<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1996.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PAPA JOHN'S INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 61-1203323
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
11492 BLUEGRASS PARKWAY, SUITE 175
LOUISVILLE, KENTUCKY 40299-2334
(502) 266-5200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CHARLES W. SCHNATTER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
PAPA JOHN'S INTERNATIONAL, INC.
P.O. BOX 99900
LOUISVILLE, KENTUCKY 40269-9990
(502) 266-5200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
IVAN M. DIAMOND, ESQ. DAN BUSBEE, ESQ.
GREENEBAUM DOLL & MCDONALD PLLC LOCKE PURNELL RAIN HARRELL
3300 NATIONAL CITY TOWER (A PROFESSIONAL CORPORATION)
LOUISVILLE, KENTUCKY 40202-3197 2200 ROSS AVENUE, SUITE 2200
(502) 589-4200 DALLAS, TEXAS 75201-6776
(214) 740-8000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) (2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 977,500 Shares $39.75 $38,855,625 $13,399
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</TABLE>
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(1) Includes 127,500 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, and
based upon the average of the high and low prices per share as reported on
the Nasdaq National Market on April 18, 1996.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 23, 1996
850,000 SHARES
LOGO
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Papa
John's International, Inc. (the "Company"). The Common Stock is traded on the
Nasdaq National Market tier of The Nasdaq Stock MarketSM under the symbol
"PZZA." On April 22, 1996, the last sale price of the Common Stock as reported
on the Nasdaq National Market was $42.75 per share. See "Price Range of Common
Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $200,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 127,500 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will
total $ and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the Underwriters named herein when,
as and if delivered to and accepted by the Underwriters and subject to their
right to reject any order in whole or in part. It is expected that delivery of
certificates representing the shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
-----------
Montgomery Securities Alex. Brown & Sons
Incorporated
, 1996
<PAGE>
[PHOTO OF "FREE-STANDING PAPA JOHN'S RESTAURANT"]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE
ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company with the Commission can be inspected and
copied, at the prescribed rates, at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also
be obtained from the Commission at prescribed rates by addressing written
requests to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Company's Common Stock is traded on the
Nasdaq National Market. Reports, proxy statements and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-
3 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus, which is a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. The Registration Statement may be inspected, and copied at
prescribed rates, at the Commission's public reference facilities at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each
contract, agreement or other document, reference is made to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
(2) Form 10-C dated March 27, 1996; and
(3) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, effective as of June 8, 1993,
including any amendment filed for the purpose of updating such information.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
respective dates of the filing of such documents. See "Available Information."
Any statement or information contained in a document incorporated or deemed to
be incorporated herein by reference shall be deemed modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this Prospectus
is delivered, upon written or oral request, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to such
documents not specifically incorporated by reference). Requests should be
directed to Papa John's International, Inc., P.O. Box 99900, Louisville,
Kentucky 40269-9990, (502) 266-5200, Attention: E. Drucilla Milby, Senior Vice
President, Chief Financial Officer and Treasurer.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, financial statements and financial data appearing elsewhere in
this Prospectus or incorporated by reference herein. Unless otherwise noted,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. Unless the context requires otherwise, all references to
the "Company" in this Prospectus include Papa John's International, Inc. and
its subsidiaries. All share and per share data in this Prospectus have been
adjusted to reflect a 3-for-2 stock split effected in the form of a 50% stock
dividend effective March 25, 1996 for stockholders of record on March 12, 1996.
THE COMPANY
The Company operates and franchises pizza delivery and carry-out restaurants
under its primary trademark "Papa John's" in 25 states, principally in the
Midwest, Mid-Atlantic, South and Southeast. The first Company-owned restaurant
opened in 1985 and the first franchised restaurant opened in 1986. The Papa
John's system has grown from 110 restaurants at the end of fiscal 1991 to 932
restaurants at March 31, 1996, consisting of 230 Company-owned and 702
franchised restaurants.
