Document:

EXHIBIT 10.1

 

Execution
Copy

 

AMENDED AND RESTATED 

ASSETS PURCHASE AGREEMENT

 

This AMENDED
AND RESTATED ASSETS PURCHASE AGREEMENT (“Agreement”) is made as of
the 26th  day of September, 2005, by and among (i) PAPA JOHN’S USA, INC., a Kentucky
corporation (“PJUSA”) and PAPA JOHN’S
INTERNATIONAL, INC., a Delaware corporation (“Papa John’s”) (PJUSA
and Papa John’s sometimes referred to collectively as the “Sellers”); and (ii) PJCOMN ACQUISITION CORPORATION, a Delaware
corporation (“Buyer”).  Buyer and Sellers
are sometimes individually or collectively referred to herein as a “Party” or
the “Parties”.

 

Recitals:

 

A.                                    Sellers
and Buyer entered into the Assets Purchase Agreement dated August 12, 2005
(the “Prior Agreement”) and now Sellers and Buyer desire to amend and restate
the Prior Agreement by entering into this Agreement, and for this Agreement to
supercede the Prior Agreement.

 

B.                                    Sellers
own and operate Eighty-five (85) Papa John’s Pizza stores described more
particularly in Exhibit A
attached hereto (all of the foregoing stores referred to herein as the “Stores”
and the operation of the retail restaurant businesses with respect to the
Stores being referred to herein as the “Business”).

 

C.                                    Sellers
desires to sell and convey to Buyer, and Buyer desires to purchase and acquire
from Sellers, free and clear of all Security Interests (as defined herein), all
of Sellers’ right, title, and interest in and to certain assets of Sellers
relating to the Stores and necessary for the operation of the Business as
presently conducted and as set forth herein but specifically excluding certain
assets as provided herein.

 

 

Agreement:

 

NOW, THEREFORE,
in consideration of the premises and the mutual covenants herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                      Purchase
and Sale.

 

(a)                                  Acquired
Assets.  Upon the terms and
subject to the conditions set forth herein, Sellers hereby agree to sell,
transfer, convey, assign and deliver to Buyer at the Closing, and Buyer hereby
agrees to purchase and acquire from Sellers at the Closing, free and clear of
all Security Interests (as defined below), all of Sellers’ right, title and
interest in and to certain assets of Sellers which are all of the assets
required to operate the Stores and Business as presently conducted and are in
such amount, quality and specifications
required to operate the Stores in compliance with all Papa John’s
current specifications and standards (the “Acquired Assets”):

 

As used in this Agreement, “Security
Interests” means any mortgage, pledge, assessment, security interest, lien,
liability, obligation, option, restriction, adverse claim or other encumbrance
or debt of any kind or nature, other than (i) such as shall be included in
the Assumed Liabilities (as defined herein), and (ii) such as shall have
been created by the terms of the Leases, the Licenses or the Assigned Contracts
validly transferred by Sellers to Buyer in accordance with this Agreement.

 

(i)                                    all
machinery, equipment, signage, smallwares, telephone systems, computers
(including — to the extent owned by Sellers —  laptops, desktops, PDAs, cellular telephones
and Blackberry devices currently used by any personnel directly associated with
the Stores or the operation of the Business), computer systems, software and
data licenses (exclusive of Sellers’ proprietary software and data relating to
Papa John’s franchised system generally to be made available to Buyer pursuant
to the Franchise Agreement(s), as hereinafter defined), furniture, fixtures and
all other tangible personal property owned by either Seller and located in the
Stores, including, without limitation, the personal property listed on Schedule 1(a)(i) of
the Disclosure Schedules (as defined in Section 6 of this Agreement) by
Sellers and also

 

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including (to the extent assignable) all warranties and guaranties,
express or implied, relating thereto;

 

(ii)                                Sellers’
right, title and interest in and to the Leased Real Property (as defined in Section 6(f) hereof)
for the Stores pursuant to and as more fully described in the Leases (as
defined in Section 6(f) hereof). 
As of the Closing Date, Sellers shall have obtained all of the required
Third Party Consents (as defined in Section 6(k)(2) of this
Agreement) to validly assign and transfer the Leases for the Leased Real
Property to Buyer;

 

(iii)                            all licenses, permits or franchises
listed on Schedule 1(a)(iii) of the Disclosure Schedules which
are all of the licenses, permits or franchises necessary to operate the Stores
and Business as presently conducted issued by any Governmental Entity (as
defined below) to either Seller and relating to the operations of the Business
(collectively, the “Licenses”) to the extent they are transferable (for
purposes of this Agreement, “Governmental Entity” means any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency).  As of the Closing Date, Sellers shall have
received the required Third Party Consents necessary to assign and validly
transfer the Licenses to Buyer, except where the failure to obtain such Third
Party Consent would not have a Business Material Adverse Effect;

 

(iv)                               the rights under all contracts or
agreements to which either Seller is a party listed in

Schedule 6(g) of the Disclosure Schedules and which are
designated as Assigned Contracts (as defined in Section 6(g) hereof)
which are all of the contracts or agreements necessary to operate the Stores
and Business as presently conducted.  As
of the Closing Date, Sellers shall have received the required Third Party
Consents necessary to assign and validly transfer the Assigned Contracts to
Buyer, except where the failure to obtain such consent would not have a
Business Material Adverse Effect;

 

(v)                                   all
telephone and facsimile numbers;

 

(vi)                               all
Stores’ inventory (including all materials and supplies), uniforms, signs,
advertising and marketing materials located in the Stores and listed in Schedule 1(a)(vi) of
the Disclosure Schedules which inventory is in such amount, quality and

 

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specifications
required to operate the Stores in compliance with all Papa John’s
current specifications and standards (but excluding Sellers’ respective
proprietary rights in trademarks, tradenames, trade dress, copyrights or other
intellectual property, the use of which by Buyer following the Closing are to
be governed by the Franchise Agreement(s));

 

(vii)                           cash of $500 per Store to be in the
drawers on the Closing Date (“Till Cash”) which Till Cash is the amount of cash
currently on hand in each Store and is an amount sufficient to operate the
Stores and the Business as presently conducted; and

 

(viii)                       all prepaid
expenses, deposits, claims for refunds after the Closing Date and rights to
offset associated with the Acquired Assets or the Business; and

 

(ix)                              Sellers’ respective rights, claims,
causes of action and defenses arising under or pursuant to the Leases, the
Licenses and the Assigned Contracts, or relating to the Leased Real Property
(or the Fee Properties), in each case relating to or connected with any party’s
performance or non-performance thereof or any other event, circumstance, action
or omission occurring thereunder or thereon at any time prior to the Closing,
including without limitation, arising out of any breach, default or actionable
misconduct by any other party to the Leases, the Licenses or the Assigned
Contracts prior to the Closing.

 

This Agreement shall not constitute an
agreement or attempted agreement to transfer, sublease, sublicense or assign
any privilege, right or interest in any Lease, License or Assigned Contract or
any claim, right or benefit arising thereunder or resulting therefrom, if an
attempted assignment thereof without the required Third Party Consent would
constitute a breach or violation thereof or affect adversely the rights of
Sellers or Buyer thereunder.  If a Third
Party Consent which is required in order to assign any interest is not obtained
prior to the Closing Date, or if an attempted assignment would be ineffective
or would adversely affect the ability of Sellers to convey their interest to
Buyer, Sellers shall cooperate with Buyer in any lawful arrangement to provide
that Buyer shall receive Sellers’ entire interest in the benefits under any
such Lease as provided in Section 8(d), License or Assigned Contract,
including, without limitation, enforcement for the benefit of Buyer of any and
all rights of Sellers against any other party thereto arising out of the breach
or cancellation thereof by such party or otherwise; provided, however,
that if Buyer is unable to receive the benefit of any Lease via assignment,
sublease or otherwise as provided above, such Lease will be excluded from the

 

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Acquired Assets and Buyer shall have nine (9) months to designate
an alternate site within the same trade area as a replacement (“Replacement
Store”).  Subject to it meeting Papa John’s
standard criteria, Sellers shall at Sellers’ expense cause the necessary
leasehold improvements to be constructed in the Replacement Store and Buyer may
transfer, at Sellers’ sole cost and expense, the equipment and signage from the
prior site.  Sellers shall also pay
$10,000 to Buyer not less than 20 days prior to the scheduled opening date of
the Replacement Store.  Notwithstanding the foregoing, the
transfer of the Acquired Assets pursuant to this Agreement shall not include
the assumption of any liability or encumbrance in respect thereof other than as
set forth in this Agreement.

 

(b)                                  Excluded Assets. 
Notwithstanding anything listed above, the following assets are
expressly excluded from the definition of Acquired Assets:

 

(i)                                    all intellectual property rights in and
to the software developed by or at the direction of Sellers, including the
PROFIT system, OARS, Tool Kit;

 

(ii)                                all assets and rights, tangible and
intangible, real, personal and mixed of Sellers not expressly listed in Subsection (a) above; 

 

(iii)                            all cash (except Till Cash in the amounts
described in subclause (a)(vii) above) and receivables due in the ordinary
course of business (including from credit cards) prior to the Closing Date;

 

(iv)                               Subject to the “Cross
Option Agreement” substantially in the form attached hereto as Exhibit I (the “Cross Option Agreement”),
the real property for the eight land parcels owned by Sellers and described (as
to tax lot and block number, and metes and bounds) on Exhibit B
hereto (the “Land”) together with Sellers’ respective interests (if any) in (A) any
strips and gores adjacent to the Land and any land lying in the bed of any
street, road or avenue, opened or proposed, in front of or adjoining the Land,
adjacent to or adjoining the Land, to the center line thereof and (B) any
easements, rights, privileges and appurtenances belonging or in any way
pertaining to the Land and (C) all improvements on or pertaining to the
Land (each parcel of the Land, together with all of the foregoing being herein
referred to as a “Fee Property” and all parcels collectively as the “Fee
Properties”);

 

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(v)                                   the lease rights and leasehold
improvements for the following locations which the Parties agree shall continue
to be operated as Papa John’s restaurants pursuant to a separate Contingent
Store Agreement between Sellers and Buyer in the form of Exhibit C (the “Contingent Store
Agreement”) to be executed on the Closing Date (hereinafter the “Contingent
Stores”):

 

(a)                                  Store No. 993, 8065 Brooklyn Blvd,
Brooklyn Park, MN 55445

(b)                                 Store No. 1041, 4250 Colfax, Denver,
CO 80204

(c)                                  Store No. 1053, 1100 Ken Pratt Blvd,
Longmont, CO 80501

(d)                                 Store No. 1372, 7973 Wedgewood Lane
N, Maple Grove, MN 55369

(e)                                  Store No. 1459, 5609 N. Academy
Blvd, Colorado Springs, CO 80918

(f)                                    Store No. 2083, 11456 Market Place
Drive N, Champlin, MN 55316

(g)                                 Store No. 2702, 17121 South Golden
Road, Golden, CO 80401

(h)                                 Store No. 2708, 7280 Lagae Road,
Castle Rock, CO 80108

(i)                                     Store No. 2709, 5135 Chambers Road,
Denver, CO 80239; and

 

(vi)                               the lease rights for Store No. 1480,
1148 W. Dillon Road, Louisville, CO 80027.

 

2.                                      Assumed
Liabilities.  Sellers shall
transfer the Acquired Assets to Buyer on the Closing Date free and clear of all
Security Interests and Buyer shall not, by virtue of its purchase of the
Acquired Assets, assume or become responsible for any debts, liabilities,
obligations or encumbrances of Sellers or of any other person relating to the
Acquired Assets, incurred prior to the Closing Date.  The only debts, liabilities, obligations or
encumbrances of any nature of Sellers being assumed by Buyer (the “Assumed
Liabilities”) are (a) the obligations of Sellers under the terms of the
Leases, Licenses and Assigned Contracts arising after the Closing Date in the
ordinary course provided, that such Leases, Licenses and Assigned Contracts
have been assigned and validly transferred to Buyer, (b) the obligations
of Sellers for telephone listings for the Stores arising after the Closing Date,
and (c) the prorated share of personal and real property taxes for the
Leased Properties and Fee Properties for periods after the Closing Date, or for
periods after the Fee Property Closing Date with respect to the Fee Properties
purchased pursuant to the Cross Option Agreement, except to the extent any such
taxes have previously been pre-paid by Sellers.

