ACQUISITION AGREEMENT
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THIS ACQUISITION AGREEMENT (the "Agreement") is made this 29th day of March
1999, by and among (i) all the members of the Minnesota Pizza Company LLC, a
Delaware limited liability company ("MPC"), as listed on the signature page
hereto (the "Members"), (ii) PAPA JOHN'S USA, INC., a Kentucky corporation
(Acquiror"), and (iii) PAPA JOHN'S INTERNATIONAL, INC., a Delaware CORPORATION
("Papa John's").
RECITALS:
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A. MPC is engaged in the operation of 37 traditional John's Pizza outlets,
one non-traditional outlet and a mobile kitchen located in the Minneapolis
metropolitan area (the "Outlets").
B. MPC, the Members and Acquiror are parties to that certain Put/Call
Agreement dated September 26, 1995 (the "Put Agreement"). MPC, the Members and
Acquiror have agreed to terminate the Put Agreement.
C. The Members and Acquiror desire to combine their ownership interests in
Acquiror and MPC. The Members and Acquiror desire the transaction to qualify
for the pooling-of-interests method of accounting.
D. Papa John's is the parent company of Acquiror.
AGREEMENT:
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. EXCHANGE OF INTERESTS. Upon the terms and subject to the conditions
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set forth herein, all of the Members hereby agree to transfer, convey, assign
and deliver to Acquiror, and Acquiror hereby agrees to acquire from the Members,
all of the ownership interests of MPC (the "Acquired Interests") in exchange for
ownership interests in Papa John's, as follows:
(a) VALUATION OF OWNERSHIP INTERESTS. Subject to subsection 1(b), Papa
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John's agrees to deliver to the Members on the Closing Date (as defined in
Section 2) in exchange for the Acquired Interests that number of shares of Papa
John's Common Stock, par value, $.01 per share (the "Common Stock"), having an
aggregate value equal to the "Preliminary Ownership Value" (the "Shares"). For
purposes of this calculation, the Preliminary Ownership Value is defined as
$17,526,000 minus the "Preliminary Net Liabilities" of MPC. The Preliminary Net
Liabilities are based upon the unaudited balance sheet of MPC as of February 21,
1999, prepared in accordance with generally accepted accounting principles
("GAAP"), excluding treatment of subscriptions receivable, attached as part of
Schedule 1 (the "Preliminary Balance Sheet"), and are calculated as total assets
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minus net fixed assets minus
intangible assets minus total liabilities. The parties agree that the
Preliminary Ownership Value is $5,380,000. The Shares will be issued by Papa
John's on the Closing Date pursuant to the terms of its Registration Statement
on Form S-4 (Reg. No. 33-96577), which was declared effective by the Securities
and Exchange Commission on September 12, 1995 and which registers the issuance
and sale from time to time of up to 750,000 shares of the Common Stock (as
amended to date, the "Registration Statement"). The number of Shares shall be
determined by dividing the Preliminary Ownership Value by $42.00 (the
"Settlement Stock Price"). Each Member shall receive a percentage of the total
number of Shares equal to the percentage set forth opposite such Member's name
on Schedule 2; provided that, no fractional shares of Common Stock shall be
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issued to any Member, and, in lieu thereof, cash equal to such fraction
multiplied by the Settlement Stock Price shall be paid to any Member who would
otherwise receive a fractional share of Common Stock hereunder.
(b) RESERVE AND SETTLEMENT. At the Closing, Acquiror shall cause its
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transfer agent to retain in escrow that number of Shares having an aggregate
value at the Settlement Stock Price equal to $100,000 (the "Reserve Shares").
The Reserve Shares shall be held in escrow for 120 days following the Closing
("Reserve Period"), and may be used by Papa John's or Acquiror to satisfy any
"Settlement Adjustment" or indemnification obligations of the Members under this
Agreement. The Settlement Adjustment, if any, will be calculated no later than
120 days after the Closing Date to reflect any differences between the
Preliminary Ownership Value and the "Settlement Ownership Value." The
Settlement Ownership Value will be calculated in the same manner as the
Preliminary Ownership Value except that Net Liabilities will be determined based
upon the Closing Balance Sheet (as defined in Section 1(c)). If the difference
between the Settlement Ownership Value and the Preliminary Ownership Value is
less than $50,000 (whether positive or negative), then no further adjustment
shall be made. If the Preliminary Ownership Value exceeds the Settlement
Ownership Value by more than $50,000 but less than $100,000, Acquiror and Papa
John's shall be entitled to retain that number of the Reserve Shares having an
aggregate value (determined on the basis of the Settlement Stock Price) equal to
the difference between the Settlement Ownership Value and the Preliminary
Ownership Value. Any Reserve Shares not applied against any Settlement
Adjustment or indemnification obligations shall be delivered by the transfer
agent to the Members pro rata in accordance with Schedule 2 following the
expiration of the Reserve Period. If the Settlement Ownership Value exceeds the
Preliminary Ownership Value by more than $50,000, Acquiror and Papa John's shall
deliver to the Members a number of shares of Common Stock (the "Settlement
Adjustment Shares") having an aggregate value (determined on the basis of the
Settlement Stock Price) equal to the difference between the Settlement Ownership
Value and the Preliminary Ownership Value; provided that, no fractional shares
of Common Stock shall be issued to any Member, and, in lieu thereof, cash equal
to such fraction multiplied by the Settlement Stock Price shall be paid to any
Member who would otherwise receive a fractional share of Common Stock hereunder.
The Settlement Adjustment Shares (plus any cash paid in lieu of fractional
shares) shall be allocated among the Members in accordance with Section 1(a).
If the Preliminary Ownership Value exceeds the Settlement Ownership Value by
more than $100,000, Acquiror and Papa John's shall be entitled to retain all of
the Reserve Shares. Additionally, the Members will be required to deliver to
Acquiror and Papa John's a number of shares of Common
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Stock (the "Members' Settlement Adjustment Shares") having an aggregate value
(determined on the basis of the Settlement Stock Price) equal to the excess of
the Preliminary Ownership Value over the Settlement Ownership Value, less
$100,000. At their election, the Members may choose to deliver the value of the
Members' Settlement Adjustment Shares in cash rather than in Common Stock.
