UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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(1)
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Title of each class of securities to which transaction applies:
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(3) Filing Party:
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(4) Date Filed:
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(i) |
To elect eight directors to serve until the 2020 annual meeting of shareholders;
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(ii) |
To hold an advisory vote on executive compensation;
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(iii) |
To ratify the appointment of Deloitte & Touche, LLP as the Company’s independent registered public accountants for fiscal 2019;
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(iv) |
To approve the Franklin Covey Co. 2019 Omnibus Incentive Plan; and
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(v) |
To transact such other business as may properly come before the Annual Meeting or at any adjournment or postponement thereof.
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Anne H. Chow, 52
Independent Director
Director Since:
March 2016
Committees:
Member of all standing committees
Other
Directorships: None
Ms. Chow is currently President, National Business at AT&T Communications. As President – National
Business, Anne leads a team of over 12,000 business professionals who support 95 percent of AT&T’s business customers nationwide. Across all AT&T business segments, Ms. Chow oversees customer experience, management of direct and
indirect sales channels, call center support, and DIRECTV FOR BUSINESS. Anne is also responsible for the operating results of the small and medium-sized business market, which includes all of AT&T’s business services, including
wireless, networking, and applications, covering over $13 billion in annual revenues. Since 2000, Ms. Chow has held a variety of leadership positions at AT&T, including Senior Vice President – Global Solutions and Sales Operations
and Senior Vice President – Premier Client Group. Throughout her multi-decade career, Ms. Chow has held a variety of leadership positions directing global organizations through major transformations, developing and executing innovative
growth strategies while building role model relationships with diverse customers and constituents.
A long standing, active member of the community, Anne has previously served on the boards of the AT&T
Foundation, Hunterdon Healthcare System, New Jersey Chamber of Commerce, Asian & Pacific Islander American Scholarship Fund, and the Joint Center for Political and Economic Studies. Ms. Chow currently serves on the Georgia Tech
Parents Board, as Vice Chair of the Board of Directors for the Asian American Justice Center, and as a member of the National Board of Directors for the Girl Scouts of the USA.
Ms. Chow holds a Master’s Degree in Business Administration with Distinction from The Johnson School at Cornell
University, as well as a Bachelor of Science Degree and Masters of Engineering Degree in Electrical Engineering from Cornell University. Ms. Chow is also a graduate of the Pre-College Division of the Juilliard School of Music.
Director Qualifications: Ms. Chow was appointed to the Company’s Board in March 2016. The Company believes that Ms. Chow’s strong sales and relationship management background as well as her extensive distribution and
global leadership experience provide valuable insight and skills to our Board of Directors. Ms. Chow’s significant involvement with various other entities throughout her career provides her with wide-ranging perspective and experience in
the areas of management, operations, and marketing.
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Clayton M. Christensen, 66
Independent Director
Director
Since: March 2004
Committees:
None
Other
Directorships: Amdocs (NASDAQ)
Dr. Christensen is the Kim B. Clark Professor of Business Administration at the Harvard Business School, where
he has been a faculty member since 1992. Dr. Christensen was a Rhodes Scholar and received his Masters of Philosophy Degree from Oxford and his MBA and DBA from the Harvard Business School. He also served as President and Chairman of
CPS Technologies from 1984 to 1989. From 1979 to 1984 he worked as a consultant and project manager for the Boston Consulting Group. Dr. Christensen is the founder of Rose Park Advisors, Innosight LLC, and the Christensen Institute
for Disruptive Change.
Director Qualifications: Dr. Christensen’s research and teaching interests center on building new growth businesses and sustaining the success of companies. His specific area of focus is in developing organizational
capabilities. Dr. Christensen is widely recognized as a leader in these fields and his knowledge and valuable insights enable him to make significant contributions to our strategic direction and development of new training and
consulting services. Additionally, Clayton’s previous work with various companies provides him with a broad perspective in the areas of management and operations.
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Michael Fung, 68
Independent Director
Director Since: July
2012
Committees: Chair
of the Audit Committee and a member of all other standing committees
Other
Directorships: 99 Cents Only Stores, LLC, and Floor and Décor Holdings, Inc.
Mr. Fung retired, after 11 years, from Wal-Mart Stores, Inc. in 2012. Mr. Fung was the Senior Vice-President and
Chief Financial Officer of Wal-Mart U.S., a position he held from 2006 through his retirement in February 2012. From 2001 to 2003, Mr. Fung served as Vice President of Finance and Administration for Global Procurement and was promoted in
2003 to Senior Vice President and Chief Audit Executive. In his previous roles with Wal-Mart, Mr. Fung was responsible for U.S. finance operations, including strategy, merchandising, logistics, real estate, operations, professional
services, and financial planning and analysis. Prior to his experience at Wal-Mart, Mr. Fung held financial leadership positions at Universal Foods Corporation, Vanstar Corporation, Bass Pro Shops, Inc., and Beatrice Company. Michael
received his bachelor’s degree in accounting from the University of Illinois and an MBA from the University of Chicago. Mr. Fung is a Certified Public Accountant (inactive) in the state of Illinois, a member of The Committee of 100, and
the University of Illinois Foundation. Michael is also a Board Leadership Fellow with the National Association of Corporate Directors.
Director Qualifications: Mr. Fung’s extensive financial background and expertise, as well as international leadership experience, provides him with wide-ranging knowledge and experience. His professional involvement in
various capacities during his career enabled Mr. Fung to gain experience in many areas including auditing, internal control, financial planning, organizational development, strategic planning, and corporate governance. Mr. Fung’s
substantial financial knowledge and leadership experience qualify him to be an audit committee financial expert and enable him to make valuable contributions to our Board of Directors and on the Audit Committee.
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Dennis G. Heiner, 75
Lead Independent Director
Director
Since: January 1997
Committees:
Chair of the Nominating Committee and member of all other standing committees
Other
Directorships: None
Mr. Heiner currently serves as a Managing Member of Sunrise Oaks Capital Fund, LLC, a small private bridge
loan financing fund. Mr. Heiner served from 1999 to 2004 as President and Chief Executive Officer of Werner Holding Co., a leading manufacturer of climbing products and aluminum extrusions. Prior to joining Werner, he was employed by
Black & Decker Corporation from 1985 to 1999 where he served for 6 years as Senior Vice President and President Worldwide Small Electric Appliances, and later as Executive Vice President and President of the Hardware and Home
Improvement Group, a world leader in residential door hardware and plumbing fixtures. From 1979 to 1985, Mr. Heiner was employed by Beatrice Foods where he served as a Division President. From 1972 to 1979, Dennis was employed by
Conroy Inc., a manufacturer of recreational vehicles, where he held the positions of Director of Marketing and Vice President of Finance and International Marketing. Mr. Heiner has also served on several other boards including Rayteck,
Shell Oil’s AERA Board, and Werner Holdings. Mr. Heiner received his Bachelor of Arts degree from Weber State University and his MBA degree from Brigham Young University. He also completed executive programs at Northwestern’s Kellogg
School of Management and the Harvard Business School.
Director Qualifications: Mr. Heiner brings to the Board of Directors chief executive leadership and business management experience, as well as strong operational knowledge and expertise. Mr. Heiner’s broad industry
experience, including previous roles in leadership, finance, and marketing, provides the Board of Directors with valuable contributions in the areas of management, strategy, leadership, governance, growth, and long-term planning. Mr.
Heiner’s executive leadership experience and strong business background enable him to provide strong and independent leadership on the Board of Directors in his role as Lead Independent Director. Mr. Heiner also makes important
contributions to our Company in the areas of board and business leadership development and succession planning.
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Donald J. McNamara, 65
Independent Director
Director Since:
June 1999
Committees:
None
Other
Directorships: Crow Holdings and Enlivant
Mr. McNamara is the founder of The Hampstead Group, LLC (The Hampstead Group), a private equity investor based
in Dallas, Texas, and has served as its Chairman since its inception in 1989. He has over 35 years of successful investment experience, including Bass Brothers Enterprises, Marriott Corporation, and JMB Realty. Mr. McNamara currently
serves as a Senior Advisor to TPG’s real estate platform, which includes $8 billion of assets collectively in its equity and debt platforms. Mr. McNamara received an undergraduate degree in architecture from Virginia Tech in 1976 and an
MBA from Harvard University in 1978. The Hampstead Group is the sponsor of Knowledge Capital, and Mr. McNamara serves on the Board as a designee of Knowledge Capital.
Director Qualifications: Mr. McNamara’s experience in private equity provides him with considerable expertise in financial and strategic matters. This expertise enables him to make valuable contributions to the Company
in the areas of raising capital, capital deployment, acquisitions and dispositions, and other major financial decisions. Don’s involvement with other entities throughout his career provides him with wide-ranging perspective and
experience in the areas of management, operations, and strategy. In addition, Mr. McNamara has a meaningful understanding of our operations having served on our Board of Directors for nearly 20 years, enabling him to make contributions
to our strategy, innovation, and long-range plans.
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Joel C. Peterson, 71
Director
Director Since:
May 1997
Committees:
None
Other
Directorships: Chairman of the Board at JetBlue Airways (NASDAQ), and Director at Packsize
Mr. Peterson has been on the faculty of the Graduate School of Business at Stanford University since 1992,
teaching courses in real estate investment, entrepreneurship, and leadership. Joel is the Chairman of the Board of Overseers at the Hoover Institution at Stanford, and is the Founding Partner and Chairman of Peterson Partners, a Salt
Lake City-based investment management firm which has invested in over 200 companies through 13 funds in four primary asset classes: growth-oriented private equity, venture capital, real estate, and search funds. Prior to Stanford
Business School and founding Peterson Partners, Mr. Peterson was Chief Executive Officer of Trammell Crow Company, then the world’s largest private commercial real estate development firm. Mr. Peterson earned an MBA from Harvard
University and received his bachelor’s degree from Brigham Young University.