 

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All other liabilities of Sellers or related
to the Stores or the Business (whether known or unknown) shall remain
obligations of Sellers (the “Excluded Liabilities”).  Except for the Assumed Liabilities, Buyer
shall not assume or be liable for, and does not undertake to attempt to, assume
or discharge, any Security Interest or any other payment obligation,
performance obligation, contingency or liability, whether fixed, contingent,
liquidated, unliquidated, matured, unmatured, asserted or unasserted, of either
Seller whether or not relating to the Stores or the Business including, without
limitation, Sellers’ liabilities with respect to:

 

(i)                                    any
obligation for borrowed money or any debt of any kind now or hereafter;

 

(ii)                                any
obligation arising out of or relating to the operation of the Stores or the
Business other than the Assumed Liabilities;

 

(iii)                            any
obligation under any Lease, License (including license transfer fees arising
from the transactions contemplated hereby) or Assigned Contract assumed by
Buyer which arises after the Closing Date but which arises out of or relates to
any action or inaction of Sellers occurring prior to the Closing Date or to
Sellers breach of any Lease, License or Assigned Contract prior to the Closing
Date;

 

(iv)                               any obligation
for Taxes (as defined below) for periods ending prior to the Closing Date
whether or not due as of the Closing Date (or with respect to the Fee
Properties for periods ending on the Fee Property Closing Date whether or not
due as of the Fee Property Closing Date for the Fee Properties), including (i) any
Taxes arising as a result of Sellers’ operation of the Stores, the Business or
ownership of the Acquired Assets or Fee Properties, (ii) any Taxes that
will arise as a result of the sale of the Acquired Assets pursuant to this
Agreement or the Fee Properties pursuant to the Cross Option Agreement that are
attributed to Sellers and (iii) any deferred Taxes of any nature. For
purposes of this Agreement, “Taxes” means all taxes however denominated
imposed by any federal, state, local or foreign government or any agency or
political subdivision of any such government, including all net income,
alternative or add-on minimum taxes, gross income, gross receipts, sales, use,
goods and services, capital, production, transfer, ad valorem, earnings,
franchise, profits, license,

 

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withholding
(including all obligations to withhold or collect for Taxes imposed on others),
payroll, disability, employer health, employment, excise, estimated, severance,
stamp, occupation, premium, property, environmental, excess profit or windfall
profit taxes, custom duty, value added or other taxes, governmental fees or
other like assessments or charges of any kind whatsoever, together with any
interest and any penalties or additions to tax;

 

(v)                                   any
obligation to any current or former employees including, without limitation,
payroll, vacation, sick leave, worker’s compensation, unemployment benefits,
pension benefits, employee stock option or profit-sharing plans, health care
plans or benefits, or any other employee plans or benefits of any kind;

 

(vi)                               any
employment, severance, retention, termination or similar agreement with any
current or former employee of Sellers, any obligation of Sellers to indemnify,
reimburse or advance amounts to any officer, director, employee or agent of
such Seller, or to any third party or otherwise;

 

(vii)                           any
obligation for Sellers’ accounts payable related to the Stores or the Business
prior to the Closing Date;

 

(viii)                       any
obligation for trade accounts payable prior to the Closing Date;

 

(ix)                              any
obligation to distribute to any of Sellers’ stockholders or otherwise apply all
or any part of the consideration received hereunder;

 

(x)                                  any
obligation arising out of any legal proceeding finally adjudicated, pending or
threatened as of the Closing Date, whether or not set forth in the Disclosure
Schedules;

 

(xi)                              any
obligation arising out of any legal proceeding commenced after the Closing Date
and arising out of, or relating to, any occurrence or event happening prior to
the Closing Date;

 

(xii)                          any
obligation arising out of or resulting from Sellers’ non-compliance with any
legal requirement or order of any Governmental Entity;

 

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(xiii)                      any
obligation under this Agreement or any other document executed in connection
with the transactions contemplated hereby;

 

(xiv)                         any obligation
based upon Sellers’ acts or omissions occurring after the Closing Date; or

 

(xv)                             any obligation
for insurance claims arising out of or that relate to any act, omission,
occurrence or event happening prior to the Closing Date, regardless when such
claim is made.

 

3.                                      Purchase
Price; Deposit.

 

(a)                                  Purchase Price.  The
purchase price to be delivered by Buyer to Sellers for the Acquired Assets
shall be $6,473,000 (the “Purchase Price”). 
The Purchase Price shall consist of (i) the Deposit (as defined in Section 3(b));
and (ii) $6,223,000
in cash (the “Closing Date Cash Payment”).

 

(b)                                  Deposit. 
Buyer shall tender to Sellers an earnest-money deposit of $250,000 upon
execution of this Agreement (“Deposit”). 
Such Deposit shall be credited against the Purchase Price.  In the event the transactions contemplated by
this Agreement do not close in accordance with the terms hereof, the Deposit
shall be refunded to Buyer only if the failure to close is due to (a) a
decision by Sellers to not proceed for any reason other than a breach or
default by Buyer under this Agreement, or (b) Sellers’ noncompliance,
breach or default under this Agreement or any of the Ancillary Agreements or (c) Sellers’
failure to meet the applicable conditions precedent to Closing or to fulfill
Sellers’ deliveries and actions at Closing, as provided in Section 9 or Section 10,
as applicable.

 

4.                                      Allocation
of Purchase Price.  The Purchase Price shall be allocated in
accordance with Schedule 4.1 attached hereto.  The Parties shall prepare for filing
all returns, declarations, reports, estimates, information returns and
statements required to be filed or sent by such Party to any applicable taxing
authority with respect to the transactions contemplated by this Agreement in a
manner consistent with such allocation. 
The Parties agree to provide the

 

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other Party, for the purpose of preparing
such returns, with such information and other documents filed by such other
Party as each may reasonably require within 60 days of the Allocation Date.

 

5.                                      (a)                                  Closing.  The closing of the transactions contemplated
herein (the “Closing”) shall occur on September 26, 2005, or at such other
date and time as the Parties mutually agree subject to the satisfaction or
waiver of the conditions precedent set forth in Section 9.  The date on which the Closing shall occur is
referred to in this Agreement as the “Closing Date”.  Title and risk of loss to the Acquired Assets
(other than the Fee Properties) shall pass to Buyer effective as of 12:01 a.m.
on the Closing Date, regardless of the actual time of the Closing (the “Effective
Time”).  The title and risk of loss to a
Fee Property shall transfer to Buyer, or its assignee, effective as of 3:00 a.m.
the day of the transfer of the Fee Properties to Buyer in accordance with the
Cross Option Agreement and the Special Warranty Deed (“Fee Property Closing
Date”). Possession of and title to the Acquired Assets and the premises of the
Stores, including the Leased Properties, the Fee Properties, all keys thereto,
and the combinations to any safes, shall be delivered to Buyer at the time the
actual Closing is conducted.  The Closing
shall be conducted by courier exchange of executed closing documents, or in
such other manner as the Parties mutually agree.   At the Closing or, where noted, the Fee
Property Closing Date:

 

(i)                                    Sellers
shall cause to be delivered to Buyer the certificate required to be delivered
under Section 9(a)(iv);

 

(ii)                                Buyer
shall cause to be delivered to Sellers the certificate required to be delivered
under Section 9(b)(iv);

 

(iii)                            the
relevant Seller(s) shall execute and deliver a Bill of Sale and Assignment in
the form attached as Exhibit D;

 

(iv)                               on
the Fee Property Closing Date, the relevant Seller(s) shall execute Special
Warranty Deeds in the form attached to the Cross Option Agreement (“Special
Warranty Deeds”);

 

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(v)                                   Buyer
and Sellers shall execute and deliver the Accounting Services Agreement in the
form attached hereto as Exhibit H
(the “Accounting Services Agreement”) and the Contingent Store Agreement;

 

(vi)                               on
the Closing Date and/or the Fee Property Closing Date, as applicable, the
relevant Seller(s) and Buyer shall execute and deliver such other instruments
of conveyance as the others may reasonably request in order to effect the sale,
transfer, conveyance and assignment to Buyer of title to the Acquired Assets
and the Fee Properties in the manner contemplated in this Agreement and the
Cross Option Agreement;

 

(vii)                           the
relevant Seller(s) shall execute and deliver to Buyer an Assignment and
Assumption Agreement providing for the transfer of the Leases, Licenses and
Assigned Contracts in the form attached hereto as Exhibit J (the “Assignment Agreement”).

 

(viii)                       Sellers
shall supply the Assignment Consent and Estoppel Certificate in the form
annexed hereto as Exhibit E (the
“Landlord Consent and Estoppel Certificate”), duly signed by the landlord under
each of the Leases (with such changes to that form as shall have been approved
by the Parties hereto); and evidencing said landlord’s consent to the
assignment of its Lease by Sellers to Buyer (or an alternate arrangement as
provided in Section 8(d) or as set forth in the last paragraph of Section 1(a));

 

(ix)                              Buyer
and Sellers shall enter into “Leases” (as defined below) for each of the Fee
Properties;

 

(x)                                  Buyer
and Sellers shall enter into the Cross Option Agreement;

 

(xi)                              Buyer
and the relevant Seller(s) shall execute and deliver such other instruments as
Sellers may reasonably request in order to effect the assumption by Buyer of
the Assumed Liabilities;

 

(xii)                          Sellers
shall deliver to Buyer, or otherwise put Buyer in possession and control of,
all of the Acquired Assets of a tangible nature owned by Sellers; and

 

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(xiii)                      Buyer and
Papa John’s shall execute and deliver the Development Agreement in the form
attached hereto as Exhibit F
(the “Development Agreement”), the Franchise Agreement(s) for each Store in the
form attached hereto as Exhibit G and
as contemplated in Section 8(h) (the “Franchise Agreement”) and the
letter agreement of changes to the Development Agreement and the Franchise
Agreement in the form attached hereto as Exhibit K
(the “Letter Agreement”).

 

The agreements and instruments referred to in
clauses (iii) through (xiii) above, together with any other documents or
instruments executed and delivered pursuant hereto, are referred to herein as
the “Ancillary Agreements.”

 

(b)                                  Further
Assurances.  At any time and from
time to time, whether before or after the Closing Date, as and when requested
by any Party hereto and at such Party’s expense, the other Party or Parties
shall promptly execute and deliver, or cause to be executed and delivered, all
such documents, instruments and certificates and shall take, or cause to be
taken, all such further or other actions as are necessary to evidence and
effectuate the transactions contemplated by this Agreement and the Ancillary
Agreements.

 

6.                                      Representations
and Warranties of Sellers. 
Sellers jointly and severally represent and warrant to Buyer that on the
date hereof and as of the Closing Date or Fee Property Closing Date, as
applicable, except as set forth in the section of the written disclosure
schedules delivered on or prior to the date hereof by Sellers (the “Disclosure
Schedules”) corresponding to each representation and warranty made
hereunder by Sellers (for purposes of this Section 6, the phrase “to the
knowledge of Sellers” (or words of similar import) shall mean the actual
knowledge of Sellers’ respective executive officers after due inquiry).

 

(a)                            Organization,
Qualification and Corporate Power. 
PJUSA and Papa John’s are corporations duly organized, validly existing
and in good standing under the laws of the Commonwealth of Kentucky and the
State of Delaware, respectively, and each is duly qualified to conduct business
under the laws of each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification necessary.  Sellers have
all requisite corporate power and authority to carry on the business in which
it is now engaged and to own, lease and use the properties now owned,

 

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leased and used by it.  Sellers’ are not in violation of any
provisions of its or their charter documents or bylaws.

 

(b)                            Authority.  Sellers have all requisite corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it will be a party and to perform its or their obligations
hereunder and thereunder, including, without limitation, to sell and transfer
the Acquired Assets pursuant to this Agreement and the Ancillary
Agreements.  The execution and delivery
by Sellers of this Agreement and such Ancillary Agreements and the consummation
by Sellers of the transactions contemplated hereby and thereby have been
validly authorized by all necessary corporate action on the part of
Sellers.  This Agreement has been, and
such Ancillary Agreements will be, validly executed and delivered by Sellers
and constitutes or will constitute a valid and binding obligation of Sellers,
enforceable against them in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and by equitable principles (including for
purposes of such exception those limiting the availability of specific
performance, injunctive relief and other equitable remedies and those providing
for equitable defenses).

 

(c)                            Financial
Statements.  Schedule 6(c) of
the Disclosure Schedule includes copies of the unaudited statement of
income and expenses of the Stores as of and for the 12-month period ended December 26,
2004 and the year-to-date period ended July 24, 2005 (collectively, the “Financial
Statements”).  Not less than three (3) days
before the Closing Date, Seller shall also deliver the unaudited statements of
income for the year-to-date period ended August 21, 2005, which shall be
deemed part of the Financial Statements. 
The Financial Statements have been prepared in accordance with Generally
Accepted Accounting Principles consistently applied throughout the periods to
which they relate and fairly present, in all material respects, the combined
results of operations of the Business for the periods referred to therein.  Since December 31, 2004, (1) there
have not been any material changes in the financial condition, assets
(including the Acquired Assets) or the results of operations of the Business
that would have a Business Material Adverse Effect (as defined in Section 9(a)(x))
and (2) the Business has been operated in the ordinary course in a manner
consistent with past practice.  As of the
Closing Date, or as of the Fee Property Closing Date with respect to the Fee
Properties, Sellers shall have satisfied all indebtedness and all liabilities
related to the

 

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(1) Acquired Assets, and the Business,
other than the Assumed Liabilities, and (2) the Fee Properties.

 

(d)                            Undisclosed
Liabilities/Net Assumed Liabilities. 
There is no circumstance, condition, event or arrangement that would
reasonably be expected to give rise hereafter to any material liabilities of
Sellers that would adversely affect the ability of Sellers to convey good,
valid, exclusive and marketable title to the Acquired Assets in the manner
contemplated in this Agreement or the Fee Properties, except those that may be
incurred in the ordinary course of business and which have been disclosed to
Buyer.

 

(e)                            Title
to Assets; Suitability of Tangible Property.  Sellers are the sole owner of the Acquired
Assets (and the Fee Properties).  All of
the representations and warranties set forth in the Cross Option Agreement with
respect to the title and condition of the Fee Properties and with respect to
environmental matters are incorporated herein by this reference as if they were
set forth in full herein.  Sellers have
good, valid, exclusive and marketable title to, a valid leasehold interest in
or a valid license or right to use, such Acquired Assets, free and clear of all
Security Interests.  The tangible
Acquired Assets are in good repair and operating condition and are suitable to
conduct the operation of the Stores and business related thereto substantially
in the same manner in which the Business has been conducted prior to the date
hereof and the Closing Date.  Upon
consummation of the transactions contemplated hereby, Buyer will have acquired
good, valid, exclusive and marketable title to the Acquired Assets free and
clear of all Security Interests and upon consummation of the Fee Properties
purchase in accordance with the Cross Option Agreement, Buyer will have
acquired good, valid, exclusive and marketable title to the Fee Properties free
and clear of all Security Interests and Defects of Title (as defined in the Cross
Option Agreement).