(c) CLOSING BALANCE SHEET. Within 30 days after the Closing Date,
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Michael T. Sweeney and W. Patrick Kranz (the "Management Team") shall deliver to
Acquiror an unaudited balance sheet for MPC as of the Closing Date (the "Closing
Balance Sheet") prepared in accordance with GAAP, excluding treatment of
subscriptions receivable, from the books and records of MPC, together with its
calculation of the Net Liabilities and the Settlement Ownership Value based on
such Closing Balance Sheet. Any dispute over the accuracy of the Closing
Balance Sheet or the amount of the Settlement Ownership Value must be raised by
Acquiror in writing within 40 days of receipt of the Closing Balance Sheet from
the Management Team or Acquiror shall be deemed to have accepted the Closing
Balance Sheet, the Net Liabilities and the Settlement Ownership Value derived
from such balance sheet. If there is a dispute regarding the accuracy of the
Closing Balance Sheet or the amount of the Net Liabilities or the Settlement
Ownership Value which cannot be resolved by good faith negotiations between the
parties within 20 days after the Management Team's receipt of the written notice
of dispute, such dispute shall be submitted to a single arbitrator with
knowledge of accountancy and employed by the Chicago office of a mutually
agreeable "Big Five" accounting firm (the "Adjustment Arbitrator") who shall be
instructed to make a final, binding determination of the Settlement Ownership
Value within 30 days of being appointed. The Adjustment Arbitrator shall
calculate the amount of the Net Liabilities and the Settlement Ownership Value
in a manner consistent with the provisions of this Agreement and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The Members collectively, on the one hand, and Acquiror and Papa John's
collectively, on the other, shall bear their own fees and expenses in connection
with such arbitration and shall bear 50% of the fees and expenses of the
Adjustment Arbitrator. The determination of the Adjustment Arbitrator regarding
the Closing Balance Sheet, the Net Liabilities and the Settlement Ownership
Value shall be final and binding on all parties and judgment to enforce such
determination may be entered in any court having proper jurisdiction over the
party obligated to pay hereunder.
(d) SPECIFIC OBLIGATIONS. The only obligations of any nature of MPC
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being assumed by Acquiror are (a) the obligations of MPC under the terms of the
Leases arising after the Closing Date, (b) the obligations of MPC for telephone
listings for each of the Outlets arising after the date hereof, (c) the
obligations incurred with respect to the operation of the Outlets arising after
the Closing, (d) any other obligations that are prorated pursuant to the
remaining provisions of this Agreement and (e) any other obligations expressly
set forth on the Closing Balance Sheet including, without limitation, the total
liabilities of MPC on the Closing Balance Sheet (collectively, the "Specific
Obligations").
(e) ALLOCATION OF PURCHASE PRICE. For state and federal income tax
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purposes, the parties have allocated the Preliminary Ownership Value to the
assets of the Company in the
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manner set forth on Exhibit A hereto, and shall update such Exhibit A as of the
Closing Date with respect to the Settlement Ownership Value in a manner
consistent with such Exhibit A. The parties hereto 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 agreed allocation. The parties hereto agree to provide each
other with such information as may be reasonably required by the other party for
the purpose of preparing such returns and other documents filed by such other
party.
2. CLOSING. The deliveries and actions to be completed pursuant to
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Section 11 of this Agreement ("Closing") shall be held at the offices of
Acquiror at 9:00 A.M. on March 29, 1999, or such later date and time as the
parties shall mutually agree. Notwithstanding the date or time of the Closing,
the effective date and time of the acquisition shall be 11:59 p.m. E.S.T. on
March 28, 1999 ("Closing Date").
3. REPRESENTATIONS AND WARRANTIES OF MEMBERS. The Members, jointly and
-----------------------------------------
severally, represent and warrant to Acquiror that except as described on
Schedule 3 (the "Disclosure Schedule"):
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(a) ORGANIZATION AND STANDING OF MPC. MPC is a limited liability
--------------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Members own 100% of the issued and outstanding
ownership interests of MPC. There are no outstanding options, warrants or other
rights of any nature to acquire any ownership interest in MPC. MPC has the
requisite power and authority to own and lease its properties as such properties
are now owned and leased and to conduct this business as and where such business
is now being conducted.
(b) FINANCIAL STATEMENTS. MPC has delivered to Acquiror the
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Preliminary Balance Sheet and an unaudited Statement of Income ("Preliminary
Income Statement") of MPC for the five months ended February 21, 1999, both of
which were prepared from the books and records of MPC. The Preliminary Balance
Sheet and Preliminary Income Statement and notes thereto are referred to as the
"Preliminary Financial Statements." Copies of the Preliminary Financial
Statements are attached hereto as Schedule 1. The Preliminary Balance Sheet
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fairly presents in all material respects the financial condition of MPC as of
its date and was prepared in accordance with GAAP (excluding treatment of
subscriptions receivable) applicable to unaudited interim financial statements
(and thus may not contain all notes and may not contain prior period comparative
data which are required to be prepared in accordance with GAAP). The
Preliminary Income Statement represents actual, bona fide transactions and
accurately reflects, in all material respects, all revenues and expenses of MPC
for the period covered.
(c) ABSENCE OF UNDISCLOSED LIABILITIES. As of the Closing Date, MPC
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will have no debts, obligations (including, but not limited to, obligations as a
guarantor) or liabilities of any nature, whether fixed, absolute, accrued,
contingent or otherwise (and whether known or unknown to MPC) that would
encumber or affect MPC's assets or business, other than (i) debts,
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obligations and liabilities incurred in the ordinary course of business
consistent with past practices, all of which have been paid or would be paid by
MPC in full in the ordinary course of business, and (ii) the Specific
Obligations.
(d) AUTHORIZATION; NO VIOLATION; COMPLIANCE WITH LAWS.
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(i) The Board of Managers of MPC has duly approved the
execution, delivery and performance of this Agreement. This Agreement has been
duly executed and delivered by MPC and constitutes the legal, valid and binding
obligation of MPC, enforceable against MPC in accordance with its terms, SUBJECT
TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER
SIMILAR LAWS NOW OR HEREAFTER IN EFFECT RELATING TO CREDITORS' RIGHTS AND
REMEDIES GENERALLY AND SUBJECT, AS TO ENFORCEABILITY, TO GENERAL PRINCIPLES OF
EQUITY (REGARDLESS OF WHETHER ENFORCEABILITY IS CONSIDERED IN A PROCEEDING AT
LAW OR IN EQUITY).
(ii) All consents, approvals, resolutions, authorizations,
actions or orders, including, without limitation, those which must be obtained
from the landlords of the Outlets, required of MPC for the authorization,
execution and delivery of, and for the consummation of the transactions
contemplated by, this Agreement have been or will (prior to Closing) be
obtained.
(iii) MPC is in compliance, and in each case, in all material
respects, with all the laws, regulations, rules and orders affecting its
business and operations, and neither member of the Management Team has actual
knowledge of any facts or circumstances which would constitute or result in any
such non-compliance.
(e) MPC'S EMPLOYEES; EMPLOYEE WITHHOLDING. MPC has paid all amounts
-------------------------------------
due to its employees, including all overtime required by law. MPC has withheld
proper and accurate amounts from its employees in compliance with the tax
withholding provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and other applicable, federal, state or local laws, and has filed
proper and accurate federal, state and local returns and reports (or appropriate
filings for extension) for all years and periods (and portions thereof) for
which any such returns and reports were due with respect to employee income,
income tax withholding, withholding taxes, social security taxes and
unemployment taxes. All payments due from MPC on account of employee income tax
withholding, withholding taxes, social security taxes and unemployment taxes and
amounts owed for workers' compensation in respect of years and periods (and
portions thereof) ended on or prior to the date hereof have been paid prior to
such date or have been properly reserved for payment (and will be so reflected
on the Closing Balance Sheet).