Papa John's restaurants offer a focused menu of high quality, value-priced
pizza, breadsticks and cheesesticks. Papa John's original, medium thick crust
is made from fresh dough (never frozen) produced in the Company's regional
commissaries. Every pizza is prepared using real mozzarella cheese, pizza sauce
made from fresh-packed tomatoes (not concentrate), a proprietary mix of savory
spices and a choice of high quality meat and vegetable toppings in generous
portions. This focused menu and use of quality ingredients enables Papa John's
to concentrate on consistently "Delivering the Perfect Pizza!"(TM). Papa John's
restaurants are typically 1,200 to 1,500 square feet in size and are located in
strip shopping centers or free-standing buildings which provide visibility,
curb appeal and accessibility.
The Company's objective is to become the leading chain of pizza delivery
restaurants in each of its targeted markets. To accomplish this objective, the
Company has developed a strategy designed to achieve high levels of customer
satisfaction and repeat business. The key elements of this strategy include a
focused menu of high quality pizza and related items, an efficient operating
and distribution system, a commitment to employee training and development,
targeted, cost-effective marketing and the development of a strong franchise
system.
The Company believes its unit economics have been significantly better than
most restaurant concepts. During the 53 weeks ended December 31, 1995, the 133
Company-owned restaurants that were open throughout the year generated average
revenues of $657,000, average cash flow (operating income plus depreciation) of
$114,000 and average restaurant operating income of $93,000 (or 14.1% of
revenues). A significant number of these restaurants were opened in new
markets. Sales and profitability in the initial months of operations at the
Company's restaurants, particularly in new markets, historically have been
lower than mature restaurants. The average cash investment for the 61 Company-
owned restaurants opened during the year ended December 31, 1995 was
approximately $205,000, exclusive of land and pre-opening costs. The Company
opened a greater number of free-standing restaurants with increased signage
during 1994 and 1995 and expects to continue this strategy. The Company expects
the average cash investment for its restaurants opened in 1996 to approximate
1995 costs, although there can be no assurance that these costs will not
increase. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Restaurant Design and Site Selection."
The Company's commissary system supplies pizza dough, food products and paper
products twice weekly to each Company-owned and franchised restaurant in the
system. This commissary system enables the Company to closely monitor and
control product quality and consistency, while lowering food costs. The Company
operates full-service commissaries in Louisville, Kentucky, Raleigh, North
Carolina, Jackson, Mississippi and Orlando, Florida. The Company opened a
distribution center in Dallas, Texas during the first quarter of 1996 and
expects to open an additional full-service commissary in Denver, Colorado
during the second quarter of 1996. The Company also intends to open either a
distribution center or full-service commissary in Phoenix, Arizona during the
first quarter of 1997. In addition, the Company expects to begin construction
in mid-1996 of a new full-service commissary with additional dough capacity and
corporate office space in Louisville, Kentucky, for occupancy in mid-1997. The
Company provides its franchisees assistance with restaurant design and a
complete equipment package for new restaurants. This provides franchisees with
a convenient, cost-effective means of opening restaurants while ensuring a
consistent restaurant appearance throughout the system.
The Company's expansion strategy focuses on clustering restaurants in
targeted markets, thereby increasing consumer awareness and enabling the
Company to take advantage of operational, distribution and advertising
efficiencies. The Company believes these factors have contributed to increases
in comparable annual sales for Company-owned restaurants of 10.9%, 13.8% and
9.0% during 1993, 1994 and 1995, respectively. During 1995, the Company opened
61 restaurants and acquired 23 restaurants from its franchisees, and its
franchisees opened 190 restaurants. The Company plans to open 60 restaurants
and anticipates that its franchisees will open 215 restaurants in 1996, of
which 13 Company-owned and 43 franchised restaurants were opened during the
first quarter ending March 31, 1996.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company. 850,000 shares
Common Stock to be outstanding after 18,725,322 shares(1)
the offering.......................
Use of proceeds..................... To fund restaurant and commissary
expansion, construct office facilities, to
fund a franchise loan program and for
general corporate purposes.
Nasdaq National Market Symbol....... PZZA
</TABLE>
- -------
(1) Excludes 1,238,844 shares of Common Stock issuable upon the exercise of
stock options as of March 31, 1996.