Director Qualifications: Mr. Peterson brings chief executive leadership, extensive financial experience, and strong academic skills to our Board of Directors. Mr. Peterson’s roles in executive leadership, financial
management, and private equity enable him to make key contributions in the areas of leadership, raising capital, capital deployment, strategy, operations, and growth. His experience with Peterson Partners and teaching courses on
entrepreneurship adds valuable knowledge in growth and long-term strategic planning as well as accessing and deploying capital. Joel also has a deep understanding of the Company’s operations and background with over 20 years of
experience on our Board of Directors. Further, prior to the FranklinCovey merger, Mr. Peterson served as a director of Covey Leadership Center from 1993 to 1997.
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E. Kay Stepp, 73
Independent Director
Director Since:
May 1997
Committees:
Chair of the Organization and Compensation Committee and member of all other standing committees
Other
Directorships: None
Ms. Stepp, a retired executive, is the former Chairperson of the Board of Providence Health and Services, and
served as President and Chief Operating Officer of Portland General Electric, an electric utility, from 1978 to 1992. She formerly was principal of Executive Solutions, an executive coaching firm, from 1994 to 2001, and was a director of
the Federal Reserve Bank of San Francisco from 1991 to 1995. Ms. Stepp also served as a director of the Covey Leadership Center from 1992 to 1997. Kay received her Bachelor of Arts degree from Stanford University and a Master of Arts in
Management from the University of Portland. Ms. Stepp also attended the Stanford Executive Program and the University of Michigan Executive Program.
Director Qualifications: Ms. Stepp’s experience in management and as chief operating officer brings valuable knowledge to the Board of Directors in areas such as marketing, distribution, human resources, technology, and
administration. Ms. Stepp also brings the Company extensive governance experience with public corporations, private corporations, and non-profit organizations. This background and experience allow Ms. Stepp to make valuable
contributions to the Board of Directors in the areas of operations, management, compensation, and organizational development. Kay also brings special expertise and experience in human resource management and compensation from her
consulting career, which provides her with the knowledge to serve as the chairperson of the Board’s Compensation and Organization Committee. Ms. Stepp has a deep understanding of our operations and long-term goals from her years of
experience on the Board of Directors.
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Robert A. Whitman, 65
Chairman of the Board and Chief Executive Officer
Director Since:
May 1997
Committees:
None
Other
Directorships: Charles River Associates (NASDAQ), and Greystar Real Estate
Mr. Whitman has served as Chairman of the Board of Directors since June 1999 and as President and Chief
Executive Officer of the Company since January 2000. Mr. Whitman previously served as a director of the Covey Leadership Center from 1994 to 1997. Prior to joining us, Mr. Whitman served as President and Co‑Chief Executive Officer of
The Hampstead Group from 1992 to 2000 and is a founding partner at Whitman Peterson. Bob received his Bachelor of Arts Degree in Finance from the University of Utah and his MBA from the Harvard Business School.
Director Qualifications: Mr. Whitman’s leadership experience as the Chief Executive Officer of the Company and his in-depth knowledge of our strategic priorities and operations enable him to provide valuable
contributions and facilitate effective communication between management and the Board of Directors. Mr. Whitman’s role as Chief Executive Officer also enables him to provide important contributions to strengthening our leadership,
operations, strategy, growth and long-range plans. Mr. Whitman’s extensive experience in finance, private equity investing, and leadership also provides him with the knowledge to make valuable contributions to the Board of Directors in
the areas of finance, raising capital, and capital deployment.
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An appropriate balance between annual cash compensation and equity compensation that may be earned over several
years.
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Metrics that are weighted between the achievement of overall financial goals and individual objectives.
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Stock ownership guidelines that encourage executive officers to accumulate meaningful levels of equity
ownership, which align the interests of executives with those of long-term shareholders.
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Director
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Audit
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Nominating
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Compensation
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Anne H. Chow
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Clayton M. Christensen
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-
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-
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-
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Michael Fung
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Dennis G. Heiner
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Donald J. McNamara
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-
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-
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-
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Joel C. Peterson
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-
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-
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-
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E. Kay Stepp
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Robert A. Whitman
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-
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-
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-
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assist our Board in its oversight of our financial statements, legal and regulatory compliance, independent
auditors’ qualification, independence, and performance, internal audit function performance, and internal controls over financial reporting;
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decide whether to appoint, retain, or terminate our independent auditors;
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pre-approve all audit, audit-related, tax, and other services, if any, to be provided by the independent
auditors; and
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prepare the Audit Committee Report.
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recommend individuals for nomination, election, or appointment as members of our Board and its committees;
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oversee the evaluation of the performance of our Board and its committees and our management;
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ensure that our committees are comprised of qualified and experienced independent directors;
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review and concur in the succession plans for our CEO and other members of senior management; and
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take a leadership role in shaping our corporate governance, including developing, recommending to the Board, and
reviewing on an ongoing basis the corporate governance principles and practices that apply to our Company.
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determine and approve the compensation of our CEO and other executive officers;
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review and make recommendations to the Board for any incentive compensation and equity-based plans that are
subject to Board approval;
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assist our Board in its oversight of the development, implementation, and effectiveness of our policies and
strategies relating to our human capital management, including recruiting, retention, career development and progression, diversity, and employment practices;
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review management development plans and succession plans to ensure business continuity (other than that within
the purview of the Nominating Committee);
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provide risk oversight of all Company compensation plans;
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review periodically the form and amount of non-employee director compensation and make recommendations to our
Board with respect thereto; and
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prepare the Compensation Committee Report.
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Meetings
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Board
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4
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Audit
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8
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Nominating
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4
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Compensation
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5
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Compensation Element
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Amount
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Annual restricted stock award
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$
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100,000
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Annual cash retainer
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40,000
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Committee retainer, paid for service on each committee
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10,000
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Lead independent director annual retainer
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30,000
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Audit committee chairperson annual retainer
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15,000
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Compensation committee chairperson annual retainer
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10,000
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Nominating committee chairperson annual retainer
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5,000
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A
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B
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C
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D
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E
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F
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G
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H
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Name
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Fees earned
or paid in cash
($)
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Stock awards
($)
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Option Awards
($)
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Non-Equity
Incentive Plan Compensation
($)
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Change in pension
value and nonqualified deferred compensation earnings
($)
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All other Comp
($)
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Total
($)
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Anne H. Chow
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70,000
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100,000
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-
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-
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-
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-
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170,000
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Clayton M. Christensen
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40,000
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100,000
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-
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-
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-
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-
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140,000
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Michael Fung
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85,000
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100,000
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-
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-
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-
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-
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185,000
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Dennis G. Heiner
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105,000
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100,000
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-
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-
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-
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-
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205,000
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Joel C. Peterson
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40,000
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100,000
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-
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-
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-
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-
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140,000
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E. Kay Stepp
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80,000
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100,000
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-
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-
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-
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-
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180,000
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Donald J. McNamara
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40,000
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100,000
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-
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-
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-
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-
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140,000
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As of October 31, 2018
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Number of Common Shares
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Percentage of
Class
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|||
Donald J. McNamara(1)(2)(4)
c/o Franklin Covey Co.
2200 West Parkway Blvd.
Salt Lake City, UT 84119-2331
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3,221,745
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23.2
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%
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Knowledge Capital Investment Group(1)
3899 Maple Ave., Suite 300
Dallas, TX 75219
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2,812,805
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20.2
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%
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Dimensional Fund Advisors, Inc.(3)
1299 Ocean Avenue
Santa Monica, CA 90401
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924,979
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6.7
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%
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Blackrock, Inc.(3)
55 East 52nd Street
New York, NY 10055
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819,056
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5.9
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%
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Pembroke Management, LTD(3)
1002 Sherbrooke Street West
Suite 1700
Montreal, Canada A8 H3A 354
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817,779
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5.9
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%
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Robert A. Whitman(5)
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691,915
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4.8
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%
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Stephen D. Young(5)
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291,994
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2.0
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%
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Joel C. Peterson(4)
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223,487
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1.6
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%
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M. Sean Covey
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206,000
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1.5
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%
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Dennis G. Heiner(4)
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62,463
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*
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%
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E. Kay Stepp(4)
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54,222
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*
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%
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Clayton M. Christensen(4)
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25,254
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*
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%
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Michael Fung(4)
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25,054
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*
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%
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Colleen Dom
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19,081
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*
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%
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||
C. Todd Davis
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17,699
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*
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%
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||
Scott J. Miller
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9,130
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*
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%
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Paul S. Walker
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8,883
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*
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%
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Anne H. Chow(4)
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4,262
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*
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%
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||
All directors and executive officers as a group (14 persons)(4)(5)
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4,861,189
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33.6
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%
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(1) |
Mr. McNamara, who is a director of the Company, is a principal of The Hampstead
Group, the private investment firm that sponsors Knowledge Capital, and therefore may be deemed the beneficial owner of the Common Stock held by Knowledge Capital. Mr. McNamara disclaims beneficial ownership of the Common Stock held
by Knowledge Capital.
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(2) |
The share amounts include those held for Donald J. McNamara by the Donald J. and Joan P. McNamara Foundation with respect to 23,000 shares. Mr. McNamara is
the trustee of his foundation, having sole voting and dispositive control of all shares held by the foundation, and may be deemed to have beneficial ownership of such shares.
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(3) |
Information for Dimensional Fund Advisors Inc., Blackrock Inc., and Pembroke Management LTD is provided as of September 30, 2018, the filing of their last 13F
Reports.
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(4) |
The share amounts indicated exclude restricted stock awards currently held by the following persons in the following amounts: Anne H. Chow, 3,334 shares;
Clayton M. Christensen, 3,334 shares; Michael Fung, 3,334 shares; Dennis G. Heiner, 3,334 shares; Donald J. McNamara, 3,334 shares; Joel C. Peterson, 3,334 shares; E. Kay Stepp, 3,334 shares; and all directors as a group, 23,338
shares. These restricted stock awards do not have voting power or dividend rights until the shares actually vest to members of the Board of Directors.