(f) LEASES. MPC has paid all amounts due under each of the
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Timberwolves/Target Center contracts and leases listed on Schedule 4 (the
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"Leases") through the end of the month of March 1999. Each of the Leases for
the Outlets is valid, binding and in full force and effect. MPC is not in
default under any Lease, there is no material dispute between
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MPC and the landlord to any such Lease, nor, to the knowledge of either member
of the Management Team, is the landlord under any of the Leases in default
thereunder. To the knowledge of the Management Team, no event has occurred which
could give the landlord under any of the Leases the right to claim a default and
the consummation of the transactions contemplated by this Agreement will not
cause a default under any such Lease. Schedule 4 includes a complete list of all
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the Leases. A true and complete summary of each Lease has been delivered to
Acquiror on or prior to the date hereof.
(g) TAX RETURNS. MPC has prepared, signed and filed all federal,
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state and other tax returns and reports (or appropriate filings for extension)
required to be filed by all applicable laws and regulations on or before the
date hereof, and has timely paid or accrued 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 and reports or which
were or are otherwise due and owing under all applicable laws and regulations
for any periods for which returns or reports were due, whether or not reflected
on such returns and reports. There are no actions, suits, proceedings,
investigations or claims now pending, nor, to the knowledge of either member of
the Management Team, proposed, against MPC, nor are there any matters under
discussion with the Internal Revenue Service, or other governmental authority,
relating to any taxes or assessments, or any claims of deficiencies with respect
thereto.
(h) TITLE TO PROPERTIES; CONDITION OF PROPERTIES. MPC has good and
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marketable title to all of the assets and properties identified as owned on the
Preliminary Balance Sheet, free and clear of all claims, mortgages, security
interests, equities, restrictions, liens, pledges, charges or encumbrances of
any nature whatsoever, except for (i) liens reflected on the Preliminary Balance
Sheet, (ii) liens set forth in the Disclosure Schedule under the caption
referencing this Section 3(h), (iii) liens for taxes and assessments or
governmental charges or levies not at the time due or the validity of which is
being currently contested in good faith in appropriate proceedings, (iv) liens
in respect of pledges or deposits or deposits under worker's compensation laws
or similar legislation, carriers', warehousemen's mechanics', laborers',
materialmen's and other statutory and similar liens, (v) the Specific
Obligations and any liens existing in connection therewith and (vi) assets
disposed of since the date of the Preliminary Balance Sheet in the ordinary
course of business.
(i) ENVIRONMENTAL. MPC has complied in all material respects with all
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state, federal and local laws and ordinances pertaining to use, storage and
disposal of hazardous materials.
(j) STATEMENTS. THE REPRESENTATIONS SET FORTH IN THIS SECTION 3, WHEN
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TAKEN TOGETHER WITH THE DISCLOSURES SET FORTH IN THE DISCLOSURE SCHEDULE AND THE
INFORMATION CONTAINED IN THE PRELIMINARY FINANCIAL STATEMENTS, TAKEN AS A WHOLE,
DO NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A
MATERIAL FACT REQUIRED TO BE STATED IN CONNECTION THEREWITH OR NECESSARY IN
ORDER TO MAKE SUCH STATEMENTS (WHEN TAKEN AS A WHOLE) NOT MISLEADING.
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4. REPRESENTATIONS AND WARRANTIES OF EACH MEMBER. Each Member, for
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himself or herself alone, represents and warrants to Acquiror:
(a) OWNERSHIP OF INTERESTS. Such Member owns the percentage interest
----------------------
in MPC set forth opposite such Member's name on Schedule 2 hereto, and will
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transfer and convey such interest(s) to Acquiror at the Closing, free of all
claims, liens and encumbrances of any nature whatsoever. Such Member holds no
ownership interest in MPC, nor any option, warrant or other right to acquire any
ownership interest in MPC, except as set forth on Schedule 2.
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(b) AUTHORIZATION. This Agreement has been duly executed and
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delivered by such Member and constitutes the legal, valid and biding obligation
of such Member, enforceable against such Member in accordance with its terms,
SUBJECT TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR
OTHER SIMILAR LAWS NOW OR HEREAFTER IN EFFECT RELATING TO CREDITORS' RIGHTS AND
REMEDIES GENERALLY AND SUBJECT, AS TO ENFORCEABILITY, TO GENERAL PRINCIPLES OF
EQUITY (REGARDLESS OF WHETHER ENFORCEABILITY IS CONSIDERED IN A PROCEEDING AT
LAW OR IN EQUITY).
(c) SECURITIES REPRESENTATIONS. Such Member acknowledges receipt of
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(i) the Prospectus dated September 12, 1995, as updated to November 5, 1998
(the "Prospectus"), which forms a part of the Registration Statement, and (ii)
Papa John's Annual Form 10-K for the year ended December 27, 1998.
5. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror hereby
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represents and warrants to each of the Members as follows:
(a) ORGANIZATION AND STANDING OF ACQUIROR. Acquiror is a corporation
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duly organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky. Acquiror has the requisite corporate power and
authority to own and lease its properties as such properties are now owned and
leased and to conduct its business as and where such business is now being
conducted.
(b) AUTHORIZATION; NO VIOLATIONS; COMPLIANCE WITH LAWS.
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(i) The Board of Directors of Acquiror has duly approved the
execution, delivery and performance of this Agreement. This Agreement has been
duly executed and delivered by Acquiror and constitutes the legal, valid and
binding obligation of Acquiror, enforceable against Acquiror in accordance with
its terms, SUBJECT TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM OR OTHER SIMILAR LAWS NOW OR HEREAFTER IN EFFECT RELATING TO
CREDITORS' RIGHTS AND REMEDIES GENERALLY AND SUBJECT, AS TO ENFORCEABILITY, TO
GENERAL PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER ENFORCEABILITY IS CONSIDERED
IN A PROCEEDING AT LAW OR IN EQUITY).
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(ii) All consents, approvals, resolutions, authorizations,
actions or orders required of Acquiror for the authorization, execution and
delivery of, and for the consummation of the transactions contemplated by, this
Agreement have been obtained.
(iii) Acquiror is in compliance, in each case, in all material
respects, with all laws, regulations, rules and orders affecting its business
and operations.
6. REPRESENTATIONS AND WARRANTIES OF PAPA JOHN'S. Papa John's hereby
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represents and warrants to each of the Members as follows:
(a) ORGANIZATION AND STANDING OF PAPA JOHN'S. PAPA JOHN'S IS A
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CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE STATE OF DELAWARE. PAPA JOHN'S HAS THE REQUISITE POWER AND AUTHORITY TO
OWN AND LEASE ITS PROPERTIES AS SUCH PROPERTIES ARE NOW OWNED AND LEASED AND TO
CONDUCT ITS BUSINESS AS AND WHERE SUCH BUSINESS IS NOW BEING CONDUCTED.