SUMMARY CONSOLIDATED FINANCIAL AND RESTAURANT DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RESTAURANTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
------------------------------------------------
DEC. 31, DEC. 27, DEC. 26, DEC. 25, DEC. 31,
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................. $23,735 $49,628 $89,233 $161,535 $253,355
Operating income............... 853 3,126 6,067 10,064 15,819
Income before income taxes..... 768 3,112 6,314 11,382 17,729
Net income..................... 742 3,072 4,919 7,200 11,204
Net income per share........... $ 0.46 $ 0.67
Weighted average shares
outstanding................... 15,683 16,759
PRO FORMA INCOME STATEMENT
DATA(2):
Operating income............... $ 3,999 $ 6,222
Income before income taxes..... 3,985 6,468
Net income..................... 2,510 4,075
Net income per share........... $ 0.20 $ 0.30
Weighted average shares
outstanding................... 12,525 13,461
RESTAURANT DATA:
Percentage change in
comparable Company-owned
restaurant sales(3)........... 23.3% 11.9% 10.9% 13.8% 9.0%
Average sales for Company-
owned restaurants open for
full period................... $ 548 $ 607 $ 653 $ 663 $ 657
Number of restaurants open at
end of period:
Company-owned................. 26 39 76 133 217
Franchised.................... 84 181 324 499 661
------- ------- ------- -------- --------
Total........................ 110 220 400 632 878
======= ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................... $128,819 $163,231
Total debt, including current maturities.............. 2,510 2,510
Stockholders' equity.................................. 106,282 140,693
</TABLE>
- -------
(1) Effective January 1, 1992, the Company adopted a change in accounting
period from a 12-month fiscal year ending December 31 of each year to a 52-
53 week fiscal year ending on the last Sunday of December of each year. The
1995 fiscal year consisted of 53 weeks, and the 1994, 1993 and 1992 fiscal
years consisted of 52 weeks.
(2) Reflects the effect on the historical income statement data for the fiscal
years ended December 27, 1992 and December 26, 1993, assuming that (i) the
Company had been treated as a C corporation rather than an S corporation
for income tax purposes, with assumed combined federal, state and local
effective income tax rates aggregating 37% and (ii) the Company's
compensation program for the top three executive officers that was adopted
during 1993 had been in effect for all relevant periods which would have
reduced compensation expense by $872,788 and $154,412 for the fiscal years
ended December 27, 1992 and December 26, 1993, respectively. Information
for years prior to 1992 is not meaningful.
(3) Includes only Company-owned restaurants open throughout the periods being
compared.
(4) Adjusted to reflect the sale of the 850,000 shares of Common Stock by the
Company in this offering at an assumed public offering price of $42.75 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
UNAUDITED FIRST QUARTER 1996 RESULTS
Total revenues for the quarter ended March 31, 1996 were $76.7 million,
representing a 47.5% increase over revenues of $52.0 million for the same
period in 1995. Net income for the quarter ended March 31, 1996 was $3.5
million, or $0.20 per share, as compared to $2.2 million, or $0.14 per share,
for the first quarter of 1995.
Comparable store sales for the quarter ended March 31, 1996 reflected
increases of 8.6% for Company-owned restaurants and 5.1% for franchised
restaurants. During the quarter, 13 Company-owned and 43 franchised restaurants
were opened.
5
<PAGE>
THE COMPANY
The Company operates and franchises pizza delivery and carry-out restaurants
under the trademark "Papa John's" in 25 states, principally in the Midwest,
Mid-Atlantic, South and Southeast. The first Company-owned restaurant opened in
1985 and the first franchised restaurant opened in 1986. The Papa John's system
has grown from 110 restaurants at the end of fiscal 1991 to 932 restaurants at
March 31, 1996, consisting of 230 Company-owned and 702 franchised restaurants.
The Company was organized as an Indiana corporation in 1985 and was
reincorporated in Delaware in November 1991. The Company's principal executive
offices are located at 11492 Bluegrass Parkway, Suite 175, Louisville, Kentucky
40299-2334, and its telephone number is (502) 266-5200.
RISK FACTORS
In addition to the other information contained elsewhere in this Prospectus,
or incorporated herein by reference, prospective investors should consider the
following factors in evaluating an investment in the Common Stock offered
hereby:
EXPANSION
The Company has grown rapidly in recent periods and intends to continue to
pursue an aggressive growth strategy. The 60 Company-owned and 215 franchised
restaurants expected to be opened in the fiscal year ended December 31, 1996
(of which 13 Company-owned and 43 franchised restaurants had been opened
through March 31, 1996) represent the largest number of restaurants opened in
any fiscal year. The Company plans to open 65 to 70 restaurants and anticipates
that its franchisees will open 220 to 230 restaurants in 1997. There can be no
assurance that either the Company or its franchisees will be able to open the
number of restaurants planned to be opened by them or that such restaurants
will be opened on schedule. In the course of its expansion, the Company will
enter new geographic regions in which it has no previous operating experience.
