br><br><br><br>
<hr>
<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="ExhibitIndex">Exhibit Index</A></font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Limited Liability Company Agreement of Franklin Covey
Coaching, LLC</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting Agreement with Krisak and Company</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sabbatical and Severance Agreement with Stephen M. R. Covey</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsidiaries of the Registrant</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr>
</table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Independent Auditors</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr>
</table>
<br>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.1</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Section 906 Certificates</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr>
</table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.2</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of KPMG LLP, Independent Auditors, on Consolidated Financial
 Statement Schedule for the years ended August 31, 2002, 2001, and 2000</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr>
</table>
<br>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.3</font></td>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuation and Qualifying Accounts and Reserves.
Financial statement schedules other than the one identified above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes
thereto, or contained in this report.</font></td>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr>
</table>
<br>



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end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhibit10_12.htm
<DESCRIPTION>10.12 AMENDED COACHING CONTRACT
<TEXT>



<HTML>
<HEAD>
<TITLE>Exhibit 10.12</Title>
</Head>
<BODY>


<p ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.12</font></p>


<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>AMENDED AND RESTATED<br>
                                                  LIMITED LIABILITY COMPANY AGREEMENT<br><br>

                                                                  OF<br><br>

                                                   FRANKLIN COVEY COACHING, L. L. C.<br></b></font></p>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<page>
<PRE>
                                                               TABLE OF CONTENTS
                                                                                                                Page
                                                                                                                ----

1.       DEFINITIONS..............................................................................................1
        1.1.     Adjusted Capital Account Deficit.................................................................1
        1.2.     Affiliate........................................................................................2
        1.3.     Agreement........................................................................................2
        1.4.     AMS..............................................................................................2
        1.5.     Auditors.........................................................................................2
        1.6.     Bankrupt.........................................................................................2
        1.7.     Bankruptcy Code..................................................................................2
        1.8.     Business.........................................................................................2
        1.9.     Capital Account..................................................................................2
        1.10.    Capital Call.....................................................................................3
        1.11.    Cash Flow........................................................................................3
        1.12.    Certificate......................................................................................3
        1.13.    Class A Member...................................................................................3
        1.14.    Class A Interests................................................................................3
        1.15.    Class B Member...................................................................................3
        1.16.    Class B Interests................................................................................3
        1.17.    Code.............................................................................................3
        1.18.    Communication....................................................................................3
        1.19.    Company..........................................................................................3
        1.20.    Company Act......................................................................................3
        1.21.    Company's Office.................................................................................3
        1.22.    Confidential Information.........................................................................3
        1.23.    Control..........................................................................................3
        1.24.    Deemed Delivery..................................................................................4
        1.25.    Effective Date...................................................................................4
        1.26.    Excepted Transfer................................................................................4
        1.27.    Fiscal Year......................................................................................4
        1.28.    Franklin Covey...................................................................................4
        1.29.    Franklin Covey Programs..........................................................................4
        1.30.    Franklin Covey Program Income....................................................................4
        1.31.    Franklin Covey Program Share.....................................................................4
        1.32.    Gross Asset Value................................................................................4
        1.33.    Management Board.................................................................................5
        1.34.    Manager..........................................................................................5
        1.35.    Member...........................................................................................5
        1.36.    Membership Interest..............................................................................5
        1.37.    Net Profits or Losses............................................................................5
        1.38.    Non-Contributing Member..........................................................................5
        1.39.    Officer..........................................................................................5
        1.40.    Operating Margin.................................................................................5
        1.41.    Organization Transactions........................................................................5
        1.42.    Percentage Interest..............................................................................6
        1.43.    Person...........................................................................................6
        1.44.    Profits..........................................................................................6
        1.45.    Regulations......................................................................................6
        1.46.    Securities Act...................................................................................6
        1.47.    Transfer.........................................................................................6
        1.48.    Unit.............................................................................................7
2.       FORMATION, PURPOSES AND DURATION.........................................................................7
        2.1.     Formation and Name...............................................................................7
        2.2.     Purposes of the Company..........................................................................7
        2.3.     Scope of the Members' Authority..................................................................7
        2.4.     Principal Place of Business......................................................................7
        2.5.     Title to Company Properties......................................................................7
        2.6.     Term.............................................................................................8
        2.7.     Assumed Name Certificate.........................................................................8
        2.8.     Other Business Activities; Waive.................................................................8
3.       CERTAIN MATTERS RELATING TO THE BUSINESS.................................................................8
        3.1.     Business Opportunities...........................................................................8
        3.2.     Noncompetition; Confidential Information.........................................................8
4.       MEMBERSHIP INTERESTS, CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS............................................9
        4.1.     Membership Interests.............................................................................9
        4.2.     Initial Capital Contribution....................................................................10
        4.3.     Capital Accounts................................................................................10
        4.4.     Limitation on Members' Liabilities..............................................................11
        4.5.     Distributions of Net Cash Flow..................................................................11
        4.6.     Time of Determination and Distribution of Distributable Cash....................................12
5.       MANAGEMENT OF THE COMPANY...............................................................................12
        5.1.     Members; No Control of Business or Right to Act for Company.....................................12
        5.2.     The Management Board............................................................................12
        5.3.     Officers........................................................................................12
6.       ACCOUNTING AND TAXES....................................................................................13
        6.1.     Books and Records...............................................................................13
        6.2.     Rights of Inspection............................................................................13
        6.3.     Bank Accounts...................................................................................13
        6.4.     Financial Statements............................................................................13
        6.5.     Other Accounting Decisions......................................................................13
        6.6.     Preparation of Tax Returns......................................................................13
        6.7.     Allocation of Profits, Gains and Losses.........................................................14
        6.8.     Tax Decisions Not Specified.....................................................................14
        6.9.     Notice of Tax Audit.............................................................................14
        6.10.    Tax Matters Partner.............................................................................14
7.       SALE, TRANSFER AND REDEMPTION...........................................................................15
        7.1.     General.........................................................................................15
        7.2.     Securities Law Limitations......................................................................15
        7.3.     Agreement with Transferees......................................................................15
        7.4.     Automatic Redemption of Class B Interests.......................................................15
8.       DISSOLUTION.............................................................................................15
        8.1.     Causes of Dissolution...........................................................................15
        8.2.     Procedure in Dissolution and Liquidation........................................................16
9.       AMENDMENT...............................................................................................16
        9.1.     Amendment.......................................................................................16
10.      DISPUTES................................................................................................17
        10.1.    Escalation......................................................................................17
        10.2.    Arbitration.....................................................................................17
11.      GENERAL PROVISIONS......................................................................................18
        11.1.    Entire Agreement................................................................................18
        11.2.    Notices.........................................................................................18
        11.3.    Validity........................................................................................19
        11.4.    Attorneys' Fees.................................................................................19
        11.5.    Survival of Rights..............................................................................19
        11.6.    No Strict Construction..........................................................................19
        11.7.    Governing Law; Jurisdiction.....................................................................19
        11.8.    No Partition....................................................................................19
        11.9.    Waiver..........................................................................................19
        11.10.   Waiver of Notice................................................................................19
        11.11.   Remedies Not Exclusive..........................................................................20
        11.12.   Construction....................................................................................20
        11.13.   Incorporation by Reference......................................................................20
        11.14.   Counterparts....................................................................................20
        11.15.   Further Assurances..............................................................................20
        11.16.   No Broker's Fees................................................................................20
        11.17.   No Third Party Rights...........................................................................20
</PRE>


<!-- MARKER PAGE="sheet: 2; page: 2" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<page>
<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>AMENDED AND RESTATED<br>
                                                  LIMITED LIABILITY COMPANY AGREEMENT<br><br>

                                                                  OF<br><br>

                                                    FRANKLIN COVEY COACHING, L.L.C.</b></font></p>
<br>
<br>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Amended and Restated Limited Liability Company Agreement (this
&#147;<B>Agreement</B>&#148;) is made as of August 31, 2002 (the
<B>&#147;Effective Date</B>&#148;) by and among those parties who, from time to
time, execute this Agreement as members and are listed on attached Exhibit A.
Such signatories to this Agreement are collectively called the
&#147;<B>Members</B>,&#148; and each is sometimes individually called a
<B>&#147;Member</B>.&#148; </FONT></P>

                                                               <p align=center><b><u>Recitals</u></b></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
AMS and Franklin Covey are parties to that certain Limited Liability Company
Agreement of Franklin Covey Coaching, LLC, dated as of September 1, 2000 (the
&#147;<B>Original Agreement</B>&#148;); </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
a dispute has arisen concerning the calculation of Modified Fair Market Value
(as defined in the Original Agreement) in connection with the anticipated
exercise by AMS of its rights under Section 7.5 of the Original Agreement; </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
in resolution of such dispute, AMS and Franklin Covey have mutually agreed that:
(i) the Company shall issue to Franklin Covey a profits interest in the Company
designated as the Class&#160;B Membership Interest pursuant to this Agreement,
and that all other outstanding membership interests in the Company shall be
reclassified as Class&#160;A Membership Interests, (ii) the Company shall not
dissolve but instead shall continue in existence for all purposes, (iii) AMS
and/or its assigns shall purchase Franklin Covey&#146;s entire Class&#160;A
Membership Interest, pursuant to a Membership Interest Purchase Agreement of
even date herewith between AMS and Franklin Covey (the &#147;<B>Purchase
Agreement</B>&#148;), and (iv) the Original Agreement shall be amended and
restated in its entirety as set forth herein. </FONT></P>

                                                               <p align=center><b><u>Agreement</u></b></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the foregoing recital, each of which is hereby
incorporated herein, and the mutual promises, terms and conditions contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
Members hereby agree as follows: </FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>1.       DEFINITIONS<br><br></b></font>