(B) AUTHORIZATIONS; NO VIOLATIONS; COMPLIANCE WITH LAWS.
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(I) PAPA JOHN'S HAS DULY APPROVED THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT. THIS AGREEMENT HAS BEEN DULY EXECUTED AND
DELIVERED BY PAPA JOHN'S AND CONSTITUTES THE LEGAL, VALID AND BINDING
OBLIGATIONS OF PAPA JOHN'S, ENFORCEABLE AGAINST PAPA JOHN'S IN ACCORDANCE WITH
ITS TERMS, SUBJECT TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM OR OTHER SIMILAR LAWS NOW OR HEREAFTER IN EFFECT RELATING TO
CREDITORS' RIGHTS AND REMEDIES GENERALLY AND SUBJECT, AS TO ENFORCEABILITY, TO
GENERAL PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER ENFORCEABILITY IS CONSIDERED
IN A PROCEEDING AT LAW OR IN EQUITY).
(II) ALL CONSENTS, APPROVALS, RESOLUTIONS, AUTHORIZATIONS,
ACTIONS OR ORDERS, REQUIRED OF PAPA JOHN'S FOR THE AUTHORIZATION, EXECUTION AND
DELIVERY OF, AND FOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY, THIS
AGREEMENT HAVE BEEN OBTAINED, INCLUDING, WITHOUT LIMITATION, ALL ACTIONS
REQUIRED BY THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR "BLUE SKY"
LAWS WITH RESPECT TO THE OFFER AND ISSUANCE OF THE SHARES AND THE SETTLEMENT
ADJUSTMENT SHARES.
(iii) Papa John's is in compliance, in each case, in all material
respects, with all laws, regulations, rules and orders affecting its business
and operations.
(C) SEC REPORTS.
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(I) SINCE JANUARY 1, 1995, PAPA JOHN'S HAS FILED ALL FORMS,
REPORTS AND DOCUMENTS WITH THE SECURITIES AND EXCHANGE
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COMMISSION (THE "SEC") REQUIRED TO BE FILED BY IT PURSUANT TO THE FEDERAL
SECURITIES LAWS AND THE SEC RULES AND REGULATIONS THEREUNDER, ALL OF WHICH HAVE
COMPLIED AS OF THEIR RESPECTIVE FILING DATES, OR IN THE CASE OF REGISTRATION
STATEMENTS (INCLUDING THE REGISTRATION STATEMENT), THEIR RESPECTIVE EFFECTIVE
DATES, IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (COLLECTIVELY, THE "SEC REPORTS"). NONE OF
SUCH SEC REPORTS, INCLUDING, WITHOUT LIMITATION, ANY EXHIBITS, FINANCIAL
STATEMENTS OR SCHEDULES INCLUDED THEREIN, AT THE TIME FILED, OR IN THE CASE OF
REGISTRATION STATEMENTS, THEIR RESPECTIVE EFFECTIVE DATES, CONTAINED ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.
(II) THE CONSOLIDATED BALANCE SHEETS AND RELATED CONSOLIDATED
STATEMENTS OF INCOME, STOCKHOLDERS' EQUITY AND CASH FLOWS (INCLUDING THE RELATED
NOTES AND SCHEDULES THERETO) OF PAPA JOHN'S INCLUDED IN THE SEC REPORTS COMPLIED
AS TO FORM, AT THE TIME FILED, IN ALL MATERIAL RESPECTS WITH THE PUBLISHED RULES
AND REGULATIONS OF THE SEC WITH RESPECT THERETO AT THE TIME FILED, WERE PREPARED
IN ACCORDANCE WITH GAAP APPLIED ON A CONSISTENT BASIS DURING THE PERIODS
INVOLVED (EXCEPT AS DISCLOSED) AND INCLUDE ALL ADJUSTMENTS CONSISTING OF NORMAL
RECURRING ACCRUALS NECESSARY (IN THE CASE OF UNAUDITED INTERIM FINANCIAL
STATEMENTS) AND PRESENT FAIRLY THE CONSOLIDATED FINANCIAL POSITION OF PAPA
JOHN'S AS OF THEIR RESPECTIVE DATES, AND THE CONSOLIDATED INCOME AND CASH FLOWS
FOR THE PERIODS PRESENTED THEREIN, ALL IN CONFORMITY WITH GAAP APPLIED ON A
CONSISTENT BASIS, EXCEPT AS OTHERWISE NOTED THEREIN OR AS PERMITTED UNDER THE
EXCHANGE ACT.
(D) ABSENCE OF CERTAIN CHANGES OR EVENTS. EXCEPT AS DISCLOSED IN THE
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SEC REPORTS, OR AS CONTEMPLATED BY THIS AGREEMENT, SINCE DECEMBER 27, 1998, THE
BUSINESS OF PAPA JOHN'S HAS BEEN CARRIED ON ONLY IN THE ORDINARY AND USUAL
COURSE AND THERE HAS NOT BEEN ANY MATERIAL ADVERSE CHANGE IN ITS BUSINESS,
PROPERTIES, OPERATIONS OR FINANCIAL CONDITION WHICH HAS RESULTED IN OR COULD
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT ON PAPA JOHN'S
BUSINESS, OPERATIONS OR FINANCIAL CONDITION.
(E) SHARES. THE SHARES AND ANY SETTLEMENT ADJUSTMENT SHARES, UPON
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DELIVERY THEREOF TO THE MEMBERS, WILL BE (I) VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE, (II) FREE AND CLEAR OF ANY AND ALL LIENS, CLAIMS AND OTHER
RESTRICTIONS (OTHER THAN THE RESTRICTIONS CONTAINED IN SECTION 7(B)), (III)
issued pursuant to an effective registration statement under the Securities Act
and in
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accordance with the requirements of the Securities Act, (iv) issued in
accordance with any applicable state securities or "blue sky" laws, (v)
registered under the Exchange Act and (vi) listed for trading on the Nasdaq
National Market, subject to official notice of issuance.
7. ADDITIONAL COVENANTS OF THE PARTIES.
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(a) PAYMENT OF TAXES. Each Member shall pay when due all taxes
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incurred by such Member as the result of the transactions contemplated by this
Agreement. Any taxes relating to events, transactions or periods through the
Closing Date and not properly paid or accounted for on the Preliminary Balance
Sheet shall be addressed through the Settlement Adjustment.
(b) ACCOUNTING TREATMENT; RESTRICTION ON TRANSFER OF SHARES.
