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SECURITY AGREEMENT THIS SECURITY AGREEMENT is entered into effective the 23 day of September, 1999, by and between Jon H. Rowberry, an individual whose address is 8402 South Robidoux Drive, Sandy, Utah 84093, ("Obligor"), and FRANKLIN COVEY CO., a Utah corporation ("Franklin Covey"). W I T N E S S E T H: WHEREAS, Obligor executed in favor of Franklin Covey a Promissory Note in the original principal amount of Eight Hundred Ninety Four Thousand Two Hundred Eighteen Dollars ($894,218), dated September 23, 1999 (the "Note"); NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. SECURITY INTEREST. Obligor hereby grants to Franklin Covey a security interest in and to 121,250 shares of Franklin Covey Co. common stock, as evidenced by that certain stock certificate identified by number ________ being held in the possession of Franklin Covey (the "Collateral") to secure Obligor's payment of all obligations evidenced by the Note. 2. DEBTOR'S COVENANTS. Except for the security interest granted hereby, Obligor represents and warrants that he is the sole owner of the Collateral, free from any adverse liens, security interests or encumbrances. Obligor shall defend the Collateral against all claims or demands of any and all persons claiming the Collateral, or any security interest therein, which are allegedly superior to that of Franklin Covey. At the request of Franklin Covey, Obligor shall join with Franklin Covey in executing one or more UCC-1 financing statements perfecting Franklin Covey's security interest in the Collateral in a form satisfactory to Franklin Covey. Obligor shall execute any other documents and take such other actions as are reasonably requested by Franklin Covey to perfect the interest of Franklin Covey in the Collateral. 3. ADDITIONAL COVENANTS. Obligor shall keep the Collateral free from any adverse liens, security interests or encumbrances. Obligor shall not sell or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Franklin Covey, and so long as any of the obligations secured hereby remain unpaid, Obligor will not execute a financing statement covering the Collateral, or any part thereof, with or for the benefit of anyone other than Franklin Covey. 4. PARTIAL RELEASE. Pursuant to the terms of the Note, Obligor has the right to make one or more payments prior to September 23, 2003, each in an amount not less than ten percent (10%) of the original principal balance of the Note (a "Partial Payment"), plus the then accrued but unpaid interest on said Partial Payment. In the event Obligor makes a Partial Payment (plus interest thereon as described above), Franklin Covey shall release from the terms of this Security Agreement and convey outright and free of lien or encumbrance hereunder the number of shares of Franklin Covey stock representing a percentage of the original Collateral equal to the percentage of the original principal balance of the Note represented by the Partial Payment. In addition to the foregoing, provided the closing price per share of Franklin Covey stock, as quoted by the New York Stock Exchange (the "Closing Price"), is greater than or equal to $7.375 (the "Collateral Base Price") for five consecutive days, the fifth day of which is the closing date of a transaction described below, Franklin Covey shall accommodate Obligor's request to have some or all of the Collateral released from the terms hereof (the "Released Shares") to enable Obligor to sell the Released Shares and simultaneously make a principle and interest payment under the Note as follows: a. Obligor shall first offer to sell the Released Shares to Franklin Covey at the Closing Price. If Franklin Covey accepts said offer, Obligor shall transfer and convey to Franklin Covey his rights in and title to the Released Shares, and Franklin Covey shall retain from the proceeds of said sale a note payment consisting of the sum of (i) a principal payment in an amount equal to the number of Released Shares multiplied by the Collateral Base Price (the "Released Shares Principal Amount"), plus (ii) an interest payment equal to the then accrued and unpaid interest on the Released Shares Principal Amount (the "Released Shares Interest Amount"), and shall pay the balance of the sale proceeds to Obligor. 52 b. If Franklin Covey fails to exercise its right of first refusal pursuant to paragraph a., Franklin Covey shall place the Released Shares in an escrow account established and governed by an escrow agreement mutually acceptable to Franklin Covey and Obligor (the "Escrow Agreement"), which Escrow Agreement shall provide, among other things, that (i) the Released Shares shall be sold, free of encumbrances hereunder; (ii) Franklin Covey shall first be paid the Released Shares Principal Amount and the Released Shares Interest Amount from the proceeds of the sale of the Released Shares; and (iii) any balance of said proceeds, net of brokerage fees, selling commissions, escrow fees and other selling costs, shall be paid to Obligor. The sale of the Released Shares shall be consummated pursuant the Escrow Agreement. 5. LOCATION OF COLLATERAL. Subject to the provisions of section 4, above, the Collateral shall at all times remain in Franklin Covey's control or possession. 6. DEFAULT. Obligor shall be in default under this Agreement in the event he fails in the payment or performance of any obligation, covenant or liability contained in or referred to herein or in the Note, or transfers any interest in the Collateral without the written authorization of Franklin Covey. 7. REMEDIES. Upon default as provided hereunder, Franklin Covey may declare all of the obligations of Obligor to Franklin Covey immediately due and payable and shall have all of the remedies of a secured party, pursuant to the Utah Uniform Commercial Code, and any other applicable laws of the State of Utah, including, but not limited to, the right to sell or otherwise dispose of the Collateral or any portion thereof. All rights and remedies of Franklin Covey are cumulative and not alternative. 8. NO RECOURSE. Without impairing the rights and security interests of this Security Agreement, Franklin Covey hereby agrees that Obligor shall have no personal liability for the payment of the indebtedness secured hereby or any interest thereon, and, notwithstanding anything contained herein or in the Note secured hereby or in any security instrument executed and delivered in connection herewith, the sole remedy of the legal holder or the payee of said Note shall be the remedies described herein, and neither the payee nor the legal holder of said Note shall be entitled to a personal or deficiency judgment, and none shall be sought or entered. 9. NO WAIVER. Any waiver by Franklin Covey of any default hereunder shall not be a waiver of any other default or of the same default on a future occasion. 53 10. MISCELLANEOUS. Obligor declares that he has read this Security Agreement, and the Note, and understands the terms and consequences of each document. Obligor agrees to pay all costs, fees and expenses of Franklin Covey, including attorneys' fees, incurred in enforcing the terms of this Security Agreement, or otherwise resulting from Obligor's breach of any of the terms or provisions hereof. 11. BINDING EFFECT. All rights of Franklin Covey hereunder shall inure to the benefit of its successors and assigns, and all obligations of Obligor shall be binding upon Obligor's successors and assigns. 12. NO INVALIDATION. Any provisions hereof found to be invalid or unenforceable shall not invalidate the remainder. 13. CONSTRUCTION. This Security Agreement shall be governed by and construed in accordance with the laws of the State of Utah. Whenever the context requires, the singular shall include the plural and the plural shall include the singular, the whole shall include any part thereof, and any gender shall include all other genders. The headings in this Agreement are for the purpose of convenience only and shall not limit, enlarge, or otherwise affect any of the terms of this Agreement. IN WITNESS WHEREOF, the parties have hereunto executed this Agreement the date and year written above. OBLIGOR: By ---------------------------------- Jon H. Rowberry FRANKLIN COVEY CO. By --------------------------------- Val John Christensen Executive Vice President