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(5) |
The share amounts indicated include shares subject to options currently exercisable held by the following persons in the following amounts: Robert A. Whitman
437,500 shares; Stephen D. Young 131,250 shares; and all executive officers and directors as a group, 568,750 shares.
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·
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Robert A. Whitman –
Chairman and Chief Executive Officer (CEO)
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·
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Stephen D. Young – Chief
Financial Officer (CFO)
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·
|
M. Sean Covey –
Executive Vice President for Global Solutions and Partnerships
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·
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Paul S. Walker –
Executive Vice President for Global Sales and Delivery
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·
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Scott J. Miller –
Executive Vice President for Global Business Development and Marketing
|
(1)
|
provides clients with unlimited access to Franklin Covey’s entire collection of best-in-class content for a defined population;
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(2)
|
can be delivered through an almost unlimited combination of delivery modalities;
|
(3)
|
includes the services of an implementation specialist to help clients design “impact journeys” to help them achieve their
performance objectives; and
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(4)
|
offers a price per population trained that is equivalent to that typically charged in the industry for just a single course in
a single delivery modality.
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·
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Salaries
– Fiscal 2018 salaries for our CEO and Mr. Walker were increased based on our analysis of relevant market data, while salaries for all other NEOs remained at the same levels as in fiscal 2017.
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·
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Annual Incentive Payments
– Consistent with prior years, the Compensation Committee approved an annual incentive plan for fiscal 2018 that provided for potential cash incentives based on (1) the annual financial performance of the Company, based on Qualified
Adjusted EBITDA, which is defined in the Analysis of Fiscal 2018 Compensation Decisions and Actions section of this document (70% of payout) and (2) executive team performance objectives (30% of payout). Based on actual performance,
the NEOs received 100% payout for target achievement under the Qualified Adjusted EBITDA performance objectives under the fiscal 2018 annual incentive plan. In addition, the metric-based executive team performance objectives were
achieved, resulting in 100% payout of the target executive team performance portion of the annual incentive plan for each NEO for fiscal 2018. Further details of our annual incentive plan for fiscal 2018 are explained in the section
below entitled “Annual Performance-Based Variable Pay.”
|
·
|
Supplemental Incentive Payment
– The Company made payments to our NEOs during early fiscal 2018 to compensate for unbilled deferred revenue generated from multi-year contracts entered into with clients in fiscal 2017, for which the revenue was not reported in
fiscal 2018 results. Further details of these supplemental payments are provided in the section below entitled “Supplemental Incentive Payments.”
|
·
|
Long-Term Incentive Awards
– Consistent with prior years, the Compensation Committee granted to each of the NEOs performance-based restricted stock units (RSUs). However, the Compensation Committee also added service-based RSU awards, and the fiscal 2018
long-term incentive plan (LTIP) awards of performance-based RSUs have a different vesting schedule and different performance criteria than the LTIP awards granted in previous years. There are three tranches in the fiscal 2018 LTIP
awards, including: a time vested tranche that vests after three years; a tranche for Qualified Adjusted EBITDA performance and a tranche for “subscription sales” performance. The number of shares that vest in each of the Qualified
Adjusted EBITDA and subscription sale tranches is based on fiscal 2020 financial results. As of August 31, 2018, all three tranches of the fiscal 2018 RSUs remain unvested. Further details of the performance-based RSUs granted in
fiscal 2018 are explained in the section below entitled “Equity Compensation.”
|
·
|
Clawback Policy – The
Board has authority to require reimbursement of any annual or long-term incentive payment made to an executive officer where: (1) the payment was based on achieving financial results that were subsequently the subject of a substantial
restatement of Company financial statements filed with the SEC; (2) the Board determines the executive engaged in misconduct that caused the need for the substantial restatement; and (3) a lower payment would have been made to the
executive based on the restated financial results. In such instance, the Company expects that it will seek to recover from the individual executive the amount by which the individual executive’s incentive payments for the relevant
period exceeded the lower payment that would have been made based on the restated financial results.
|
·
|
Hedging Policy – Our
directors and executive officers are prohibited from trading in publicly traded options, puts, calls or other derivative instruments related to Company stock or debt. All other employees are discouraged from engaging in hedging
transactions related to Company stock.
|
·
|
No Repricing Without
Shareholder Approval – Our equity plans expressly prohibit option repricing without shareholder approval.
|
·
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No Excise Tax Gross-ups
– Excise tax gross-ups for our NEOs are prohibited.
|
·
|
Stock Ownership Guidelines
– Our stock ownership guidelines require an ownership threshold of five times base salary for our CEO, three times base salary for our CFO and two times base salary for our other NEOs, with each NEO targeted to reach the applicable
threshold within five years of the policy becoming applicable to the NEO and from the date the NEO first has shares awarded as part of his or her annual compensation. Unvested share awards are included in calculating whether the
required threshold has been achieved. NEOs are prohibited from selling any shares until after these guidelines are met. The Compensation Committee annually reviews executives’ progress toward meeting these guidelines. Currently,
the stock ownership of each of our CEO, our CFO and Mr. Covey meets or exceeds the applicable threshold. Mr. Walker and Mr. Miller are currently expected to meet their ownership thresholds within the allotted time. In addition, a
Board policy requires that each director who is not an employee of the Company must maintain beneficial ownership of the Company’s common stock and/or fully vested RSUs equal in value to at least four times the Board cash retainer at
all times during his or her tenure on the Board. New directors have up to three years of service on the Board in which to meet this ownership requirement.
|
·
|
No Significant Perquisites
– No significant “corporate perquisites” such as country club memberships or automobile allowances are provided to our NEOs.
|
·
|
No Employment Agreements for
NEOs and Limited Change-in-Control Benefits – The Company does not enter into employment agreements with its NEOs, and has a change-in-control policy for its NEOs that provides for a potential change-in-control severance
benefit of only one times total targeted annual cash compensation without any excise tax gross-ups. Our NEOs are subject to the same general (non-change-in-control) severance policies as all Company employees.
|
·
|
Pay for Performance – The 2018 performance-based awards were designed to incentivize even greater achievement levels in the Company’s results of operations,
and payout only if these operating improvements are achieved.
|
·
|
Efficient Share Utilization – The Compensation Committee believes that the Company’s historical share utilization for compensation purposes has been relatively low;
this utilization is expected to remain relatively low in the future.
|
·
|
Reflect Performance: To
align compensation with performance over both the short and long term, we establish multi-year objectives for the Company relating both to growth and to the achievement of key strategic objectives. Annual performance targets are
established in the context of these multi-year objectives, and for fiscal 2018 consisted primarily of goals for growth in revenue, Adjusted EBITDA and Qualified Adjusted EBITDA. NEO performance pay levels for the year are generally
determined by assessing the Company’s level of achievement compared to these objectives. Since our NEOs have responsibility for our overall Company performance against these objectives, their compensation can vary (and has varied)
significantly from year to year.
|
·
|
Encourage Long-Term
Company-Wide Focus: We believe that compensation should encourage and reward both the achievement of annual objectives and longer-term, Company-wide performance improvement. We utilize a service-based and performance-based
RSU program to focus NEO efforts on long-term growth in shareholder value. We believe that paying a significant portion of variable compensation to our NEOs in the form of equity-based compensation that vests over a period of time,
based on performance, also encourages a long-term, Company-wide focus. Value is realized through delivering results today, but in a way that builds the foundation for delivering even stronger results in the future. We believe that
this practice will lead to our NEOs having a considerable investment in our shares over time. This investment in turn advances both a culture of teamwork and partnership, and encourages a stewardship mentality for the Company among
our key leaders.
|
·
|
Attract and Retain Talent:
We believe that we understand the importance of hiring and retaining the best people. Retention of talented employees is critical to successfully executing our business strategy. We seek to be what we refer to internally as “the
workplace of choice for achievers with heart.” Successful execution of our business strategy requires that our management team be in place, engaged and focusing their best energy and talents on achieving our business goals and
strategies. For us, compensation is not just an overhead expense; it is a key component of the investments we make and costs we incur to generate our revenues. For our delivery consultants, a portion of this compensation cost is
reflected as cost of goods sold. In determining the compensation of our NEOs and in reviewing the effectiveness of our compensation program for attracting and retaining talent, the Compensation Committee generally considers the
competitive market for talent. We believe that our compensation programs should enable us to attract and retain talented people, and incentivize them to contribute their finest talents to achieving our objectives. We are pleased
that our executive officers have an average tenure of over 22 years with our Company (ranging from 17 to 33 years).
|
·
|
Controls on the allocation and overall management of risk-taking;
|
·
|
Comprehensive profit and loss and other management information, that provides ongoing performance feedback;
|
·
|
Rigorous, multi-party performance assessments and compensation decisions; and
|
·
|
A Company-wide compensation structure that strives to meet industry best practice standards, including a business model that is
based on compensating our associates in direct proportion to the revenue and profit-contribution they generate.
|
·
|
Base salary;
|
·
|
Short-term, performance-based variable pay plan;
|
·
|
Long-term incentive equity awards in the form of ongoing service-based and performance-based RSUs;
|
·
|
Other benefits (primarily insurance, as discussed below) that are generally available to all employees on similar terms, except
as specifically described below; and
|
·
|
Severance and change-in-control benefits, which are substantially the same for our NEOs as they are for other employees.
|
·
|
Revenue;
|
·
|
Adjusted EBITDA and operating income;
|
·
|
Multi-year changes in operating income, Adjusted EBITDA and specific revenue targets; and
|
·
|
Achieving high rates of retention for subscription-based revenue.
|
·
|
Cambium Learning Group, Inc.
|
·
|
CRA International Inc.
|
·
|
Exponent Inc.
|
·
|
Forrester Research Inc.
