Exhibit 10.1

 

Execution Copy

 

AGREEMENT

 

This Agreement (this “Agreement”) is made and entered into as of March 4, 2019,
by and among Papa John’s International, Inc., a Delaware corporation (the
“Company”), and John H. Schnatter (“Founder”) (each of the Company and Founder,
a “Party” to this Agreement, and collectively, the “Parties”).

 

RECITALS

 

WHEREAS, the Company and Founder have engaged in various discussions and
communications concerning the Company;

 

WHEREAS, as of the date hereof, Founder has a beneficial ownership (as
determined under Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (together with the rules or regulations promulgated thereunder,
the “Exchange Act”)) interest in the common stock, $0.01 par value per share, of
the Company (the “Common Stock”), totaling, in the aggregate, 9,965,732 shares,
or approximately 31% of the Common Stock issued and outstanding on the date
hereof;

 

WHEREAS, pursuant to an opinion, dated January 15, 2019, and an order dated
January 23, 2019 (collectively, the “220 Orders”), the Court of Chancery of the
State of Delaware (the “Court of Chancery”) ordered the Company to produce books
and records for inspection by Founder in connection with an action brought by
Founder under Section 220 of the General Corporation Law of the State of
Delaware (the “220 Action”);

 

WHEREAS, Founder submitted a letter to the Company on March 1, 2019 (the
“Nomination Letter”), nominating himself to be elected to the Company’s board of
directors (the “Board”) at the Company’s 2019 annual meeting of stockholders
(the “2019 Annual Meeting”);

 

WHEREAS, the Company is agreeing to amend, within ten (10) business days after
the date of this Agreement, that certain Rights Agreement, dated as of July 22,
2018, between the Company and the rights agent (as amended from time to time,
the “Rights Plan”) to remove the “acting in concert” provision;

 

WHEREAS, the Company is agreeing to amend, within ten (10) business days after
the date of this Agreement, that certain Governance Agreement, dated February 4,
2019 (the “Governance Agreement”), between the Company and certain funds
affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”)
to remove Section 1(c)(iii) thereof in its entirety; and

 

WHEREAS, the Company and Founder have determined to come to an agreement with
respect to the composition of the Board and certain other matters, as provided
in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties, intending to be legally bound hereby, agree as follows:

 

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1.             Board Appointments and Related Agreements.

 

(a)           Board Appointments.

 

(i)            Promptly following execution of this Agreement, the Parties agree
to cooperate to identify a mutually acceptable independent director (a “Founder
Independent Designee”) who (A) is not the Founder, (B) has business, restaurant,
marketing, technology, accounting, finance and/or other relevant experiences or
expertise, (C) is acceptable to Founder and the Board, each in its sole and
absolute discretion, (D) qualifies as “independent” pursuant to The Nasdaq Stock
Market’s (“Nasdaq”) listing rules, (E) is independent of Founder and Starboard,
(F) does not have a conflict of interest with the Company, and (G) satisfies the
publicly disclosed corporate governance guidelines and policies with respect to
service on the Board that are generally applicable to all directors of the
Company (subject to any phase-in periods generally applicable to new directors,
such as stock ownership requirements) (clauses (A)-(G), the “Eligibility
Requirements”), to recommend for appointment as a director of the Company.
Founder acknowledges that the Founder Independent Designee or proposed Founder
Independent Designee may be required, if requested by the Company, to submit to
the Company a fully completed copy of the Company’s standard director and
officer questionnaire and other reasonable and customary director onboarding
documentation required by the Company in connection with the appointment or
election of new Board members generally.  The Board shall make its determination
and recommendation regarding whether a Founder Independent Designee meets the
Eligibility Requirements promptly, and in any event within ten (10) business
days,  after such nominee has submitted to the Company the documentation
required by the previous sentence.  If the Board determines that a proposed
Founder Independent Designee does not meet the Eligibility Requirements, the
Parties agree to thereafter cooperate to identify another proposed Founder
Independent Designee whose appointment shall be subject to meeting the
Eligibility Requirements in accordance with the procedures described in this
paragraph.

 

(ii)           If a Founder Independent Designee is recommended for appointment
as a director of the Company and the Board determines that such Founder
Independent Designee meets the Eligibility Requirements on or prior to March 22,
2019, the Company agrees that, subject to the Founder Independent Designee’s
continued satisfaction of the Eligibility Requirements, (A) the Board and all
applicable committees of the Board shall take all necessary actions to increase
the size of the Board by one member and appoint the Founder Independent Designee
to fill the newly created directorship effective immediately, and nominate,
along with its other nominees, the Founder Independent Designee for election to
the Board at the 2019 Annual Meeting for a term expiring at the Company’s 2020
Annual Meeting of Stockholders (the “2020 Annual Meeting”), and (B) the Company
shall recommend, support and solicit proxies for the election of the Founder
Independent Designee at the 2019 Annual Meeting in the same manner as it
recommends, supports and solicits proxies for the election of the other nominees
nominated by the Board for election as directors.