         <FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following words, terms or phrases have the respective meanings set forth thereafter:<BR><BR></font>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.&nbsp;&nbsp;<B>"Adjusted  Capital Account  Deficit"</B> shall mean,  with respect to any Member,  the deficit  balance,  if any, in such Member's
Capital Account as of the end of any Fiscal Year after giving effect to the following  adjustments:  (i) credit to such Capital Account
the sum of (A) any amount  which such  Member is  obligated  to restore to such  Capital  Account  pursuant  to any  provision  of this
Agreement,  plus (B) an amount equal to such Member's share of Partnership  Minimum Gain as determined  under Section  1.704-2(g)(1) of
the Regulations  and such Member's share of Partner  Nonrecourse  Debt Minimum Gain as determined  under Section  1.704-2(i)(5)  of the
Regulations,  plus (C) any amounts which such Member is deemed to be obligated to restore pursuant to Section  1.704-l(b)(2)(ii)(c)  of
the  Regulations;  and (ii) debit to such Capital Account the items described in Sections  1.704-l(b)(2)(ii)(d)(4),  (5) and (6) of the
Regulations.</font>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall
be interpreted consistently therewith. </FONT></P>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2.&nbsp;&nbsp;<b>"Affiliate"</b>  shall mean,  with respect to any Person,  any Person  Controlled  by, under common  Control with or Controlled or
managed by such Person.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3.&nbsp;&nbsp;<b>"Agreement"</b>  shall  mean this  Amended  and  Restated  Limited  Liability  Company  Agreement  as the same may be  amended  or
supplemented from time to time in accordance with the provisions hereof.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4.&nbsp;&nbsp;<b>"AMS"</b> shall mean AMS Direct, Inc., a Delaware corporation.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5.&nbsp;&nbsp;<b>"Auditors"</b>  shall mean Ernst &amp; Young,  LLP or another  independent  certified  public  accountant  as from time to time may be
engaged for the Company by the Management Board.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6.&nbsp;&nbsp;<b>"Bankrupt"</b>  shall mean,  with respect to any Member,  the  occurrence of any one or more of the  following:  (i) the making by
such Member of an assignment for the benefit of creditors;  (ii) the filing against such Member of an involuntary  petition  seeking an
adjudication  of  bankruptcy  under  Chapter 7 of the  Bankruptcy  Code,  which filing is not  dismissed  within sixty (60) days of the
filing;  (iii) the filing of a voluntary  petition by such Member under Chapter 7 of the Bankruptcy Code; (iv) the entry of an order of
relief  against  such Member under  Chapter 7 of the  Bankruptcy  Code;  (v) the filing of a voluntary  or  involuntary  petition by or
against such Member under Chapters 11 or 13 of the Bankruptcy  Code which is not dismissed  within sixty (60) days of the filing;  (vi)
the entry of an order,  judgment or decree by a court of competent  jurisdiction  providing for the  liquidation  of the assets of such
Member or appointing a receiver,  trustee or other  administrator  of such Member's assets which continues in effect and unstayed for a
period of sixty (60) days;  (vii) the confirmation of any plan of  reorganization  under either Chapter 11 or 13 of the Bankruptcy Code
providing for the liquidation of  substantially  all of such Member's assets or (viii) a written  admission by such Member of inability
to pay debts.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7.&nbsp;&nbsp;<b>"Bankruptcy Code"</b> shall mean Title 11 of the United States Code, as now in effect or as hereafter amended.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8.&nbsp;&nbsp;<b>"Business"</b>  shall  mean,  as of any  date,  developing,  marketing,  and/or  providing,  in  person  or  through  any  form of
communication or media,  personalized  coaching programs and/or services,  involving one-on-one  interaction,  of the same general type
and nature as those provided by the Company as of such date;  provided,  that Business shall not include any proprietary  businesses of
AMS or Franklin Covey that are not related  specifically  to coaching and shall not include seminar  training or product sales,  public
or corporate training programs,  works of authorship,  intellectual property development or the licensing or sale of any other goods or
services  provided by any subsidiary or division of AMS or Franklin Covey other than the Franklin Covey personal  coaching  division as
of the date of execution of the Original Agreement.<br><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9.&nbsp;&nbsp;<b>"Capital  Account"</b> shall mean the record of a Member's  contributions,  distributions,  allocable share of income,  gain, loss
and deduction  maintained by the Company in accordance with the capital  account rules of Section  1.704-1(b) of the  Regulations.  The
Company  shall  adjust  Capital   Accounts  to  reflect  the  fair  market  value  of  Company  property  in  accordance  with  Section
1.704-1(b)(2)(iv)(f) of the Regulations in connection with any events described in Section 1.704-1(b)(2)(iv)(f)(5) of the Regulations.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10.&nbsp;&nbsp;<b>"Capital Call"</b> shall have the meaning given such term in Section 4.7(b) hereof.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11.&nbsp;&nbsp;<b>"Cash Flow"</b> shall mean, for any period,  any and all cash receipts from any source whatsoever except  contributions to capital
and proceeds from financings,  borrowings or other extensions of credit after deducting (i) all cash expenditures,  expenses, debts and
obligations  of the Company  payable in such period,  including  those due to the Managers and Officers,  and all capital  expenditures
made during such period;  and (ii) such  reserves,  or increase of any existing  reserves,  necessary or  appropriate  for  outstanding
expenses  and  anticipated  cash needs of the  Company,  including  without  limitation,  reserves  for capital  investments,  business
expansion and anticipated  operating  expenses,  which  deductions shall be, in each case (at all times prior to the Class B Redemption
Date (as defined in Section 7.4)), made in a manner and rate not materially inconsistent with past practices.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12.&nbsp;&nbsp;<b>"Certificate"</b>  shall mean the  Certificate of Formation of the Company,  duly filed and amended in accordance with the laws of
the State of Delaware.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13.&nbsp;&nbsp;<b>"Class A  Member"</b>  shall  mean a holder of Class A  Membership  Interests  who has been  accepted  as a Member of the  Company
pursuant to this Agreement.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14.&nbsp;&nbsp;<b>"Class A Interests"</b> shall mean those Class A Membership Interests in the Company described more fully in Section 4.1.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15.&nbsp;&nbsp;<b>"Class B Member"</b> shall mean a holder of Class B Interests  who has been  accepted as a Member of the Company  pursuant to this
Agreement.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16.&nbsp;&nbsp;<b>"Class B Interests"</b> shall mean those of Class B Interests in the Company described more fully in Section 4.1.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17.&nbsp;&nbsp;<b>"Code"</b> shall mean the Internal Revenue Code of 1986, as now in effect or as hereafter amended  including,  but not limited to,
any successor or substitute federal tax codes or legislation.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18.&nbsp;&nbsp;<b>"Communication"</b>  shall mean any and all notices,  requests,  demands,  elections and other  communications given in connection
with this Agreement.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19.&nbsp;&nbsp;<b>"Company"</b> shall mean Franklin Covey Coaching, L.L.C., a Delaware limited liability company.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20.&nbsp;&nbsp;<b>"Company Act"</b> shall mean the Limited Liability Company Act of the State of Delaware, as amended from time to time.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21.&nbsp;&nbsp;<b>"Company's Office"</b> shall have the meaning given to such term in Section 2.4.
<br><Br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22.&nbsp;&nbsp;<b>"Confidential Information"</b> shall have the meaning given to such term in Section 3.2(b).
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.23.&nbsp;&nbsp;<b>"Control"</b>  shall mean,  with respect to a Person (i) direct or indirect  ownership of fifty percent (50%) or more of the total
combined  voting  power of all  classes of equity  interests  in the  controlled  entity  entitled  to vote,  or (ii) being an officer,
director,  manager, trustee or general partner of the controlled entity (or an officer,  director,  manager, general partner or trustee
of a manager, trustee or general partner of the controlled entity).
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.24.&nbsp;&nbsp;<b>"Deemed  Delivery"</b>  shall  mean,  with  respect to a written  Communication  sent to a recipient  Member or the  Company  (the
"Recipient"),  the earlier of (a) the date it shall be  delivered  to the address of the  Recipient  on the records of the Company (the
"Recipient's  Address"),  (b) the date delivery shall have been refused at the Recipient's Address, (c) with respect to a Communication
sent by mail, the date as of which the postal service shall have indicated such  Communication  to be  undeliverable at the Recipient's
Address,  or (d) with  respect to a  Communication  sent by facsimile to the  facsimile  number of the  Recipient on the records of the
Company and in respect of which a facsimile  receipt  confirmation  statement is printed,  (i) the next business day after receipt,  if
the  Communication  is  received  at or after  five (5) p.m.  in the time  zone of the  Recipient,  or (ii) the day of  receipt  if the
Communication is received before five (5) p.m. in the time zone of the Recipient.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.25.&nbsp;&nbsp;<b>"Effective Date"</b> shall have the meaning given such term in the preamble hereto.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.26.&nbsp;&nbsp;<b>"Excepted  Transfer"</b> shall mean any Transfer by a Member of a Membership  Interest to a controlled  subsidiary or affiliate of
such Member (or a family member of such Member or a trust for the benefit of such Member and/or such Member's  family  members,  in the
case of any  individual  Member);  provided that the  transferee  first agrees to become a party to this Agreement and bound hereby and
provided that no such Transfer shall relieve the  transferring  Member of its obligations  hereunder  without the prior written consent
of the other Members.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.27.&nbsp;&nbsp;<b>"Fiscal  Year"</b> shall mean the period from  September 1 to August 31 of each year,  or such other  period as may  hereafter  be
adopted by the Managers.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.28.&nbsp;&nbsp;<b>"Franklin Covey"</b> shall mean Franklin Covey Co., a Utah corporation.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.29.&nbsp;&nbsp;<b>"Franklin Covey Programs"</b>  means all coaching  programs and other services and materials  provided by the Company with respect
to (i) proprietary  coaching programs now or hereafter  developed,  produced and/or marketed by Franklin Covey or its Affiliates (other
than the Company), and/or (ii) any of the third party programs identified on Exhibit B attached hereto.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.30.&nbsp;&nbsp;<b>"Franklin Covey Program Income"</b> means,  for any period,  the Operating Margin generated by Franklin Covey Programs during such
period,  minus the Franklin Covey Program Share of all remaining  operating  expenses  (other than those  included in Franklin  Covey's
Operating Margin) incurred by the Company during such period.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.31.&nbsp;&nbsp;<b>"Franklin Covey Program Share"</b> means, for any period,  the percentage  equivalent of a fraction,  the numerator of which shall
be the total revenue from Franklin Covey Programs  during such period,  and the  denominator of which shall be the total revenue of the
Company during such period.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.32.&nbsp;&nbsp;<b>"Gross  Asset  Value"</b>  shall mean,  with  respect to any Company  asset,  the asset's  adjusted  basis for federal  income tax
purposes, except as follows:
<br><br></font>
<pre>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial  Gross  Asset Value of an asset  contributed  by a Member to the Company  shall be the gross fair market  value of
                  such asset as of the date of contribution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;The Gross Asset Values of all Company assets shall be adjusted to equal the assets'  respective  gross fair market values,  as
                  determined  by the  Company  using such  reasonable  and  uniform  methods of  valuation  as it may adopt,  as of the
                  following  times:  (i) the  acquisition  of  additional  Membership  Interests  in the Company by any new or existing
                  Member in exchange for more than a de minimus capital  contribution,  or the distribution by the Company of more than
                  a de  minimus  amount of money or other  property  to a Member  as  consideration  for all or part of its  Membership
                  Interests in the Company; and (ii) the liquidation of the Company within the meaning of Section  1.704-1(b)(2)(ii)(g)
                  of the Regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;The Gross Asset Value of any Company asset  distributed  to a Member shall be the gross fair market value of such asset on the
                  date of contribution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.       &nbsp;The Gross Asset Values of Company  assets shall be increased (or  decreased) to reflect any  adjustments to the adjusted basis
                  of such assets  pursuant to Code Sections  734(b) or 743(b),  but only to the extent such  adjustments are taken into
                  account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.       &nbsp;In the event of dissolution or  liquidation,  the Gross Asset Value of any Company asset  distributed to a Member shall be the
                  gross fair market value of such asset on the date of distribution.
</pre>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Gross Asset Value of an asset has been determined or adjusted pursuant to
subsections a., b., c. or d., above, such Gross Asset Value shall thereafter be
adjusted by the depreciation, cost recovery or amortization taken into account
with respect to such asset for purposes of computing Profits or Losses. Such
items shall be computed in accordance with Section 1.704-1(b)(2)(iv)(g)(3) of
the Regulations. </FONT></P>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.33.&nbsp;&nbsp;<b>"Management Board"</b> shall mean the Management Board of the Company described in Section 5.2.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.34.&nbsp;&nbsp;<b>"Manager"</b> shall have the meaning given such term in Section 5.2(b) hereof.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.35.&nbsp;&nbsp;<b>"Member"</b> shall have the meaning given such term in the preamble hereto.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.36.&nbsp;&nbsp;<b>"Membership  Interest"</b> shall mean a Member's entire ownership interest in the Company,  including the Member's interest in the
capital,  Net Profits or Losses,  gains,  losses and credits of the Company  (whether  expressed  in terms of the  Member's  Percentage
Interest,  Units or otherwise)  and all rights and  obligations  with respect to the Company under this  Agreement and the Company Act,
including, but not limited to, the right to receive distributions from the Company.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.37.&nbsp;&nbsp;<b>"Net Profits or Losses"</b> shall mean the Profits or Losses for the Fiscal Year computed under the accrual method of accounting.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.38.&nbsp;&nbsp;<b>"Non-Contributing Member"</b> shall have the meaning given such term in Section 4.7(c) hereof.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.39.&nbsp;&nbsp;<b>"Officer"</b> shall mean those Persons appointed by the Management Board pursuant to Section 5.3 herein.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.40.&nbsp;&nbsp;<b>"Operating Margin"</b> means,  during any period with respect to the Franklin Covey Programs,  the total revenue generated by such
Programs during such period, minus the costs directly  attributable to such Programs (including without limitation,  business promotion
costs of such Program) during such period.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.41.&nbsp;&nbsp;<b>"Organization  Transactions"</b>  shall mean all  transactions  in connection with the  contribution to and/or  acquisition by the
Company of (a)  Franklin  Covey's  coaching  services  business  and all  related  assets and  liabilities,  pursuant  to that  certain
Contribution  Agreement dated as of September 1, 2000 between the Company and Franklin Covey, and (b) AMS' contributed  assets pursuant