|
·
|
GP Strategies Corporation
|
·
|
The Hackett Group, Inc.
|
·
|
Healthstream, Inc.
|
·
|
Heidrick & Struggles International, Inc.
|
·
|
Huron Consulting Group Inc.
|
·
|
Information Services Group, Inc.
|
·
|
RCM Technologies, Inc.
|
·
|
Resources Connection Inc.
|
Qualified Adjusted EBITDA less than $7.7 million and not meeting performance objectives
|
Pro-rata share of 70% financial performance metric for achieving Qualified Adjusted EBITDA as
calculated if > $7.7 million and < $12.0 million
and meeting performance objectives
|
Targeted Qualified Adjusted EBITDA of $12.0 million and meeting performance objectives
|
Pro-rata share of total target opportunity for achieving Qualified Adjusted EBITDA (including STIP expense)
if > $12.0 million and < $15.0 million
and meeting performance objectives
|
Qualified Adjusted EBITDA (including STIP expense)
equal to or greater than $15 million and
meeting performance objectives
|
0%
|
Pro-rata calculation
|
100%
|
Pro-rata calculation
|
200%
|
(1)
|
25% of the total RSUs is time vested and in general will vest on August 31, 2020;
|
(2)
|
70% of the remaining 75% of the total RSUs is based on fiscal 2020 Qualified Adjusted EBITDA performance, as previously defined;
and
|
(3)
|
30% of the remaining 75% of the total RSUs is based on fiscal 2020 subscription sales results.
|
·
|
$18.0 million (50% target);
|
·
|
$25.0 million (100% target); and
|
·
|
$30.0 million (200% target).
|
·
|
$135.0 million (50% target);
|
·
|
$150.0 million (100% target); and
|
·
|
$160.0 million (200% target).
|
·
|
Term Life Insurance:
Franklin Covey provides a portable 20-year term life policy for the CEO and CFO. The coverage amount is approximately 2.5 times each NEO’s target annual cash compensation (base salary plus target performance-based cash variable pay).
|
·
|
Supplemental Disability
Insurance: We provide our CEO with long-term disability insurance which, combined with our current group policy, provides, in the aggregate, monthly long-term disability benefits equal to approximately 75% of his fiscal 2018
target cash compensation. Our other NEOs may purchase voluntary supplemental disability insurance at their own expense.
|
·
|
Our High Deductible Health Plans and Health Savings Accounts administered pursuant to Sections 125 and 223 of the Internal
Revenue Code of 1986, as amended (the Code).
|
·
|
Our Employee Stock Purchase Plan implemented and administered pursuant to Section 423 of the Code.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
All Other Compensation
($)
|
Total
($)
|
Robert A. Whitman
|
2018
|
566,442
|
367,500
|
1,150,000
|
575,000
|
70,666
|
2,729,608
|
Chairman and
|
2017
|
525,000
|
309,136
|
1,050,000
|
157,500
|
64,906
|
2,106,542
|
CEO
|
2016
|
525,000
|
—
|
1,050,000
|
78,750
|
60,568
|
1,714,318
|
Stephen D. Young
|
2018
|
351,347
|
164,500
|
350,000
|
235,000
|
16,407
|
1,117,254
|
CFO
|
2017
|
350,000
|
126,598
|
350,000
|
70,500
|
15,652
|
912,750
|
2016
|
350,000
|
—
|
350,000
|
35,250
|
12,947
|
748,197
|
|
M. Sean Covey
|
2018
|
301,153
|
140,000
|
200,000
|
200,000
|
213,103
|
1,054,256
|
EVP Global Solutions
|
2017
|
300,000
|
117,766
|
200,000
|
60,000
|
206,340
|
884,106
|
and Partnerships
|
2016
|
300,000
|
—
|
200,000
|
30,000
|
328,710
|
858,710
|
Paul S. Walker
|
2018
|
379,546
|
140,000
|
300,000
|
200,000
|
13,160
|
1,032,706
|
EVP Global Sales and
|
2017
|
309,500
|
117,766
|
200,000
|
60,000
|
10,493
|
697,759
|
Delivery
|
2016
|
309,500
|
—
|
200,000
|
30,000
|
6,071
|
545,571
|
Scott Miller
|
2018
|
301,154
|
140,000
|
150,000
|
200,000
|
2,889
|
794,043
|
EVP Global Business
Development & Marketing
|
Name
|
Year
|
Company Contributions to 401(k) Plan (a)
($)
|
Executive Life Insurance Premiums (b)
($)
|
Executive Disability Premiums (c)
($)
|
Other
($)
|
Total
($)
|
Mr. Whitman
|
2018
|
7,962
|
8,084
|
50,778
|
3,842
|
70,666
|
Mr. Young
|
2018
|
8,504
|
4,409
|
—
|
3,494
|
16,407
|
Mr. Covey
|
2018
|
8,171
|
—
|
—
|
204,932(d)
|
213,103
|
Mr. Walker
|
2018
|
9,868
|
—
|
—
|
3,292
|
13,160
|
Mr. Miller
|
2018
|
—
|
—
|
—
|
2,889
|
2,889
|
(a) |
We match dollar-for-dollar the first 1% of salary contributed to the 401(k) plan and 50 cents on the dollar of the next 4% of salary contributed. Our match
for executives is the same match received by all associates who participate in the 401(k) plan.
|
(b) |
For the CEO and CFO, we maintain an executive life insurance policy with a face value of approximately 2.5 times their target annual cash compensation.
These amounts show the annual premiums paid for each 20-year term executive life insurance policy.
|
(c) |
We provide Mr. Whitman with long-term disability insurance which, combined with our current group policy, provides, in the aggregate, monthly long-term
disability benefits equal to approximately 75% of his fiscal 2018 target cash compensation. The amount shows the premiums paid for Mr. Whitman’s supplemental long-term disability coverage.
|
(d) |
For Mr. Covey, this amount includes approximately $202,000 of royalties earned during fiscal 2018 from books he authored that are used in our training and
education businesses.
|
Name
|
Grant Date
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
|
Estimated Future Payouts Under Equity Incentive Plan Awards
|
All Other Stock Awards:
Number of Shares of Stock or Units
(#)
|
Grant Date Fair Value of Stock and Option Awards (e)
($)
|
||||
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
||||
Mr. Whitman
|
|||||||||
STIP (a)
|
—
|
—
|
575,000
|
1,150,000
|
—
|
—
|
—
|
—
|
—
|
LTIP RSUs (b)
|
11/14/2017
|
—
|
—
|
—
|
22,403
|
44,806
|
89,610
|
—
|
862,500
|
LTIP RSUs (c)
|
11/14/2017
|
—
|
—
|
—
|
—
|
—
|
—
|
14,935
|
287,500
|
Mr. Young
|
|||||||||
STIP (a)
|
—
|
—
|
235,000
|
470,000
|
—
|
—
|
—
|
—
|
—
|
LTIP RSUs (b)
|
11/14/2017
|
—
|
—
|
—
|
6,818
|
13,636
|
27,273
|
—
|
262,500
|
LTIP RSUs (c)
|
11/14/2017
|
—
|
—
|
—
|
—
|
—
|
—
|
4,545
|
87,500
|
Mr. Covey
|
|||||||||
STIP (a)
|
—
|
—
|
200,000
|
400,000
|
—
|
—
|
—
|
—
|
—
|
LTIP RSUs (b)
|
11/14/2017
|
—
|
—
|
—
|
3,896
|
7,793
|
15,584
|
—
|
150,000
|
LTIP RSUs (c)
|
11/14/2017
|
—
|
—
|
—
|
—
|
—
|
—
|
2,597
|
50,000
|
Mr. Walker
|
|||||||||
STIP (a)
|
—
|
—
|
200,000
|
400,000
|
—
|
—
|
—
|
—
|
—
|
LTIP RSUs (b)
|
11/14/2017
|
—
|
—
|
—
|
4,773
|
9,546
|
19,091
|
—
|
183,750
|
LTIP RSUs (c)
|
11/14/2017
|
—
|
—
|
—
|
—
|
—
|
—
|
3,182
|
61,250
|
LTIP RSUs (b,d)
|
01/25/2018
|
—
|
—
|
—
|
679
|
1,357
|
2,714
|
—
|
41,250
|
LTIP RSUs (c,d)
|
01/25/2018
|
—
|
—
|
—
|
—
|
—
|
—
|
452
|
13,750
|
Mr. Miller
|
|||||||||
STIP (a)
|
—
|
—
|
200,000
|
400,000
|
—
|
—
|
—
|
—
|
—
|
LTIP RSUs (b)
|
11/14/2017
|
—
|
—
|
—
|
2,922
|
5,844
|
11,688
|
—
|
112,500
|
LTIP RSUs (c)
|
11/14/2017
|
—
|
—
|
—
|
—
|
—
|
—
|
1,948
|
37,500
|
(a) |
These amounts relate to the STIP for the annual performance period ending August 31, 2018. For additional information regarding the STIP, see the section
above entitled “Compensation Discussion and Analysis – Analysis of Fiscal 2018 Compensation Decisions and Actions.” The actual payouts made to the NEOs for this program are reflected in the “Non-Equity Incentive Plan Compensation”
column of the Fiscal 2018 Summary Compensation Table above.
|
(b) |
These amounts relate to the LTIP awards granted to the NEOs in the form of performance-based RSUs, which vest in general based on fiscal 2020 Qualified
Adjusted EBITDA and fiscal 2020 subscription sales achievement. Payout for these awards is expected, if at all, after August 31, 2020. For additional information about these equity awards, see the section entitled “Compensation
Discussion and Analysis – Analysis of Fiscal 2018 Compensation Decisions and Actions” above.
|
(c) |
These amounts relate to the LTIP awards granted to the NEOs in the form of service-based RSUs, which vest in general on August 31, 2020. For additional
information about these equity awards, see the section entitled “Compensation Discussion and Analysis – Analysis of Fiscal 2018 Compensation Decisions and Actions” above.