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Acquiror, Papa John's and the Members intend that this acquisition shall be
treated for accounting purposes as a pooling-of-interests. Accordingly each of
Acquiror, Papa John's and the Members shall refrain from taking any action or
engaging in any transaction or arrangement as reasonably requested by another
party to this Agreement that would result in the acquisition not being accounted
for as pooling-of- interests. Each Member specifically agrees that the Shares
to be received by such Member at the Closing shall not be sold, pledged,
hypothecated or otherwise transferred or disposed of by such Member until such
time as financial results covering at least 30 days of combined operations of
Acquiror and MPC have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies (the "Publication Date"),
except as permitted by Staff Accounting Bulletin No. 76 issued by the SEC. All
certificates representing Shares shall bear the legend set forth on Exhibit B,
Restrictive Legend. Papa John's hereby agrees to publish such financial results
on or before July 28, 1999. Following the Publication Date, upon request from
any Member, Papa John's shall remove the legend referenced above from all
certificates representing the Shares and any Settlement Adjustment Shares issued
to such Member and shall issue to such Member replacement certificate or
certificates without such legend.
(c) SPECIFIC OBLIGATIONS. Acquiror shall promptly pay when due all of
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the Specific Obligations.
(d) UTILITIES. Acquiror will promptly arrange for all utilities
---------
servicing the Outlets that are to be paid directly by the tenant to be billed to
Acquiror as soon as possible after the Closing. Any utilities expense for
periods through the Closing Date not paid or properly accrued on the Preliminary
Balance Sheet shall be addressed through the Settlement Adjustment.
(e) COVENANT AND AGREEMENT NOT-TO-COMPETE. Each Member acknowledges
-------------------------------------
the Franchise Documents (as defined in Section 7(f)) impose certain obligations
upon such Member which by their express terms, continue for a period of time
after termination of the Franchise Agreements (the "Post-Termination
Restrictions"). Such Member hereby reaffirms such Member's agreement to be
bound by the restrictions as and to the extent set forth in the Owner Agreement.
-10-
(f) TERMINATION OF EXISTING AGREEMENTS. Contemporaneously with the
----------------------------------
Closing, MPC, Acquiror, Papa John's, the Members, and each of the appropriate
affiliates of each of the foregoing shall enter into the Termination Agreement
in the form of Exhibit C (the "Termination Agreement") which acknowledges that
---------
(i) the Put/Call Agreement is terminated in its entirety as of the Closing Date;
(ii) all obligations and liabilities of the respective parties pursuant to the
Development Agreement, the Franchise Agreements, the Owner Agreement, the
Put/Call Agreement, the Advertising Agreement, and all other agreements between
or among any of such parties (collectively, the "Franchise Documents") have been
fully satisfied by all of the parties thereto with all appropriate adjustments
thereunder having been made as of the Closing Date; (iii) all further
obligations of the parties under the Franchise Documents other than the Post-
Termination Restrictions of the Owner Agreement are and shall be terminated
effective as of the Closing; and (iv) without limitation of the generality of
the foregoing, any and all guarantee obligations of the Management Team under
the Owner Agreement are and shall be terminated as of the Closing.
(g) FURTHER ACTIONS. Between the date hereof and the Closing Date,
---------------
the Management Team shall use commercially reasonable efforts to protect the
business and assets of MPC. Each of the parties hereto agrees that it will, at
any time, and from time to time, after the date hereof, upon the request of the
appropriate party, do, execute, acknowledge and deliver, or will cause to be
done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required to complete the transactions described in this Agreement.
(h) COMPLIANCE WITH CONDITIONS. All parties hereto agree to cooperate
--------------------------
with each other in order to meet the conditions set forth in Section 8. All
parties further agree to use their respective best efforts, and to act in good
faith to consummate the transactions described in this Agreement as promptly as
possible, in accordance with this Agreement.
(i) RESIGNATION OF MEMBERS. At or before the Closing, any Member who
----------------------
serves as an officer, director, consultant or employee of MPC shall resign and
any consulting or similar agreement between MPC and any Member shall be
terminated. Following the Closing, neither MPC nor Acquiror shall have any
obligation to employ, nor any liability for compensation to, any Member (except
to the extent any Member provides services to MPC or Acquiror after the
Closing); provided that Acquiror and Richard Blankenship anticipate discussing
the terms of his potential continued employment.
(j) FILING OF SEC REPORTS. Between the date hereof and the date on
---------------------
which it has been finally determined whether or not any Settlement Adjustment
Shares will be issued pursuant to Section 1(b), Papa John's shall file all
forms, reports and documents with the SEC required to be filed by it pursuant to
the federal securities laws and the SEC rules and regulations thereunder, all of
which shall comply as of their RESPECTIVE FILING DATES, OR IN THE CASE OF
REGISTRATION STATEMENTS (INCLUDING ANY AMENDMENTS TO THE REGISTRATION
STATEMENT), THEIR RESPECTIVE EFFECTIVE DATES, IN ALL MATERIAL RESPECTS WITH
-11-
ALL APPLICABLE REQUIREMENTS OF THE SECURITIES ACT AND THE EXCHANGE ACT, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER. NONE OF SUCH SEC REPORTS,
INCLUDING, WITHOUT LIMITATION, ANY EXHIBITS, FINANCIAL STATEMENTS OR SCHEDULES
INCLUDED THEREIN, AT THE TIME FILED, OR IN THE CASE OF REGISTRATION STATEMENTS,
THEIR RESPECTIVE EFFECTIVE DATES, SHALL CONTAIN ANY UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES
UNDER WHICH THEY WERE MADE, NOT MISLEADING.
8. CONDITIONS TO THE ACQUISITION.
-----------------------------
(a) CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND PAPA JOHN'S. The
---------------------------------------------------------
obligations of Acquiror and Papa John's to consummate the transactions described
in this Agreement are subject to the fulfillment, prior to or at the Closing, of
the conditions precedent that:
(i) All representations and warranties of the Members in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made on such date, except for (A) such changes that are
contemplated or permitted by this Agreement and (B) those representations and
warranties made as of a specific date. The Management Team specifically agrees
to update Acquiror on the occurrence of any event known to the Management Team
that would make the representations and warranties, if made on the Closing Date,
untrue in any material respect.
(ii) The Members shall have performed and complied in all
material respects with all the covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
(iii) No action or proceeding before any court or any governmental
body will be pending against the Members or MPC since the date of this Agreement
pursuant to which an unfavorable judgment, decree, injunction or order would (A)
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, (B) declare unlawful the transactions described in this
Agreement, (C) cause such transactions to be rescinded or (D) materially
adversely affect the right of Acquiror to operate or control the business,
operations or assets of MPC.
(b) CONDITIONS TO THE OBLIGATIONS OF THE MEMBERS. The obligations of
--------------------------------------------
the Members to consummate of the transactions contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(i) All representations and warranties of Acquiror and Papa
John's in this Agreement shall be true and correct in all material respects on
and as of the Closing Date as though made on such date except for such changes
that are contemplated or permitted by this
-12-
Agreement.
(ii) Acquiror and Papa John's shall have performed and complied
in all material respects with all the covenants, agreements and conditions
required by this Agreement to be performed or compiled with by them prior to or
at the Closing.