 

(iii)          If a Founder Independent Designee is recommended for appointment
as a director of the Company and the Board determines that such Founder
Independent Designee meets the Eligibility Requirements after March 22, 2019,
the Company agrees that, subject to the Founder Independent Designee’s continued
satisfaction of the Eligibility Requirements, the Board and all applicable
committees of the Board shall take all necessary actions to increase the

 

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size of the Board by one member and appoint the Founder Independent Designee to
fill the newly created directorship effective immediately following the later of
(A) the 2019 Annual Meeting or (B) the determination of the Board that the
Founder Independent Designee meets the Eligibility Requirements.

 

(b)           Board Resignation; Nomination Withdrawal.

 

(i)            If the Founder Independent Designee is appointed to the Board
prior to the 2019 Annual Meeting, Founder agrees to resign effective upon the
appointment of the Founder Independent Designee to the Board (unless Founder
decides to resign at an earlier time).  Founder agrees that his term as a
director of the Company expires at the 2019 Annual Meeting.

 

(ii)           Upon the Company’s performance of its obligations set forth in
Sections 2(a) and (b), within the time periods prescribed therein, the
Nomination Letter shall automatically be withdrawn.

 

(c)           Committees.

 

Subject to the Company’s corporate governance guidelines, the rules and
regulations promulgated under the Exchange Act, Nasdaq’s listing rules and
applicable laws, the Board shall give the Founder Independent Designee the same
due consideration for membership on all committees of the Board as any other
independent director.

 

(d)           Certain Litigation Agreements.

 

(i)            Within two (2) business days after being notified of the
Company’s performance of its obligations set forth in Sections 2(a) and (b),
within the time periods prescribed therein, Founder shall cause the Notice of
Dismissal attached hereto as Exhibit A to be filed in the action pending in the
Court of Chancery styled John H. Schnatter v. Mark S. Shapiro, et al., C.A.
No. 2018-0646-AGB, dismissing the action without prejudice.  For purposes of
this Section 1(d), the Parties agree that the Company’s disclosure of the
performance of its obligations set forth in Sections 2(a) and (b) in a Form 8-K
filed with the Securities and Exchange Commission shall constitute notification
to Founder.

 

(ii)           Within ten (10) business days after the expiration of Founder’s
term as a director of the Company at the 2019 Annual Meeting (or his earlier
resignation), Founder shall cause the action filed by Evergreen Real Estate, LLC
against the Company in the circuit court for Jefferson County, Kentucky to be
dismissed with prejudice.

 

(iii)          From and after the date of this Agreement, the Company shall
cooperate with Founder in connection with the defense of that certain action
styled Danker v. Papa John’s Int’l., Inc., et al., pending in the United States
District Court for the Southern District of New York unless and to the extent
the Company determines in good faith that such cooperation is not in the best
interests of the Company’s stockholders.  Beginning immediately after the date
of this Agreement, the Company shall advance Founder all reasonable legal costs,
fees and expenses incurred to date and as they are thereafter incurred by
Founder in connection with such action (subject to receipt of a customary
undertaking by Founder if required by applicable law, the Company’s charter and
bylaws or any agreement between Founder and the Company).

 

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(iv)          The Company will produce the books and records as ordered to be
produced by the 220 Orders and will not appeal the 220 Orders; neither Founder’s
rights under nor the Company’s compliance with the 220 Orders will be limited,
waived, or modified in any way by the expiration of Founder’s term (or earlier
resignation) as a director of the Company.  For the avoidance of doubt, nothing
in this Agreement shall constitute a waiver of Founder’s rights as a stockholder
to inspect books and records under applicable law.

 

2.             Amendment of Rights Plan and Governance Agreement.

 

(a)           Within ten (10) business days after the date of this Agreement,
the Company shall amend the Rights Plan to remove the “acting in concert”
provisions by deleting Section 1(b) in its entirety and deleting the following
language from Section 1(d)(iii): “is (A) Acting in Concert, or (B).”

 

(b)           Within ten (10) business days after the date of this Agreement,
the Company shall amend the Governance Agreement to delete
Section 1(c)(iii) thereof in its entirety.

 

(c)           The Company shall not take any action prior to the 2020 Annual
Meeting that, directly or indirectly, would be inconsistent with the provisions
of Sections 2(a) or (b), including, without limitation, by amending the Rights
Plan to implement (or entering into a new rights agreement that contains)
“acting in concert” provisions, by entering into any voting agreement or binding
commitment with Starboard, whether or not pursuant to the Governance Agreement,
or otherwise.