|
(d) |
Mr. Walker was granted an additional award with the same restrictions as the awards granted on 11/14/17. The additional award was approved as a result of a
change in Mr. Walker’s overall targeted compensation.
|
(e) |
The amounts reported in the “Grant Date Fair Value of Stock and Option Awards” column for fiscal 2018 represent the aggregate grant date fair values
(computed in accordance with ASC Topic 718), based on the probable outcome of any applicable performance conditions, excluding the effect of estimated forfeitures, for the RSUs granted to NEOs as LTIP awards. For the performance-based
RSUs, the fair value on the grant date was based on the probable outcome that only the target award would vest.
|
Option Awards
|
Stock Awards
|
||||||||
Name
|
Grant Date
|
Number of Securities Underlying Unexercised Options
(#)
Exercisable(a)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($) (h)
|
Equity Incentive Plan Awards: Number of Un-earned Shares, Units or Other Rights That Have Not
Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout Value of Un-earned Shares, Units or Other
Rights That Have Not Vested
($)(h)
|
|
Mr. Whitman
|
11/14/17
|
—
|
—
|
—
|
— |
— |
89,610 (b)
|
2,294,016
|
|
11/14/17
|
—
|
—
|
—
|
14,935 (c)
|
382,336
|
— | — | ||
10/18/16
|
—
|
—
|
—
|
—
|
—
|
27,146 (d)
|
694,938
|
||
11/12/15
|
—
|
—
|
—
|
—
|
—
|
33,980 (e)
|
869,888
|
||
11/21/14
|
—
|
—
|
—
|
—
|
—
|
25,350 (f)
|
648,960
|
||
11/21/13
|
—
|
—
|
—
|
—
|
—
|
22,116 (g)
|
566,170
|
||
9/28/11
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||
1/28/11
|
62,500
|
9.00
|
1/28/2021
|
—
|
—
|
—
|
—
|
||
1/28/11
|
62,500
|
10.00
|
1/28/2021
|
—
|
—
|
—
|
—
|
||
1/28/11
|
62,500
|
12.00
|
1/28/2021
|
—
|
—
|
—
|
—
|
||
1/28/11
|
62,500
|
14.00
|
1/28/2021
|
—
|
—
|
—
|
—
|
||
1/28/10
|
62,500
|
10.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
1/28/10
|
62,500
|
12.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
1/28/10
|
62,500
|
14.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
Mr. Young
|
11/14/17
|
—
|
—
|
—
|
—
|
—
|
27,273 (b)
|
698,189
|
|
11/14/17
|
—
|
—
|
—
|
4,545 (c)
|
116,352
|
—
|
—
|
||
10/18/16
|
—
|
—
|
—
|
—
|
—
|
9,048 (d)
|
231,629
|
||
11/12/15
|
—
|
—
|
—
|
—
|
—
|
11,326 (e)
|
289,946
|
||
11/21/14
|
—
|
—
|
—
|
—
|
—
|
8,450 (f)
|
216,320
|
||
11/21/13
|
—
|
—
|
—
|
—
|
—
|
6,740 (g)
|
172,544
|
||
9/28/11
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||
1/28/10
|
43,750
|
10.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
1/28/10
|
43,750
|
12.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
1/28/10
|
43,750
|
14.00
|
1/28/2020
|
—
|
—
|
—
|
—
|
||
Mr. Covey
|
11/14/17
|
—
|
—
|
—
|
—
|
—
|
15,584 (b)
|
398,950
|
|
11/14/17
|
—
|
—
|
—
|
2,597 (c)
|
66,483
|
—
|
—
|
||
10/18/16
|
—
|
—
|
—
|
—
|
—
|
5,170 (d)
|
132,352
|
||
11/12/15
|
—
|
—
|
—
|
—
|
—
|
6,472 (e)
|
165,683
|
||
11/21/14
|
—
|
—
|
—
|
—
|
—
|
4,828 (f)
|
123,597
|
||
11/21/13
|
—
|
—
|
—
|
—
|
—
|
3,510 (g)
|
89,856
|
||
Mr. Walker
|
01/25/18
|
—
|
—
|
—
|
—
|
—
|
2,714 (b)
|
69,478
|
|
01/25/18
|
—
|
—
|
—
|
452 (c)
|
11,571
|
—
|
—
|
||
11/14/17
|
—
|
—
|
—
|
—
|
—
|
19,091 (b)
|
488,730
|
||
11/14/17
|
—
|
—
|
—
|
3,182 (c)
|
81,459
|
—
|
—
|
||
10/18/16
|
—
|
—
|
—
|
—
|
—
|
5,170 (d)
|
132,352
|
||
11/12/15
|
—
|
—
|
—
|
—
|
—
|
6,472 (e)
|
165,683
|
||
Mr. Miller
|
11/14/17
|
—
|
—
|
—
|
—
|
—
|
11,688 (b)
|
299,213
|
|
11/14/17
|
—
|
—
|
—
|
1,948 (c)
|
49,869
|
—
|
—
|
||
10/18/16
|
—
|
—
|
—
|
—
|
—
|
3,878 (d)
|
99,277
|
||
11/12/15
|
—
|
—
|
—
|
—
|
—
|
4,854 (e)
|
124,262
|
||
11/21/14
|
—
|
—
|
—
|
—
|
—
|
2,414 (f)
|
61,798
|
||
11/21/13
|
—
|
—
|
—
|
—
|
—
|
2,340 (g)
|
59,904
|
(a) |
These options had a market vesting condition related to the resolution of a management stock loan program when the share price reached the breakeven amount
for participants. In 2013, the stock price exceeded the required threshold and the management stock loan program was extinguished, resulting in these options vesting for both the CEO and CFO.
|
(b) |
These awards are LTIP awards granted in the form of performance-based RSUs in fiscal 2018 (November 14, 2017 and, for Mr. Walker, January 25, 2018). For
additional information regarding the fiscal 2018 LTIP award, including the vesting requirements, see the section above entitled “Compensation Discussion and Analysis – Equity Compensation.”
|
(c) |
These awards are LTIP awards granted in the form of service-based RSUs in fiscal 2018 (November 14, 2017 and, for Mr. Walker, January 25, 2018) that
generally vest on August 31, 2020. For additional information regarding the fiscal 2018 LTIP award, see the section above entitled “Compensation Discussion and Analysis – Equity Compensation.”
|
(d) |
These awards are LTIP awards granted in fiscal 2017 (October 18, 2016). The number of shares that may be awarded under the RSUs to the participants is
based on six individual vesting conditions that are divided into two performance measures: (1) trailing four-quarter LTIP Adjusted EBITDA, which equals Adjusted EBITDA plus the change in deferred revenue (less certain costs), and
excludes the impact of foreign exchange and (2) increased All Access Pass sales. Multi-year LTIP Adjusted EBITDA targets for this award (excluding the impact of fluctuations in foreign currency exchange rates and STIP) are $36.7
million, $41.8 million and $47.7 million (70% of the award shares), and the targets related to All Access Pass sales are $30.1 million, $35.4 million and 40.8 million (30% of the award shares). As of August 31, 2018, participants had
vested in all three tranches of 18,338 shares related to All Access Pass sales and the first tranche of 42,789 shares related to LTIP Adjusted EBITDA. All other tranches of this award remain unvested.
|
(e) |
These awards are LTIP awards granted in fiscal 2016 (November 12, 2015). The number of shares that may be awarded under the RSUs to the participants is
based on six individual vesting conditions that are divided into two performance measures: (1) trailing four-quarter LTIP Adjusted EBITDA, which equals Adjusted EBITDA plus the change in deferred revenue (less certain costs), and
excludes the impact of foreign exchange and (2) increased sales of the Organization Development Suite (OD Suite) of offerings. The OD Suite is defined as Leadership, Productivity and Trust offerings. Multi-year LTIP Adjusted EBITDA
targets for this award (excluding the impact of fluctuations in foreign currency exchange rates and STIP) are $36.0 million, $40.0 million and $44.0 million (70% of the award shares), and the targets related to increased sales of the
OD Suite are $107.0 million, $116.0 million and $125.0 million (30% of the award shares). As of August 31, 2018, participants had vested in all three tranches of 23,128 shares related to increased OD Suite sales and the first tranche
of 53,964 shares related to LTIP Adjusted EBITDA. All other tranches of this award remain unvested.
|
(f) |
These awards are LTIP awards granted in fiscal 2015 (November 21, 2014). The number of shares that may be awarded to the participants is based on six
individual vesting conditions that are divided into two performance measures: (1) trailing four-quarter LTIP Adjusted EBITDA and (2) increased sales of the OD Suite of offerings. Multi-year LTIP Adjusted EBITDA targets for this award
are $39.6 million, $45.5 million and $52.3 million (70% of the award shares), and the targets related to increased sales of the OD Suite are $107.0 million, $118.0 million and $130.0 million (30% of the award shares). As of August
31, 2018, participants had vested in all three tranches of 11,247 shares related to increased OD Suite sales and the first tranche of 26,241 shares related to LTIP Adjusted EBITDA. All other tranches of this award remain unvested and
it is anticipated that at least one tranche will not vest prior to the expiration date.
|
(g) |
These awards are LTIP awards granted in fiscal 2014 (November 21, 2013). The number of shares that may be awarded to the participants is based on six
individual vesting conditions that are divided into two performance measures: (1) trailing four-quarter LTIP Adjusted EBITDA and (2) trailing four-quarter increased sales of courses related to The 7 Habits of Highly Effective People.