to that certain Contribution Agreement dated as of September 1, 2000 between the Company and AMS.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.42.&nbsp;&nbsp;<b>"Percentage  Interest"</b> shall mean a Class A Member's  percentage  interest in the aggregate share of Cash Flow, Net Profits or
Losses,  gains,  losses and tax credits and  distributions  of the Company to be made and/or  allocated  to the Class A  Interests as a
whole, as well as the Class A  Member's  percentage vote on matters  requiring a vote of the Members,  in each case represented by such
Class A Member's  Membership  Interest in the Company.  The initial  Percentage  Interests of the Class A Members shall be as set forth
on <u>Exhibit A</u> attached hereto and shall be changed from time to time as provided in this Agreement.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.43.&nbsp;&nbsp;<b>"Person"</b> shall mean an individual,  general partnership,  limited partnership,  limited liability company, corporation,  joint
venture, trust, estate, business trust, cooperative or association and their heirs, executors,  administrators,  legal representatives,
successors, and assigns of such Person where the context so permits.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.44.&nbsp;&nbsp;<b>"Profits"</b> or <b>"Losses"</b>  shall mean,  for each Fiscal Year or other period,  an amount equal to the Company's  taxable income or
loss for such Fiscal Year or period,  determined  in accordance  with Section  703(a) of the Code (all items of income,  gain,  loss or
deduction  required to be stated  separately  pursuant to Section  703(a)(1) of the Code being  included in taxable  income or loss for
this purpose), with the following adjustments;</font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.        Any income of the  Company  described  in Section  705(a)(1)(B)  of the Code that is exempt  from  federal  income tax and not
                  otherwise taken into account in computing  Profits or Losses shall be added to such taxable income or subtracted from
                  such taxable loss.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.        Any  expenditures  of the  Company  described  in  Section  705(a)(2)(B)  of the  Code  or  treated  as  Section  705(a)(2)(B)
                  expenditures  pursuant to Section  1.704-1(b)(2)(iv)(i)  of the  Regulations  and not otherwise taken into account in
                  computing Profits or Losses shall be subtracted from such taxable income or added to such taxable loss.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.        In the event the Gross Asset Value of any Company  asset is adjusted  upon the  occurrence  of any of the events  specified in
                  clauses (c) or (d) of the definition of "Gross Asset Value" herein the amount of such adjustment  shall be taken into
                  account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.        Gain or loss  resulting  from any  disposition of an asset with respect to which gain or loss is recognized for federal income
                  tax purposes shall be computed by reference to the Gross Asset Value of such asset.
</pre>
<br><br>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.45.&nbsp;&nbsp;<b>"Regulations"</b>  shall mean the federal  income tax  regulations  promulgated  by the Department of the Treasury under the Code,
including temporary (but not proposed) regulations, as such regulations shall be in effect from time to time.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.46.&nbsp;&nbsp;<b>"Securities Act"</b> shall mean the Securities Act of 1933, as amended.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.47.&nbsp;&nbsp;<b>"Transfer"</b>  shall  mean the sale,  assignment,  conveyance,  gift,  pledge or other  transfer  or  encumbrance  of  Membership
Interests.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.48.&nbsp;&nbsp;<b>"Unit"</b> shall mean a divisible  portion of a Member's  Membership  Interests  carrying with it a  proportionate  amount of each
aspect of the rights,  privileges,  duties and obligations of the Member  relating to such Member's  Membership  Interests.  Initially,
each one percent (1%) of Membership Interest of a given class shall be comprised of one (1) Unit of such class.
<br><br>
<b>2.       FORMATION, PURPOSES AND DURATION</b>
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.     <u>Formation and Name.</u></font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.        Pursuant to the Original  Agreement,  the Members formed a company  pursuant to the Company Act to be known as "Franklin Covey
                  Coaching,  L.L.C." The Company shall change its name to a name dissimilar to "Franklin Covey Coaching,  L.L.C" within
                  180 days after the Class B Redemption Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.        The business of the Company shall be conducted  under the name indicated in Section  2.1.a,  or such other name as the Company
                  may from time to time  adopt,  and all assets of the  Company  shall be held under such name  except as  provided  in
                  Section 2.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.        The ownership  interests,  rights and obligations of the Members as members in the Company shall be as provided in the Company
                  Act, except and to the extent otherwise provided in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.        The Company shall bear the expenses  directly incident to its formation,  including,  but not limited to, filing and recording
                  fees, taxes and legal and accounting fees incident to the formation and operation of the Company.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.     <u>Purposes of the Company.</u>  The purposes of the Company shall be:</font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.        To  engage  in the  Business,  and any and all  other  business  and  activities  that the  Managers  may in their  discretion
                  determine; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.        To perform any and all lawful acts  incidental to the  foregoing  purpose or reasonably  necessary to the  fulfillment  of the
                  foregoing purpose.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.     <u>Scope of the Members' Authority.</u>  Except as otherwise expressly and specifically  provided in this Agreement,  no Member shall
have any authority in such capacity to bind or act for, or assume any  obligation  or  responsibility  on behalf of, the Company or any
other Member or the Company.  Neither the Company nor any Member shall be responsible or liable for any  indebtedness  or obligation of
any other Member or otherwise  relating to the Company  property,  except as to those  responsibilities,  liabilities,  indebtedness or
obligations  incurred by separate  agreement or  instrument  or incurred on or after the date hereof  pursuant to and as limited by the
terms of this Agreement.  Except as may otherwise be expressly  required by law or this Agreement,  the Class B Interests shall have no
right to vote.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.     <u>Principal  Place of Business.</u>  The Company  shall have its  principal  place of business at 2650 South Decker Lake  Boulevard,
2nd Floor,  Salt Lake City, Utah 84119 (the <b>"Company's  Office"</b>) or such other place as determined by the Management Board from time to
time.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.     <u>Title to Company  Properties.</u>  Legal title to all Company  properties  shall be taken and at all times held in the name of the
Company,  except that any real estate held by the Company may alternatively be held in the name of a trustee for the Company,  provided
that the Company is specifically  designated by name as sole  beneficiary or principal under a written trust agreement  executed by any
such trustee.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.     <u>Term.</u>  The term of the Company shall  commence on the date of the filing of the Articles with the  appropriate  authorities of
the State,  and shall be perpetual  until the Company is dissolved in accordance  with the  provisions of this Agreement or the Company
Act.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7.     <u>Assumed Name Certificate.</u>  The Officers shall execute,  file and publish an assumed name certificate,  if necessary,  and such
other  certificates  and documents as may be required by applicable  law with respect to the Company,  in Delaware,  Utah and all other
states in which the Company engages in business.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8.     <u>Other Business Activities;  Waiver.</u> Subject to Section 3.2., below, any Member or any officer,  manager,  director,  employee,
partner,  shareholder,  member or other Person holding a legal or beneficial  interest in any entity which is a Member or any Affiliate
of a Member may engage in, broker,  or possess an interest in other business  ventures of every nature and  description  other than the
Business,  independently  or with others,  and neither the Company nor the Members shall have any right by virtue of this  Agreement in
or to such independent  ventures or to the income or profits derived  therefrom except those rights, if any, in and to any New Business
Opportunity as defined in Section 3.1 below.
<br><br>
<b>3.       CERTAIN MATTERS RELATING TO THE BUSINESS</b>
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.     <u>Business  Opportunities.</u>  It is the express  intent of the Members that the Company shall be the exclusive  vehicle to develop
and provide all  personal  coaching  and related  programs  and services  relating to the  proprietary  programs and  materials of each
Member.  Therefore,  no Member shall at any time when such Person is a Member,  without the prior  unanimous  consent of the  Managers,
(i) directly or indirectly  (including  through any contract,  license or other  arrangement with third parties)  develop,  market,  or
provide any personal  coaching,  training or personal  interactive  learning  program or service related thereto of the same or similar
nature  as the  Business  (<b>"Scope"</b>  and any such  proposed  service  offering  or  program  within  such  Scope  being a <b>"New  Business
Opportunity"</b>)  with or for any Person other than the Company;  (ii) license or otherwise  provide any program  content or materials for
use in any New Business  Opportunity to any Person other than the Company; or (iii) sell or license any customer lists,  inquiry lists,
or other  information  relating to customers or potential  customers,  and/or any marketing  rights relating  thereto  (<b>"Leads"</b>) to any
Person for the purpose,  in whole or in part,  of having such Person  provide  and/or  offer to provide any  products or services  with
respect to such New Business Opportunity or otherwise within the Scope to such Leads; other than to or through the Company
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.     <u>Noncompetition; Confidential Information.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;At all times while a Person is a Member,  neither  such Person nor any  Affiliate of such Person may  (1) engage,  directly or
                  indirectly,  in the Business, (2) contact,  solicit, or direct any Person to contact or solicit, any of the customers
                  of the  Company  for the  purpose of  providing  any  services  that are the same or similar to those  offered by the
                  Company  (and the  restriction  in this clause (2) will  continue  for  eighteen  (18) months after such Person is no
                  longer a Member),  or (3)  solicit,  or accept if offered to it with or without  solicitation,  the  services  of any
                  individual  who is an Officer or employee of the Company at the time of such  solicitation  or acceptance or has been
                  an employee of the Company within the one year prior to such  solicitation or acceptance (and the restriction in this
                  clause (3) will  continue for eighteen (18) months after such Person is no longer a Member).  The  provisions of this
                  Section 3.2.a. shall not apply to Members in the event of dissolution or liquidation of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;The Company has furnished to each Member  certain  information  that is either  non-public,  confidential,  or  proprietary in
                  nature.  The Company  may also  impart to the  Members  from time to time  additional  non-public,  confidential,  or
                  proprietary information,  including,  without limitation, one or more business plans and other procedures,  concepts,
                  methods, trade secrets,  documentation,  diagrams,  manuals, handbooks,  training or processing materials,  marketing
                  techniques or development plans,  financial and pricing information,  and the like, whether oral or written. All such
                  material  heretofore or hereafter  furnished to the Members  which at the time of disclosure  was or is marked with a
                  suitable legend, such as "Confidential," together with any analysis,  compilations,  studies, summaries, or documents
                  prepared  for  review  by  the  Members,  their  agents,  or  their  employees,  is  hereinafter  referred  to as the
                  <b>"Confidential  Information."</b>  If  Confidential  Information  is disclosed  orally or visually,  the Company agrees to
                  identify the same as  "Confidential"  at the time of  disclosure.  The  Confidential  Information  also  includes any
                  information  described  above  which  the  Company  obtains  from  third  parties  and which  the  Company  treats as
                  confidential  or  proprietary,  regardless  of  whether  such  information  is owned  or  developed  by the  Company.
                  Confidential  Information  shall not include  information that: (i) is in or comes into the public domain without any
                  breach of any  obligation of  confidentiality  owed to the Company;  (ii) was in a Member's  possession  prior to the
                  Effective  Date  without the breach or existence  of any  obligation  of  confidentiality  to the  Company;  (iii) is
                  independently  developed by or comes into the possession of a Member at any time hereafter  without  reference to any
                  information  from the Company and without any breach of any  obligation of  confidentiality  owed to the Company;  or
                  (iv) is required to be disclosed under or by applicable law, regulation or lawful court order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;Each Member agrees (at all times while a Member and for two years  thereafter)  to maintain the  Confidential  Information  in
                  secrecy  and  confidence  and not to,  directly or  indirectly,  without the prior  written  consent of the  Company,
                  disclose or cause to be disclosed,  or use or make known,  or suffer or permit any former,  current,  or  prospective
                  employee or agent of such Member or any  Affiliate  of such  Member to disclose or cause to be  disclosed,  or use or
                  make known, any of the Confidential Information, except in connection with the conduct of the Company's business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.       &nbsp;Each Member  agrees that any material  violations  of this Section 3.2.  would cause  irreparable  harm to the Company and its
                  Members.  Therefore,  each  Member  consents  and agrees that if such Member  materially  violates  the terms of this
                  Section  3.2.,  the  Company  shall be  entitled,  in  addition  to any other  rights and  remedies  that it may have
                  (including  monetary  damages),  to apply to any court of  competent  jurisdiction  for specific  performance  and/or
                  injunctive or other relief in order to enforce, or prevent any continuing or threatened  violation of, the provisions
                  of this  Section  3.2 by such  Member.  If the  Company  shall  institute  any action or  proceeding  to enforce  the
                  provisions of this Section 3.2,  each Member  hereby  waives the claim or defense that this is an adequate  remedy at
                  law, and each Member agrees in any such action or  proceeding  not to interpose the claim or defense that such remedy
                  exists at law.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>4.       MEMBERSHIP INTERESTS, CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS</b>
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.     <u>Membership Interests.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;The Company shall have two classes of Membership Interests, known as Class A Interests and Class B Interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;After giving effect to the transactions  contemplated by the Purchase Agreement and this Agreement,  the respective Classes of
                  Interest (and in the case of Class A Interests,  Percentage Interests) of each Member shall be set forth on <u>Exhibit A</u> attached hereto:
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.     <u>Initial Capital Contribution.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;Each Member has previously  contributed the property and/or rights  indicated  opposite such Member's name on Exhibit A to the