The Company's continued growth will depend upon the ability of the Company
and its franchisees to open and operate additional restaurants profitably and
the Company's continued ability to attract and retain qualified franchisees.
The opening of new restaurants, both by the Company and franchisees, will
depend on a number of factors, many of which are beyond the control of the
Company and its franchisees. These factors include, among other things,
selection and availability of suitable locations, negotiation of acceptable
lease or financing terms, timely construction of restaurants, securing of
required governmental permits and approvals and employment and training of
qualified personnel. Opening of additional franchised restaurants will depend,
in part, upon the ability of existing and future franchisees to obtain
financing or investment capital adequate to meet their market development
obligations. The Company opened a distribution center in Dallas, Texas during
the first quarter of 1996 and expects to open an additional full-service
commissary in Denver, Colorado during the second quarter of 1996. The Company
also intends to open either a distribution center or full-service commissary in
Phoenix, Arizona during the first quarter of 1997. The ability of the Company
and its franchisees to expand into new geographic regions is dependent upon the
Company's ability to open and successfully operate additional commissaries and
distribution centers. There can be no assurance that the Company or its
franchisees will be successful in maintaining their levels of recent growth in
opening the number of restaurants anticipated, or that new restaurants opened
by the Company or its franchisees will be operated profitably. See "Business--
Expansion."
RESTAURANT INDUSTRY AND COMPETITION
The restaurant industry is highly competitive and is affected by changes in
consumer tastes, as well as national, regional and local economic conditions
and demographic trends. The performance of individual restaurants can be
affected by changes in traffic patterns, demographics and the type, number and
location of competing restaurants. The quick-service restaurant industry is
extremely competitive with respect to price, service, location and food
quality. The Company and its franchisees compete with a variety of other
restaurants in the quick-service restaurant industry, including those that
offer dine-in, carry-out and delivery services. These competitors include
national and regional chains, franchisees of other restaurant chains and
6
<PAGE>
local owner-operated restaurants. Many competitors have been in existence
longer and have a more established market presence and substantially greater
financial, marketing and other resources than the Company and its franchisees.
The Company competes for qualified franchisees with many other business
concepts, including national and regional restaurant chains. See "Business--
Competition."
A risk to the Company, as with other companies which offer delivery services,
is the potential for claims resulting from traffic accidents involving its
delivery personnel. The Company does not have, and has not in the past offered,
guaranteed delivery times nor does the Company penalize its drivers for late
deliveries. In addition, the Company believes that it promotes safety among its
delivery personnel through various measures, including conducting an education
and safety program for delivery personnel, checking driving records of delivery
personnel, limiting store delivery areas and offering safe driving awards. The
Company maintains excess liability coverage on its delivery drivers in an
amount believed by management to be adequate. However, a change in the cost or
availability of such insurance, or the incurrence of a significant number of
claims or liability in excess of policy limits, could adversely affect the
Company.
LIMITED OPERATING HISTORY
The Company opened its first restaurant in 1985 and has experienced rapid
growth in Company-owned and franchised restaurant openings, revenues and level
of operations. At December 31, 1995, 120 of the 217 Company-owned restaurants
(55.3%) and 359 of the 661 franchised restaurants (54.3%) had been open less
than two years. Consequently, operating results achieved to date may not be
indicative of the results that may be achieved by any existing or new
restaurants in the future. The Company has a limited operating history upon
which investors may evaluate the Company's performance and, although the
Company has been profitable since 1988, there can be no assurance that the
Company will be able to sustain profitability in the future.
DEPENDENCE UPON KEY PERSONNEL
Management of the Company is dependent on the continuing services of John
Schnatter, the Company's Founder, Chairman and Chief Executive Officer, and
other key personnel. The loss of the services of Mr. Schnatter or other key
personnel could have a material adverse effect on the Company's business.