 

(f)                                    Leased Real Property.

 

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(1)                                 Schedule 6(f)(1) of
the Disclosure Schedules describes the leased real property included in the
Acquired Assets (the “Leased Real Property”) and each lease in effect
with respect thereto (the “Leases”). 
Schedule 6(f)(1) of the Disclosure Schedules lists all
of the Leases for the Stores and the information set forth thereon accurately
summarizes the terms and conditions currently in effect for all such
Leases.  With respect to each of the
Leases (a true, complete and accurate copy of which has been provided to
Buyer):

 

(i)                                          it
is a valid and binding obligation of Sellers and, to the knowledge of Sellers,
each other party to such Lease, enforceable and in full force and effect;

 

(ii)                                      neither
Sellers nor, to the knowledge of Sellers, any other party to the Lease is in
breach or default thereof, and to Sellers’ knowledge no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
default or permit termination, modification or acceleration thereunder, and no
written claim and, to Sellers’ knowledge, no oral claim has been made by any
other party to such Lease alleging that Sellers are in breach of default
thereunder;

 

(iii)                                  Sellers
have not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold of such Lease;

 

(iv)                                     There
is no Security Interest, easement, covenant or other restriction applicable to
the Leased Real Property subject to such Lease, except for such as have been
created by the terms of the Lease and except for recorded easements, covenants
and other restrictions which do not materially impair the current uses or the
occupancy of Sellers of such Leased Real Property;

 

(v)                                         There
are no outstanding or threatened requirements by any insurance company that has
issued an insurance policy covering the Leased Real Property, or by any board
of fire underwriters or other body exercising similar functions, requiring any
repairs or alterations to be done on the Leased Real Property;

 

15

 

(vi)                                     To
Sellers knowledge, there are no Hazardous Materials (as defined in the Cross
Option Agreement) on or under the Leased Real Property and Sellers have not
deposited any Hazardous Materials on or under the Leased Real Property nor have
Sellers transported to or from the Leased Real Property or used, generated,
manufactured, stored or disposed of any Hazardous Materials on or under the
Leased Real Property; and

 

(vii)                                 Sellers
have obtained, or will obtain prior to the Closing Date, all material required
consents to assign and validly transfer the Leases to Buyer.

 

As used in
this Agreement, “Affiliate” means, with respect to a Party, any legal
entity controlling, controlled by or under common control with such Party.  For purposes of this definition, “control”
means the legal, beneficial or equitable ownership, directly or indirectly of:
at least 50% of the aggregate of all voting interests in such entity or at
least 35% of the aggregate of all voting interest of such entity combined with
management control of such entity.

 

(g)                                 Assigned Contracts.  Schedule 6(g) of the
Disclosure Schedules lists all of the contracts or agreements (other than the
Leases), whether written or oral, to which Sellers are a party or by which it
is bound as of the date of this Agreement relating to a Store or to the
Business which are being assigned to and assumed by Buyer as part of the
Acquired Assets hereunder (the “Assigned Contracts”), and identifies all
prepaid deposits under Assigned Contracts, including deposits delivered or held
as security or in escrow.  Sellers have
made available to Buyer a true, complete and accurate copy of each contract and
agreement listed in Schedule 6(g) of the Disclosure
Schedules.  The Assigned Contracts are
all of the material contracts and agreements that are necessary to operate the
Stores and the Business as presently conducted. Each Assigned Contract is a
valid and binding obligation of Sellers and, to the knowledge of Sellers, of
each other party thereto, in full force and effect.  Neither Sellers nor, to the knowledge of
Sellers, any other party to an Assigned Contract is in breach or default and to
the knowledge of Sellers no event has occurred which, with notice or lapse of
time or both, would constitute a breach or default or permit termination,
modification or acceleration thereunder. 
No written claim and, to the knowledge of Sellers, no oral claim has
been made by any other party to any Assigned Contract alleging that Sellers are
in breach or default thereunder.  Sellers
have no knowledge that any other party intends to terminate or not renew any
Assigned Contract.  Schedule 6(g) of
the Disclosure Schedules lists each Assigned Contract

 

16

 

that cannot be assigned or
transferred by Sellers without the prior consent of the other party
thereto.  Sellers have obtained, or will
obtain prior to the Closing Date, all material required consents to assign and
validly transfer the Assigned Contracts to Buyer. Other than as set forth on Schedule 6(g) of
the Disclosure Schedules, Sellers do not lease any equipment or others assets
located at any of the Stores.

 

(h)                           Litigation.  Schedule 6(h) of the
Disclosure Schedules lists each (a) judgment, order, decree, stipulation
or injunction of any third party or Governmental Entity with respect to this
Agreement, the Business or any of the Acquired Assets (b) action, suit,
claim, legal, administrative, arbitratorial or other proceeding or
investigation pending or, the knowledge of Sellers, threatened by any third
party or by or before any Governmental Entity relating to (i) this
Agreement or the consummation of the transactions contemplated hereby, (ii) the
Business or (iii) any of Sellers’ assets or properties relating to the
Business, including, without limitation, the Acquired Assets.

 

(i)                              Legal
Compliance.  To the knowledge of
Sellers, Sellers are in compliance in all material respects with all laws
applicable to the Stores and the Business (including rules and regulations
thereunder), including, without limitation, health, environmental and safety,
of any federal, state, local or foreign government, or any Governmental Entity,
except for such non-compliance as would not have a Business Material Adverse
Effect as defined in Section 9(a)(x). 
Sellers have not received written notice of any pending and, to the
knowledge of Sellers, there is no threatened, action, suit, proceeding,
hearing, investigation, claim, demand or notice relating to the Stores or the
Business alleging any failure to so comply.

 

(j)                              Brokers’
Fees.  Sellers do not have any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement that
would constitute an Assumed Liability or for which Buyer could become liable or
obligated.

 

(k)                          Noncontravention.  Neither the execution and delivery by Sellers
of this Agreement or the Ancillary Agreements to which Sellers will be a party,
nor the consummation by Sellers of the transactions contemplated hereby or
thereby, will:

 

17

 

(1)                                 conflict with
or violate any provision of the charter or bylaws of Sellers;

 

(2)                                 require on the
part of Sellers or any permit, authorization, consent or approval of, any third
party or Governmental Entity, except for the consents set forth in Schedule 6(k) of the Disclosure Schedules (the consents
so set forth in Schedule 6(k) of the Disclosure Schedules being herein
sometimes referred to collectively as the “Third Party Consents”);

 

(3)                                 conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, create in any party the right to terminate or modify,
or require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage,
instrument of indebtedness or Security Interest to which Sellers are a party or
by which Sellers are bound and which will have a Business Material Adverse
Effect, except for the Third Party Consents; or

 

(4)                                 violate any
judgment, order, writ, stipulation, injunction, decree or statute, rule or
regulation applicable to Sellers, the Fee Properties or the Acquired Assets.

 

(l)                                    Tax Returns; Tax Elections. With
respect to the Business, the Acquired Assets and the Fee Properties, and except
as set forth on Schedule 6(l) of the Disclosure Schedules
(regardless if scheduled herein, all Taxes for pre-Closing Date periods (or
pre-Fee Property Closing Date periods with respect to the Fee Properties) shall
remain a liability of Sellers):

 

(i)                                    Sellers have
prepared, signed and filed all federal, state and other tax returns and reports
required to be filed by all applicable laws and regulations (“Tax Returns”) on
or before the date hereof and as of the Closing Date (or the Fee Property
Closing Date with respect to the Fee Properties), and has timely paid all Taxes
or installments thereof, interest, penalties, assessments and deficiencies of
every kind and nature whatsoever which were due and owing on such Tax Returns
or which were or are otherwise due and owing under all applicable laws and
regulations for any periods for which Tax Returns were due, whether or not
reflected on such Tax Returns and whether or not relating to the income of
Sellers.  All such Tax Returns accurately
and correctly reflect the Taxes of Sellers for the periods covered thereby

 

18

 

and are complete in all material respects.  All Taxes owed by Sellers, or for which
Sellers may be liable (whether or not shown on any Tax return), have been or
will be timely paid.  Sellers are not
currently the beneficiaries of any extension of time within which to file any
Tax Return.  No claim has ever been made
by an authority in a jurisdiction where Sellers do not file Tax Returns that it
is or may be subject to taxation by that jurisdiction.  Except as set forth on Schedule 6(l)
of the Disclosure Schedules, (A) there are no actions, suits, proceedings
or claims now pending against Sellers relating to any Taxes or assessments, or
any claims or deficiencies with respect thereto; (B) there are no pending
investigations involving, or threatened actions, suits, proceeding or claims
against, Sellers with respect to any Taxes or assessments or any claims or
deficiencies with respect thereto; and (C) Sellers are not engaging in any
discussions with the Internal Revenue Service or other Governmental Entity
relating to any Taxes or assessments or any claims or deficiencies with respect
thereto.

 

(ii)                                Sellers have withheld
proper and accurate amounts from their employees, independent contractors or
other persons in full and complete compliance with the tax withholding
provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and
other applicable federal, foreign, state or local laws, and has filed proper
and accurate federal, foreign, state and local returns and reports for all
years and periods (and portions thereof) for which any such returns and reports
were due with respect to payroll, employee income, income tax withholding,
withholding taxes, social security taxes, unemployment taxes and other similar
taxes.  All payments due from Sellers on
account of employee income tax withholding, withholding taxes, payroll taxes,
social security taxes, unemployment taxes or other similar taxes and amounts
owed for workers’ compensation in respect of years and periods (and portions
thereof) ended on or prior to the Closing Date were timely paid prior to such
date or shall be timely paid hereafter by Sellers.

 

(iii)                            Any liability for Taxes of
any nature or kind relating the Stores, the Business, any of the Acquired
Assets, the Fee Properties or otherwise required to be paid by Sellers and
which are due or payable for periods prior to the Closing Date (or prior to the
Fee Property Closing Date, as applicable) have been or shall be paid by Sellers
and Buyer shall have no liability with respect to any such Taxes.

 

19

 

(m)                              Insurance.
Sellers have self-insured programs, policies of insurance and bonds insuring
the Acquired Assets against the risks involved in the conduct of the Business
and the ownership of the Acquired Assets which are appropriate as to the types,
amounts of coverages and deductibles for a corporation with the revenues and
assets of Sellers.  Each such insurance
program or policy is valid and binding and in full force and effect, no premiums
due thereunder have not been paid and Sellers have not received any written
notice of cancellation or termination in respect of any such policy and is not
in default thereunder in any material respect. 
Any claims that occur prior to the Closing Date but that are not
reported until post-Closing shall be covered by Sellers’ insurance or by
Sellers as an Excluded Liability.

 

(n)                                 Affiliate
Transactions. Except as set forth in the “Offering Circular” (as
defined in Section 7(c)) or as contemplated hereby, no officer, director,
Affiliate or related party of either Seller or any associate of any such
officer, director or Affiliate provides or causes to be provided any assets,
services or facilities used in connection with the Business which individually
or in the aggregate would have a Business Material Adverse Effect.

 

(o)                                  Employment
Matters.

 

(i)                                    Sellers have
been and are in full compliance with all applicable Laws governing and/or
relating to employment of their employees primarily engaged in the Business (the
“Business Employees”), including, but not limited to, laws pertaining to wages,
hours, collective bargaining agreements, employment discrimination, and payment
of withholding and unemployment taxes (collectively, “Employment Laws”).  Sellers have been and are in full compliance
with respect to all laws governing and/or relating to association with sales
representatives and other independent contractors primarily providing services
to the Stores or in connection with the operation of the Business (the “Business
Contractors”).  After Closing, Buyer will
not be obligated to continue to employ any of the Business Employees, or make
any payment or provide any benefits to any such employee on account of services
rendered prior to Closing.  After
Closing, Purchaser will not be obligated to continue any association or
relationship with any of the Business Contractors.

 

(ii)                                None of the
Business Employees is represented by any labor union or similar
organization.  Sellers are not a party to
or bound by any collective bargaining

 

20

 

agreement covering the
Business.  No labor union or employee
association has been certified or recognized as the collective bargaining
representative of any of the Business Employees.  To the knowledge of Sellers, there is no
union organizational campaign or representation proceeding underway or
threatened with respect to the Business Employees, and there is no existing or,
to the knowledge of Sellers, threatened labor strike, work stoppage, slow down,
grievance, unfair labor practice charge or labor arbitration proceeding related
to or affecting the Business which may interfere with the operations of the
Business by Buyer.  There is no existing
or, to the knowledge of Sellers, threatened legal action or proceeding against
Sellers with respect to the Business or regarding a violation of any Employment
Laws by any Business Employee or Business Contractor.