                  Original  Agreement in  consideration  for the Class A  Interests.  The holder of the Class B  Interests  has made no
                  contribution to the capital of the Company in consideration for such holder's Class B Interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;Subject to Section  4.3.f.,  the Capital  Account of each of the  Members  shall be  credited  with the  current  total of all
                  capital contributions by such Member to the Company less any distributions to such Member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;No Member shall be entitled to any interest on such Member's capital contributions to the Company.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.     <u>Capital Accounts.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;A Capital  Account shall be established  and maintained for each Member in accordance  with the Code and with the  Regulations
                  and shall be subject to adjustment as provided in Section 4.3.b.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;In accordance with and subject to the Regulations, the Capital Account of each Member shall from time to time be:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)      &nbsp;&nbsp;Increased  by (i) the amount of cash and the Gross Asset Value of property  contributed  by such  Member,  (ii) such  Member's
                           share of the  Profits,  determined  pursuant  to Section 6.7 for Capital  Account  purposes,  whether or not
                           distributed,  and (iii) the amount of any Company liabilities assumed by such Member or which are secured by
                           any Company property distributed to such Member;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)      &nbsp;&nbsp;Decreased  by (i) the amount of cash and the Gross Asset Value of property  distributed  to such  Member,  (ii) such  Member's
                           share of Losses,  determined  pursuant to Section 6.7 for Capital Account purposes,  and (iii) the amount of
                           any  liabilities of such Member  assumed by the Company or which are secured by any property  contributed by
                           such Member to the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)      &nbsp;&nbsp;Increased or decreased,  as the case may be, to reflect the fair market value of Company  property in accordance  with Section
                           1.704-1(b)(2)(iv)(f)   of  the   regulations   in   connection   with  any  events   described   in  Section
                           1.704-1(b)(2)(iv)(f)(5) of the regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;Except as  otherwise  provided in this  Agreement,  whenever it becomes  necessary  to  ascertain  the balance of any Member's
                  Capital Account,  such a determination shall be made after giving effect to all allocations of Profits and Losses and
                  other  applicable  adjustments  for the  current  taxable  year and all  distributions  for such year in  respect  of
                  transactions  effected  prior to the date as of which such  determination  is to be made. No Member shall be entitled
                  to (i) make any  withdrawal  from its Capital  Account or to receive any  distribution  from the  Company,  except as
                  expressly provided in this Agreement,  or (ii) make any additional capital  contribution to the Company other than as
                  provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.       &nbsp;Any dispute between the Members with respect to  determination  of Capital Accounts or otherwise with respect to the manner or
                  method of  accounting  by the Company  shall be resolved by an  independent  third  party  accounting  firm  mutually
                  acceptable to the Members in question.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.       &nbsp;In the event that  property  is  distributed  by the  Company  to a Member  (including  distributions  in  liquidation  of the
                  Company),  the Capital Accounts of the Members shall be adjusted immediately before such distribution,  in accordance
                  with the  applicable  allocation  of Profits  and  Losses,  to  reflect  the  Profits or Losses and other  applicable
                  adjustments  that would have been  realized by the Company if the  distributed  property had been sold on the date of
                  its distribution for its fair market value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.       &nbsp;The Capital Account of any Person who acquires Membership Interests from a Member (including,  without limitation,  Membership
                  Interests  transferred  pursuant to the Purchase Agreement) shall include the Capital Account of the Member from whom
                  the Membership Interest was acquired.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.     <u>Limitation on Members'  Liabilities.</u>  A Member shall not be bound by, or be personally  liable for, the expenses,  liabilities
or  obligations of the Company,  and the liability of each Member shall be limited  solely to the amount of such Member's  contribution
to the capital of the Company, except as otherwise required by the laws of the State of Delaware.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.     <u>Distributions of Net Cash Flow.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;For purposes  hereof,  the  <b>"Distributable  Cash Flow"</b> with respect to each Fiscal Year or portion of a Fiscal Year shall mean
                  the Cash Flow for such Fiscal Year or portion of a Fiscal  Year,  after  first  deducting, in  all periods up through
                  September 30, 2003, any Franklin  Covey Program Income  generated  during such period.  The Company shall  distribute
                  Distributable  Cash Flow for each  Fiscal  Year or portion of a Fiscal Year (with such  frequency  as required  under
                  Section  4.6),  60% to the  Class A  Members,  <u>pro rata</u>  according  to the  Class A  Members'  respective  Percentage
                  Interests,  and 40% to the Class B Member; provided that the Class B Interests shall no longer be entitled to receive
                  any further  distributions  pursuant to this Section 4.5.a after the Company has distributed a total of $2,000,000 to
                  the Class B  Interests  pursuant this Section 4.5.a (the <b>"Class B  Maximum"</b>),  and the Company shall  distribute  all
                  further  Distributable  Cash Flow  thereafter  to the Class A  Members,  <u>pro rata</u>  according to the Class A  Members'
                  respective  Percentage  Interests.  The Company may, but shall not be obligated to, make special distributions to the
                  Class B  Interests in an amount up to the positive  difference  between (A) the Class B Maximum and (B) the aggregate
                  total of all prior  distributions  previously made to the Class B  Interests  pursuant to this Section 4.5.a from and
                  after September 1, 2002.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;After September 30, 2002, and on or prior to October 15, 2003, the Company shall  determine,  report to the Class B Member and
                  distribute to the Class B Member the positive  amount,  if any, equal to the lesser of (i) the Franklin Covey Program
                  Income  generated  during the thirteen month period ending  September 30, 2003, or (ii)  $1,225,000  (the <b>"Special FC
                  Distribution"</b>).  Upon calculation and receipt of the Special FC Distribution,  if any, the Class B Interests shall no
                  longer be  entitled to receive any  distributions  pursuant to this  Section  4.5.b and all  Franklin  Covey  Program
                  Income, if any, shall thereafter be part of Distributable Cash Flow to be distributed pursuant to Section 4.5.a.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.     <u>Time of Determination and Distribution of Distributable Cash</u>  Distributable  Cash Flow shall,  except as otherwise provided in
this  Agreement,  be determined by the Management  Board,  and shall be distributed  from time to time by the Officers  pursuant to the
directions  of the  Management  Board.  Until the  Class B  Maximum  has been  distributed,  the Company  shall  determine,  report and
distribute Distributable Cash Flow at least as often as quarterly, promptly following the end of each fiscal quarter of the Company.
<br><br>
<b>5.       MANAGEMENT OF THE COMPANY</b>
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.     <u>Members;  No Control of Business or Right to Act for Company.</u>  Other than as otherwise  provided in this  Agreement,  a Member
shall take no part (in such capacity) in the  management,  conduct or control of the business of the Company and shall have no right or
authority (in such capacity) to act for or to bind the Company.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.     <u>The Management Board.</u></font>
<br><br>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;The overall  management and control of the business and affairs of the Company shall be vested in the Management Board,  which
                  shall have all the powers and authority of managers  under the Company Act, or necessary or advisable in  connection,
                  or consistent,  therewith.  All actions approved by the Management Board (including  through its appointed  Officers)
                  shall be binding on the  Company and each of the  Members.  In this  regard,  all  actions  taken by any  Managers or
                  Officers in  connection  with the  Organization  Transactions  shall be deemed to be and treated for all  purposes as
                  actions approved by the Management Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;The Management  Board shall be composed of up to five (5) individuals (the  <b>"Managers"</b>),  who shall be elected annually by the
                  Class A Members who hold a majority of the outstanding Percentage Interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;At all times while the Class B Interests are outstanding,  the Company shall invite a representative  designated by the holder
                  of the Class B  Interests to attend all  meetings,  including  without  limitation,  informational  meetings,  of the
                  Management Board in a nonvoting observer capacity and, in this respect,  shall give such representative copies of all
                  notices,  minutes,  consents,  and other material that it provides to its directors,  except that such representative
                  shall not be entitled to so attend and observe and shall not be entitled to such  information if the Management Board
                  in good faith  determines  that such  attendance,  observation  or disclosure  would be likely to result in a loss of
                  attorney-client  privilege  with  respect to  discussions  at such  meetings or with respect to such  materials;  and
                  provided further that the  representative  shall agree to sign a protective  agreement or such other documents as the
                  Management  Board  reasonably  deems  necessary  to protect and  maintain  the  confidentiality  of its  confidential
                  information.  Such  representative  may  participate in discussions of matters brought to the Management  Board.  The
                  initial  representative  shall be Val John Christensen and the Company shall have the right to reasonably approve any
                  change in this representative.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.     <u>Officers.</u>  The  Management  Board  shall  elect  officers  for the  Company  from time to time.  The  authority  and  specific
responsibilities  of each of the  Company's  officers  are set  forth in the  Bylaws  and shall be  limited  to the  express  authority
contained therein or in resolutions adopted from time to time by the Management Board.
<br><br>
<b>6.       ACCOUNTING AND TAXES</b>
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.     <u>Books and Records.</u></font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;At all times during the term hereof,  the  Management  Board shall use its best efforts to cause accurate books and records of
                  account to be  maintained  in which are to be entered all matters  relating to the  business  and  operations  of the
                  Company,  including all income,  expenditures,  assets and liabilities thereof. The Company's financial records shall
                  be maintained on an accrual basis in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;Such books and  records of account  should be  maintained  on the accrual  basis and shall be adequate to provide  each Member
                  with all such  financial  information  as may be needed by such  Member for  purposes  of  satisfying  the  financial
                  reporting obligations of such Member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;Each Member is entitled to any  information  reasonably  necessary for the  preparation of such Member's  federal or state tax
                  returns.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.     <u>Rights of Inspection.</u>  Each Member and/or its  authorized  representatives  shall have the right to inspect,  examine and copy
(at such Member's expense) the books,  records,  files,  securities and other documents of the Company, for a proper purpose consistent
with such  Member's  rights under this  Agreement and during the regular  business  hours of the Company upon giving  reasonable  prior
written notice.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3.     <u>Bank Accounts.</u> All funds of the Company,  including,  without limitation,  all funds representing capital contributions to the
Company,  and the proceeds of all borrowings of the Company,  shall be deposited in such <b>"Operating  Accounts"</b> of a type, in a form and
in a bank or banks  selected by the  Management  Board.  All Company  expenses  and  distributions  are to be paid from such  Operating
Accounts.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.     <u>Financial Statements.</u>  The Company shall retain independent  certified  accountants  independent from the audit firm of either
Member.  Within  forty-five  (45) days after the end of each of the first three quarters of each Fiscal Year, the Company shall send to
the Members  unaudited  statements of operations  and cash flows for such fiscal  quarter and for the period from the beginning of such
Fiscal Year to the end of such fiscal  quarter  and an  unaudited  balance  sheet as of the close of such  fiscal  quarter.  As soon as
practicable  after the end of each  Fiscal Year ending on or after the  Effective  Date,  but not later than ninety (90) days after the
beginning of the following  Fiscal Year, the Company shall provide to each Member audited  statements of  operations,  Member's  equity
and cash flows,  for such ended Fiscal Year, and an audited balance sheet  (including a breakdown of each Member's  Capital Account and
a statement of  allocations to each Member of its  respective  portion of the Company's  taxable income for such Fiscal Year) as of the
close of such ended Fiscal Year,  including  appropriate  notes to such  financial  statements,  audited by the Auditors,  all of which
shall be prepared in accordance with generally accepted  accounting  principles and/or  requirements for tax accounting pursuant to the
Regulations.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5.     <u>Other  Accounting  Decisions.</u>  All  accounting  decisions for the Company (other than those  specifically  provided for in any
other Section of this Agreement) shall be made by the Management Board.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.     <u>Preparation  of Tax Returns.</u>  Upon being  provided by the Members with all  information  required for their  preparation,  the
Management  Board or its agents shall,  on behalf of the Company,  use their best efforts to cause all federal,  state and local income
tax returns of the Company to be  prepared.  The  Management  Board will use its best efforts to cause copies of all tax returns of the
Company to be made  available  for review by the  Members  at least  thirty  days prior to the  statutory  date for  filing,  including
extensions thereof, if any.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7.     <u>Allocation  of Profits,  Gains and Losses.</u>  Except as  otherwise  provided in this  Agreement,  net  profits,  net gains,  net
losses,  deductions  and Federal tax  credits,  if any,  for any Fiscal Year shall be allocated  among the Members in  accordance  with
Regulations underss.704(b) pursuant to the terms of this Section 6.7.</font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;<u>Profits.</u>  All items of Profits,  income and gain of the Company  with  respect to any Fiscal  Year shall be  allocated  to the
                  Members in the same proportions and to the same extent as  distributions  of  Distributable  Cash Flow and Special FC
                  Distribution  were actually made to the Members pursuant to this Agreement with respect to such period.  In the event
                  that,  pursuant to the terms of this  Section  6.7,  the items of Profits,  income or gain with respect to any Fiscal