Multi-year LTIP Adjusted EBITDA targets for this award are $37.0 million, $43.0 million and $49.0 million (70% of the award shares), and the targets related to increased sales of The 7 Habits of Highly Effective People courses are
$5.0 million, $10.0 million and $12.5 million (30% of the award shares). As of August 31, 2018, participants had vested in the first tranche of 20,864 shares related to LTIP Adjusted EBITDA and all three tranches of 8,942 shares
related to increased sales of The 7 Habits of Highly Effective People courses. All other tranches of this award remain unvested and it is anticipated that at least one tranche will not vest prior to the expiration date.
|
(h) |
Values were determined by multiplying the target number of RSUs or other performance awards, or the number of service-based RSUs, by the closing price per
share of the Company’s common stock on the NYSE on August 31, 2018 of $25.60.
|
Target Total Severance Payment
|
Base Salary
|
Target Annual STIP
|
Target Annual Cash Compensation
|
Target Severance Compensation (Excluding COBRA)
|
Target COBRA Premiums
|
||
Name
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
Mr. Whitman
|
2018
|
2,576,733
|
575,000
|
575,000
|
1,150,000
|
2,543,269
|
33,464
|
Mr. Young
|
2018
|
680,918
|
350,000
|
235,000
|
585,000
|
663,750
|
17,168
|
Mr. Covey
|
2018
|
502,045
|
300,000
|
200,000
|
500,000
|
480,769
|
21,276
|
Mr. Walker
|
2018
|
717,838
|
400,000
|
200,000
|
600,000
|
692,308
|
25,531
|
Mr. Miller
|
2018
|
502,045
|
300,000
|
200,000
|
500,000
|
480,769
|
21,276
|
Target Total Severance Payment
|
Base Salary
|
Target Annual STIP
|
Target Annual Cash Compensation
|
Target COBRA Premiums for 12 Months
|
||
Name
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
Mr. Whitman
|
2018
|
1,165,131
|
575,000
|
575,000
|
1,150,000
|
15,131
|
Mr. Young
|
2018
|
600,131
|
350,000
|
235,000
|
585,000
|
15,131
|
Mr. Covey
|
2018
|
522,127
|
300,000
|
200,000
|
500,000
|
22,127
|
Mr. Walker
|
2018
|
622,127
|
400,000
|
200,000
|
600,000
|
22,127
|
Mr. Miller
|
2018
|
522,127
|
300,000
|
200,000
|
500,000
|
22,127
|
·
|
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Company to disclose
the ratio of the CEO’s annual total compensation (under the Summary Compensation Table definition) to that of the Company’s median employee (excluding the CEO) using the same methodology.
|
·
|
Our CEO’s compensation for fiscal 2018, as disclosed in the Summary Compensation Table, is $2,729,608. The
annual total compensation for our median employee is $89,316.29. The ratio between the CEO’s and median employee’s annual total compensation as of August 31, 2018 is approximately 31:1.
|
·
|
To determine the median employee, we prepared a list of our full employee population as of June 30, 2018. The
population included all US and Non-US employees, whether employed on a full-time, part-time, temporary or seasonal basis.
|
·
|
We established a consistently applied compensation measure inclusive of total cash paid from July 1, 2017,
through June 30, 2018. We annualized compensation for employees hired during that time. Non-US compensation was converted to US dollars based on applicable exchange rates as of June 30, 2018.
|
·
|
The ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of SEC Regulation S-K.
Given the rule’s flexibility, the method the Company used to determine the median employee may be different from its peers, so the ratios may not be comparable.
|
Fiscal 2018
|
Fiscal 2017
|
|||||||
Audit Fees(1)
|
$
|
708,979
|
$
|
716,574
|
||||
Audit-Related Fees(2)
|
-
|
-
|
||||||
Tax Fees(3)
|
29,400
|
34,139
|
||||||
All Other Fees
|
-
|
-
|
||||||
$
|
738,379
|
$
|
750,713
|
(1) |
Audit fees represent fees and expenses for professional services provided in connection with the audit of our consolidated financial statements and the
effectiveness of internal controls over financial reporting found in the Annual Report on Form 10-K and reviews of our financial statements contained in Quarterly Reports on Form 10-Q, procedures related to registration statements,
accounting consultations on actual transactions, and audit services provided in connection with other statutory filings.
|
(2) |
Audit-Related Fees primarily consist of accounting consultation on proposed transactions.
|
(3) |
Tax Fees consisted primarily of fees and expenses for services related to tax compliance, tax planning, and tax consulting.
|
•
|
Limit on Shares Authorized.
Under the 2019 Omnibus Plan, the aggregate number of shares that may be issued is 700,000, plus in certain circumstances, shares that are forfeited
under the Company’s prior plans. No eligible person may receive an award for more than 250,000 shares in any year.
|
•
|
No Repricing or Discounting of
Stock Options or Stock Appreciation Rights (SARs): Stock options and SARs may not generally be repriced or granted at a discount under the 2019 Omnibus Plan.
|
•
|
Limited Share
“Recycling.” The 2019 Omnibus Plan provides that any shares surrendered to pay the exercise price of an option, shares covered by a stock-settled stock appreciation right that are not issued in connection with settlement upon
exercise, or shares withheld by the Company or tendered to satisfy tax withholding obligations with respect to any award will not be
added back (“recycled”) to the available shares under the 2019 Omnibus Plan.
|
•
|
No Payment of Dividends or
Voting Rights on Unvested Awards. The 2019 Omnibus Plan prohibits the payment of dividends or dividend equivalents on awards other than with respect to restricted stock and restricted stock unit awards for which the applicable
restrictions have lapsed. Unvested awards may not be voted at Annual Meetings or at other shareholder meetings.
|
• |
Awards
Subject to Clawback Policy. All awards under the 2019 Omnibus Plan will be subject to forfeiture or other penalties pursuant to any clawback
policy we may adopt or amend from time to time, as determined by the Compensation Committee.
|
• |
Awards Are
Typically Not Transferable. Awards under the 2019 Omnibus Plan are typically not transferable, except pursuant to limited exceptions. If a transfer is permitted, the transfer shall be for no value.
|
•
|
Minimum Vesting Period.
Stock-based compensation awards granted under the 2019 Omnibus Plan will have a minimum vesting period of one year from the date of grant (or, in the case of performance-based objectives, one year from the commencement of the period
over which performance is evaluated), except for five percent of the shares approved, which may be granted with fully vested terms, and subject to the acceleration of vesting as described in the 2019 Omnibus Plan.
|
Fiscal 2018
|
Fiscal 2017
|
Fiscal 2016
|
||||||||||
Time-based equity awards granted
|
66,221
|
(1)
|
29,834
|
25,032
|
||||||||
Performance-based awards earned and vested(2)
|
247,619
|
144,548
|
7,350
|
|||||||||
Weighted average common shares outstanding
|
13,849,000
|
13,819,000
|
14,944,000
|
|||||||||
Burn rate
|
2.26
|
%
|
1.26
|
%
|
0.22
|
%
|
||||||
Three-year average burn rate
|
1.25
|
%
|
||||||||||
Performance-based awards granted
|
128,650
|
(3)
|
183,381
|
231,276
|
(1)
|
Amount consists of our annual unvested stock award to non-employee members of the Board plus the time-based
component of the fiscal 2018 long-term incentive plan award.
|
(2)
|
Amount excludes shares purchased by and issued to participants in our Employee Stock Purchase Plan.
|
(3)
|
The fiscal 2018 long-term incentive award allows a range of shares to be vested based upon the achievement of
performance objectives. Participants may earn a range of shares from 50 percent of the target award to 200 percent of the target award. The number of shares shown in the table reflects the target number of shares granted to
participants. The maximum number of shares that may vest to participants under the 2018 long-term incentive plan is 257,300 shares. If minimum specified targets are not achieved, no shares will be earned by participants. For further
information on our stock-based compensation plans, refer to Note 11 in our consolidated financial statements for the fiscal year ended August 31, 2018 as filed on Form 10-K with the SEC on November 14, 2018.
|
•
|
stock options, including both incentive stock options (ISOs) and non-qualified stock options (together with ISOs, options);
|
•
|
stock appreciation rights;
|
•
|
restricted stock;
|
•
|
restricted stock units; and
|
•
|
other stock-based awards
|
•
|
termination of any award, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the
amount that would have been attained upon exercise of the award or the realization of the participant’s rights under the award. Awards may be terminated without payment if the Compensation Committee or the Board determines that no amount
is realizable under the award as of the time of the transaction;
|
•
|
replacement of any award with other rights or property selected by the Compensation Committee or the Board;
|
•
|
the assumption of any award by the successor entity (or its parent or subsidiary) or the arrangement for the substitution for
similar awards covering the stock of such successor entity, with appropriate adjustments as to the number and kind of shares and prices; or
|
•
|
require that the award cannot vest, be exercised or become payable until after a future date, which may be the effective date of
the corporate transaction.
|
[a]
|
|
[b]
|
[c]
|
|||||||||
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants, and rights
|
Weighted-average exercise price of outstanding options, warrants, and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding
securities reflected in column [a])
|
|||||||||
(in thousands)
|
(in thousands)
|
|||||||||||
Equity compensation plans approved by security holders(4)
|
1,129
|
(1)(2)
|
$
|
11.67
|
1,200
|
(3)(4)
|
(1) |
Excludes 23,338 shares of unvested (restricted) stock awards and stock units that are subject to forfeiture.
|
(2) |
Amount includes 790,143 performance share awards that may be awarded under the terms of various long-term incentive plans. The number of shares eventually
awarded to participants through our long-term incentive plans is variable and based upon the achievement of specified financial goals. For performance-based compensation awards where the number of shares may fluctuate within a range
based on the achievement of the specified goal, this amount includes the maximum number of shares that may be awarded to participants. The actual number of shares issued to participants therefore, may be less than the amount
disclosed. The weighted average exercise price of outstanding options, warrants, and rights does not include the impact of performance awards. For further information on our stock-based compensation plans, refer to the notes to our
financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended August 31, 2018.
|
(3) |
Amount is comprised of the remaining shares authorized in our 2015 Omnibus Incentive Plan and 2017 Employee Stock Purchase Plan. The number of
performance-based plan shares expected to be awarded at August 31, 2018 may change in future periods based upon the achievement of specified goals and revisions to estimates.
|
(4) |
At August 31, 2018, we had approximately 946,000 shares authorized for purchase by participants in our Employee Stock Purchase Plan.
|
Directions to FranklinCovey from Provo/South
·Take I-15 North to the 21st South Freeway; merge onto the
21st South Freeway Westbound
·Take the Redwood Road exit
·Turn left (South) onto Redwood Road.