 

(iii)                            Severance.  The consummation of the transactions
contemplated by this Agreement will not result in any of the following with
respect to any Business Employee or Business Contractor for which Buyer will be
liable:  (a) severance pay; (b) acceleration
of the time of payment or vesting of, increase the amount of, or satisfy a
condition to the compensation due to any Business Employee or Business
Contractor; or (c) result in any similar payment (including parachute
payments) except as set forth on Schedule 6(o) of the Disclosure Schedules for which
Buyer shall have no obligation.  Sellers have paid or will pay in accordance
with its customary payroll practices all pre-Closing Date compensation due to
any Business Employees or Business Contractor, including all employee vacation
obligations.

 

(iv)                               WARN.  The transactions contemplated by this Agreement
will not require any notice under the Worker Adjustment and Retaining
Notification Act.

 

(v)                                   Resignations.  No Business Employee has provided notice to
Sellers of his/her intention to terminate his/her relationship with Sellers
prior to the Closing or to decline employment with Buyer if offered.  Sellers have no knowledge of any plan of any
such employee to do so.

 

(vi)                               COBRA.  Contemporaneously with Closing, Sellers shall
be obligated to provide, and shall at Closing or promptly thereafter provide,
to all Business Employees all benefits accrued through the Closing Date.  Sellers shall also provide all “M&A
Qualified Beneficiaries” (as such term is defined by 26 C.F.R. 54.4980B-9,
Question 4) timely notice of Consolidated
Omnibus Budget Reconciliation Act (“COBRA”) rights (including, but

 

21

 

not limited to, a Coverage Election Notice), and shall provide to all
such persons all rights under COBRA pursuant to the group health plan(s) that
Sellers have in place prior to the Closing Date or may thereafter put in
place.  Sellers shall maintain such group
health plan(s) following Closing for the full time necessary to provide each
such person with full COBRA coverage for the maximum period such coverage would
be available to each such Person under COBRA provided Sellers maintain such
group health plan(s).  The transactions
contemplated under this Agreement shall not subject Buyer to any Liabilities
under COBRA with respect to any person employed by Sellers, or any dependent of
such person, other than retained employees and their dependents.

 

(p)                                  Benefit Plans.

 

(i)                                    Except as
listed in Schedule 6(p) of the Disclosure Schedules, neither
Sellers, any Affiliate of Sellers nor any trade or business (whether or not incorporated)
which is treated as a single employer with Sellers (each, an “ERISA Affiliate”)
have ever participated in a multi-employer plan.  Neither Sellers nor any ERISA Affiliate is
delinquent in any contributions to any multi-employer plan.

 

(ii)                                All employee
Benefit Plans of Sellers (as defined below) that are intended to be qualified
under Section 401(a) of the Code have a current and valid
determination letter from the Internal Revenue Service. All Benefit Plans that
are intended to be qualified under Section 401(a) of the Code have
been timely amended for any subsequent statutory or regulatory changes. Any
Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has been operated in compliance with its plan documents and, if applicable,
the Employee
Retirement Income Security Act (“ERISA”) and the Code. Sellers shall
be solely responsible for all obligations for any Benefit Plans.  “Benefit Plan” means any plan established by
Sellers, or any predecessor or Affiliate of Sellers, existing at the Closing
Date or at any time within the five (5) year period prior thereto, to
which Sellers contribute or have contributed on behalf of any current or former
employee or director, or under which any employee, former employee or director
of Sellers or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.

 

(q)                                  Disclosure.    No information in this Agreement, Ancillary
Agreement or in any Schedule attached to this Agreement or any Ancillary
Agreement, contains any untrue

 

22

 

statement of a material fact or, when considered together with all such
information delivered to Buyer, omits to state any material fact necessary in
order to make the statements made not misleading.

 

EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR IN ANY ANCILLARY AGREEMENT, SELLERS MAKE NO REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESSED OR IMPLIED, WITH RESPECT TO THE ACQUIRED ASSETS,
THE STORES, THE BUSINESS, SELLERS OR OTHERWISE, AND HEREBY DISCLAIM ANY AND ALL
SUCH OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

7.                                      Representations
and Warranties of Buyer.  Buyer
hereby represents and warrants to Sellers as follows:

 

(a)                                  Organization
and Standing of Buyer.  Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware.  Buyer has full power
and authority to own and lease its property in the conduct of its business.

 

(b)                                  Authorization;
No Violations; Compliance with Law.  
Buyer, and all other persons from whom consent is required, have duly
approved the execution, delivery and performance of this Agreement.  This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms, subject to the application of
legal principles affecting the availability of equitable remedies.  Buyer is in compliance with all laws,
regulations, rules and orders necessary for Buyer’s acquisition of the
Acquired Assets.

 

(c)                                  Disclosure.

 

(i)                                    Buyer
has received, at least ten (10) business days prior to execution of this
Agreement, the disclosure document entitled “Papa John’s Franchise Offering
Circular” (the “Offering Circular”). 
Buyer and its counsel have read and understand the Offering Circular.

 

23

 

(ii)                                Buyer
acknowledges that additional working capital may be required to fund operation
of the Stores.  Sellers have made no
representation to Buyer that the Stores will, or are likely to, earn a gross or
net profit or generate positive cash flow at any time.

 

(iii)                            Buyer
understands and agrees that Sellers make no representation or warranty
regarding the markets or the profitability of operating Papa John’s restaurants
and that no representations have been made by Sellers, or by any of their
Affiliates, or their respective officers, directors, shareholders, employees or
agents, that are contrary to or inconsistent with the terms of this Agreement,
or with the statements made in the Offering Circular, or with the terms of the
Franchise Agreement(s).

 

8.                                      Additional
Covenants of the Parties.  The
Parties further covenant and agree as follows:

 

(a)                                  Payment
of Taxes.  Sellers shall pay all
Taxes, including withholding and other employment taxes applicable to Sellers’
employees, that become due or that accrue before the Closing Date (or prior to
the Fee Property Closing Date with respect to the Fee Properties), or that are
due for periods prior to the Closing Date (or Fee Property Closing Date) but
payable after the Closing Date or Fee Property Closing Date, as
applicable.  Sellers shall pay at the
Closing (or the Fee Property Closing Date, as applicable) any sales, use,
transfer or similar Taxes that may arise out of or result from the transactions
consummated pursuant to this Agreement or the Ancillary Agreements.  Buyer shall pay all Taxes arising or accruing
with respect to the Acquired Assets or the Fee Properties that are due for
periods after the Closing Date or Fee Property Closing Date, as applicable.

 

(b)                                  Excluded
Liabilities.  Sellers shall
promptly pay when due all of the Excluded Liabilities.

 

(c)                                  Assumed
Liabilities.  Buyer shall promptly
pay when due the Assumed Liabilities.

 

(d)                                  Assigned Leases.  Sellers shall, together with Buyer’s
cooperation and assistance, obtain all required Third Party Consents for the
Leases. 
Notwithstanding any other

 

24

 

provision in this Agreement, in the event one
or more landlords under the Leases fails or refuses to execute a Landlord
Consent and Estoppel Certificate of the type contemplated in Subsection 5(a)(viii) or
such other documents (on terms satisfactory to the Parties) necessary to effect
an assignment and assumption of any such Leases on the Closing Date as
contemplated herein, then the Closing will proceed and Buyer and the relevant
Sellers shall enter into a sublease (if permissible), a management agreement or
another mutually satisfactory arrangement permitting Buyer to occupy the
premises of each affected Store subject to the relevant Lease and to operate
such Store with full responsibility and benefits for Store operations and the
Acquired Assets with respect to such Store. 
Upon the Closing, and assuming such required Third Party Consent has not
been obtained, the relevant Sellers of such Store will hold Buyer harmless with
respect to any adverse action by the landlord for such Store under its
respective Lease arising out of Sellers’ failure to obtain that required Third
Party Consent before permitting Buyer to occupy and use the relevant leased
premises, and the Parties agree to continue to pursue such Landlord Consent and
Estoppel Certificate or other such documents necessary to effect the assignment
of such Lease.  If the remedies
contemplated by this Section 8(d) cannot be legally effected, then
the remedies available in the last paragraph of Section 1(a) shall
apply.

 

(e)                                  Rent;
Expenses.  Sellers represent and
warrant that they have paid or will as of the Closing have paid all amounts due
under the Leases through the month in which the Closing takes place.   All security deposits shall become the property
of Buyer and remain in place.  Buyer
shall be responsible for and shall pay all amounts due under each of the Leases
following the Closing, including all rents, CAM, taxes and insurance for
periods after the Closing Date.  Buyer
has arranged, or will promptly arrange, for all utilities servicing the Stores
following the Closing that are to be paid directly by the tenant to be billed
to Buyer as soon as possible following the Closing.  All utility deposits shall become the
property of Buyer and remain in place. 
Sellers agree to pay all utility fees and expenses accruing prior to the
Closing Date.  If Sellers incur any
additional utility expenses for periods on or after the Closing Date, Buyer
shall reimburse Sellers within fifteen (15) days after an invoice is submitted
for such amounts.  If Buyer pays any
amounts for rent or utilities relating to Sellers’ occupancy of the Stores
before the Closing Date, Sellers shall reimburse Buyer within fifteen (15) days
after an invoice is submitted for such amounts, if not settled at Closing.

 

25

 

(f)                                    Use
of Telephone Numbers.  Effective
as of the Closing, Sellers hereby grant to Buyer the right to use the telephone
and fax numbers of the Stores as set forth in Exhibit A
(the “Phone Numbers”).  Sellers agree to
execute appropriate forms of Authorization to Transfer Telephone Number with
respect to the Phone Numbers and any other telephone numbers servicing the
Stores as of the Closing Date, and to take such further actions and execute
such additional documents as may be reasonably necessary or required to assist
in the moving Phone Numbers and any such other telephone numbers to Buyer.

 

(g)                                 Development
and Franchise Agreements.  At
Closing, Papa John’s and Buyer shall enter into a Development Agreement and a Franchise
Agreement for each Store. Among other things, the Franchise Agreement shall
contain provisions granting Buyer the right and license to (i) operate the
Stores under the Papa John’s system and (iii) to all trademarks and
service marks necessary to operate the Business.  

 

(h)                                 Accounting Services Agreement:  At Closing, PJUSA and Buyer shall enter
into an Accounting Services Agreement, providing for PJUSA to provide Buyer
with the identified accounting services for a 12 month period subsequent to
Closing for a fee as specified in the Accounting Services Agreement.  After the above 12 month period, Buyer shall
offer Sellers the right to match any terms for accounting services received by
Buyer from a third party for another 12 month period, but only this one
additional 12 month period.  Sellers
shall have fifteen (15) days to match the terms of service of such third party
after receipt of written notice from Buyer setting forth such proposed terms.  If Sellers fail to match the proposed terms
set forth in the notice, or fail to respond within the fifteen (15) day period
noted above, Buyer shall have no obligation to utilize Sellers’ accounting
services and may retain the third party set forth in its notice.  After the 24 month period subsequent to the
Closing Date expires, Buyer shall have no further obligation of any nature to
Sellers with respect to accounting services.

 

(i)                                    Cross
Option Agreement.  At Closing,
the Parties shall enter into the Cross Option Agreement.

 

(j)                                    Assignment and Assumption Agreement. At
the Closing the Parties shall have entered into the Assignment Agreement and
Assumption Agreement.

 

26

 

(k)                                Closing Efforts.  Subject to the terms hereof, each of the
Parties shall take all actions and to do all things reasonably necessary or
advisable to consummate the transactions contemplated by this Agreement,
including to: (i) obtain all required Third Party Consents; provided that
Sellers hereby acknowledge and agree that it and they have the sole obligation
to take all actions and do all things reasonably necessary or advisable to
obtain the Third Party Consents to the assignment of the Assigned Contracts (ii) effect
all registrations, filings and notices with or to Governmental Entities (the “Governmental
Filings”) and (iii) otherwise comply in all material respects with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement. 
Each of the Parties shall promptly notify each of the other Parties of
any fact, condition or event known to it that would reasonably be expected to
prohibit, make unlawful or delay the consummation of the transactions
contemplated by this Agreement.

 

(l)                                    Operation of Business.  Except as contemplated by this Agreement, during the period from the
date of this Agreement until the Closing Date, Sellers shall (i) conduct
the operations of the Business in the ordinary course consistent with past
practice, (ii) use commercially reasonable efforts to preserve the Business
intact, (iii) use commercially reasonable efforts to keep available the
services of its employees and preserve its relationships with its customers,
suppliers and others with whom it deals, and (iv) have in effect and
maintain at all times its current policies of insurance. Except as contemplated
by this Agreement, during the period from the date of this Agreement until the
Closing Date or the Fee Property Closing Date with respect to the Fee
Properties, Sellers shall refrain from: (i) other than transfers
(including, acquisitions and dispositions of inventory and equipment and
nonexclusive licenses of proprietary rights) on commercially reasonable terms
in the ordinary course of business, acquiring or disposing of, or incurring any
lien on, any Acquired Assets or the Fee Properties; (ii) entering into,
amending, modifying, terminating (partially or completely), granting any waiver
under or giving any consent with respect to any Assigned Contract; (iii) engaging
with any person in any business combination which directly or indirectly
involves the Acquired Assets or the Fee Properties; (iv) engaging in any
transaction individually or in the aggregate with other such transactions
material to the condition of the Business with any officer, director, Affiliate
or associate of Sellers, or any associate of any such officer, director or
Affiliate, outside the ordinary course of business other than on an arm’s-length
basis; (v) hiring or terminating or increasing the compensation of any
management

 

27

 

employees or entering into
or revising any employment agreements with any employees; (vi) granting
requests from any employees for vacation in excess of such employee’s current
vacation time or which will occur, in whole or in part, on or after the Closing
Date; or (vii) entering into any contract, agreement or arrangement to do
or engage in any of the foregoing, except as set forth on

Schedule 6(o) of the Disclosure Schedules.