                  Year exceed all of the  distributions  of  Distributable  Cash Flow and Special FC Distribution  actually made to the
                  Members  with  respect to such Fiscal  Year,  such excess with  respect to such Fiscal Year shall be allocated to the
                  Class A Members pro rata according to their Percentage Interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;<u>Losses.</u>  Losses and credits  shall be  allocated to the Members  proportionately  with  respect to their  respective  positive
                  Capital Account  balances,  or to the extent such Losses or credits  allocable herein exceed the foregoing amounts so
                  that any Losses or credits have not otherwise been  allocated,  such excess shall be allocated to the Class A Members
                  pro rata according to their Percentage Interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;<u>Allocations with Respect to Mid-year  Transferred  Membership  Interests.</u>  In the event of a Transfer of a Member's Membership
                  Interest or any portion thereof,  the Member's items of Profits and Losses shall be allocated  between the Transferor
                  (as defined in Section 7.3 below) and the  Transferee (as defined in Section 7.3 below) in the ratio of the number of
                  days in the fiscal year of the Company before and after the effective date of the Transfer.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.     Tax  Decisions  Not  Specified.  Tax  decisions  and  elections  for the Company not  provided for herein shall be made in the
discretion of the Management Board.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9.     Notice of Tax Audit.  The Company will use its best  efforts to give prompt  notice to the Members upon receipt of advice that
the Internal Revenue Service intends to examine Company income tax returns for any Fiscal Year.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.    Tax Matters  Partner.  AMS will be the tax matters partner (the <b>"Tax Matters  Partner</b>") for purposes of Sections  6221-6231 of
the Code and the  Regulations.  The Tax Matters  Partner  agrees to use its best efforts to comply in good faith with all provisions of
the Code  concerning a tax matters  partner and to take all actions  necessary to make each Member a notice partner under the Code. The
Tax Matters Partner will use its best efforts to give each Member copies of all notices or other material  communications  delivered to
or by him with respect to federal, state or local tax matters,  negotiations,  decisions,  settlements or other events. The Tax Matters
Partner  may not  initiate  or take  material  action  with  respect to any  litigation  without  the prior  consent of the  Members in
accordance with Section 5.5.
<br><br>
<b>7.       SALE, TRANSFER AND REDEMPTION</b>
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.     <u>General.</u>  Except  for any  Transfer  which is an  Excepted  Transfer,  no  Member  shall (i)  Transfer  all or any part of its
Membership  Interests,  or (ii) contract to Transfer all or any part of its Membership  Interests,  whether voluntarily or by operation
of law,  without in each instance  obtaining the prior written consent of the Managers,  which consent may be withheld in the Managers'
sole  discretion.  Any attempt to Transfer  Membership  Interests  without the required consent shall be void. The giving of consent in
connection with one or more Transfers shall not limit or waive the need for such consent in connection with any other Transfers.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.     <u>Securities Law Limitations.</u>  Notwithstanding  anything in this Agreement,  no Membership  Interests may be Transferred  except
as permitted  under the  Securities  Act and applicable  state  securities  laws or exemption  therefrom.  Further,  no Transfer of any
Membership  Interests or portions  thereof shall be permitted  without the Member first having  presented to the Company or its counsel
both (a) a written opinion of securities  counsel,  retained and  compensated by the Member but reasonably  satisfactory to counsel for
the  Company,  describing  the  proposed  Transfer and stating  such  counsel's  opinion that the Transfer  will not violate any of the
registration  provisions of the Securities Act, any applicable state securities law or the respective  rules  thereunder,  and (b) such
additional documents or written assurances as the Company may reasonably request to support the Member's request for Transfer.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3.     <u>Agreement  with  Transferees.</u>  In the event that,  pursuant to the  provisions of this Section 7, without regard as to whether
any prior  written  consent of the majority of the  non-transferring  Members as set forth in Section 7.1. is required,  any Member (as
<b>"Transferor"</b>)  shall  Transfer any  Membership  Interests to any Person (a  <b>"Transferee"</b>),  no such Transfer  shall be made or shall be
effective  to make such  Transferee  a Member or entitle  such  Transferee  to any  benefits  or rights  hereunder  until the  proposed
Transferee  agrees  in  writing  to (i)  assume  and be bound by all of the  terms  and  provisions  of this  Agreement  and all of the
obligations of the transferring  Member, and (ii) be subject to all the restrictions to which the transferring  Member is subject under
the terms of this Agreement and any further  agreements  with respect to the Company  property or as  contemplated by this Agreement to
which the Transferor is then subject or is then required to be a party.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4.     <U>Automatic  Redemption of Class B Interests.</u>  Immediately upon the later of (i) the date upon which aggregate  distributions to
the Class B Member under Section 4.5.a total the Class B Maximum or (ii) the  calculation  of the Special FC  Distribution  pursuant to
Section 4.5.b and the payment of the Special FC  Distribution,  if any (such time being  referred to herein as the <b>"Class B  Redemption
Date"</b>), the Class B Interests shall  automatically be redeemed for no further  consideration,  without any further action by any party.
From and after the Class B  Redemption Date, the Class B  Interests shall no longer be outstanding,  the holder thereof shall no longer
be a Member or hold any Membership Interest in the Company.
<br><BR>
<b>8.       DISSOLUTION</b>
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.     <u>Causes of Dissolution.</u>
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company shall be dissolved only in the event:</font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;Of the death,  removal,  liquidation,  dissolution,  withdrawal or bankruptcy of the final Member (each a <b>"Member's Withdrawal
                  Event"</b>);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;That the Class A Members holding more than fifty percent (50%) of the Percentage Interests vote to terminate the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;That there is a general  assignment of the assets of the Company for the benefit of its creditors,  or the adjudication of the
                  Company as Bankrupt; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.       &nbsp;That the Company is dissolved by operation of law.
</pre>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding anything in
this Agreement to the contrary, at no time prior to the Class&#160;B Redemption
Date shall the holders of Class&#160;A Interests cause or permit the Company to
be dissolved without the prior consent of the holder of the Class&#160;B
Interest, unless the holder of Class&#160;B Interests shall receive an amount in
connection with such dissolution which, when added to all prior distributions
pursuant to this Agreement, totals at least $3,225,000. </FONT></P>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.     <u>Procedure in Dissolution and Liquidation.</u></font>
<br><BR>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;Upon  dissolution  of the Company  pursuant to Section 8.1, the  Management  Board shall  immediately  commence to wind up the
                  affairs of and shall proceed with reasonable promptness to liquidate the business of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;During the period of the winding up of the affairs of the Company,  the rights and  obligations  of the  Management  Board set
                  forth herein with respect to the management of the Company shall continue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;The assets of the Company shall be applied or distributed in liquidation in the following order of priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)      &nbsp;&nbsp;In payment of debts and obligations of the Company owed to third parties who are not Members;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)      &nbsp;&nbsp;In payment of debts and obligations of the Company to any Member made in accordance with the terms of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)      &nbsp;&nbsp;To the Members pro rata, in accordance with and to the extent of their respective positive Capital Account balances; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)      &nbsp;&nbsp;Any  excess,  40% to the  Class B  Member,  and 60% to the  Class A  Members  in  proportion  to their  respective  Percentage
                           Interests;  provided that no amount shall be distributed to the Class B Interests if such dissolution occurs
                           after the Class B Redemption  Date, and provided  further that no amount shall be distributed to the Class B
                           Interests that would cause the amount distributed hereunder,  together with the aggregate total of all prior
                           distributions  to the  Class B  Interest  pursuant  to all other  provisions  of this  Agreement,  to exceed
                           $3,225,000.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>9.       AMENDMENT</b>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.     <u>Amendment.</u>  This Agreement may not be amended,  altered or modified  except by a writing signed by the Class A Members holding
more than fifty percent (50%) of the total number of Percentage  Interests;  provided,  that no amendment to this  Agreement that would
have a material adverse affect on the rights of the Class B Member shall be effective without the prior consent of the Class B Member.
<br><BR>
<b>10.      DISPUTES</b>
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.    <u>Escalation.</u>  Any dispute or  controversy  between the Members  arising out of this  Agreement or any  document,  instrument or
agreement  executed and delivered  pursuant  hereto (a <b>"Dispute"</b>),  shall first be submitted to  non-binding  mediation in the State of
Delaware,  or such other location as the parties may agree,  under the mediation rules of the American  Arbitration  Association.  Each
party shall bear its own costs in  connection  with such  mediation  and shall bear  one-half of the cost of the  American  Arbitration
Association and the mediator.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.    <u>Arbitration.</u></font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;In the event that a Dispute is not resolved by  non-binding  mediation  pursuant to Section 10.1 above,  such dispute shall be
                  submitted to binding arbitration in the State of Delaware, or such other location as the parties may agree.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;Either  party  requesting  arbitration  shall  serve a written  demand for  arbitration  on the other party by  registered  or
                  certified  mail.  The demand shall set forth a statement of the nature of the  dispute,  the amount  involved and the
                  remedies  sought.  Each party shall have the right to be represented by counsel and shall have the right only to such
                  expedited  discovery as the arbitrator may authorize upon a showing of good cause.  Except as  specifically  provided
                  herein,  the  arbitration  shall be  conducted  by and in  accordance  with  the  commercial  rules  of the  American
                  Arbitration  Association,  and the  arbitrator's  ruling  shall  be in  accordance  with  law and the  terms  of this
                  Agreement.  The arbitrator shall not have the power to amend this Agreement in any respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;No later than twenty (20)  calendar  days after a demand for  arbitration  is served,  the Members  shall  jointly  select and
                  appoint  a  disinterested  person  to act as the  arbitrator.  In the  event  that the  Members  do not  agree on the
                  selection of an arbitrator,  each Member shall select an arbitrator  within ten (10) days after the date on which the
                  Members do not agree on the selection of a sole  arbitrator and the two  arbitrators so selected shall select a third
                  arbitrator  within  ten (10) days after the  Members  select  their  arbitrators;  the  provisions  set forth  herein
                  regarding  the single  arbitrator  shall  apply to the three  arbitrators  so  selected.  Any  arbitrator  designated
                  hereunder  shall not now or in the three years  preceding  such  arbitration  be an  employee,  consultant,  officer,
                  director  or  shareholder  of any  party  hereto or any  Affiliate  of any  Member or have now or in the three  years
                  preceding such arbitration any business relationship with any Member or any Affiliate of any Member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.       &nbsp;No later than ten (10) calendar days after the arbitrator is appointed,  the arbitrator  shall schedule the  arbitration for a
                  hearing to commence on a mutually  convenient  date.  The hearing  shall  commence no later than thirty (30) calendar
                  days after the arbitrator is appointed and shall continue from day to day until completed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.       &nbsp;Each Member shall direct the  arbitrator  to use his or her best efforts to rule on each  disputed  issue within 30 days after
                  the  completion  of the hearings  described in paragraph (d) above.  The  determination  of the  arbitrator as to the
                  resolution of any dispute shall be binding and  conclusive  upon all Members;  provided,  that the arbitrator may not
                  award any punitive  damages.  All rulings of the  arbitrator  shall be in writing,  shall set forth the basis for the
                  decision and shall be delivered to the Members.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.       &nbsp;The prevailing  Member in any arbitration  shall be entitled to an award of reasonable  attorneys' fees incurred in connection
                  with the arbitration and the disputed issues with respect  thereto.  The  non-prevailing  Member shall pay such fees,
                  together  with the fees of the  arbitrator  and the costs and expenses of the  arbitration.  For purposes  hereof,  a
                  Member seeking payment of any amount in arbitration  shall be deemed to be the prevailing  Member if it is determined
                  that such party is entitled to receive at least 75% of the payment  initially  claimed by it to be due to such Member
                  in such arbitration,  and the Member from which such payment is sought shall be deemed to be the "prevailing  Member"
                  if the other Member is not so deemed to be the prevailing Member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.       &nbsp;Judgment on any arbitration award may be entered by any court having jurisdiction over the parties and subject matter.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>11.      GENERAL PROVISIONS</b>
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.    <u>Entire  Agreement.</u>  This  Agreement  constitutes  the entire  agreement  among the Members,  and  supersedes  all  agreements,
representations,  warranties,  statements,  promises and  understandings,  whether oral or written,  with respect to the subject matter
hereof.  None of the  Members  shall  be bound  by nor  charged  with any  oral or  written  agreements,  representations,  warranties,
statements,  promises or  understandings  with respect to the subject matter hereof not specifically set forth in this Agreement or the
exhibits hereto.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2.    <u>Notices.</u></font>
<pre>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.       &nbsp;Communications  given in connection with this Agreement shall be deemed  adequately given only if in writing to the Person for
                  whom such  Communications  are intended and sent by (1) personal  delivery,  (2) first class  registered or certified
                  mail, postage prepaid, return receipt requested,  (3) facsimile, (4) nationally recognized overnight delivery service
                  or (5) other means at least as fast and reliable as first class mail.  The addresses and facsimile  numbers  required
                  by this Agreement, unless changed pursuant to Section 12.2.c, are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)      &nbsp;&nbsp;To the Company or the Management Board:

                           c/o Franklin Covey Coaching, L.L.C.
                           2200 West Parkway Blvd. Second Floor
                           Salt Lake City, Utah 84119

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)      &nbsp;&nbsp;To Members:

                           As set forth on Exhibit A hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.       &nbsp;All Communications shall be effective upon such Communication's Deemed Delivery only.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.       &nbsp;By giving to the Company at least ten (10) days' written  notice  thereof,  Persons shall have the right from time to time and
                  at any time during the term of this Agreement to change their respective  addressee,  address and/or facsimile number
                  for notices,  and each shall have the right to specify as its address and/or  facsimile  number for notices any other
                  address and/or facsimile number.
</pre>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3.    <u>Validity.</u>  In the event that any  provision of this  Agreement  shall be held to be invalid or  unenforceable,  the same shall
not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4.    <u>Attorneys'  Fees.</u>  Should any  arbitration or litigation be commenced by the Company against any Member or between the Members
hereto or their  representatives,  or  should  any  Member  institute  any  proceeding  in a  bankruptcy  or  similar  court  which has
jurisdiction  over any  other  Member  hereto or any or all of such  Member's  property  or assets  concerning  any  provision  of this
Agreement or the rights and duties of any Person or entity in relation  thereto,  the party or parties  prevailing  in such  litigation
shall be entitled,  in addition to such other relief as may be granted,  to a reasonable  sum as and for its or their  attorneys'  fees
and court costs in such  litigation  which shall be determined by the court in such litigation or in a separate action brought for that
purpose.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5.    <u>Survival  of Rights.</u>  Except as  provided  herein to the  contrary,  this  Agreement  shall be  binding  upon and inure to the
benefit of the Members signatory hereto, and their respective permitted successors and assigns.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6.    <u>No Strict  Construction.</u>  The language used in this Agreement  will be deemed to be the language  chosen by the Members hereto
to express their  collective  mutual intent.  This Agreement  shall be construed as if drafted  jointly by the Members  hereto,  and no
rule of strict construction will be applied against any Person.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7.    <u>Governing Law;  Jurisdiction.</u>  The Agreement  shall be governed by and construed  exclusively  in accordance  with laws of the
State of Delaware without regard to the conflicts of law principles thereof.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8.    <u>No  Partition.</u>  No Member  shall have the right to, and each Member  hereby  covenants  that it will not,  bring any action to
dissolve,  terminate or liquidate the Company, except as provided in this Agreement,  and no Member at any time shall have the right to
petition  or to take any  action to  subject  the  Company  assets or any part  thereof to the  authority  of any court of  bankruptcy,
insolvency, receivership or similar proceeding, unless the same is approved by a vote of Members.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9.    <u>Waiver.</u>  No consent  or  waiver,  express  or  implied,  by a Member to or of any  breach or default by another  Member in the
performance  by such other  Member of its  obligations  hereunder  shall be deemed or  construed to be a consent or waiver to or of any
other breach or default in the  performance by such other Member of the same or any other  obligations of such other Member  hereunder.
A failure on the part of a Member to  complain  of any act or failure to act on the part of another  Member or a failure to declare the
other Member in default,  irrespective of how long such failure  continues,  shall not constitute a waiver by such Member of its rights
hereunder  unless such default is cured prior to the date upon which the  non-defaulting  Member  declares such default.  The giving of
consent by a Member in any one  instance  shall not  constitute  a waiver by such Member in any other  instance  and shall not limit or
waive the necessity to obtain such Member's consent in any future instance.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10.   <u>Waiver of Notice.</u>  Whenever any notice  whatever is required to be given to any Person under the  provisions of this Agreement
or under the  provisions  of the  Articles  or under the  Company  Act, a waiver  thereof in  writing,  signed by the Person or Persons
entitled to such notice,  whether  before or after the time stated  therein,  shall be deemed  equivalent to the giving of such notice.
Attendance at any meeting shall  constitute  waiver of notice  thereof  unless the Person at the meeting  objects to the holding of the
meeting because proper notice was not given.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11.   <u>Remedies Not  Exclusive.</u>  The rights and remedies of the Members and the Company  hereunder  shall not be mutually  exclusive,
<u>i.e.</u>,  the exercise of one or more of the provisions  hereof shall not preclude the exercise of any other  provisions  hereof.  Each of
the Members  confirms that damages at law will be an inadequate  remedy for a breach or threatened  breach of this Agreement and agrees
that, in the event of a breach or threatened breach of any provision hereof,  the respective rights and obligations  hereunder shall be
enforceable by specific  performance,  injunction or other equitable remedy, but nothing herein contained is intended to, nor shall it,
limit or affect any rights at law or by statute or otherwise  of any Member  aggrieved  as against  another for a breach or  threatened
breach of any provision  hereof,  it being the intention of this Section to make clear the agreement of the Members that the respective
rights and obligations of the Members hereunder shall be enforceable in equity as at law or otherwise.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12.   <u>Construction.</u>  All personal pronouns used in this Agreement,  whether used in the masculine,  feminine or neuter gender, shall
include all other  genders;  and the  singular  shall  include the plural and vice versa.  Titles of Sections and  Subsections  are for
convenience  only, and neither limit nor amplify the provisions of this Agreement  itself.  References to Sections or Subsections shall
refer to  Sections  or  Subsections  of this  Agreement,  unless  otherwise  indicated.  The use herein of the word  "including,"  when
following any general statement,  term or matter, shall not be construed to limit such statement,  term or matter to the specific items
or matters set forth  immediately  following such word or to similar items or matters,  whether or not  non-limiting  language (such as
"without  limitation," or "but not limited to," or words of similar import) is used with reference thereto,  but rather shall be deemed
to refer to all other items or matters that could reasonably fall within the broadest  possible scope of such general  statement,  term
or matter.  For the purposes of this  Agreement,  "and/or"  means one or the other or both,  or anyone or more or all, of the things or
Persons in connection with which the conjunction is used.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13.   <u>Incorporation  by Reference.</u>  Any exhibits  referred to herein are those  attached to this Agreement and shall be deemed to be
incorporated as a part of this Agreement.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14.   <u>Counterparts.</u>  This Agreement may be executed in any number of  counterparts,  each of which shall be deemed to be an original
and all of which shall constitute one and the same agreement.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.15.   <u>Further  Assurances.</u>  Each party  hereto  agrees to do all acts and things,  and to make,  execute and  deliver  such  written
instruments, as shall from time to time be reasonably required to carry out the terms and provisions of this Agreement.
<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.16.   <u>No Broker's  Fees.</u>  No broker's  fees or other such fees or  commissions  shall be payable by the Company with respect to this
Agreement or any of the transactions  pursuant to which the Members make their initial capital  contributions to the Company,  and each
Member  agrees to and shall  indemnify  and hold  harmless the Company  against and from any such  obligations  to which the Member has
committed itself or the Company.
<br><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.17.   <u>No Third Party Rights.</u>  This Agreement shall not (directly,  indirectly,  contingently or otherwise) confer or be construed as
conferring any rights or benefits on any Person that is not a named Member,  the holder directly or indirectly of Membership  Interests
or a permitted Transferee of a Member hereunder.
<BR><BR></font>
<p align=center>*****</p>