·Turn right at Parkway Blvd. (2495 South), this intersection has a
traffic light, gas station on corner
·You will pass UPS on your right
·FranklinCovey will be the block after UPS on your right
·2200 West Parkway Blvd. Salt Lake City, UT 84119
·Park at the Washington Building, this building has 3 big flagpoles
at the front door
·Receptionist in the Washington building will be able to help you
|
Directions to Franklin Covey from Downtown/North
·If entering I-15 from 600 South on-ramp southbound
·Take the 21st South Freeway
·Take the first exit off 21st South Freeway which is Redwood Road
·Turn left (South) onto Redwood Road.
·Turn right at Parkway Blvd. (2495 South), this intersection has a
traffic light, gas station on corner
·You will pass UPS on your right
·FranklinCovey will be the block after UPS on your right
·2200 West Parkway Blvd. Salt Lake City, UT 84119
·Park at the Washington Building, this building has 3 big flagpoles
at the front door
·Receptionist in the Washington building will be able to help you
|
(i)
|
a change in control required to be reported pursuant to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act;
|
(ii)
|
a change in the composition of the Board, as a result of which fewer than fifty percent of the incumbent Directors are Directors
who either (i) had been directors of the Company 24 months prior to such change or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Directors who had been Directors of
the Company 24 months prior to such change and who were still in office at the time of the election or nomination;
|
(iii)
|
any “person” (as such term is used in Section 13(d) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right
to vote at elections of Directors (the “Base Capital Stock”); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded
until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of the Company; or
|
(iv)
|
The consummation of a merger or consolidation of the Company with or into another person or the sale, transfer, or other
disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions that requires the approval of the Company’s shareholders, whether for such
transaction or the issuance of securities in such transaction (a “Business Combination”), unless in connection with such Business
Combination securities possessing more than 50% of the total combined voting power of the survivor’s or acquiror’s outstanding securities (or the securities of any parent thereof) are held by a person or persons who held securities
possessing more than 50% of the total combined voting power of the Company’s outstanding securities (“Company Voting Securities”)
immediately prior to such Business Combination and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to
such Business Combination.
|
(i)
|
700,000 Shares, plus
|
(ii)
|
any Shares subject to any outstanding award under the Prior Stock Plans that, after November 30, 2018, are not purchased or are
forfeited or reacquired by the Company, or otherwise not delivered to the Participant due to termination or cancellation of such award, subject to the share counting provisions of Section 4(b) below, less
|
(iii)
|
any Shares subject to any award issued under the Prior Stock Plans after November 30, 2018. On and after shareholder approval of
this Plan, no awards shall be granted under the Prior Stock Plans, but all outstanding awards previously granted under the Prior Stock Plans shall remain outstanding and subject to the terms of the Prior Stock Plans.
|
(i) |
Shares Added Back to Reserve.
Subject to the limitations in (ii) below, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited or are reacquired by the Company, then the number of Shares counted against the aggregate number
of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall again be available for granting Awards under the Plan.
|
(ii)
|
Shares Not Added Back to Reserve.
Notwithstanding anything to the contrary in (i) above, the following Shares will not again become available for issuance under the Plan: (A) any Shares which would have been issued upon any exercise of an Option but for the fact that
the exercise price was paid by a “net exercise” pursuant to Section 6(a)(iii)(B) or any Shares tendered in payment of the exercise price of an
Option; (B) any Shares withheld by the Company or Shares tendered to satisfy any tax withholding obligation; (C) Shares covered by a stock-settled Stock Appreciation Right issued under the Plan that are not issued in connection with
settlement in Shares upon exercise; or (D) Shares that are repurchased by the Company using Option exercise proceeds.
|
(iii) |
Cash-Only Awards. Awards that do not
entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate number of Shares available for Awards under the Plan.
|
(iv)
|
Substitute Awards Relating to Acquired Entities.
Shares issued under Awards granted in substitution for awards previously granted by an entity that is acquired by or merged with the Company or an Affiliate shall not be counted against the aggregate number of Shares available for
Awards under the Plan.
|
(i)
|
Limitation for Employees and Officers.
No Eligible Person who is an employee or officer may be granted any Award or Awards denominated in Shares for more than 250,000 Shares (subject to adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any fiscal year.
|
(ii)
|
Limitation for Consultants, Independent
Contractors and Advisors. No Eligible Person who is a consultant, independent contractor or advisor may be granted any Award or Awards denominated in Shares for more than 250,000 Shares (subject to adjustment as provided
for in Section 4(c) of the Plan), in the aggregate in any fiscal year.
|
(iii)
|
Limitation of Awards Granted to Non-Employee
Directors. No Director who is not also an employee of the Company or an Affiliate may be granted any Award or Awards denominated in Shares that exceed in the aggregate $125,000 (such value computed as of the date of
grant in accordance with applicable financial accounting rules) in any fiscal year. The foregoing limit shall not apply to any Award made pursuant to any election by the Director to receive an Award in lieu of all or a portion of
annual and committee retainers and annual meeting fees.
|
(i)
|
Exercise Price. The purchase
price per Share purchasable under an Option shall be determined by the Committee and shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock
option previously granted by an entity that is acquired by or merged with the Company or an Affiliate.
|
(ii)
|
Option Term. The term of each
Option shall be fixed by the Committee at the time but shall not be longer than 10 years from the date of grant. Notwithstanding the foregoing, the Committee may provide in the terms of an Option (either at grant or by subsequent
modification) that, to the extent consistent with Section 409A, in the event that on the last business day of the term of an Option (other than an Incentive Stock Option) (i) the exercise of the Option is prohibited by applicable law
or (ii) Shares may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the
Company, the term of the Option shall be extended for a period of not more than thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement.
|
(iii)
|
Time and Method of Exercise.
Subject to Section 6(a)(iii)(B), the Committee shall determine the time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms, including, but not limited to, cash, Shares (actually or by attestation), other securities, other Awards or other property, or any combination thereof, having a Fair Market Value
on the exercise date equal to the applicable exercise price, in which, payment of the exercise price with respect thereto may be made or deemed to have been made.
|
(A)
|
Promissory Notes. Notwithstanding
the foregoing, the Committee may not accept a promissory note as consideration.
|
(B)
|
Net Exercises. Notwithstanding
anything to the contrary herein, the Participant may, in his or her discretion, exercise an Option by requesting that the Company deliver to the Participant a number of Shares having an aggregate Fair Market Value (determined as of
the date of exercise) equal to the excess, if positive, of the Fair Market Value of the Shares underlying the Option being exercised on the date of exercise, over the exercise price of the Option for such Shares.
|
(iv)
|
Incentive Stock Options.
Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options which are intended to qualify as Incentive Stock Options:
|
(A)
|
The aggregate number of Shares that may be issued under all Incentive Stock Options under the Plan shall be
700,000 Shares.
|
(B)
|
The Committee will not grant Incentive Stock Options in which the aggregate Fair Market Value (determined as of
the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under this Plan and all other plans of the Company and its
Affiliates) shall exceed $100,000.
|
(C)
|
All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan
was adopted by the Board or the date this Plan was approved by the shareholders of the Company.
|
(D)
|
Unless sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than 10
years after the date of grant; provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of its Affiliates, such Incentive Stock Option shall expire and no longer be exercisable no later than five years from the date of grant.
|
(E)
|
The purchase price per Share for an Incentive Stock Option shall be not less than 100% of the Fair Market Value
of a Share on the date of grant of the Incentive Stock Option; provided, however, that, in the case of the grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code)
stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its Affiliates, the purchase price per Share purchasable under an Incentive Stock Option shall be not less than 110% of the
Fair Market Value of a Share on the date of grant of the Incentive Stock Option.
|
(F)
|
Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall
deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the Option as an Incentive Stock Option.
|
(i)
|
Restrictions. Shares of Restricted
Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to receive any property with respect thereto), which restrictions may lapse
separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. For purposes of clarity and without limiting the Committee’s general authority under Section 3(a), vesting of such Awards may, at the Committee’s discretion, be conditioned upon the Participant’s completion of a minimum period of service with the
Company or an Affiliate, or upon the achievement of one or more performance goals established by the Committee, or upon any combination of service-based and performance-based conditions. As provided in Section 6(e)(ix) below, the holders of Restricted Stock will not have any voting, dividend, or other rights until the Restricted Stock restrictions lapse or are waived. The
holders of Restricted Stock Units shall have no voting rights and shall have no dividend rights until the applicable restrictions lapse or are waived.
|
(ii)
|
Issuance and Delivery of Shares.
Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may be evidenced in such manner as the Committee may deem appropriate, including book‑entry registration or issuance of a stock
certificate or certificates, which certificate or certificates shall be held by the Company or held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Plan. Such
certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. Shares representing Restricted Stock that are no
longer subject to restrictions shall be delivered (including by updating the book‑entry registration) to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock Units, no Shares
shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holder of the Restricted Stock Units.
|
(i)
|
Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted
in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of
such other Awards or awards.
|
(ii)
|
Forms of Payment under Awards.
Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation, cash, Shares, other securities (but excluding promissory notes), other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments.
|
(iii)
|
Limits on Transfer of Awards. No
Award (other than fully vested and unrestricted Shares issued pursuant to any Award) and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution, and no Award
(other than fully vested and unrestricted Shares issued pursuant to any Award) or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance
thereof shall be void and unenforceable against the Company or any Affiliate. Notwithstanding the foregoing, the Committee may permit the transfer of an Award other than a fully vested and unrestricted Share to family members, provided
that such permitted transfer shall be for no value and in accordance with the rules of Form S-8. The Committee may also establish procedures as it deems appropriate for a Participant to designate a person or persons, as beneficiary or
beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death.
|
(iv)
|
Restrictions; Securities Exchange Listing.
All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws
and regulatory requirements, and the Committee may cause appropriate entries to be made with respect to, or legends to be placed on the certificates for, such Shares or other securities to reflect such restrictions. The Company shall
not be required to deliver any Shares or other securities covered by an Award unless and until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as
may be determined by the Company to be applicable are satisfied.
|
(v)
|
Prohibition on Option and Stock Appreciation
Right Repricing. Except as provided in Section 4(c) hereof, the Committee may not, without prior approval of the Company’s
shareholders, seek to effect any re-pricing of any previously granted, “underwater” Option or Stock Appreciation Right by: (i) amending or modifying the terms of the Option or Stock Appreciation Right to lower the exercise price; (ii)
canceling the underwater Option or Stock Appreciation Right and granting either (A) replacement Options or Stock Appreciation Rights having a lower exercise price; or (B) Restricted Stock, Restricted Stock Units, or Other Stock-Based
Award in exchange; or (iii) cancelling or repurchasing the underwater Option or Stock Appreciation Right for cash or other securities. An Option or Stock Appreciation Right will be deemed to be “underwater” at any time when the Fair
Market Value of the Shares covered by such Award is less than the exercise price of the Award.
|
(vi)
|
Minimum Vesting. Except as provided
in (A) below, no Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Other‑Stock Based Award shall be granted with terms providing for a lapse of any vesting obligations earlier than a date that is at least
one-year following the date of grant (or, in the case of vesting based upon performance-based objectives, vesting restrictions cannot lapse earlier than the one-year anniversary measured from the commencement of the period over which
performance is evaluated).
|
(A)
|
Notwithstanding the foregoing, a maximum of five percent (5%) of the aggregate number of Shares available for
issuance under this Plan may be issued as Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or other Stock‑Based Awards that do not comply with the applicable one‑year minimum vesting requirements set forth
above.
|
(B)
|
For purposes of counting Shares against the five percent (5%) limitation, the Share counting rules under Sections 4(a) and 4(b) of the Plan apply.
|
(C)
|
Nothing in this Section 6 shall limit the authority of the Committee to provide for the acceleration of the
exercisability of any Award or the lapse of any restrictions relating to any Award except where expressly limited in Section 6(e)(viii).
|
(vii)
|
Section 409A Provisions.
Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit that constitutes “deferred compensation” to a Participant under Section 409A and applicable guidance thereunder is
otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a change in control event or due to the Participant’s disability or “separation from service” (as such term
is defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such
change in control event, disability or separation from service meet the definition of a change in control event, disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or
final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short‑term deferral exemption or otherwise. Any payment or distribution that
otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six months after the date of the
Specified Employee’s separation from service (or if earlier, upon the Specified Employee’s death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short‑term deferral exemption or
otherwise.
|
(viii)
|
Acceleration of Vesting or Exercisability.
No Award Agreement shall accelerate time-based vesting of any Award solely in connection with any corporate transaction as described in Section 7(b);
provided, that an Award Agreement may accelerate time-based vesting for events occurring in connection with a corporate transaction
that are materially adverse to the Participant (e.g., termination without cause, resignation for good reason, death or disability,
as such terms are determined by the Committee). The Committee may, pursuant to its general authority under Section 3(a), waive the foregoing
limitation and accelerate time-based vesting under an Award, but only upon the consummation of (or effective immediately prior to the consummation of, provided that the consummation subsequently occurs) a corporate transaction that
qualifies as a Change in Control where the definitive agreement among the parties to the Change in Control contemplates that the Award will be cancelled in exchange for an immediate right to cash in accordance with Section 7(b)(i). The foregoing limitation shall not be construed to limit the Committee’s ability to modify performance vesting conditions (as
opposed to time-based vesting provisions) in connection with a corporate transaction.
|
(ix)
|
Dividend Rights. Except as provided
in Section 4(c)(with respect to equitable adjustments), the holders of Awards shall have no voting rights and shall have no dividend or
equivalent rights (including no right to accrue dividends or dividend equivalent amounts that become payable upon vesting, lapse of restrictions, or settlement of an Award). In the event of any non-regular dividend or similar equitable
adjustment to an Award under Section 4(c), such dividend or other adjustment amount shall be subject to the same vesting and other restrictions
as apply to the underlying Award Shares. The foregoing limitations shall not apply to fully vested, unrestricted Shares issued under any Award.
|
(i)
|
unless the New York Stock Exchange or any other securities exchange that is applicable to the Company requires otherwise, amend
the eligibility for, and limitations or conditions imposed upon, participation in the Plan;
|
(ii)
|
amend any terms relating to the granting or exercise of Awards, including but not limited to terms relating to the amount and
payment of the exercise price, or the vesting, expiration, assignment or adjustment of Awards, or otherwise waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively;
|
(iii)
|
make changes that are necessary or desirable to comply with applicable laws, rules, regulations and policies of any applicable
governmental entity or stock exchange (including amendments to Awards necessary or desirable to maximize any available tax deduction or to avoid any adverse tax results, and no action taken to comply with such tax provision shall be
deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof); or
|
(iv)
|
amend any terms relating to the administration of the Plan, including the terms of any administrative guidelines or other rules
related to the Plan.
|
(i)
|
require shareholder approval under the rules or regulations of the Securities and Exchange Commission, the New York Stock
Exchange or any other securities exchange that is applicable to the Company;
|
(ii)
|
increase the number of shares authorized under the Plan as specified in Section 4(a) of the Plan;
|
(iii)
|
increase the number of shares or value subject to the limitations contained in Section 4(d) of the Plan;
|
(iv)
|
permit repricing of Options or Stock Appreciation Rights, which is currently prohibited by Section 6(e)(v) of the Plan;
|
(v)
|
permit the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair Market Value of
a Share on the date of grant of such Option or Stock Appreciation Right, contrary to the provisions of Section 6(a)(i) and Section 6(b) of the Plan; or
|
(vi)
|
increase the maximum term permitted for Options and Stock Appreciation Rights as specified in Section 6(a)(ii) and Section 6(b).
|
(i)
|
either (A) termination of the Award, whether or not vested, in exchange for an amount of cash and/or other property, if any,
equal to the amount that would have been attained upon the exercise of the Award or realization of the Participant’s rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the transaction or event described in
this Section 7(b)(i)(A), the Committee or the Board determines in good faith that no amount would have been attained upon the exercise of the
Award or realization of the Participant’s rights, then the Award may be terminated by the Company without any payment) or (B) the replacement of the Award with other rights or property selected by the Committee or the Board, in its sole
discretion;
|
(ii)
|
that the Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
|
(iii)
|
that, subject to the limitation in Section
6(e)(viii), the Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the applicable Award Agreement; or
|
(iv)
|
that the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of
the event.
|
Fiscal Year Ended August 31,
|
||||||||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
2013
|
|||||||||||||||||||
Reconciliation of net income (loss) to Adjusted EBITDA:
|
||||||||||||||||||||||||
Net income (loss)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
$
|
18,067
|
$
|
14,319
|
||||||||||
Adjustments:
|
||||||||||||||||||||||||
Other income, net
|
-
|
-
|
-
|
-
|
-
|
(21
|
)
|
|||||||||||||||||
Interest expense, net
|
2,154
|
2,029
|
1,938
|
1,754
|
1,810
|
1,718
|
||||||||||||||||||
Discount on related party receivable
|
-
|
-
|
-
|
363
|
1,196
|
519
|
||||||||||||||||||
Income tax provision (benefit)
|
367
|
(3,737
|
)
|
4,895
|
6,296
|
3,692
|
5,079
|
|||||||||||||||||
Amortization
|
5,368
|
3,538
|
3,263
|
3,727
|
3,954
|
3,191
|
||||||||||||||||||
Depreciation
|
5,161
|
3,879
|
3,677
|
4,142
|
3,383
|
3,008
|
||||||||||||||||||
Share-based compensation
|
2,846
|
3,658
|
3,121
|
2,536
|
3,534
|
3,589
|
||||||||||||||||||
Adjustments to contingent earn-out liabilities
|
1,014
|
(1,936
|
)
|
1,538
|
35
|
(1,579
|
)
|
-
|
||||||||||||||||
Impairment of related party receivable
|
-
|
-
|
-
|
-
|
363
|
-
|
||||||||||||||||||
Impairment of assets
|
-
|
-
|
-
|
1,302
|
-
|
-
|
||||||||||||||||||
Costs to exit Japan publishing business
|
-
|
2,107
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Restructuring costs
|
-
|
1,482
|
776
|
587
|
-
|
-
|
||||||||||||||||||
ERP system implementation costs
|
855
|
1,404
|
448
|
-
|
-
|
-
|
||||||||||||||||||
Business acquisition costs
|
-
|
442
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Contract termination costs
|
-
|
1,500
|
-
|
-
|
-
|
-
|
||||||||||||||||||
China start-up costs
|
-
|
505
|
222
|
-
|
-
|
-
|
||||||||||||||||||
$
|
11,878
|
$
|
7,699
|
$
|
26,894
|
$
|
31,858
|
$
|
34,420
|
$
|
31,402
|
1. |
Election of eight directors of the Company, each to serve until the next Annual Meeting and until their respective successors shall be duly elected and shall
qualify.
|
all nominees |
AUTHORITY for the nominee(s) whose
name(s) are circled above
|
Dated:
|
|
|
|
Signature of Shareholder(s)
|
|
|
|
Signature (if held jointly)
|
|
CONTROL NUMBER
|
|
|