 

(m)                        Metropolitan
Sports Agreement.    Sellers and Buyer shall cooperate and take
commercially reasonable actions to negotiate an extension of the Metropolitan
Sports Facility Agreement on terms acceptable to Buyer.

 

(n)                           Solicitation.
Subject to the duties imposed by applicable law, unless this Agreement is
terminated as a result of a failure of Buyer to meet a condition precedent or
by mutual agreement of the Parties, from the date hereof through the Closing
Date, Sellers will not take, nor will it permit any Affiliate of Sellers (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other person retained by or acting for or on behalf of Sellers or
any such Affiliate) to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Business or permitting
access to the Acquired Assets, Fee Properties or Business) any offer or inquiry
from any person concerning the direct or indirect acquisition of the Acquired
Assets or the Fee Properties other than Buyer or its Affiliates.

 

(o)                            Intercreditor Agreement. Sellers shall
make available to any senior lender of Buyer an Intercreditor Agreement whereby
Buyer’s lender shall have the right, in the case of a default by Buyer, to
market to an approved franchisee, the collateral as ongoing Papa John’s
businesses.  Such agreement shall be
conditioned upon Buyer being in compliance with the terms of the Franchise
Agreements and current on all amounts owed to Sellers and their Affiliates (or
the lender bringing the Stores current and into compliance).

 

(p)                            Marketing Support.  Sellers, for a period of six (6) months
subsequent to the Closing Date, shall provide Buyer with marketing support and
services from Papa John’s corporate headquarters and field personnel, which
support and services shall include, but not be limited to, reviewing and
assisting with marketing plans, direct mail, print and media buying to support
Buyer’s marketing efforts at no cost to Buyer.

 

28

 

(q)                            Business
License, Permits etc...   Sellers shall provide to Buyer within 30 days
of the Closing Date, electronic versions of spreadsheets, which list all the
business and operating licenses, health permits and all other licenses,
permits, certifications and other approvals from an Governmental Entity that
are necessary for PJCOMN to legally operate all of the Stores, with such
spreadsheet naming such license, permit and/or certification necessary for each
store/restaurant, the name of the Governmental Entity and contact person, if
any, and the expiration and/or renewal date, if any, for any such permit,
license, certification and other approvals.

 

9.                                Conditions
Precedent to Obligations of Buyer and Sellers to consummate the Closing.

 

(a)                            Conditions
to Obligations of Buyer.  The
obligation of Buyer to consummate the transactions to be consummated at the
Closing is subject to the satisfaction (or waiver by Buyer) of the following
conditions:

 

(i)                                    the representations
and warranties of Sellers set forth in this Agreement shall be true and correct
in all material respects as of the Closing Date as if made as of the Closing
Date and, with respect to the Fee Properties, as of the Fee Property Closing
Date;

 

(ii)                                Sellers shall
have performed or complied in all material respects with the agreements and
covenants required to be performed or complied with by it under this Agreement
as of or prior to the Closing;

 

(iii)                            no action, suit
or proceeding shall be pending by or before any Governmental Entity seeking to
prevent or challenge the consummation of the transactions contemplated by this
Agreement and no judgment, order, writ, stipulation, injunction or decree
enjoining or preventing the consummation of the transactions contemplated by
this Agreement shall be in effect;

 

(iv)                               Sellers shall
have delivered to Buyer a certificate to the effect that each of the conditions
specified in clauses (i) through (iii) of this Section 9(a) is
satisfied;

 

29

 

(v)                                   Sellers shall
have obtained all Third Party Consents and either a Landlord Consent and
Estoppel Certificate or another arrangement as provided in 8(d) or as
provided in the last paragraph of Section 1(a) for each Lease in a
form and substance satisfactory to the Parties and shall have effected all
Governmental Filings to be obtained or effected by Sellers;

 

(vi)                               Sellers shall caused to
be conducted, and deliver to Buyer not less than five days prior to the Closing
Date, UCC lien search reports evidencing that there are no liens on the
Acquired Assets;

 

(vii)                           the Acquired
Assets shall be free and clear of all Security Interests and, as of the Fee
Property Closing Date, the Fee Properties shall be free and clear of all Title
Defects (as defined in the Cross Option Agreement) and Security Interests;

 

(viii)                       Buyer shall
have received (A) such other customary certificates (such as certificates
of good standing of Sellers in its or their jurisdictions of incorporation and
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing; and
(B) a title report with regard to each Fee Property representing that each
such Fee Property is free of Security Interests and Title Defects and a
certificate of occupancy with regard to each Store authorizing the use thereof
as a Papa John’s restaurant; and (C) a Bill of Sale and Assignment
conveying title to the Acquired Assets to Buyer; and

 

(ix)                              there shall not
have occurred any change, event or circumstance that, individually or in the
aggregate, is materially adverse to the business, financial condition or
results of operations of the Business as a whole (other than changes, events or
circumstances that are the result of economic factors affecting the local or
national economy as a whole or that are the result of factors generally
affecting the industry in which the Business competes) (a “Business Material
Adverse Effect”).

 

(b)                                  Conditions
to Obligations of Sellers.  The
obligation of Sellers to consummate the transactions to be consummated at the
Closing is subject to the satisfaction (or waiver by Sellers) of the following
conditions:

 

30

 

(i)                                    the
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the Closing Date as if made as
of the Closing Date;

 

(ii)                                Buyer shall
have performed or complied with its agreements and covenants required to be
performed or complied with by it under this Agreement as of or prior to the
Closing Date or the Fee Property Closing Date as applicable;

 

(iii)                            no action, suit
or proceeding shall be pending by or before any Governmental Entity seeking to
prevent consummation of the transactions contemplated by this Agreement and no
judgment, order, writ, stipulation, injunction or decree enjoining or
preventing consummation of the transactions contemplated by this Agreement
shall be in effect;

 

(iv)                               Buyer shall
have delivered to Sellers a certificate to the effect that each of the
conditions specified in clauses (i) through (iii) of this Section 9(b) is
satisfied; and

 

(v)                                   Sellers shall have
received such other customary certificates (such as a certificate of good
standing of Buyer in its jurisdiction of incorporation and certificates as to
the incumbency of officers and the adoption of authorizing resolutions) as it
shall reasonably request in connection with the Closing.

 

10.                               Other
Deliveries and Actions Taken at Closing.

 

(a)                                  Other
Deliveries by Buyer at the Closing. 
In addition to those documents referenced in Section 8, at the
Closing, Buyer shall also deliver to Sellers the following documents and funds
(fully executed where appropriate):

 

(i)                                    Certified
funds or a wire transfer in an amount representing the Closing Date Cash
Payment.

 

31

 

11.                               Indemnification
and Survival of Representations and Warranties.

 

(a)                                  Definitions.                                As
used in this Agreement, the following terms shall have the following meanings:

 

“Event of Indemnification”
shall mean and include:

 

with
respect to Buyer, (i) the breach by Sellers of any of its or their
representations or warranties contained in this Agreement, (ii) the breach
by Sellers of any of its or their representations or warranties contained in
any Ancillary Agreement, (iii) the failure of Sellers to pay, perform and
discharge when due any Excluded Liability, (iv) the non-fulfillment or
breach by Sellers of any of its or their covenants and agreements contained in
this Agreement or in any Ancillary Agreement, or (v) the failure of
Sellers to pay any income, sales, use or other Taxes with respect to the
Business attributable to the operation of the Business prior to the Closing
Date or the Fee Property Closing Date with respect to the Fee Properties (each,
a “Buyer Event of Indemnification”); and

 

with
respect to Sellers, (i) the breach by Buyer of any of its representations
or warranties contained in this Agreement, (ii) the breach by Buyer of any
of its representations or warranties contained in any Ancillary Agreement, (iii) the
failure of Buyer to pay, perform and discharge when due any Assumed Liability, (iv) the
non-fulfillment or breach by Buyer of any of its covenants and agreements contained
in this Agreement or in any Ancillary Agreement or (v) the failure of
Buyer to pay any sales, use or similar Taxes with respect to the Business
attributable to the operation of the Business after the Closing Date or the Fee
Property Closing Date with respect to the Fee Properties purchased, if any,
pursuant to the Cross Option Agreement (each, a “Seller Event of
Indemnification”).

 

“Indemnified Persons
shall mean and include:

 

with
respect to a Buyer Event of Indemnification, Buyer and its Affiliates,
successors and permitted assigns, and the respective officers and directors of
each of the foregoing (collectively, “Buyer Indemnified Persons”); or

 

32

 

with
respect to a Seller Event of Indemnification, each Seller and its and their
respective Affiliates, successors and permitted assigns, and the respective
officers and directors of each of the foregoing (collectively, “Seller
Indemnified Persons”).

 

Indemnifying Persons shall mean and include:

 

with
respect to a Buyer Event of Indemnification, each Seller, jointly and
severally, and each of their respective successors and assigns (the “Seller
Indemnifying Parties”); or

 

with
respect to a Seller Event of Indemnification, Buyer and each of its successors
and assigns (the “Buyer Indemnifying Parties”).

 

“Losses” shall mean
any and all losses, demands, actions or causes of action, suits, proceedings,
investigations, arbitrations, claims, assessments, shortages, damages,
liabilities (contingent or otherwise), payments, obligations, expenses
(including reasonable attorneys’ and accountants’ fees), assessments sustained,
suffered or incurred by any Indemnified Person arising from or in connection
with any such matter that is the subject of indemnification under this Section 11;
provided, that Losses shall not include any special, incidental or
consequential damages or other similar relief (including without limitation,
lost profits).

 

(b)                                  Indemnification
Generally.  Subject to the
limitations provided below, the Indemnifying Persons shall indemnify and hold
harmless the Indemnified Persons from and against any and all Losses with
respect to, arising out of or in connection with any Event of Indemnification.

 

(c)                                  Assertion
of Claims.  No claim shall be
brought under this Section 11 unless the Indemnified Persons, or any of
them, in the case of a misrepresentation or breach of warranty only at any time
prior to the applicable Survival Date (as herein defined), give the appropriate
Indemnifying Persons (a) written notice of the existence of any such
claim, specifying the nature and basis of such claim and the amount thereof, to
the extent known or (b) written notice of any Third Party Claim (as
defined below), the existence of which might give rise to such a claim; provided,
that the failure so to provide either such notice will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons

 

33

 

under this Agreement.  Upon the
giving of such written notice as aforesaid in the case of a misrepresentation
or breach of warranty only, the Indemnified Persons, or any of them, shall have
the right to commence legal proceedings for the enforcement of its or their
rights under this Section 11.

 

(d)                                  Notice
and Defense of Third Party Claims. 
Losses for which indemnification may be sought hereunder resulting from
the assertion of liability by third parties (each, a “Third Party Claim”)
shall be subject to the following terms and conditions:

 

(i)                                    The Indemnified
Persons shall promptly give written notice to the Indemnifying Persons of any
Third Party Claim that might give rise to such Losses by the Indemnified
Persons, stating the nature and basis of such Third Party Claim, and the amount
thereof to the extent known.  Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim.  The Indemnifying
Party shall have 15 business days to respond in writing if it desires to assume
the defense of such claim.  Notwithstanding the foregoing, the failure to
provide notice of a Third Party Claim as aforesaid will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons under this Agreement.

 

(ii)                                In the event
the Indemnifying Party elects to assume the defense of a Third Party Claim, it
shall have the right to prosecute or settle such claim on terms it deems
reasonable so long as such action shall not materially and adversely affect the
business or assets of the Indemnified Party. 
Any settlement shall include a release by the third party claimant(s) of
any and all liability of the Indemnified Party for such claim(s) and shall not include injunctive relief against the
Indemnified Party without its consent. 
The Indemnified Party shall cooperate with the Indemnifying Party in the
contest, defense or settlement of a claim so long as such is being pursued in
good faith.

 

(iii)                            In the event
the Indemnifying Party fails or elects not to assume the defense of a Third
Party Claim, the Indemnified Persons may defend that Third Party Claims with
counsel of their own choosing, at the sole cost and expense of the Indemnifying
Parties, and shall act reasonably and in accordance with their good faith
business judgment in handling such Third Party Claims.

 

34

 

(iv)                               The
Indemnifying Persons, on the one hand, and the Indemnified Persons, on the
other hand, shall make available to each other and their counsel and
accountants all books and records and information relating to any Third Party
Claims, keep each other fully apprised as to the details and progress of all
proceedings relating thereto and render to each other such assistance as may be
reasonably required to ensure the proper and adequate defense of any and all
Third Party Claims.

 

(e)                                  Survival
of Representations and Warranties.  
Subject to the further provisions of this Section 11, the
representations and warranties of Buyer contained in this Agreement and any
Ancillary Agreements and the representations and warranties of Sellers in this
Agreement and any Ancillary Agreements shall be deemed to have been made on the
date of this Agreement and on the Closing Date or the Fee Property Closing
Date, as applicable, and shall survive the Closing for a period of one year
after the Closing Date or the Fee Property Closing Date as applicable; provided
that the representations and warranties in Section 6(a), 6(b), 6(e), 6(l)
and the representations and warranties with respect to title to the Fee Properties
set forth in the Cross Option Agreement and environmental matters set forth in
the Cross Option Agreement shall survive the Closing (or the Fee Property
Closing Date) for the applicable statute of limitations.