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<HR SIZE=5 COLOR=GRAY NOSHADE>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this Amended and Restated Limited Liability Company Agreement
is executed as of the date first stated above. </FONT></P>

<PRE>
AMS DIRECT, INC.,                                             FRANKLIN COVEY CO.,
a Delaware Corporation                                        a Utah Corporation



By:_______________________________                        By:_____________________________________
         Mark S. Holecek                                             Val John Christensen,
           Chairman                                                Executive Vice President


COACHING INVESTMENTS, LLC,
a Delaware limited partnership

By:_______________________________
         Mark S. Holecek
             Manager

         The  following  Persons  hereby  join in and agree to be bound (to the same  extent as the  Affiliate  of such Person who is a
Member) by Sections 3.1 and 3.2 of this Agreement:

FRANKLIN COVEY CLIENT SALES, INC.,
a Utah corporation

By:_______________________________________
         Val John Christensen
Title:     Vice President


AMERICAN MARKETING SYSTEMS, INC.,
an Illinois corporation

By:_______________________________________
         Mark S. Holecek
Title:      Chairman

</pre>


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<HR SIZE=5 COLOR=GRAY NOSHADE>



<p align=center><font face="Times New Roman, Times, Serif" SIZE=2><b>EXHIBIT A</b></font></p>

<p align=center><font face="Times New Roman, Times, Serif" SIZE=2><b>MEMBERS</b></font></p>


<p align=left><font face="Times New Roman, Times, Serif" SIZE=2>THIS  SCHEDULE  MAY BE AMENDED  FROM TIME TO TIME WITH THE  REQUIRED  CONSENT OF THE  MEMBERS,  IF ANY, TO REFLECT THE  ADDITION OF NEW
MEMBERS,  THE ISSUANCE OF NEW  MEMBERSHIP  INTERESTS,  THE SALE OR EXCHANGE OF  MEMBERSHIP  INTERESTS,  OR OTHER  SHIFTS OF  MEMBERSHIP
INTERESTS  PROVIDED  ALL SUCH CHANGES ARE  PURSUANT TO THE  AGREEMENT OR A CHANGE OF ADDRESS OR FACSIMILE  NUMBER OF A PERSON FOR WHICH
NOTICE WAS GIVEN TO THE COMPANY PURSUANT TO THIS AGREEMENT.</font></p>


<p align=left><font face="Times New Roman, Times, Serif" SIZE=2><b>CLASS A MEMBERS</b></font></p>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br><u>Name and Address</u></FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Facsimile<br><u>Number</u></FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;<br><u>Class</u></font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Percentage<br><u>Interest</u></FONT></TD>
</tr></TABLE>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMS Direct, Inc.<br>7020 High Grove Boulevard<br> Burr Ridge, Illinois 60521</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(630) 382-3282</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A</font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[51%]</FONT></TD>
</tr></TABLE>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Coaching Investments, LLC</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A</font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>49%</u></FONT></TD>
</tr></table>
<br>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</font></td>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>100%</u></FONT></TD>
</tr></table>
<br>
<pre>
---------------------------------------- -------------------------------------- --------------------------------------
CLASS B MEMBER                           Fax Number                             Percentage of Class
---------------------------------------- -------------------------------------- --------------------------------------
Franklin Covey Co.                       (801) 817-8723                         100%
2200 West Parkway Boulevard
Salt Lake City, Utah  84119
(801) 975-1776
---------------------------------------- -------------------------------------- --------------------------------------
</PRE>

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<HR SIZE=5 COLOR=GRAY NOSHADE>


<p align=center><font face="Times New Roman, Times, Serif" SIZE=2><b>EXHIBIT B</b></font></p>

<p align=center><font face="Times New Roman, Times, Serif" SIZE=2><b>Franklin Covey Programs</b></font></p>

<PRE>
<u>Current Programs</u>

o        Zig Ziglar Corporation
o        Zig Ziglar Network
o        Denis Waitley Inc. / International Learning Technologies Inc.
o        Home Mortgage Network
o        Tom Hopkins International
o        Brian Tracy
o        Inc. Magazine, Inc. Consulting
o        National Association of Realtors
o        Personal Selling Power

<u>Pending Contracts</u>

o        Money / Time Inc. Brand Licensing
o        Norman Vincent Peale Foundation / Guideposts
o        Great Life Network
o        teachmetotrade.com
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Franklin Covey and the
Company hereby agree that, at any time after December 31, 2002, Franklin Covey
may, upon prior written notice to the Company, direct the Company to exclude the
financial results of any of the above programs from the calculation of Franklin
Covey Program Income, if and only if the financial performance of such program
is negatively impacting Franklin Covey Program Income, such exclusion to begin
thirty (30) days after the Company&#146;s receipt of such notice and to be
subject to completion of pre-existing coaching client commitments. </FONT></P>
</Body>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>exhibit10_13.htm
<DESCRIPTION>10.13 CONSULTING AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.13
</title>
</head>
<BODY>

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.13</font></p>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Krisak and Company<br>
Management Consultants</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Brian A. Krisak<br>President</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Robert A. Whitman<br>
Chairman and CEO<br>
Franklin Covey Company, Inc.<br>
2200 West Parkway Boulevard<br>
Salt Lake City, UT 84119</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Bob,</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based upon our recent agreement, I am pleased to provide the proposal for management
 consulting services to Franklin Covey Company, Inc., as an independent contractor on a best efforts professional basis.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I agree to provide, and Franklin Covey Company, Inc. agrees to contract
for, my professional services for a minimum average of eighty hours per month at the rate of $250. per hour beginning
September 3, 2001 and ending December 31, 2002.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>My services, under your direction, will be to assist yu and your team
on projects that we mutually agree may provide significant value to Franklin Covey Company, Inc.
Initially these include; research and advisory services on project "Cherry Tree"; organizational alignment and execution
solutions development; and, a series of high-level client industry briefings.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Krisak and Company bills monthly on a professional fee plus expense basis.
Expenses will be billed in addition to fees and will include: directly related travel; meals; lodging; stenographic;
research; computer; telephone; and, postage expenses.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All work and information received will be confidential.  Further,
I agree to execute Franklin Covey Company, Inc.'s standard confidentiality and non-disclosure agreements.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assuming this meets with your approval, please sign a copy of this agreement on the
following page and return it to me at your earliest convenience.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I appreciate and look forward to the opportunity to
continue working with you and your team.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely,</font></p>

<br>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Brian A. Krisak</font></p>

<br>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Krisak and Company  4400 emerson Ave.  Dallas, TX 75205
(214) 219-1299  e-mail:krisakco@swbell.net</font></p>
<BR><BR><bR><BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accepts for Franklin Covey Company, Inc.:</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  ROBERT A. WHITMAN</FONT><HR></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert A. Whitman, Chairman and CEO</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>
<BR><BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OCTOBER 3, 2001</FONT><HR></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>
<BR><BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accepts for Krisak and Company:</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  BRIAN A. KRISAK</FONT><HR></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Brian A. Krisak, President</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>
<BR><BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OCTOBER 3, 2001</FONT><HR></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></TABLE>


</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>exhibit10_14.htm
<DESCRIPTION>10.14 SABBATICAL AND SEVERANCE AGREEMENT
<TEXT>
<html>
<head>
<TITLE>Exhibit 10.14
</title>
</head>
<body>

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.14</font></p>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 25, 2002</font></p>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stephen M.R. Covey<br>
2460 North Canyon Road<br>
Provo, UT 84604</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Stephen:</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
letter memorializes the agreement between you and Franklin Covey regarding your
sabbatical leave of absence from Franklin Covey. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Sabbatical Leave.</u> You are entitled to take a 12-month sabbatical leave of absence, commencing May 12, 2002, and ending May
10, 2003 (the "Sabbatical Leave").  Your employment will terminate upon commencement of your Sabbatical Leave.  During your
Sabbatical Leave, you will receive the gross amount of $362,000 (your most recent $268,000 regular salary, plus a bonus in the amount
of $94,000), less all applicable withholdings, payable in twenty-six (26) bi-weekly installments corresponding to Franklin Covey's
regular payroll dates, commencing May 31, 2002.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Severance.</u>  In the event you do not resume your active employment with Franklin Covey at the conclusion of your Sabbatical
Leave, whether by your choice or Franklin Covey's choice, you will be entitled to receive severance in the gross amount of  $543,000,
less all applicable withholdings, payable in thirty-nine (39) bi-weekly installments corresponding to Franklin Covey's regular
payroll dates, commencing on May 31, 2003 (the "Severance Period").</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>COBRA During the Sabbatical Leave.</u>  Commencing with your Sabbatical Leave, you will be eligible as a terminated employee to
continue any health and dental benefits that were elected by you and are in place immediately prior to your Sabbatical Leave pursuant
to COBRA. COBRA coverage is available for up to eighteen (18) months following the date of termination of your employment.  If you
elect COBRA coverage, Franklin Covey will pay an amount approximately equal to your monthly COBRA premium, including the
administrative charge, for each month during your Sabbatical Leave.  You are responsible to review all COBRA materials, elect
coverage, and pay the applicable COBRA premium for as long as you are eligible and elect the coverage.  COBRA information will be
sent to your home address following the Effective Date of Termination.  COBRA rates may change at any time.  The foregoing COBRA
premium reimbursement payment will increase or decrease to match any increase or decrease in the applicable COBRA rate.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Medical Coverage Following COBRA Period.</u>   In the event you do not resume your active employment with Franklin Covey at the
conclusion of your Sabbatical Leave, (i) you will continue to be eligible for continued health care coverage pursuant to COBRA, under
the terms of paragraph 3 above, for the remaining six months of the statutory COBRA period that commenced with your Sabbatical Leave,
and (ii) commencing upon the expiration of the statutory COBRA period, and for the balance of the time you are receiving severance
payments pursuant to paragraph 2, above, Franklin Covey shall reimburse you, within 30 days after receipt of your written request
therefore (accompanied by documentation verifying your payment thereof), the premiums you pay to procure health insurance coverage
comparable to the coverage you and your family received under COBRA.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Office Equipment.</u> If you decide not to return to Franklin Covey at the conclusion of your sabbatical leave of absence, you
agree to return to Franklin Covey, within 15 days after the date of written request, at Franklin Covey's expense, any computers,
printers, fax machines, telephones or other business or office equipment or furniture in your possession that is owned by Franklin
Covey.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Noncompete; Nondisclosure; Nonsolicitation; Nondisparagement.</u>  During the course of your employment with Franklin Covey, you
have obtained information or knowledge, which is confidential or proprietary in nature relating to Franklin Covey's business,
operations, services, products or equipment. To remain eligible to receive the payments and benefits described herein, you agree that
for a period of two (2) years from the Effective Date of this Agreement, you will not; (i) exploit, disclose or assist others in
exploiting, using or disclosing, to compete or to assist others to compete, directly or indirectly, with the business of Franklin
Covey, any Franklin Covey proprietary information or proprietary documents including, without limitation: (a) market, business or
alliance strategies or initiatives; (b) training services pricing and material pricing information or strategies; (c) new product or
training seminar concepts, or ideas; (d) financial or information technology initiatives, status or expectations; (e) market research
results; (f) marketing and product strategies; (g) customer lists; and (h) vendor and supplier lists; or (ii) solicit to work in any
field or industry or otherwise induce any employee of Franklin Covey to terminate his/her employment with Franklin Covey for any
reason. Further, you agree that for a period of two (2) years, you will not make any statements to third parties that disparage,
demean, or criticize Franklin Covey officers, management, employees, business practices, strategies, products, or services.  The
foregoing shall not prevent you from making truthful statements under oath as a witness in a proceeding by a court of competent
jurisdiction or administrative agency.  Notwithstanding the foregoing provisions of this Paragraph 6, nothing herein shall prevent
you from doing business and competing in the training/learning industry, provided that (1) you do not disclose Franklin Covey
proprietary information or proprietary documents as stated above, and (2) for a period of two (2) years from the Effective Date of
this Agreement, you do not personally work for or personally do business with the following entities: Electronic Data Systems, Shea
Homes, Ritz-Carlton, Comcast, Campbell Soup and Avon.  Notwithstanding the foregoing provisions of this Paragraph 6, any intellectual
property that you develop during your Sabbatical Leave or thereafter (except when employed by Franklin Covey), including but not
limited to books, training materials, articles and papers ("your intellectual property"), shall be owned by you, provided that your
intellectual property was not developed utilizing Franklin Covey facilities and personnel.  Provided you give appropriate attribution
to Stephen R. Covey and Franklin Covey, you are expressly permitted to reference, expand upon or further develop in books, articles
and other published media (including audio and video tapes) any distinct principle, concept or idea contained in works developed
partially or wholly by Stephen R. Covey (including "The 7 Habits of Highly Effective People") that are owned by or licensed to
Franklin Covey ("Your Works").  You agree to negotiate in good faith to grant to Franklin Covey the exclusive right to market and
deliver any training curricula based upon Your Works; provided, however, that if you and Franklin Covey are unable, each acting in
good faith, to reach agreement on such terms, you shall have the exclusive right to develop, market and deliver training curricula
based upon Your Works.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>General Release.</u> For and in consideration of the payments and benefits described herein, the receipt and sufficiency of
which you hereby acknowledge, on your own behalf, and on behalf of your heirs and assigns, and all persons claiming under you, you
hereby fully and forever unconditionally release and discharge Franklin Covey Co., all of its affiliated and related corporations,
their predecessors, successors and assigns, together with their divisions and departments, and all past or present officers,
directors, employees, insurers and agents of any of them (hereinafter referred to collectively as "Releasees") of and from, and you
covenant not to sue or assert against Releasees, for any purpose, all claims, administrative complaints, demands, actions and causes
of action, of every kind and nature whatsoever, whether at law or in equity, and both negligent and intentional, arising from or in
any way related to your employment by Franklin Covey, based in whole or in part upon any act or omission occurring on or before the
date of this general release, without regard to your present actual knowledge of the act or omission, which you may now have, or
which you, or any person acting on your behalf may at any future time have or claim to have, including specifically, but not by way
of limitation, matters which may arise at common law or under federal, state or local laws, such as the Fair Labor Standards Act, the
Employee Retirement Income Security Act, the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Older Workers Protection Act, the Rehabilitation Act of 1973, the American With Disabilities
Act, and the Equal Pay Act.  You warrant that you have not assigned or transferred any right or claim described in this general
release. You expressly assume all risk that the facts and law concerning this general release may be other than as presently known to
you. You acknowledge that, in signing this general release, you are not relying on any information provided to you by Releasees or
upon Releasees to provide information not known to you.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Acknowledgment.</u>  You acknowledge that you have read this agreement, understand its terms, and have had an opportunity to
have answered to your satisfaction any questions concerning the terms hereof. You execute this agreement voluntarily and of your own
free will and choice, after having been advised to seek your own legal counsel, without threat, coercion or duress, intending to be
legally bound.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Remedies.</u> In addition to any other legal or equitable remedies Franklin Covey may have, all unpaid payments and benefits
described in this agreement shall be immediately canceled, terminated and forfeited in their entirety in the event you violate any of
the provisions hereof.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>overning Law. </u>The laws of the State of Utah shall govern this agreement. This is the entire agreement between the parties.
No other promises or agreements have been made to you except as stated in this agreement. This agreement may not be changed or
modified except by a written document signed by the parties.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Entire Agreement.</u> This Agreement embodies the entire agreement and understanding of the parties hereto with respect to the
subject matter contained herein.  There are no restrictions, promises, representations, warranties, covenants, or undertakings
between the parties regarding such subject matter other than those expressly set forth or referred to herein.  This Agreement
supersedes all other prior written and verbal agreements and understandings between the parties with respect to such subject matter.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Effective Date of this Agreement is May 12, 2002.</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please
signify your agreement with the foregoing by signing both original letters where
indicated below and returning one original to me. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely,</font></p>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/   ROBERT A. WHITMAN</font></p>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert A. Whitman<br>
Chief Executive Officer</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACCEPTED AND AGREED<br>
This 25th day of November, 2002.</font></p>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  STEPHEN M.R. COVEY<br>
Stephen M. R. Covey</font></p>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>exhibit21.htm
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 21 - Subsidiaries</Title>
</Head>
<BODY>