INCREASES IN OPERATING COSTS; AVAILABILITY OF SUPPLIES
An increase in operating costs could adversely affect profitability of the
Company. Factors such as inflation, increased food costs, increased labor and
employee benefit costs and the availability of qualified management and hourly
employees may adversely affect operating costs. The Company currently purchases
all of its cheese, which represents approximately 40% of food costs, from one
supplier. However, the Company believes that alternative sources for the supply
of cheese are readily available. Cheese, as well as other commodities, are
subject to seasonal fluctuations, weather, demand and other factors. Most of
the factors affecting costs are beyond the control of the Company. The Company
maintains property, casualty and liability insurance on its business and
employees, including excess liability coverage on its delivery drivers.
Management believes its insurance coverages are adequate; however, a change in
the cost or availability of such insurance, or the incurrence of a significant
number of claims or liability in excess of policy limits, could adversely
affect the Company. In addition, the dependence on frequent deliveries of food
supplies, such as dough, cheese, pizza sauce and other products, to Company-
owned and franchised restaurants could subject those restaurants to shortages
or interruptions which could also adversely affect the Company.
CONTROL BY OFFICERS AND DIRECTORS
John Schnatter, the Company's Founder, Chairman and Chief Executive Officer,
will own 33.5% of the outstanding Common Stock after this offering. As a
result, Mr. Schnatter will have substantial control over matters requiring
approval by the stockholders of the Company, including the election of
directors. The Company's officers and directors will, in the aggregate,
beneficially own approximately 36.2% of the outstanding Common Stock after this
offering, including shares subject to currently exercisable options.
7
<PAGE>
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation ("Restated
Certificate") authorizes the issuance of one or more series of Preferred Stock,
the terms of which may be fixed by the Board of Directors. Additionally, the
Restated Certificate provides for a classified Board of Directors and limits
the ability of stockholders to call special meetings or to amend the Company's
Restated Certificate or By-Laws. The Restated Certificate also requires, among
other things, that certain business combinations be approved by either a
majority of the continuing directors or disinterested stockholders holding 75%
of the voting securities of the Company. Each of these provisions, as well as
the Delaware business combination statute to which the Company is subject,
could have the effect of delaying or preventing a change in control of the
Company.
GOVERNMENT REGULATION
The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and building and zoning requirements. Also, the Company and its
franchisees are subject to laws governing their relationship with employees,
including minimum wage requirements, overtime, working conditions and
citizenship requirements. The Company is also subject to federal regulation and
certain state laws which govern the offer and sale of franchises. Many state
franchise laws impose substantive requirements on the franchise agreement,
including limitations on non-competition provisions and termination or non-
renewal of a franchise. Some states require that certain materials be
registered before franchises can be offered or sold in that state. Bills have
been introduced in Congress (one of which is now pending) which provide for
federal regulation of substantive aspects of the franchisor-franchisee
relationship. As proposed, such legislation would limit, among other things,
the duration and scope of non-competition provisions, the ability of a
franchisor to terminate or refuse to renew a franchise and the ability of a
franchisor to designate sources of supply. The failure to obtain or retain food
licenses or approvals to sell franchises, or an increase in the minimum wage
rate, employee benefit costs or other costs associated with employees, could
adversely affect the Company and its franchisees. Some states have set minimum
wage requirements higher than the federal level, and there are currently bi-
partisan proposals in Congress to increase the federal minimum wage. At the
federal level, there have also been proposals to introduce a system of mandated
health insurance. These and other initiatives, if implemented, could adversely
affect the Company as well as the restaurant industry in general. See
"Business--Government Regulation."
STOCK PRICE VOLATILITY
The Company's Common Stock has been quoted on the Nasdaq National Market tier
of the Nasdaq Stock Market since June 8, 1993, and has experienced significant
price volatility since such date. Quarterly operating results of the Company or
other restaurant companies, changes in general conditions in the economy, the
restaurant industry, or the financial markets, or other developments affecting
the Company, its competitors or the financial markets, could cause the market
price of the Common Stock to fluctuate significantly. In addition, the stock
market has recently experienced extreme price and volume fluctuations. These
broad market fluctuations may adversely affect the market price of the Common
Stock. See "Price Range of Common Stock."