(iii) No action or proceeding before any court or any governmental
body will be pending against the Acquiror or Papa John's since the date of this
Agreement pursuant to which an unfavorable judgment, decree, injunction or order
would (A) prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, (B) declare unlawful the transactions described in this
Agreement or (C) cause such transactions to be rescinded.
9. TERMINATION BY ACQUIROR. Acquiror shall have the right to terminate
-----------------------
this Agreement and all rights and obligations hereunder, upon the occurrence of
the following:
(a) The comparable store sales of the Outlets, taken as a whole, for
the month of March 1999 are more than 10% less than for the month of March 1998;
or
(b) Since the date of this Agreement, there has been a material
adverse change to the business or assets of MPC, taken as a whole.
10. MPC'S EMPLOYEES. Acquiror agrees to offer employment and/or make
---------------
payments to those employees of MPC for the periods and in the amounts listed on
Exhibit D.
11. DELIVERIES AND ACTIONS AT CLOSING.
---------------------------------
(a) DELIVERIES BY MPC AT THE CLOSING. At the Closing, MPC shall
--------------------------------
deliver the following documents to Acquiror (fully executed where appropriate):
(i) A Certificate of Good Standing for MPC issued by the
Minnesota Secretary of State;
(ii) The minute books, tax returns and other records of MPC;
(iii) Possession of the Outlets, including all keys thereto and
the combination to any safes; and
(iv) Such other documents as are reasonably necessary to effect
the closing of the transactions contemplated herein.
(b) DELIVERIES BY EACH MEMBER AT THE CLOSING. At the Closing, each
----------------------------------------
Member shall deliver or cause to be delivered the following documents to
Acquiror:
-13-
(i) All certificates representing such Member's ownership
interests in MPC;
(ii) A copy of the Termination Agreement executed by such
Member; and
(iii) Such other documents as are reasonably necessary to
effect the closing of the transaction contemplated herein.
(c) DELIVERIES BY ACQUIROR AND PAPA JOHN'S AT THE CLOSING. At the
-----------------------------------------------------
Closing, Acquiror or Papa John's (as appropriate) shall:
(i) Deliver certificates representing the Shares (reduced
by the number of the Reserve Shares) in appropriate names and numbers as
determined pursuant to Section 1(a);
(ii) Execute and deliver the Termination Agreement;
(iii) Deliver certificates representing the Reserve Shares,
in appropriate names and numbers as determined pursuant to Section 1(a), to Papa
John's transfer agent;
(iv) Pay the amounts of cash in lieu of fractional shares
due to the Members pursuant to Section 1(a);
(v) Pay all amounts due from MPC to U.S. Bank, Minneapolis,
or provide evidence satisfactory to each of the Management Team that Papa John's
will do so and will indemnify in full each of the Management Team against
personal liability with respect to such amounts; and
(vi) Deliver such other documents as are reasonably
necessary to effect the closing of the transaction contemplated herein.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
------------------------------------------
representations and warranties set forth in this Agreement shall survive the
closing of this Agreement and the consummation of any and all transactions
contemplated hereby, regardless of any investigation made by any party hereto,
but shall expire at the earlier of (i) the date fourteen (14) months from the
Closing Date and (ii) the date on which Papa John's publicly releases its
audited financial statements for fiscal year 1999 (the "Claim Termination
Date").
13. INDEMNITY AGAINST CLAIMS.
------------------------
(a) INDEMNIFICATION BY MEMBERS. Subject to the limitations below, the
--------------------------
Members shall indemnify and hold Acquiror harmless from and against any and all
losses, costs, liabilities, damages or deficiencies resulting from any
misrepresentation by the Members contained herein or from the breach or non-
fulfillment of any agreements, covenants or
-14-
undertakings on the part of the Members contained in this Agreement, and any and
all actions, suits, proceedings, demands, assessments or judgments incident to
any of the foregoing. Such indemnification shall include, without limitation,
any suits, actions, legal or administrative proceedings, claims, demands, actual
damages, fines, punitive damages, losses, costs, liabilities or other
obligations, whether legal or equitable, resulting from, arising out of or in
any way connected with any release to the environment prior to the Closing Date
including, without limitation, any migration or any release from one
environmental medium to another environmental medium, if the release or
migration involves hazardous or toxic substances or any contamination or illegal
release of substances released to the environment by MPC or involves any such
substances generated or used by MPC and shipped off-site for recycling,
treatment, storage, disposal, use or reuse.
(b) INDEMNIFICATION BY ACQUIROR AND PAPA JOHN'S. Acquiror and Papa
-------------------------------------------
John's, jointly and severally, shall indemnify and hold each Member harmless
from and against any and all losses, costs, liabilities, damages or deficiencies
resulting from (i) any misrepresentation by Acquiror or Papa John's contained
herein, (ii) the breach or non-fulfillment of any agreements, covenants or
undertakings on the part of Acquiror or Papa John's contained in this Agreement,
(iii) the operation of MPC and the Outlets from and after the Closing Date, (iv)
Papa John's failure to register or otherwise qualify the issuance of all of the
Shares and Settlement Adjustment Shares as required by the Securities Act and
any applicable state securities or "blue sky" laws and (v) any untrue statement
or alleged untrue statement, or omission or alleged omission, made in any of the
SEC Reports, the Registration Statement or the Prospectus (including, in the
case of Settlement Adjustment Shares, any SEC Reports or any applicable
registration statement or prospectus filed after the Closing Date but before the
date of issuance of such Settlement Adjustment Shares), and any and all actions,
suits, proceedings, demands, assessments or judgments incident to any of the
foregoing. Such indemnification shall include, without limitations, any suits,
actions, legal or administrative proceedings, claims, demands, actual damages,
fines, punitive damages, losses, costs, liabilities or other obligations,
whether legal or equitable, resulting from, arising out of or in any way
connected with any release to the environment after the Closing Date, including,
without limitation, any migration or any release from one environmental medium
to another environmental medium, if the release or migration involves hazardous
or toxic substances or any contamination or illegal release of substances
released to the environment by Acquiror or in connection with the operation of
the Outlets by Acquiror or involves any such substances generated or used by
Acquiror or in connection with the operation of the Outlets by Acquiror and
shipped off-site for recycling, treatment, storage, disposal, use or reuse.
(c) EXCLUSIVITY. The settlement procedure and Reserve under Section
-----------
1(b) together with indemnification rights granted to the parties under this
Section 13 constitute the sole and exclusive remedies available to any party
hereto in the event of any misrepresentation herein or any breach or non-
fulfillment of any agreement, covenant or undertaking on the part of any party
contained in this Agreement; provided, however, that the foregoing shall not
limit or restrict the ability of Acquiror or its affiliates to enforce any of
the Post-Termination Restrictions, as described in Section 7.(f), and shall not
limit or restrict the ability of either
-15-
member of the Management Team to enforce Papa John's obligations to indemnify in
full and hold such member of the Management Team harmless from any liability
with respect to such member of the Management Team's personal guarantees to U.S.