<p ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Exhibit 21</b></font></p>

&nbsp;
<h1 ALIGN=Center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>FRANKLIN COVEY CO.</b></font></h1>
<p ALIGN=Center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u><b>Subsidiaries</b></u></font></p>

<p ALIGN=Left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic:<br>
Franklin Covey Printing, Inc. (a Utah corporation)<br>
Franklin Development Corporation  (a Utah corporation)<br>
Franklin Covey Asia, Inc.  (a Utah corporation)<br>
Franklin Covey Mexico, Inc.  (a Utah corporation)<br>
Franklin Covey Brazil, Inc.  (a Utah corporation)<br>
Franklin Covey Argentina, Inc. (a Utah corporation)<br>
Franklin Covey International, Inc.  (a Utah corporation)<br>
Franklin Covey Travel, Inc.  (a Utah corporation)<br>
Franklin Covey Catalog Sales, Inc. (a Utah corporation)<br>
Franklin Covey Client Sales, Inc. (a Utah corporation)<br>
Franklin Covey Product Sales, Inc. (a Utah corporation)<br>
Franklin Covey Services, L.L.C. (a Utah limited liability company)<br>
Franklin Covey Marketing, Ltd. (a Utah limited liability company)<br>
McCulley Cuppan, L.L.C. (a Utah limited liability company)<br>
Franklin Planner.com, Inc. (a Utah corporation)<br>
Franklin Covey Coaching, L.L.C.  (a Delaware limited liability company)</font></p>

<p ALIGN=Left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>International:<br>
Franklin Covey Canada, Ltd.  (a Canada corporation)<br>
Franklin Covey de Mexico S. de R.L. de C.V. (Mexico)<br>
Franklin Covey Europe, Ltd. (England, Wales)<br>
Franklin Covey Proprietary Limited (Queensland Australia)<br>
Franklin Covey Middle East W.L.L. (Bahrain)<br>
Franklin Covey Japan Co. Ltd. (Japan)<br>
Franklin Covey Brasil Ltda. (Brazil)<br>
Franklin Covey Germany G.m.b.H. (Germany)<br>
Franklin Covey Netherlands B.V. (The Netherlands)<br>
Franklin Covey Cayman Islands, Ltd. (British West Indies)<br>
Franklin Covey France S.A.R.L. (France)<br>
Franklin Covey Ireland Limited (Ireland)</font></p>

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</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>exhibit23.htm
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>

<html>
<head>
<TITLE>Auditors Consent - E23
</title>
</head>
<body>
<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23</font></p>
<br><BR>



<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Independent Auditors' Consent</u></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<br>
Franklin Covey Co.:</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the
incorporation by reference in registration statements (Nos. 333-38172, 333-34498,
333-89541, 033-73624, and 033-51314) of our reports dated November 19, 2002 with
respect to the consolidated balance sheets of Franklin Covey Co. as of August
31, 2002 and 2001, and the related consolidated statements of operations and
comprehensive loss, shareholders&#146; equity, and cash flows for each of the
years in the three year period ended August 31, 2002, and the related financial
statement schedule, which reports appear in the Annual Report on Form 10-K of
Franklin Covey Co. for the year ended August 31, 2002. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  KPMG LLP</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Salt Lake City, Utah<br>
November 25, 2002</font></p>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>9
<FILENAME>exhibit99_1.htm
<DESCRIPTION>99.1 SECTION 906 CERTIFICATES
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.1</title>
</head>
<BODY>

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 99.1</font></p>
<br>

<P align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002,
the following certifications were made to accompany the Form 10-K</font></p>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>CERTIFICATION OF<br>
CHIEF EXECUTIVE OFFICER<br>
OF FRANKLIN COVEY<br>
PURSUANT TO 18 U.S.C. &sect; 1350</b></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to 18 U.S.C.
 &sect; 1350 and in connection with the accompanying report on Form 10-K for the
period ended August 31, 2002 that is being filed concurrently with the
Securities and Exchange Commission on the date hereof (the &#147;Report&#148;),
the undersigned officer of Franklin Covey Co. (the &#147;Company&#148;) hereby
certifies that, to my knowledge: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 26, 2002,</font></p>

<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  ROBERT A. WHITMAN
<BR><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Robert A. Whitman<br>
Chief Executive Officer</font></p>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The above certification is furnished solely to accompany the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a separate disclosure statement.</font></p>
<br><Br><BR><br>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>CERTIFICATION OF<br>
CHIEF FINANCIAL OFFICER<br>
OF FRANKLIN COVEY<br>
PURSUANT TO 18 U.S.C. &sect; 1350</b></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to 18 U.S.C.
 &sect; 1350 and in connection with the accompanying report on Form 10-K for the
period ended August 31, 2002 that is being filed concurrently with the
Securities and Exchange Commission on the date hereof (the &#147;Report&#148;),
the undersigned officer of Franklin Covey Co. (the &#147;Company&#148;) hereby
certifies that, to my knowledge: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November 26, 2002,</font></p>

<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/  STEPHEN D. YOUNG
<BR><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Stephen D. Young<br>
Chief Financial Officer</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The above certification is furnished solely to accompany the Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a separate
disclosure statement.</font></p>


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</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>10
<FILENAME>exhibit99_2.htm
<DESCRIPTION>99.2REPORT OF INDEPENDENT AUDITORS
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<TITLE>Exhibit 99.2
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<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 99.2</font></p>
<br><Br>




<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Independent Auditors' Report on Consolidated Financial Statement Schedule</u></font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors and Shareholders<br>
Franklin Covey Co.:</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under date of November 19,
2002, we reported on the consolidated balance sheets of Franklin Covey Co. and
subsidiaries as of August 31, 2002 and 2001, and the related consolidated
statements of operations and comprehensive loss, shareholders&#146; equity, and
cash flows for each of the years in the three-year period ended August 31, 2002,
which are included in the Franklin Covey Co.&#145;s Annual Report on Form 10-K.
In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule included in the Annual Report on Form 10-K of Franklin Covey Co. The consolidated
financial statement schedule is the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on the consolidated financial
statement schedule based on our audits. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, such
consolidated financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Notes 1 and
4 to the consolidated financial statements, the Company adopted Statement of
Financial Accounting Standards No. 142, &#147;Goodwill and Other Intangible
Assets&#148;, in the year ended August 31, 2002. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ KPMG LLP</font></p>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Salt Lake City, Utah<br>
November 19, 2002</font></p>



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<SEQUENCE>11
<FILENAME>exhibit99_3.htm
<DESCRIPTION>99.3 VALUATION AND QUALIFYING ACCOUNTS
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<TITLE>Exhibit 99.3
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<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SCHEDULE II</font></p>
<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 99.3</font></p>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>FRANKLIN COVEY CO.</b></font></p>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>VALUATION AND QUALIFYING ACCOUNTS AND RESERVES</b></font></p>
<P align=center><font face="Times New Roman, Times, Serif" SIZE=3><b>For the Three Years Ended August 31, 2002 for Continuing Operations</b></font></P>
<hr>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>(Dollars in Thousands)</b></font></p>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Column A</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Column B</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Column C</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Column D</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Column E</font></td>
</tr></table>
<HR SIZE=2 COLOR=black NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>&nbsp;&nbsp;&nbsp;&nbsp;Additions</b></FONT><hr></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Description</b></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Balance at<br>Beginning of<br>Period</b></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Charged to Costs<br>and Expenses</b></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Deductions</b></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Balance at End<br> of Period</b></font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Year ended August 31, 2000:</i></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
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<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allowance for doubtful accounts</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;3,897</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;1,855</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;(2,606)&sup1;</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;3,146</font><HR SIZE=2 COLOR=black NOSHADE></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Year ended August 31, 2001:</i></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allowance for doubtful accounts</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;3,146</FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;2,255</FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;(3,602)&sup1;</FONt></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;1,799</font></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reserve for losses on management stock loans</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,052</FONT><HR></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;</FONt><HR></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,052</font><HR></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;3,146</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;3,307</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;(3,602)</FONt><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;2,851</font><HR SIZE=2 COLOR=black NOSHADE></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Year ended August 31, 2002:</i></FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=14%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Allowance for doubtful accounts</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;1,799</FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;1,680</FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;(1,677)&sup1;</FONt></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;1,802</font></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reserve for losses on management stock loans</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,052</FONT><hr></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;24,775</FONT><hr></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONt><hr></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;25,827</font><hr></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
</tr></table>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=44%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;2,851</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;26,455</FONT><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;(1,677)</FONt><HR SIZE=2 COLOR=black NOSHADE></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;27,629</font><HR SIZE=2 COLOR=black NOSHADE></td>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&sup1; Represents a write-off of accounts deemed uncollectible</font></p>

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