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 850,000 shares of Common
Stock offered hereby at an assumed public offering price of $42.75 per share
are estimated to be $34,411,469 ($39,603,189 if the Underwriters' over-
allotment option is exercised in full). The net proceeds of the offering will
be used primarily for the development of additional Company-owned restaurants,
commissaries and distribution centers, the construction of corporate office
facilities and to fund the implementation of a loan program for franchisees.
The Company plans to open 47 restaurants during the final three quarters of
1996 and 65 to 70 restaurants in 1997. The Company expects to open a full-
service commissary in Denver, Colorado during the second quarter of 1996 and
either a distribution center or full-service commissary in Phoenix, Arizona
during the first quarter of 1997. The Company expects to begin construction in
mid-1996 of a new full-service commissary with additional dough capacity and
corporate office space in Louisville, Kentucky. During each of 1996 and 1997,
the Company expects to fund approximately $6 to $8 million in loans to selected
franchisees under a recently adopted loan program. However, the amounts
actually provided during 1996 and 1997 may vary as the Company gains experience
with the loan program. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Business--Properties" and "Business--Franchise Program--Franchisee Loan
Program."
A portion of the net proceeds of the offering also may be used to acquire
restaurants from franchisees. Although the Company considers acquiring
franchised restaurants from time to time, the Company does not have any pending
agreements or arrangements for such acquisitions at the date of this
Prospectus. The remaining net proceeds will be used for general corporate
purposes. Pending such uses, the Company plans to invest the net proceeds in
investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company intends to retain any future earnings for use in its business and
does not intend to pay cash dividends on the Common Stock in the foreseeable
future. The payment of future dividends, if any, will be at the discretion of
the Company's Board of Directors and will depend upon, among other things,
future earnings, operations, capital requirements, restrictions in future
financing agreements, the general financial condition of the Company and
general business conditions.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock began trading on the Nasdaq National Market tier
of The Nasdaq Stock Market on June 8, 1993 under the trading symbol "PZZA." As
of March 31, 1996, there were approximately 450 record holders of Common Stock,
although the Company believes that the number of beneficial owners of its
Common Stock is substantially greater. The table below sets forth for the
calendar quarters indicated the reported high and low sale prices of the
Company's Common Stock, as reported on the Nasdaq National Market. All sale
prices have been adjusted to reflect a 3-for-2 stock split, effected in the
form of a 50% stock dividend, effective March 25, 1996 for stockholders of
record on March 12, 1996.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1994
First quarter............................................. $ 22.17 $16.50
Second quarter............................................ 20.00 14.00
Third quarter............................................. 19.67 15.83
Fourth quarter............................................ 21.67 16.00
1995
First quarter............................................. $ 25.00 $18.33
Second quarter............................................ 25.50 21.00
Third quarter............................................. 33.34 23.00
Fourth quarter............................................ 31.75 23.67
1996
First quarter............................................. $ 44.75 $25.21
Second quarter (through April 22, 1996)................... 44.75 38.50
</TABLE>
9
<PAGE>
On April 22, 1996, the last sale price of the Common Stock as reported on the
Nasdaq National Market was $42.75.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as of
December 31, 1995, and as adjusted to give effect to the issuance and sale by
the Company of 850,000 shares of Common Stock in this offering at an assumed
public offering price of $42.75 per share and the application of the net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt.......................................... $ -- $ --
======== ========
Long-term debt, including current maturities............. $ 2,510 $ 2,510
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 authorized;
no shares outstanding................................. -- --
Common stock, $.01 par value, 35,000,000 shares
authorized; 17,845,758 shares outstanding; 18,695,758
shares outstanding, as adjusted(1).................... 178 187
Additional paid-in capital............................. 88,133 122,535
Unrealized loss on investments (net)................... (263) (263)
Deferred compensation (net)............................ (4) (4)
Retained earnings...................................... 18,842 18,842
Reacquired treasury stock.............................. (604) (604)
-------- --------
Total stockholders' equity............................. 106,282 140,693
-------- --------
Total capitalization................................. $108,792 $143,203
======== ========
</TABLE>
- --------
(1) Excludes at December 31, 1995 (a) options to purchase 1,150,205 shares of
Common Stock, (b) 1,349,636 shares available for issuance under the
Company's 1993 Stock Ownership Incentive Plan (subject to stockholder
approval of an amendment increasing the number of shares reserved for
issuance under the plan to 2,325,000) and (c) 91,500 shares available for
issuance under the Company's 1993 Stock Option Plan for Non-Employee
Directors.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected consolidated financial data of Papa
John's International, Inc. and its subsidiaries. The selected consolidated
income statement and balance sheet data of the Company are derived from the
Company's Consolidated Financial Statements which have been audited by Ernst &
Young LLP, independent auditors. The pro forma consolidated income statement
data for the fiscal years ended December 27, 1992 and December 26, 1993, set
forth below, are unaudited.