Bank and to Papa John's with respect to any indebtedness of MPC (the "Guarantee
Indemnity").
(d) CLAIM PERIOD. Claims for indemnification under this Section 13
------------
must be asserted in writing against the party from whom indemnification is
sought on or prior to the Claim Termination Date. Any claims for indemnification
not so asserted on or prior to the Claim Termination Date shall be barred, and
no party to this Agreement shall have any obligation to provide any
indemnification under this Section 13 with respect to claims not so asserted on
or prior to the Claim Termination Date.
(e) LIMITATION OF LIABILITY. The obligation of each Member to provide
-----------------------
indemnification under this Section 13 shall not exceed, in the aggregate, (i)
the value of the Shares delivered to such Member hereunder which have been
actually received by such Member prior to the assertion of an indemnification
claim by the Buyer under this Section 13, and (ii) the legal fees, costs and
expenses incurred by Papa John's or Acquiror in connection with any action to
obtain indemnification to which Papa John's or Acquiror is entitled hereunder
from such Member. The liability of each of the Members other than the Management
Team shall be several and not joint. Subject to the limitation on liability set
forth above, each member of the Management Team shall be jointly and severally
liable with respect to their respective indemnification obligations under this
Section 13. The obligation of Papa John's or Acquiror to provide indemnification
under this Agreement shall not exceed, in the aggregate, $1.0 million.
(f) RESERVE SHARES. In accordance with Section 1(b), prior to the
--------------
expiration of the Reserve Period, Acquiror or Papa John's shall use Reserve
Shares to satisfy any indemnification claims that it may have against the
Members. The number of Reserve Shares subject to such use shall be that number
that has an aggregate value (determined on the basis of the Settlement Stock
Price) equal to the amount of such indemnification claim.
(g) TENDER OF SHARES. Any Member may satisfy its indemnification
----------------
obligations under this Section 13, in whole or in part, by delivering to
Acquiror or Papa John's that number of Shares (or Settlement Adjustment Shares)
having an aggregate value equal to the indemnification obligation of such
Member. For purposes of this Section 13.(g), any Shares (or Settlement
Adjustment Shares) so delivered to Acquiror or Papa John's shall have a per
share value equal to the Settlement Stock Price.
(h) MEMBERS' REPRESENTATIVE.
-----------------------
(i) During the period ending on the date when all obligations
under this Agreement have been discharged (including all indemnification
obligations pursuant to this Section 13), there shall be a representative for
the Members who (A) is authorized to act in accordance with Section 13(h)(ii)
and (B) shall be selected in accordance with Section 13(h)(iv) (the "Members'
Representative").
-16-
(ii) The Members' Representative shall be authorized to take
any action required or permitted to be taken by the Members under this Agreement
(including any action with respect to indemnification obligations pursuant to
this Section 13) and in connection therewith to deliver any certificate, notice,
consent or instrument (an "Instrument") which the Members' Representative
determines in his discretion to be necessary, appropriate or desirable. In
connection with the taking of any such action or the delivery of any such
Instrument, the Members' Representative is authorized to hire or retain, at the
sole expense of the Members, such counsel, investment bankers, accountants,
representatives and other professional advisors as he determines in his sole and
absolute discretion to be necessary, advisable or appropriate.
(iii) Any party receiving an Instrument from the Members'
Representative shall have the right to rely in good faith upon such Instrument
and to act in accordance with it without independent investigation.
(iv) W. Patrick Kranz is hereby appointed as the initial
Members' Representative. From the date of this Agreement through the date when
all obligations under this Agreement have been discharged (including all
indemnification obligations pursuant to this Section 13), the Members who held
at least 51% of the total Units (as such term is defined in the Limited
Liability Company Agreement, dated September 26, 1995, of MPC, as amended to
date) issued and outstanding as of the date of this Agreement (a "Majority") may
from time to time upon written notice to the Members' Representative, any
Members who were not part of the Majority, Acquiror and Papa John's, remove the
Members' Representative or appoint a new Members' Representative to fill any
vacancy created by the death, incapacitation, resignation or removal of the
Members' Representative, and if the Members' Representative dies, becomes
incapacitated, resigns or is removed by a Majority, the Majority shall appoint a
successor Members' Representative to fill the vacancy so created. A copy of any
appointment by the Majority of any successor Members' Representative shall be
provided to Acquiror, Papa John's and any Members who were not part of the
Majority promptly after it shall have been effected.
(v) If the Members' Representative determines that it is
necessary or desirable to have the Members advance funds to cover out-of-pocket
costs or expenses incurred or to be incurred by the Members' Representative, he
may notify each of the Members in writing and request that they participate
ratably in accordance with their respective interests in MPC in such costs and
expenses. The notice shall contain such other terms and conditions as the
Members' Representative determines to be necessary or desirable, and shall set
forth the amount with the Members' Representative has reasonably determined to
be necessary to cover such costs and expenses and such Member's allocable share
of such amount. Each Member will then be required to deliver a check to the
Members' Representative for such Member's allocable share of the amount required
within 10 business days of the date of the request. Any unused funds shall be
returned, ratably, by the Members' Representative to the Members.
(vi) In no case shall the Members' Representative have any
liability to the Members for any act or omission to act in his capacity as
Members' Representative unless the
-17-
Member asserting such liability is able to prove that the Members'
Representative was guilty of willful misconduct or bad faith.
(h) THIRD PARTY CLAIMS. In the event that any third party asserts a
------------------
claim against a party (the "Indemnified Party") for which such Indemnified Party
intends to seek indemnity from another party hereto (the "Indemnifying Party"),
the Indemnified Party shall promptly notify each Indemnifying Party of such
claim or demand and the amount thereof (the "Claim Notice"); provided, however,
that an Indemnified Party's failure to so provide a Claim Notice shall not
relieve any Indemnifying Party from liability under this Section 13 except to
the extent such failure prejudices such Indemnifying Party. The Indemnifying
Party or all Indemnifying Parties, jointly, shall have 30 days from actual
receipt of the Claim Notice to undertake, conduct and control the defense of
such third party claim. All costs and expenses incurred by the Indemnifying
Party in defending such third party claim shall be paid by the Indemnifying
Party. If the Indemnified Party desires to participate in any such defense or
settlement, it may do so at its sole cost and expense (it being understood that
the Indemnifying Party shall be entitled to control the defense), provided that,
if the defendants in the action include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it and/or other Indemnified
Parties which are different from or in addition to those available to the
Indemnifying Party, or if there is a conflict of interest which would prevent
counsel for the Indemnifying Party from also representing the Indemnified Party,
the Indemnified Party or Indemnified Parties shall have the right to select
separate counsel to participate in the defense of such action on behalf of such
Indemnified Party or Parties at the sole expense of the Indemnifying Party. So
long as the Indemnifying Party is defending such third party claim the
Indemnified Party shall not settle such claim.