 

3.             Representations and Warranties of the Company.

 

The Company represents and warrants to Founder that (a) the Company has the
corporate power and authority to execute this Agreement, and to bind it hereto,
(b) this Agreement has been duly and validly authorized, executed and delivered
by the Company, constitutes a valid and binding obligation and agreement of the
Company, and is enforceable against the Company in accordance with their terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
generally affecting the rights of creditors and subject to general equity
principles, and (c) the execution, delivery and performance of this Agreement,
the Rights Amendment and the Governance Amendment by the Company does not and
will not (i) violate or conflict with any law, rule, regulation, order, judgment
or decree applicable to the Company or its subsidiaries, or (ii) result in any
breach or violation of or constitute a default (or an event which with notice or
lapse of time or both would constitute such a breach, violation or default)
under or pursuant to, or result in the loss of a material benefit under, or give
any right of termination, amendment, acceleration or cancellation of, any
organizational document or agreement to which the Company or any of its
subsidiaries is a party or by which it or they are bound.

 

4.             Representations and Warranties of Founder.

 

Founder represents and warrants to the Company that (a) Founder has the power
and authority to execute this Agreement and to bind Founder hereto, (b) this
Agreement has been duly authorized, executed and delivered by Founder, and is a
valid and binding obligation of Founder, enforceable against Founder in
accordance with its terms except as enforcement thereof

 

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may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws generally affecting the rights of
creditors and subject to general equity principles, and  (c) the execution,
delivery and performance of this Agreement by Founder does not and will not
(i) violate or conflict with any law, rule, regulation, order, judgment or
decree applicable to Founder or (ii) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of time or both
would constitute such a breach, violation or default) under or pursuant to, or
result in the loss of a material benefit under, or give any right of
termination, amendment, acceleration or cancellation of, any agreement,
contract, commitment, understanding or arrangement to which Founder is a party
or by which he is bound.

 

5.             Specific Performance.

 

Each of Founder, on the one hand, and the Company, on the other hand,
acknowledges and agrees that irreparable injury to the other Party may occur in
the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached and that such
injury would not be adequately compensable by the remedies available at law
(including the payment of money damages).  It is accordingly agreed that
Founder, on the one hand, and the Company, on the other hand, shall each be
entitled to seek specific enforcement of, and injunctive relief to prevent any
violation of, the terms hereof and without need to post a bond or other
security.  This Section 5 is not the exclusive remedy for any violation of this
Agreement.

 

6.             Severability.

 

If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.  It is hereby stipulated and declared to be the intention of the
Parties that the Parties would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable.  In addition, the Parties agree to use
their best efforts to agree upon and substitute a valid and enforceable term,
provision, covenant or restriction for any of such that is held invalid, void or
enforceable by a court of competent jurisdiction.

 

7.             Notices.

 

Any notices, consents, determinations, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (a) upon receipt, when delivered
personally; (b) upon confirmation of receipt, when sent by email (provided such
confirmation is not automatically generated); or (c) two (2) business days after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the Party to receive the same.  The addresses and
facsimile numbers for such communications shall be:

 

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If to the Company:

 

Papa John’s International, Inc.

2002 Papa John’s Boulevard

Louisville, Kentucky 40299-2367

Facsimile:  (502) 261-4705

Attention:  Caroline Oyler, Senior Vice President, Chief Legal and Risk Officer

E-mail:  Caroline_Oyler@papajohns.com

 

with a copy (which shall not constitute notice) to:

 

Hogan Lovells US LLP
Columbia Square

555 Thirteenth Street, NW

Washington, DC 20004
Facsimile:  (202) 637-5910

Attention:  John Beckman, Esq.

E-mail:  john.beckman@hoganlovells.com

 

If to Founder:

 

John H. Schnatter

11411 Park Road

Anchorage, Kentucky 40223

 

with a copy (which shall not constitute notice) to:

 

Hunton Andrews Kurth LLP

951 E. Byrd Street

Riverfront Plaza — East Tower

Richmond, Virginia 23219

Facsimile:  (804) 343-4864

Attention:      Steven M. Haas, Esq.

E-mail:  shaas@hunton.com

 

and

 

Glaser Weil LLP

10250 Constellation Blvd.

19th Floor

Los Angeles, California 90067

Facsimile:  (310) 785-3515

Attention:  Garland A. Kelley, Esq.

E-mail:  GKelley@GlaserWeil.com

 

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8.             Applicable Law.

