Exhibit 10.12
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FRANKLIN COVEY COACHING, L. L. C.
TABLE OF CONTENTS
Page
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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
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FRANKLIN COVEY COACHING, L.L.C.
This Amended and Restated Limited Liability Company Agreement (this “Agreement”) is made as of August 31, 2002 (the “Effective Date”) 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 “Members,” and each is sometimes individually called a “Member.”
Recitals
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 “Original Agreement”);
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;
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 B Membership Interest pursuant to this Agreement, and that all other outstanding membership interests in the Company shall be reclassified as Class 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’s entire Class A Membership Interest, pursuant to a Membership Interest Purchase Agreement of even date herewith between AMS and Franklin Covey (the “Purchase Agreement”), and (iv) the Original Agreement shall be amended and restated in its entirety as set forth herein.
Agreement
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:
1. DEFINITIONS
The following words, terms or phrases have the respective meanings set forth thereafter:
1.1. "Adjusted Capital Account Deficit" 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.
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.
1.2. "Affiliate" shall mean, with respect to any Person, any Person Controlled by, under common Control with or Controlled or managed by such Person. a. 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.
b. 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.
c. 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.
d. 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.
e. 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.
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.
1.33. "Management Board" shall mean the Management Board of the Company described in Section 5.2.
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.
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.
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.
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.
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.
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.
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.
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.
2.2. Purposes of the Company. The purposes of the Company shall be:
a. To engage in the Business, and any and all other business and activities that the Managers may in their discretion
determine; and
b. To perform any and all lawful acts incidental to the foregoing purpose or reasonably necessary to the fulfillment of the
foregoing purpose.
2.3. Scope of the Members' Authority. 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.
a. 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.
b. 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
"Confidential Information." 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.
c. 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.
d. 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.
4. MEMBERSHIP INTERESTS, CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS
a. The Company shall have two classes of Membership Interests, known as Class A Interests and Class B Interests.
b. 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 Exhibit A attached hereto:
4.2. Initial Capital Contribution.
a. 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.
b. 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.
c. No Member shall be entitled to any interest on such Member's capital contributions to the Company.
4.3. Capital Accounts.
a. 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.
b. In accordance with and subject to the Regulations, the Capital Account of each Member shall from time to time be:
(1) 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;
(2) 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
(3) 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.
c. 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.
d. 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.
e. 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.
f. 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.
4.4. Limitation on Members' Liabilities. 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.
a. For purposes hereof, the "Distributable Cash Flow" 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, pro rata 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 "Class B Maximum"), and the Company shall distribute all
further Distributable Cash Flow thereafter to the Class A Members, pro rata 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.
b. 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 "Special FC
Distribution"). 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.
4.6. Time of Determination and Distribution of Distributable Cash 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.
a. 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.
b. The Management Board shall be composed of up to five (5) individuals (the "Managers"), who shall be elected annually by the
Class A Members who hold a majority of the outstanding Percentage Interests.
c. 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.
5.3. Officers. 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.
a. 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.
b. 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.
c. Each Member is entitled to any information reasonably necessary for the preparation of such Member's federal or state tax
returns.
6.2. Rights of Inspection. 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.
a. Profits. 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.
b. Losses. 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.
c. Allocations with Respect to Mid-year Transferred Membership Interests. 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.
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.
a. Of the death, removal, liquidation, dissolution, withdrawal or bankruptcy of the final Member (each a "Member's Withdrawal
Event");
b. That the Class A Members holding more than fifty percent (50%) of the Percentage Interests vote to terminate the Company;
c. 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
d. That the Company is dissolved by operation of law.
Notwithstanding anything in this Agreement to the contrary, at no time prior to the Class B Redemption Date shall the holders of Class A Interests cause or permit the Company to be dissolved without the prior consent of the holder of the Class B Interest, unless the holder of Class 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.
8.2. Procedure in Dissolution and Liquidation.
a. 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.
b. 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.
c. The assets of the Company shall be applied or distributed in liquidation in the following order of priority:
(1) In payment of debts and obligations of the Company owed to third parties who are not Members;
(2) In payment of debts and obligations of the Company to any Member made in accordance with the terms of this Agreement;
(3) To the Members pro rata, in accordance with and to the extent of their respective positive Capital Account balances; and
(4) 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.
9. AMENDMENT
9.1. Amendment. 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.
a. 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.
b. 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.
c. 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.
d. 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.
e. 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.
f. 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.
g. Judgment on any arbitration award may be entered by any court having jurisdiction over the parties and subject matter.
11. GENERAL PROVISIONS
a. 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:
(1) 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
(2) To Members:
As set forth on Exhibit A hereto.
b. All Communications shall be effective upon such Communication's Deemed Delivery only.
c. 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.
11.3. Validity. 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.
*****
IN WITNESS WHEREOF, this Amended and Restated Limited Liability Company Agreement is executed as of the date first stated above.
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
EXHIBIT A
MEMBERS
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.
CLASS A MEMBERS
| Name and Address |
Facsimile Number |
Class |
Percentage Interest |
| AMS Direct, Inc. 7020 High Grove Boulevard Burr Ridge, Illinois 60521 |
(630) 382-3282 | A | [51%] |
| Coaching Investments, LLC | A | 49% |
| Total | 100% |
---------------------------------------- -------------------------------------- -------------------------------------- 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 ---------------------------------------- -------------------------------------- --------------------------------------
EXHIBIT B
Franklin Covey Programs
Current Programs 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 Pending Contracts o Money / Time Inc. Brand Licensing o Norman Vincent Peale Foundation / Guideposts o Great Life Network o teachmetotrade.com
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’s receipt of such notice and to be subject to completion of pre-existing coaching client commitments.