(i) CERTAIN DAMAGES. Notwithstanding anything herein to the contrary,
---------------
no claims or causes of action arising out of or related to the transaction
contemplated by this Agreement may be asserted by either party for punitive,
presumptive, special or exemplary damages.
(j) If an Indemnifying Party shall disagree with an Indemnified Party
with respect to the amount of any indemnification claim under this Section 13,
it shall have 30 days from receipt of written notice of the indemnification
claim (or, if later, of the date of written notice from the Indemnified Party
setting forth such amount and the basis for it) to dispute in writing the amount
of such claim. If such dispute cannot be resolved by good faith negotiations
between the parties within 30 days after the Indemnified Party's receipt of the
written notice of such dispute, such dispute shall be submitted to a single
arbitrator with knowledge of accountancy and employed by the Chicago office of a
mutually agreeable "Big Five" accounting firm (the "Claim Arbitrator") who shall
be instructed to make a final, binding determination of the amount of such
indemnification claim within 30 days of being appointed. The Claim Arbitrator
shall calculate the amount of such claim in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Each of the
Indemnifying Party (or Parties), on the one hand, and the Indemnified Party (or
Parties), on the other, shall bear its own
-18-
fees and expenses in connection with such arbitration and shall bear 50% of the
fees and expenses of the Claim Arbitrator. The determination of the Claim
Arbitrator regarding the amount of such indemnification claim shall be final and
binding on all parties and judgment to enforce such determination may be entered
in any court having proper jurisdiction over the party obligated to pay
hereunder.
(k) Each of Acquiror, Papa John's and the Members acknowledges and
agrees that Section 1(b) contains the sole remedy for any differences that are
determined to exist between the Preliminary Ownership Value and the final
Settlement Ownership Value and that they shall not be further entitled to seek
to recover any amounts pursuant to this Section 13 based upon or arising out of
the facts underlying any such difference. Therefore, Acquiror, Papa John's and
the Members acknowledge and agree that the provisions of Section 1(b) (including
the $50,000 threshold) shall constitute full and complete satisfaction of any
claim any of them may have under this Section 13 with respect to the final
Settlement Ownership Value and related underlying facts, even if the facts
underlying such determination would otherwise entitle Acquiror or Papa John's to
seek indemnification for breach of a representation or warranty (or for some
other permissible reason hereunder). Therefore, if the net difference between
the Preliminary Ownership Value and the final Settlement Ownership Value results
in less than $50,000 owed to Papa John's, the Members may not be held liable for
indemnity under this Section 13.
14. 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, (b) on receipt of electronic confirmation of transmission,
if sent by facsimile, (c) three days after the date of deposit in the United
States Mail, postage prepaid, by certified mail, return receipt requested, or
(d) one day after the date of delivery to an internationally recognized
overnight 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 Acquiror
or Papa John's: Papa John's USA, Inc.
P.O. Box 99900
Louisville, Kentucky 40269-0900
Attn: General Counsel
Facsimile: 502/261-4324
If to MPC
or the Members' c/o W. Patrick Kranz
Representative: 80 Birch Bluff Road
Tonka Bay, Minnesota 55331
Facsimile: 612/474-8041
If to any Member, at such Member's address as set forth on Schedule 2.
----------
-19-
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.
17. EXHIBITS; SCHEDULES. All Exhibits and 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 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.
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 in accordance with, the laws of the Commonwealth of Kentucky. The
proper venue for all matters litigated under this Agreement shall be in the
courts of Jefferson County, Kentucky or Hennepin County, Minnesota.
21. BINDING EFFECT. This Agreement may not be assigned by any party
--------------
without the prior written consent of the other parties. Subject to the
foregoing, 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 assigns.
22. ENTIRE AGREEMENT. As used herein, the term "Agreement" shall mean
----------------
this Acquisition Agreement, the Exhibits hereto and the Schedules delivered in
connection herewith, and all financial statements and other documents and
instruments delivered pursuant to the terms of this Agreement. This Agreement
embodies 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, and no party shall be bound by or be
-20-
liable for any alleged representation, promise, inducement or statement of
intention not so set forth. This Agreement may be amended, modified, superseded,
or cancelled 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
PAPA JOHN'S USA, INC.
Taxpayer I.D. #61-1193912
By: /s/ Blaine E. Hurst
_______________________________________________
Blaine E. Hurst
Vice Chairman and President
("Acquiror")
PAPA JOHN'S INTERNATIONAL, INC.
Taxpayer I.D. #51-1203323
By: /s/ J. David Flanery
_______________________________________________
J. David Flanery
Vice President and Controller
/s/ Robert Rinek
__________________________________________________
ROBERT RINEK
/s/ Howard Schultz
__________________________________________________
HOWARD SCHULTZ
/s/ Dan Levitan
__________________________________________________
DAN LEVITAN
-21-
/s/ A. MARK BERLIN, JR.
________________________________________________
A. MARK BERLIN, JR.
/s/ ALAN MCDOWELL
________________________________________________
ALAN McDOWELL
/s/ ANDY HUNTER
________________________________________________
ANDY HUNTER
/s/ DOUGLAS R. DONALDSON
________________________________________________
DOUGLAS R. DONALDSON
/s/ JOHN L. MORRISON
________________________________________________
JOHN L. MORRISON
/s/ MICHAEL J. AHEARN
________________________________________________
MICHAEL J. AHEARN
/s/ MICHAEL T. SWEENEY
________________________________________________
MICHAEL T. SWEENEY
/s/ RALPH W. BURNET
________________________________________________
RALPH W. BURNET
/s/ ROBERT B. RINEK
________________________________________________
ROBERT B. RINEK
/s/ TIMOTHY D. JOHNSON
________________________________________________
TIMOTHY D. JOHNSON
/s/ W. PATRICK KRANZ
________________________________________________
W. PATRICK KRANZ
-22-
/s/ WALTER R. BARRY, JR.
________________________________________________
WALTER R. BARRY, JR.
/s/ RICHARD BLANKENSHIP
________________________________________________
RICHARD BLANKENSHIP
/s/ SHEILA HARRIS
________________________________________________
SHEILA HARRIS
/s/ SHARON EMMONS
________________________________________________
SHARON EMMONS
/s/ GORDON M. AAMOTH, MD IRA
________________________________________________
GORDON M. AAMOTH, MD IRA
/s/ PARADISE CANYON VENTURES
________________________________________________
PARADISE CANYON VENTURES
-23-
ASSET PURCHASE AGREEMENT
------------------------
EXHIBITS AND SCHEDULES
----------------------
Exhibit Description
------- -----------
A Allocation of Valuation
B Restrictive Legend
C Termination Agreement
D MPC's Employees
Schedule Description
-------- -----------
1 Preliminary Financial Statements
2 Ownership of Interests
3 Disclosure Schedule
4 Leases and Timberwolves/Target Center
Contracts
-24-