 

(f)                                    Characterization
of Payments.  Any payments made
pursuant to this Section 11 shall be treated for all Tax purposes as
adjustments to the Purchase Price and no Party or any of
its Affiliates shall take any position on a Tax Return or in any proceeding
with any taxing authority contrary to such treatment, unless otherwise required
by law.

 

(g)                                 Limitations.  Notwithstanding anything to the contrary
contained in this Agreement or any Ancillary Agreement:

 

(i)                                    no
Buyer or Seller Indemnified Person shall be entitled to assert a claim under
this Section 11 for or in respect of any Buyer or Seller Events of
Indemnification or any Losses associated therewith to the extent such Losses
are recovered by that Buyer or Seller Indemnified Person under any policy of
insurance then in effect:

 

35

 

(A)                               to
the extent such Losses are recovered by that Buyer or Seller Indemnified Person
under any policy of insurance then in effect; or

 

(B)                               until
such time as the aggregate of all Losses that have been incurred by all Buyer
or Seller Indemnified Persons, collectively, on account of all Buyer or Seller
Events of Indemnification has exceeded $25,000 (the “Basket”), and then only to
the extent of the Losses in excess of the Basket; or

 

(C)                               in
excess of $5,000,000 in the aggregate with respect to all such claims
collectively (the “Cap”).

 

(D)                               notwithstanding
paragraphs (B) and (C) above, the Cap shall not apply to any Losses
incurred by a Buyer Indemnified Party arising from or relating to (i) any
Excluded Liability, (ii) a failure by Sellers to pay any Taxes due and
required to be paid by Sellers in accordance with this Agreement, (iii) any
claim for a breach by Sellers’ of any of its or their representations and
warranties in Section 6(l), (iv) any shortages in the amount of Till
Cash or inventory to be in the Stores at Closing, or (v) Sellers’ fraud.

 

(ii)                                the
provisions of this Section 11 shall be the relevant Parties’ sole and
exclusive remedy for a breach or default by any other Party of any of its
respective representations, warranties, covenants or agreements set forth in
this Agreement or any Ancillary Agreement.

 

12.                               Counterparts
and Facsimile Signature.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.  This Agreement may be
executed by facsimile signature.

 

13.                               Notices.  All notices, requests, consents, demands and
other communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been duly given (a) on the
date of personal delivery or (b) three days after the date of deposit in
the United States Mail, postage prepaid, by certified mail, return receipt
requested, or (c) one day after the date of delivery to an internationally
recognized overnight

 

36

 

courier service, in each case addressed as
follows or to such other person or address as either Party shall designate by
notice to the other Parties in accordance herewith:

 

	
  If to Sellers:

  	
  via U.S. Mail

  
	
   

  	
  Papa John’s USA, Inc. or

  
	
   

  	
  Papa John’s International, Inc.

  
	
   

  	
  P.O. Box
  99900

  
	
   

  	
  Louisville,
  KY 40269-0900

  
	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  
	
   

  	
  via Courier

  
	
   

  	
  Papa John’s International, Inc.

  
	
   

  	
  2002 Papa John’s Boulevard

  
	
   

  	
  Louisville, KY 40299

  
	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  
	
  If to Buyer:

  	
  c/o Milestone Capital
  Management I, LLC

  
	
   

  	
  1775 Eye Street, NW

  
	
   

  	
  8th Floor

  
	
   

  	
  Washington, DC 20006

  
	
   

  	
  Attn: Murry N. Gunty

  
	
   

  	
  Facsimile: (202) 367-3001

  
	
   

  	
   

  
	
  With a copy to:

  	
  Patton Boggs LLP

  
	
   

  	
  2550 M Street, NW

  
	
   

  	
  Washington, DC 20037

  
	
   

  	
  Attn: Douglas C. Boggs

  
	
   

  	
  Facsimile: (202) 457-6315

  

 

14.                               Entire
Agreement.  As used herein, the
term “Agreement” shall mean this Assets Purchase Agreement, and the Exhibits
hereto and the Schedules delivered in connection herewith.    This Agreement and the Ancillary Agreements
and the Confidentiality Agreement previously executed by principals of Buyer
embody the entire agreement and understanding of the Parties hereto with
respect to the subject matter herein contained, and supersedes all prior
agreements, correspondence, arrangements and understandings relating to the
subject matter hereof.  No
representation, promise, inducement or statement of intention has been made by
any Party which has not been embodied in this Agreement or in the Ancillary
Agreements, and no Party shall be bound by or be liable for any alleged
representation, promise, inducement or

 

37

 

statement of intention not so set forth.  This Agreement may be amended, modified,
superseded, or canceled only by a written instrument signed by all of the
Parties hereto, and any of the terms, provisions, and conditions hereof may be
waived, only by a written instrument signed by the waiving Party.  Failure of any Party at any time or times to
require performance of any provision hereof shall not be considered to be a
waiver of any succeeding breach of such provision by any Party.

 

15.                               Captions.  The captions in this Agreement are included for
purposes of convenience only and shall not be considered a part of the
Agreement in construing or interpreting any provision hereof.

 

16.                               Expenses.  The Parties hereto shall each bear their own
costs and expenses incurred in connection with the transactions described
herein, including, without limitation, the fees and expenses of their legal
counsel and accountants, and no such fees or expenses shall be charged to or
paid on behalf of any Party hereto. Provided however, each Party shall equally
share the cost of title insurance issued for the Fee Properties in connection
with the transactions contemplated by the Cross Option Agreement.

 

17.                               Exhibits;
Schedules.  All Exhibits
(including the representations and warranties contained in the Cross Option
Agreement) and the Schedules to this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set out in full
herein.

 

18.                               Severability
of Provisions.  If any provision
of this Agreement or the application thereof to any person or circumstance
shall to any extent be held in any proceeding to be invalid or unenforceable,
the remainder of this Agreement, or the application of such provision to
persons or circumstances other than those to which it was held to be invalid or
unenforceable, shall not be affected thereby, and shall be valid and be
enforceable to the fullest extent permitted by law, but only if and to the
extent such enforcement would not materially and adversely frustrate the
Parties’ essential objectives as expressed herein.

 

38

 

19.                               Number;
Gender.  Unless the context
clearly states otherwise, the use of the singular or plural in this Agreement
shall include the other and the use of any gender shall include all others.

 

20.                               Governing
Law; Venue.  This Agreement shall
be governed by, and shall be construed and enforced in accordance with, the
laws of the Commonwealth of Kentucky, without giving effect to Kentucky’s
conflicts of laws principles.  The proper
venue for all matters litigated under this Agreement shall be in the courts of
Jefferson County, Kentucky.

 

21.                               Binding
Effect.  Neither Buyer nor
Sellers may assign their respective rights or obligations under this Agreement
without the prior written consent of the other Party.  Notwithstanding the foregoing, Sellers
acknowledge and agree that Buyer may assign its rights to purchase the Acquired
Assets and its obligations under this Agreement to one or more majority owned
subsidiaries of Buyer or any of its Affiliates or to any lender as security for
borrowings pursuant to a written agreement. Upon any such permitted assignment,
the references in this Agreement to Buyer shall also apply to any such assignee
unless the context otherwise requires. 
Any such assignment shall not release Buyer from its obligations under
this Agreement or the Ancillary Agreements. 
All of the terms, provisions and conditions of this Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the
Parties hereto, and their respective heirs, personal representatives,
successors and permitted assigns.

 

22.                               Access to Information.  From and after the Closing, Buyer shall
afford Sellers reasonable access to all books and records, at reasonable times
and on reasonable notice, relating to the Acquired Assets as shall be necessary
for Sellers’ preparation of any Federal, State or local tax returns relevant to
the Business for any periods prior to the Closing.

 

 

(SIGNATURES ON
FOLLOWING PAGE)

 

39

 

IN
WITNESS WHEREOF, the Parties hereto have duly executed
this Agreement as of the date first written above, but actually on the dates
set forth below their respective signatures.

 

	
   

  	
  PJUSA:

  	
  PAPA JOHN’S USA, INC.

  
	
   

  	
   

  	
  (Federal EIN 61-1193912)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael R. Cortino

  	
   

  
	
   

  	
   

  	
   

  	
  Michael R. Cortino

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Operations

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Papa John’s:

  	
  PAPA JOHN’S
  INTERNATIONAL, INC.

  
	
   

  	
   

  	
  (Federal EIN 61-1203323)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ J. David Flanery

  	
   

  
	
   

  	
   

  	
   

  	
  J. David Flanery

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Buyer:

  	
  PJCOMN ACQUISITION
  CORPORATION

  
	
   

  	
   

  	
  (Federal EIN 20-3223709)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Murry N. Gunty

  	
   

  
	
   

  	
   

  	
   

  	
  Murry N. Gunty

  
	
   

  	
   

  	
  Title:

  	
  Chairman of the Board

  

 

40

 

ASSETS
PURCHASE AGREEMENT

 

EXHIBITS

 

	
  Exhibit

  	
   

  	
  Description

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  Stores
  (including phone numbers)

  
	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  Fee Properties

  
	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  Contingent
  Store Agreement

  
	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  Bill of Sale and Assignment

  
	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  Form of Assignment, Consent and
  Estoppel

  
	
   

  	
   

  	
   

  
	
  F

  	
   

  	
  Form of Development Agreement

  
	
   

  	
   

  	
   

  
	
  G

  	
   

  	
  Form of Franchise Agreement

  
	
   

  	
   

  	
   

  
	
  H

  	
   

  	
  Accounting
  Services Agreement

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Cross Option Agreement

  
	
   

  	
   

  	
   

  
	
  J

  	
   

  	
  Assignment and Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  K

  	
   

  	
  Letter Agreement

  

 

41

 

The schedules referenced in
this document and the exhibits listed on the previous page were omitted
from this filing. The material terms of the agreement are included within the
document filed.Exhibit 10.01

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made and entered into as of the 28th
day of October, 2005, by and between NEOPHARM, INC., a Delaware corporation
(the “Company”) and GUILLERMO A. HERRERA (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ Executive and
Executive desires to accept such employment, upon the terms and conditions
hereinafter set forth;

 

NOW, THEREFORE, in consideration of the covenants
and mutual agreements set forth herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto do hereby agree as follows:

 

1.             Employment.  Throughout the Term (as
defined in Section 2 below), the Company shall employ Executive as
provided herein, and Executive hereby accepts such employment.  In accepting such employment, Executive
states that, to the best of his knowledge, (i) he is not now, and by
accepting such employment, will not be, under any restrictions in the
performance of the duties contemplated under this Agreement as a result of the
provisions of any prior employment agreement or non-compete or similar
agreement to which Executive is or was a party; and (ii) he will not make
use of or reveal to anyone employed by or affiliated with the Company any information
that is of a confidential or proprietary nature which he has obtained or which
has been disclosed to him as a result of his position with any entity with
which he has been previously employed or affiliated.

 

2.             Term of Employment.  The
term of Executive’s employment by the Company hereunder shall commence on
October 28, 2005, or such earlier or later date as Executive and the Company
may mutually agree (the “Effective Date”) and shall continue thereafter unless
sooner terminated as a result of Executive’s death or in accordance with the
provisions of Section 7 below (the “Term”).

 

3.             Duties.  Throughout the Term, and
except as otherwise expressly provided herein, Executive shall be employed by
the Company as the President and Chief Executive Officer (“CEO”) of the
Company.  In such capacity, Executive
shall devote his full time to the performance of his duties as President and
CEO of the Company in accordance with the Company’s By-laws, this Agreement and
the directions of the Company’s Board of Directors.  In addition, the Company shall promptly
appoint Executive to the Board and thereafter nominate Executive as a nominee
for election to the Board and solicit proxies for his election for so long as
this Agreement is in effect.  Without
limiting the generality of the foregoing, throughout the Term, Executive shall
use his best efforts to faithfully perform his duties as President and CEO at
all times so as to promote the best interests of the Company.  Notwithstanding the foregoing, Executive may
engage in charitable, civic or community activities and, with the prior
approval of the Board, may serve as a director of other business corporations,
provided that such activities or service do not interfere with Executive’s
duties hereunder or violate the terms of any other covenants contained in
Sections 9 and 10 hereof.

 

 

4.             Compensation.

 

(a)           Base Salary.  For any and all services
performed by Executive under this Agreement during the Term, in whatever
capacity, the Company shall pay to Executive an annual salary of Four Hundred
Twenty-Five Thousand Dollars ($425,000) per year (the “Base Salary”), less any
and all applicable federal, state and local payroll and withholding taxes.  The Base Salary shall be paid in the same
increments as the Company’s normal payroll, but no less frequent than monthly
and prorated, however, for any period of less than a full month.  The Salary will be reviewed annually by the
Compensation Committee of the Board of Directors and a determination shall be
made at that time as to the appropriateness of an increase, if any, thereto.

 

(b)           Stock Grant.  Upon execution of this
Agreement by Executive and the Company, the Company will grant to Executive.
pursuant to the Company’s 1998 Equity Incentive Plan, that number of shares of
the Company’s common stock as shall equal, based on the closing price of the
common stock as reported by Nasdaq on the date of this Agreement, Two Hundred
Thousand Dollars ($200,000.00) adjusted, as necessary, to reflect the nearest
whole share (the “Stock Grant”).

