On July 8, 2020, Franklin Covey Co. (the Company) entered into the First Modification Agreement to its existing secured credit agreement (the 2019 Credit Agreement) with JPMorgan Chase Bank, N.A. (the Lender). The Lender also provides the majority of the Company’s day-to-day banking services.

The primary purpose of the First Modification Agreement is to provide alternative borrowing covenants for the fiscal quarters ending August 31, 2020 through May 31, 2021. These new covenants include the following:

Adjusted EBITDA for purposes of this calculation is not the same as reported by the Company in its quarterly earnings releases and includes the addition of capitalized development amortization, which is classified in cost of sales. The Adjusted EBITDA levels shown above are necessarily indicative of future results and should not be construed as guidance for future reporting periods.

The previously existing financial covenants remain in effect at all times other than the quarterly periods ending from August 31, 2020 through May 31, 2021.

In addition to the previously described financial covenants, the Company is prohibited from holding domestic cash balances in excess of $5.0 million at the time of any borrowing on its revolving credit facility and the Company is prohibited from making certain restricted payments, including dividends on its common stock and open-market purchases of its common stock for treasury until the Company has been in compliance with the previously existing financial covenants for two consecutive quarters.

The First Modification Agreement includes covenants that, if breached, could result in a default and the acceleration of payments due from the Company.

The Company’s interest rate under the First Amendment will increase from LIBOR plus 1.85% to LIBOR plus 3.0% and the unused credit commitment fee will increase to 0.5% from 0.2%.

The foregoing description of the First Modification to the 2019 Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the First Modification Agreement to the 2019 Credit Agreement, which is filed as Exhibit 10.1 attached hereto.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant

On July 8, 2020, the Company and certain of its subsidiaries entered into the First Modification Agreement to the 2019 Credit Agreement with its primary Lender as described above in Item 1.01. The information in Item 1.01 is incorporated by reference herein.

Item 9.01 Financial Statements and Exhibits

FRANKLIN COVEY CO Exhibit
EX-10.1 2 exhibit10_1.htm EXHIBIT 10.1 CREDIT AGREEMENT 7-10-20 Exhibit 10.1 FIRST MODIFICATION AGREEMENT This FIRST MODIFICATION AGREEMENT (the “Agreement”) is made effective as of July 8,…
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About FRANKLIN COVEY CO. (NYSE:FC)

Franklin Covey Co. is a global company specializing in performance improvement. The Company’s segments are Direct Offices, Strategic Markets, Education practice and International Licensees. The Direct Offices segment consists of its geographic sales offices that serve the United States and Canada, its international sales offices located in Japan, the United Kingdom and Australia, and its public programs group. The Strategic Markets segment includes its government services office, the Sales Performance practice, the Customer Loyalty practice, and a new Global 50 group, which is specifically focused on sales to large, multi-national organizations. The Education practice segment consists of its domestic and international Education practice operations, which are centered on sales to educational institutions, such as elementary schools, high schools, and colleges and universities. The International Licensees segment consists of its international licensees’ royalty revenues.