The Selected Consolidated Financial Data set forth below should be read in
conjunction with, and are qualified in their entirety by, the Consolidated
Financial Statements and related Notes and other financial information included
elsewhere in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
-----------------------------------------------
DEC. 31, DEC. 27, DEC. 26, DEC. 25, DEC. 31,
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Restaurant sales................. $11,916 $20,033 $32,505 $ 66,267 $111,747
Franchise royalties.............. 891 2,481 5,290 9,163 13,561
Franchise and development fees... 659 1,374 2,379 3,274 3,508
Commissary sales................. 7,608 20,684 41,013 67,515 105,874
Equipment and other sales........ 2,661 5,056 8,046 15,316 18,665
------- ------- ------- -------- --------
Total revenues................. 23,735 49,628 89,233 161,535 253,355
Costs and expenses:
Restaurant expenses:
Cost of sales.................... 3,209 5,561 9,334 19,095 31,703
Salaries and benefits............ 3,266 5,321 8,855 18,168 29,946
Advertising and related costs.... 941 1,559 2,452 5,887 10,513
Occupancy costs.................. 461 766 1,357 3,358 5,896
Other operating expenses......... 1,734 2,617 4,872 10,011 14,913
------- ------- ------- -------- --------
9,611 15,824 26,870 56,519 92,971
Commissary, equipment and other
expenses:
Cost of sales.................... 8,621 21,702 41,571 68,745 101,342
Salaries and benefits............ 570 884 1,966 3,956 7,072
Other operating expenses......... 673 1,836 3,307 4,881 7,577
------- ------- ------- -------- --------
9,864 24,422 46,844 77,582 115,991
General and administrative
expenses......................... 3,034 5,494 7,601 12,266 19,954
Depreciation...................... 316 721 1,435 3,367 5,776
Amortization...................... 57 41 416 1,737 2,844
------- ------- ------- -------- --------
Total costs and expenses....... 22,882 46,502 83,166 151,471 237,536
------- ------- ------- -------- --------
Operating income.................. 853 3,126 6,067 10,064 15,819
Other income (expense):
Investment income................ 13 67 247 1,156 1,659
Interest expense................. (112) (100) (35) -- --
Other, net....................... 14 19 35 162 251
------- ------- ------- -------- --------
Income before income taxes........ 768 3,112 6,314 11,382 17,729
Income tax expense................ 26 40 1,395 4,182 6,525
------- ------- ------- -------- --------
Net income........................ $ 742 $ 3,072 $ 4,919 $ 7,200 $ 11,204
======= ======= ======= ======== ========
Net income per share.............. $ 0.46 $ 0.67
Weighted average shares
outstanding...................... 15,683 16,759
PRO FORMA INCOME STATEMENT
DATA(2):
Operating income.................. $ 3,999 $ 6,222
Income before income taxes........ 3,985 6,468
Income tax expense................ 1,475 2,393
------- -------
Net income........................ $ 2,510 $ 4,075
======= =======
Net income per share.............. $ 0.20 $ 0.30
Weighted average shares
outstanding...................... 12,525 13,461
BALANCE SHEET DATA (END OF
PERIOD):
Total assets...................... $ 5,291 $ 7,852 $27,789 $ 76,173 $128,819
Total debt, including current
maturities....................... 1,431 1,161 0 1,279 2,510
Stockholders' equity.............. 1,045 2,418 19,269 62,609 106,282
</TABLE>
11
<PAGE>
- --------
(1) Effective January 1, 1992, the Company adopted a change in accounting
period from a 12-month fiscal year ending December 31 of each year to a 52-
53 week fiscal year ending on the last Sunday of December of each year. The
1995 fiscal year consisted of 53 weeks, and the 1994, 1993 and 1992 fiscal
years consisted of 52 weeks.