 

(c)           Bonus.  In addition to the Base
Salary, Executive shall be eligible to receive from the Company an annual
incentive compensation bonus (the “Bonus”) based on a percentage of his Base
Salary.  The Bonus, if any, shall be
determined based on the achievement by the Company of certain specific
strategic plans and goals (the “Performance Goals”) during the preceding
calendar year (the “Measurement Period”) as shall be determined by the Board in
consultation with Executive.  The
Performance Goals for each Measurement Period, beginning with the 2006
Measurement Period, shall be established as promptly as possible in each such
Measurement Period, with the expectation that the Performance Goals be in place
each year prior to distribution of the Company’s annual proxy materials.  Following each Measurement Period, the
Compensation Committee of the Board shall review the Performance Goals for the
prior Measurement Period in light of the Company’s actual performance during
such Measurement Period as reflected on the Company’s audited financial
statements.  Achievement of various
levels of the Performance Goals shall result in the following payments as a
percentage of Salary:

 

	
  Level of Achievement

  	
   

  	
  Bonus as Percent of Salary

  	
   

  
	
  Below Target

  	
   

  	
  0%

  	
   

  
	
  Target Goal

  	
   

  	
  50%

  	
   

  
	
  Overachievement Goal

  	
   

  	
  50-100%

  	
   

  

 

Payment of each year’s Bonus, if any, shall be made within thirty (30)
days after the Company’s performance for the Measurement Period is established
on the basis of the Company’s audited financial statements.  In addition, and at its sole discretion, the
Board may award additional compensation to Executive based on Executive’s
contributions to the Company.  For the
2005 Measurement Period, a Bonus, if any, shall be at the discretion of the
Board of Directors and shall be

 

 

based upon such criteria as the Compensation Committee of the Board
shall deem reasonable.

 

5.             Benefits and Other Rights.  In
consideration for Executive’s performance under this Agreement, the Company
shall provide to Executive the following benefits:

 

(a)           The Company will provide Executive with cash advances for or
reimbursement of all reasonable out-of-pocket business expenses incurred by
Executive in connection with his employment hereunder; provided, however,
Executive adheres to any and all reasonable policies established by the Company
from time to time with respect to such reimbursements or advances, including,
but not limited to, a requirement that Executive submit supporting evidence of
any such expenses to the Company.

 

(b)           The Company will provide Executive with a monthly car allowance in the
amount of One Thousand Dollars ($1,000.00) subject to standard payroll
withholding for taxes.

 

(c)           The Company will provide Executive with disability coverage on the same
basis as is provided to its other senior executives.

 

(d)           The Company will provide Executive and his family with the opportunity
to receive group medical coverage under the terms of the Company’s health
insurance plan, but subject to completion of normal waiting periods.  During any such waiting period, the Company
will pay, or reimburse Executive for, the cost of COBRA coverage for Executive
and his family under his prior health plan.

 

(e)           During the Term Executive shall be entitled to four (4) weeks paid
vacation, it being understood and agreed that unused vacation shall not be
carried over from one year to the next.

 

(f)            During the Term Executive shall be eligible
to participate in the Company’s 401(k) program and life insurance programs, if
any, subject to satisfying any eligibility requirements for said benefits.

 

6.             Options.

 

(a)           The Company shall grant to Executive options pursuant to the Company’s
1998 Equity Incentive Plan (the “Option Plan”), as amended, to purchase 500,000
shares of the Company’s common stock (the “Options”) at an option exercise
price equal to the Fair Market Value (as determined under the Option Plan) of
the Company’s common stock as of the Effective Date, which date shall be the
date of grant of the Options for purposes of the Option Plan (the “Date of
Grant”).  The Options shall vest in equal
installments of 125,000 Options per year on each of the first four
anniversaries of the Date of Grant.  The
Options shall not be exercisable subsequent to the date ten (10) years
after the Date of Grant. In all other respects the Initial Options shall be
governed by the terms and conditions of the Option Plan.

 

3

 

7.             Termination of the Term.

 

(a)           The Company shall have the right to terminate the Term under the
following circumstances:

 

(i)            Executive shall die or suffer a Disability,
as herein defined;

 

(ii)           With or without Cause, as herein defined,
effective upon written notice to Executive by the Company; or,

 

(iii)          Upon or within one (1) year following a
Change of Control, as herein defined, effective upon written notice to
Executive from the Company.

 

(b)           Executive shall have the
right to terminate the Term under the following circumstances:

 

(i)            At any time upon thirty (30) days prior
written notice to the Company; or

 

(ii)           For Good Reason, as herein defined, upon or within one (1) year
following a Change of Control.

 

(c)           For purposes of this Agreement, “Cause” shall mean:

 

(i)            Executive shall be indicted for or convicted
of the commission of a felony or a crime involving dishonesty, fraud or moral
turpitude;

 

(ii)           Executive has engaged in acts of fraud, misappropriation, embezzlement,
theft or other dishonest acts with respect to the Company or any affiliate of
the Company;

 

(iii)          Executive violates the Company’s Code of Business Conduct and Ethics or
any statutory or common law duty of loyalty to the Company or its subsidiaries,
which violation is willful and deliberate on Executive’s part;

 

(iv)          Executive’s gross neglect or willful misconduct in the discharge of his
duties and responsibilities;

 

(v)           Executive’s failure to follow the lawful direction of the Board of
Directors or supervising officers which failure continues for five (5) business
days after written notice of the failure has been given to Executive by the Company;
or

 

(vi)          Executive’s material breach of any restrictive covenant set forth in Section 9
or Section 10 of this Agreement.

 

(d)           For purposes of this Agreement, “Change of Control” shall mean the
occurrence of any of the following:

 

4

 

(i)            The acquisition (other than by a direct
purchase of shares from the Company) by any “person,” including a “syndication”
or “group”, as those terms are used in Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (other than by any such person
currently owning in excess of 20% of the type of securities hereafter
described), of securities representing 50% or more of the combined voting power
of the Company’s then outstanding voting securities, which is any security that
ordinarily possesses the power to vote in the election of the Board of
Directors of a corporation without the happening of any precondition or
contingency;

 

(ii)           The Company is merged or consolidated with another corporation and immediately
after giving effect to the merger or consolidation less than 50% of the
outstanding voting securities of the surviving or resulting entity are then
beneficially owned in the aggregate by (x) the stockholders of the Company
immediately prior to such merger or consolidation, or (y) if a record date has
been set to determinate the stockholders of the Company entitled to vote on
such merger or consolidation, the stockholders of the Company as of such record
date;

 

(iii)          If at any time during a calendar year a majority of the directors of
the Company are not persons who were directors at the beginning of the calendar
year or are not persons who were nominated or approved for election by a
majority of directors who were directors at the beginning of the year (or are
deemed to have been in office as of such date through the prior operation of
this provision); or

 

(iv)          The Company transfers substantially all of its assets to another
corporation which is a less than 80% owned subsidiary of the Company.

 

(e)           For purposes of this Agreement, “Good Reason” shall mean the occurrence
of any one or more of the following events which continues uncured for a period
of not less than thirty (30) days following written notice given by Executive
to the Company within fifteen (15) days following the occurrence of such event,
unless Executive specifically agrees in writing that such event shall not be
Good Reason:

 

(i)            Any material breach of this Agreement by the
Company;

 

(ii)           Any failure to continue Executive as an executive officer of the
Company;

 

(iii)          The requirement by the Company that Executive perform his services
hereunder primarily at a location outside of the metropolitan Chicago, Illinois
area; or

 

(iv)          The reduction of the Employee’s Base Salary below the amount set forth
in Section 4(a) above without the written consent of Executive.

 

5

 

(f)            For purposes of this Agreement, “Disability”
shall mean (i) Executive becomes eligible for full benefits under a
long-term disability policy provided by the Company or (ii) Executive has
been unable, due to physical or mental illness or incapacity, as verified by a
licensed physician selected by the Company, to substantially perform the
essential duties of his employment for a continuous period of ninety (90) days
or an aggregate of one-hundred eighty (180) days during any consecutive twelve
(12)-month period.

 

8.             Effect of Expiration or Termination of the
Term.  Promptly following the termination of the
Term, and except as otherwise expressly agreed to in writing by the Company,
Executive shall:

 

(a)           Immediately resign, effective as of the date of termination, from any
and all other positions or committees which Executive holds or is a member of
with the Company or any subsidiary of the Company, including, but not limited
to, as an officer and director of the Company or any subsidiary of the
Company.  Executive hereby agrees to
execute any and all reasonable documentation evidencing such resignation upon
request and at the sole expense of the Company, but he shall be treated for all
purposes as having so resigned upon termination of his employment regardless of
when or whether he executes any such documentation.

 

(b)           Provide the Company with all reasonable assistance necessary to permit
the Company to continue its business operations without interruption and in a
manner consistent with reasonable business practices; provided, however, that
such transition period shall not exceed thirty (30) days after termination nor
require more than twenty (20) hours of Executive’s time per week and Executive
shall be promptly reimbursed for all out-of-pocket expenses.

 

(c)           Deliver to the Company possession of any and all property owned or
leased by the Company which may then be in Executive’s possession or under his
control, including, without limitation, any and all such keys, credit cards,
automobiles, equipment, supplies, books, records, files, computer equipment,
computer software and other such tangible and intangible property of any
description whatsoever.  If, following
the expiration or termination of the Term, Executive shall receive any mail
addressed to the Company, then Executive shall immediately deliver such mail,
unopened and in its original envelope or package, to the Company.

 

(d)           Other than as specifically provided in this Section 8, upon a
termination of employment all other benefits and/or entitlements to participate
in programs or benefits, if any, will cease as of the effective date of such
termination.

 

(e)           Upon termination of Executive pursuant to § 7(a)(ii),
without Cause, following the six (6) month anniversary of the Effective
Date, the Company shall provide Executive with Base Salary continuance, subject
to § 8(h), for twelve (12) months (a “Salary Continuance”) at the rate in
effect immediately prior to termination.

 

6

 

(f)            Upon termination of Executive pursuant to § 7(a)(i),
§ 7(a)(ii) with Cause or § 7(b)(i), the Company shall pay
Executive or Executive’s estate all Base Salary accrued, but unpaid, as of the
date of such termination.

 

(g)           Upon termination of Executive pursuant to
§7(a)(iii) or § 7(b)(ii), the Company shall:  (i) provide Executive with Salary
Continuance for twelve (12) months at the rate in effect immediately prior to
termination, plus (ii) a lump sum payment equal to one hundred percent
(100%) of the Bonus, if any, paid to Executive for the calendar year
immediately preceding such termination, plus (iii) all of Executive’s then
unvested options, if any, previously issued pursuant to the Option Plan shall
immediately vest and be exercisable as provided in the Option Plan.

 

(h)           In the event that Executive shall be entitled
to receive a Salary Continuance pursuant to § 8(e), such Salary
Continuance shall continue only while Executive is in compliance with the
covenants set forth in Sections 9 and 10 of this Agreement and only until such
time as Executive shall have accepted another full-time position.  In addition, in the event that Executive
shall perform consulting or other services during the period he is receiving
any Salary Continuance for which he shall receive compensation, all
compensation shall be reported to the Company and shall be offset against any
remaining Salary Continuance payments. 
Failure of Executive to observe the provisions of Sections 9 and 10 of
this Agreement or to promptly report the receipt of any compensation from a
third party or the acceptance of a new position shall entitle the Company to
terminate all remaining Salary Continuance and to seek restitution for any
payments made to Executive subsequent to such breach, job acceptance or
compensation receipt.

 

(i)            Any Salary Continuance payments shall be made
in accordance with the usual payroll practices which were applicable prior to
termination. Except as otherwise specifically set forth herein, any and all
payments made pursuant to this Agreement shall be net of any and all applicable
federal, state and local payroll and withholding taxes.

 

(j)            If the Company or the Company’s accountants determine
that the payments called for under Section 8(g) of this Agreement
either alone or in conjunction with any other payments or benefits made
available to Executive by the Company will result in Executive being subject to
an excise tax (“Excise Tax”) under Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”), or if an Excise Tax is assessed against
Executive as a result of such payments or other benefits, the Company shall
make a Gross-Up Payment (as defined below) to or on behalf of Executive as and
when such determination(s) and assessments(s), as appropriate, are made,
subject to the conditions of this subsection (j).  A “Gross-Up Payment” shall mean a payment to
or on behalf of Executive that shall be sufficient to pay (i) any Excise
Tax in full, (ii) any federal, state and local income tax and Social
Security or other employment tax on the payment made to pay such Excise Tax as
well as any additional Excise Tax on the Gross-Up Payment, and (iii) any
interest or penalties assessed by the Internal Revenue Service on Executive if
such interest or penalties are attributable to the Company’s failure to comply
with its obligations under this subsection (j) or applicable law.  Any determination under this subsection (j)
by the Company or the Company’s

 

7

 

accountants shall be made in accordance with Section 280G
of the Code, any applicable related regulations (whether proposed, temporary or
final), any related Internal Revenue Service rulings and any related case law,
and shall assume that Executive shall pay Federal income taxes at the highest
marginal rate in effect for the year in which the Gross-Up Payment is made and
state and local income taxes at the highest marginal rate in effect in the
state of Executive’s residence for such year. 
Executive shall take such action (other than waiving Executive’s right
to any payments or benefits) as the Company reasonably requests under the
circumstances to mitigate or challenge such tax.  If the Company reasonably requests that
Executive take action to mitigate or challenge, or to mitigate and challenge,
any such tax or assessment and Executive complies with such request, the
Company shall provide Executive with such information and such expert advice
and assistance from the Company’s accountants, lawyers and other advisors as
Executive may reasonably request and shall pay for all expenses incurred in
effecting such compliance and any related fines, penalties, interest and other
assessments.  Subject to the provisions
of this subsection (j), all determinations required to be made under this
subsection (j), including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made, after receiving the prior
approval of the Audit Committee of the Board of Directors, by the public
accounting firm that is retained by the Company as of the date immediately
prior to the Change of Control (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and Executive within
thirty (30) business days of receipt of notice from the Company or Executive
that there has been a payment that could trigger a Gross-Up Payment, or such
earlier time as is requested by the Company (collectively the “Determination”).  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, or in the event that the Audit Committee of the Board of
Directors shall not approve of the accountants’ performing such services,
Executive may appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). 
All fees and expenses of the Accounting Firm shall be borne solely by
the Company and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services
hereunder.  The Gross-Up Payment under
this subsection (j) with respect to any payments shall be made no later
than sixty (60) days following such payments. 
If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect,
and to the effect that failure to report the Excise Tax, if any, on Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty.  The
Determination by the Accounting Firm shall be binding upon the Company and
Executive.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that the Gross-Up Payments which will not
have been made by the Company should have been made (“Underpayment”) or
Gross-Up Payments are made by the Company which should not have been made (“Overpayment”),
consistent with the calculations required to be made hereunder.  In the event that Executive thereafter is
required

 

8

 

to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of Executive. 
In the event the amount of the Gross-Up Payment exceeds the amount
necessary to reimburse Executive for his Excise Tax as herein set forth, the
Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of
the Code) shall be promptly paid by Executive to or for the benefit of the
Company.  Executive shall cooperate, to
the extent Executive’s expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.