 

This Agreement, and all claims and causes of action hereunder, whether in tort
or contract, or at law or in equity, shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without reference
to the conflict of laws principles thereof that would result in the application
of the law of another jurisdiction.  Each of the Parties irrevocably agrees that
any action, suit or proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising
hereunder, brought by the other Party or its successors or permitted assigns,
whether in tort or contract or at law or in equity, shall be brought and
determined exclusively in the Court of Chancery and any state appellate court
therefrom within the State of Delaware (or, if the Court of Chancery declines to
accept jurisdiction over a particular matter, any state or federal court within
the State of Delaware).  Each of the Parties hereby irrevocably submits with
regard to any such action, suit or proceeding for itself and in respect of its
property, generally and unconditionally, to the personal jurisdiction of the
aforesaid courts and agrees that it will not bring any action, suit or
proceeding relating to this Agreement in any court other than the aforesaid
courts.  The Parties knowingly and irrevocably waive the right to a trial by
jury in connection with any such action, suit or proceeding.  Each of the
Parties hereby irrevocably waives, and agrees not to assert in any action, suit
or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason,
(b) any claim that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise) and (c) to the
fullest extent permitted by applicable legal requirements, any claim that
(i) the suit, action or proceeding in such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper or
(iii) this Agreement, or the subject matter hereof, may not be enforced in or by
such courts.  The Parties acknowledge that nothing in this Agreement limits the
exercise of any director’s fiduciary duty as a director of the Company under
applicable law (including the Founder Independent Designee).

 

9.             Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall
be considered one and the same agreement and shall become effective when
counterparts have been signed by each of the Parties and delivered to the other
Party (including by means of electronic delivery or facsimile).

 

10.          Entire Agreement; Amendment and Waiver; Successors and Assigns;
Third Party Beneficiaries; Term.

 

This Agreement contains the entire understanding of the Parties with respect to
its subject matter.  There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings between the Parties other
than those expressly set forth herein.  No modifications of this Agreement can
be made except in writing signed by an authorized representative of the Company
and by Founder.  No failure on the part of any Party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any

 

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single or partial exercise of such right, power or remedy by such Party preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  All remedies hereunder are cumulative and are not exclusive of any
other remedies provided by law.  The terms and conditions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors, heirs, executors, legal representatives, and
permitted assigns.  No Party shall assign this Agreement or any rights or
obligations hereunder without, with respect to Founder, the prior written
consent of the Company, and with respect to the Company, the prior written
consent of Founder.  This Agreement is solely for the benefit of the Parties and
is not enforceable by any other persons or entities.  This Agreement shall
terminate immediately after the 2020 Annual Meeting, except the provisions of
Section 5 through Section 9, which shall survive such termination.

 

[The remainder of this page intentionally left blank; signature page follows.]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized signatories of the Parties as of the date hereof.

 

 

 

PAPA JOHN’S INTERNATIONAL, INC.

 

 

 

 

 

 

By:

/s/ Joseph H. Smith, IV

 

Name:

Joseph H. Smith, IV

 

Title:

Senior Vice President &

 

 

Chief Financial Officer

 

 

 

 

JOHN H. SCHNATTER

 

 

 

 

 

/s/ John H. Schnatter

 

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Exhibit A

 

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 

JOHN H. SCHNATTER,

 

)

 

 

 

)

 

Plaintiff,

 

)

 

 

 

)

 

v.

 

)

C.A. No. 2018-0646-AGB

 

 

)

 

MARK S. SHAPIRO, SONYA E. MEDINA, OLIVIA F. KIRTLEY, CHRISTOPHER L. COLEMAN,
LAURETTE T. KOELLNER, and PAPA JOHN’S INTERNATIONAL, INC.,

 

)

)

)

)

)

 

 

 

)

 

Defendants.

 

)

 

 

NOTICE OF DISMISSAL WITHOUT PREJUDICE

 

PLEASE TAKE NOTICE THAT, pursuant to Court of Chancery Rule 41(a)(1)(i) and that
certain Agreement, dated March 4, 2019, to which the form of this notice is
attached, Plaintiff dismisses the above-captioned action WITHOUT PREJUDICE. 
Plaintiff reserves all of his rights with respect to any person named as a
Defendant in this action, at any time.  Neither this Notice of Dismissal Without
Prejudice, nor any prior amendment to the action, shall operate to bar any
claims against any person named as a Defendant in this action, at any time.

 

 

BAYARD, P.A.

 

 

 

 

 

/s/

 

Peter B. Ladig (#3513)

 

Brett M. McCartney (#5208)

 

Elizabeth A. Powers (#5522)

 

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600 N. King Street, Suite 400

 

Wilmington, Delaware 19801

 

(302) 655-5000

 

Attorneys for John Schnatter

 

 

 

Dated: March     , 2019

 

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