 

9.             Restrictive Covenants for Executive. 
Executive hereby covenants and agrees with the Company that for so long
as Executive is employed by the Company and for a period (the “Restricted
Period”) of twelve (12) months after the termination of such employment for any
reason, Executive shall not, without the prior written consent of the Company,
which consent shall be within the sole and exclusive discretion of the Company,
but which consent shall not be unreasonably withheld, either directly or indirectly,
on his own account or as an executive, consultant, agent, partner, joint
venturer, owner, officer, director or shareholder of any other person, firm,
corporation, partnership, limited liability company or other entity:

 

(a)           Perform services for the Competing Business, as hereinafter defined,
that are substantially similar in whole or in part to those that he performed
for the Company in his role as President and CEO, including specifically, but
not limited to, the research, development, sale or marketing of drug or
non-drug products or the management of individuals involved in the research,
development, sale or marketing of drug or non-drug products.  For purposes of this covenant, the term “Competing
Business” shall mean any entity engaged in the research, development, marketing
or sale of drug and nondrug products which are competitive with:  (1) those products being marketed by the
Company at the time of Executive’s termination; or (2) those products that
Executive was aware were under research and development by the Company and
expected to be marketed within four years of Executive’s termination.  This covenant shall apply only within the “Territory”
which is defined as the fifty states of the United States.  Executive recognizes and agrees that in
capacity of President and CEO, his duties extend throughout the entire service
area of the Company which includes, at a minimum, the Territory and that,
because of the executive nature of Executive’s position with the Company, in
order to afford the Company protection from unfair competition by Executive
following his termination of employment, this covenant must extend throughout
the stated Territory.  Executive further
acknowledges that this covenant does not prohibit him from engaging in his
entire trade or business but only a very limited segment of the pharmaceuticals
industry;

 

(b)           Solicit any current supplier, customer, employee, or client of the
Company with whom Executive dealt, or with whom anyone in Executive’s direct
chain of

 

9

 

command dealt, on behalf of the Company within the year preceding
Executive’s termination of employment, for the purpose of researching,
developing or purchasing, selling or marketing drug or non-drug products, which
are competitive with:  (1) those
products being marketed by the Company at the time of Executive’s termination;
or (2) those products that Executive was aware were under development by
the Company and expected to be marketed within four years of Executive’s termination;

 

(c)           All ideas, inventions, trademarks, and other developments or
improvements conceived or developed by Executive, alone or with others, during
the term of this Agreement, whether or not during working hours that are within
the scope of the Company’s business operations, or that relate to any Company
work or projects, shall be conclusively presumed to have been created for or on
behalf of the Company as part of Executive’s services to the Company (“Development”).  Executive shall disclose promptly to Company
any and all such Developments.  Such
Developments are the exclusive property of the Company without the payment of
consideration therefore, and Executive hereby transfers, assigns and conveys
all of Executive’s right, title and interest in any such Developments to the
Company and agrees to execute and deliver any documents that the Company deems
necessary to effect such transfer on the demand of the Company.  Executive agrees to assist the Company, at its
expense, to obtain patents on any such patentable Developments, and agrees to
execute all documents necessary to obtain such patents in the name of the
Company.  This Agreement does not apply
to any invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on
Executive’s own time unless:  (1) the
invention relates (a) to the business of the Company or (b) to the
Company’s actual demonstratively anticipated research and development, or (2) the
invention results from any work performed by Executive for the Company.

 

(d)           Executive recognizes and understands that Executive’s duties at the
Company may include the preparation of materials, including written or graphic
materials and other Developments, and that any such materials conceived or
written by Executive shall be deemed a “work made for hire” as defined and used
in the Federal Copyright Act, 17 U.S.C. § 101.  In the event of publication of such
materials, Executive understands that since such work is “work made for hire,”
the Company shall solely retain and own all rights in such materials, including
any right of copyright.

 

(e)           Executive, during the Term and at all times thereafter, shall not (i) make
any public derogatory comment concerning the Company or its affiliates or
anyone whom Executive knows to be a current or former director, officer, or
employee of the Company or (ii) publish or produce any information or
write any book, article, screenplay, teleplay or similar type of publication
relating to the Company or its affiliates or anyone whom Executive knows to be
a current or former director, officer, or employee.

 

10

 

(f)            If any restrictions on competition or other
activities contained in this Section 9 shall for any reason be held by a
court of competent jurisdiction to be excessively broad as to duration,
geographical scope, activity or subject, such restrictions shall be construed
so as thereafter to be limited or reduced to be enforceable to the extent compatible
with the applicable law; it being understood that by the execution of this
Agreement, (i) the parties hereto regard the current restrictions as
reasonable and compatible with their respective rights and (ii) Executive
acknowledges and agrees that the restrictions will not prevent him from
obtaining gainful employment subsequent to the termination of his employment.

 

10.           Confidentiality. 
Executive acknowledges that during the period of his employment by the
Company, and in his performance of services hereunder, he will be placed in a
relationship of trust and confidence regarding the Company and its
affairs.  In the course of and due to
that relationship he will have contact with the Company’s customers, suppliers,
affiliates, and distributors and their personnel.  In the course of the aforesaid relationship,
he will have access to and will acquire confidential information relating to
the business and operations of the Company, including, without limitation,
information relating to processes, plans and methods of operation of the
Company.  Executive acknowledges that any
such information that is not a trade secret, nonetheless constitutes
confidential information as between himself and the Company, that the disclosure
thereof (or of any information which he knows relates to confidential, trade,
or other secret aspects of the Company’s business) would cause substantial loss
to the goodwill of the Company, and will continue to be made known to Executive
only because of the position of trust and confidence which he will continue to
occupy hereunder.  In view of the
foregoing, and in consideration of the covenants and premises of this
Agreement, Executive agrees that he will not, at any time during the term of
his employment, and for a period of twelve (12) months thereafter, disclose to
any person, firm or company any trade secrets or confidential information or
such ideas which he may have acquired or developed or may acquire or develop
relating to the business of the Company while serving the Company as an executive.

 

11.           Remedies.

 

(a)           The covenants of Executive set forth in Sections 9 and 10 are separate
and independent covenants for which valuable consideration has been paid, the
receipt, adequacy and sufficiency of which are acknowledged by Executive, and
have also been made by Executive to induce the Company to enter into this
Agreement.  Each of the aforesaid
covenants may be availed of, or relied upon, by the Company in any court of
competent jurisdiction, and shall form the basis of injunctive relief and
damages including expenses of litigation (including, but not limited to,
reasonable attorney’s fees upon trial and appeal) suffered by the Company
arising out of any breach of the aforesaid covenants by Executive.  The covenants of Executive set forth in this
Agreement are cumulative to each other and to all other covenants of Executive
in favor of the Company contained in this Agreement and shall survive the
termination of this Agreement for the purposes intended.

 

11

 

(b)           Each of the covenants contained in Sections 9 and 10 above shall be
construed as agreements which are independent of any other provision of this
Agreement, and the existence of any claim or cause of action by any party
hereto against any other party hereto, of whatever nature, shall not constitute
a defense to the enforcement of such covenants. 
If any of such covenants shall be deemed unenforceable by virtue of its
scope in terms of geographical area, length of time or otherwise, but may be
made enforceable by the imposition of limitations thereon, Executive agrees
that the same shall be enforceable to the fullest extent permissible under the
laws and public policies of the jurisdiction in which enforcement is sought.  The parties hereto hereby authorize any court
of competent jurisdiction to modify or reduce the scope of such covenants to
the extent necessary to make such covenants enforceable.

 

(c)           In the event that Executive believes that the Company is in violation
of a material obligation owed to Executive under this Agreement, and Executive
has given notice of such violation to the Company requesting that the Company
cure such violation, and within twenty (20) business days the Company has not
undertaken steps to cure such violation or to provide information to Executive
demonstrating that the Company is not in violation of the Agreement, and as a
result of such failure to cure or dispute such violation, Executive terminates
the Agreement in accordance with Section 7(b), Executive shall not be
barred from seeking employment with a competitor notwithstanding the
restriction of Section 9(a); provided, however, that all other
restrictions contained in this Agreement, including, but not limited to, the
other covenants in Section 9 and in Section 10, shall remain in full
force and effect.

 

12.           Enforcement Costs.  If
any legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorney’s fees, court costs and all expenses even if not taxable as
court costs (including, without limitation, all such fees, costs and expenses
incident to appeal and other post-judgment proceedings), incurred in that
action or proceeding, in addition to any other relief to which such party or
parties may be entitled.  Attorney’s fees
shall include, without limitation, paralegal fees, investigative fees,
administrative costs, sales and use taxes and all other charges billed by the
attorney to the prevailing party.

 

13.           Indemnification.  The
Company covenants and agrees that, to the extent permitted by applicable law,
it will indemnify and hold Executive harmless from any and all liability, loss,
damage, cost and expense (including reasonable attorneys’ fees) which Executive
may incur, suffer or be required to pay and which result from or arise in
connection with any act by the Company, or on the Company’s behalf by any of
the Company’s officers, directors, employees, consultants, representatives or
agents, which act occurred prior to the Effective Date and in which Executive
did not, directly or indirectly, participate.

 

14.           Notices.  Any and all notices necessary
or desirable to be served hereunder shall be in writing and shall be

 

12

 

(a)           personally delivered, or

 

(b)           sent by certified mail, postage prepaid, return receipt requested, or
guaranteed overnight delivery by a nationally recognized express delivery
company, in each case addressed to the intended recipient at the address set
forth below.

 

(c)           For notices sent to the Company:

 

NeoPharm, Inc.

150 Field Drive, Suite 195

Lake Forest, Illinois 60045

Attention: 
Office of the Secretary

Telephone No.: (847) 295-8678

Facsimile No.: (847) 295-8654

 

(d)           For notices sent to Executive:

At the most recent address on file with the Company

 

Either party hereto may amend the addresses for notices to such party
hereunder by delivery of a written notice thereof served upon the other party
hereto as provided herein.  Any notice
sent by certified mail as provided above shall be deemed delivered on the third
(3rd) business day next following the postmark date which it bears.

 

15.           Entire Agreement.  This
Agreement sets forth the entire agreement of the parties hereto with respect to
the subject matter hereof, and all prior negotiations, agreements and
understandings are merged herein.  This
Agreement may not be modified or revised except pursuant to a written
instrument signed by the party against whom enforcement is sought.

 

16.           Severability.  The
invalidity or unenforceability of any provision hereof shall not affect the
enforceability of any other provision hereof, and except as otherwise provided
in Section 11 above, any such invalid or unenforceable provision shall be
severed from this Agreement.

 

17.           Waiver. Failure to insist upon strict compliance with any of the terms or
conditions hereof shall not be deemed a waiver or such term or condition, and
the waiver or relinquishment of any right or remedy hereunder at any one or
more times shall not be deemed a waiver or relinquishment of such right or
remedy at any other time or times.

 

18.           Governing Law.  This
Agreement and the rights and obligations of the parties hereto shall be
governed by and construed in accordance with the laws of the State of Illinois,
without regard to its conflicts of laws provisions.  Each party hereto hereby (a) agrees that
any litigation which may be initiated with respect to this Agreement or to
enforce rights granted hereunder shall be initiated in a court located in Cook
County, Illinois and (b) consents to personal jurisdiction of such courts
for such purpose.

 

13

 

19.           Benefit and Assignability. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns.  The rights and obligations of Executive
hereunder are personal to him, and are not subject to voluntary or involuntary
alienation, transfer, delegation or assignment.

 

[SIGNATURE PAGE FOLLOWS]

 

14

 

IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as
of the day and year first above written.

 

	
   

  	
  NEOPHARM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank C. Becker

  	
   

  
	
   

  	
  Its:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Guillermo A. Herrera

  	
   

  
	
   

  	
  GUILLERMO A. HERRERA

  
					

 

15

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