(2) Reflects the effect on the historical income statement data for the fiscal
years ended December 27, 1992 and December 26, 1993, assuming that (i) the
Company had been treated as a C corporation rather than an S corporation
for income tax purposes, with assumed combined federal, state and local
effective income tax rates aggregating 37% and (ii) the Company's
compensation program for the top three executive officers that was adopted
during 1993 had been in effect for all relevant periods which would have
reduced compensation expense by $872,788 and $154,412 for the fiscal years
ended December 27, 1992 and December 26, 1993, respectively. Information
for years prior to 1992 is not meaningful.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company began operations in 1985 with the opening of its first Papa
John's restaurant in Jeffersonville, Indiana. At March 31, 1996, there were 932
Papa John's restaurants in operation, consisting of 230 Company-owned and 702
franchised restaurants. The Company's revenues are derived from sales by
Company-owned restaurants, franchise royalties, franchise and development fees,
sales of food and paper products to franchisees, and sales of restaurant
equipment and printing and promotional items principally to franchisees.
The Company intends to continue to expand the number of Company-owned and
franchised restaurants. The Company's expansion strategy is to cluster
restaurants in targeted markets, thereby increasing consumer awareness and
enabling the Company to take advantage of operational, distribution and
advertising efficiencies. The Company believes that its expansion strategy has
contributed to increases in comparable annual sales for Company-owned
restaurants of 9.0% in 1995, 13.8% in 1994 and 10.9% in 1993. The Company
anticipates that future comparable sales increases, if any, will be at a lesser
rate than in recent periods. Average sales for Company-owned restaurants open a
full year decreased to $657,000 for 1995 from $663,000 for 1994, principally
due to the Company's entry into several new markets beginning in 1994. Average
sales volumes in new markets are generally lower than those markets in which
the Company has established a significant market position.
Approximately 49% of the Company's revenues for 1995 and 51% for 1994 were
derived from the sale of food and paper products, restaurant equipment and
printing and promotional items to franchisees by the Company's commissary
subsidiary, PJ Food Service, Inc., and the Company's support services
subsidiary, Printing & Promotions, Inc. The Company believes that, in addition
to supporting both Company and franchised growth, these subsidiaries contribute
to product quality and consistency throughout the Papa John's system.
The Company continually strives to obtain high quality sites with greater
access and visibility, and to enhance the appearance and quality of its
restaurants. The Company believes that these factors improve Papa John's image
and brand awareness. During 1994 and 1995, the Company pursued a greater number
of free-standing locations and expects to continue this strategy in 1996.
The average cash investment for the 61 restaurants opened during 1995,
exclusive of land and pre-opening costs, increased to approximately $205,000
from $146,000 for the 53 units opened in 1994. This increase was primarily due
to higher average costs of free-standing units, increased signage and leasehold
improvement costs and hardware and related costs associated with point of sale
technology installed in substantially all Company-owned restaurants opened in
1995. Sales at free-standing restaurants generally exceed sales at in-line
restaurants. During their first 13 weeks of operations, the 20 free-standing
restaurants opened by the Company during 1995 had average weekly sales of
approximately $12,300, 29.5% higher than average weekly sales at the 41 in-line
restaurants opened by the Company during the same period. The Company expects
the average cash investment for its restaurants opened in 1996 to approximate
1995 costs, although there can be no assurance that these costs will not
increase.
Pre-opening costs are capitalized and amortized on a straight-line basis over
a period of one year from the opening date of the restaurant or commissary
facility. The Company defers certain costs incurred in connection with the
development of its information systems, and amortizes such costs over periods
of up to five years from the date of completion.
This Prospectus contains forward-looking statements which involve risks and
uncertainties relating to future events. Prospective investors are cautioned
that the Company's actual events or results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
actual
13
<PAGE>
results to differ materially from those indicated by such forward-looking
statements include the matters set forth under the caption "Risk Factors."
The Company operated as a Subchapter S Corporation through June 6, 1993. As
such, the earnings of the Company were taxed for federal and certain state
income tax purposes directly to the Company's stockholders. Beginning June 7,
1993, the Company became subject to state and federal income taxes. The
Company's fiscal year ends on the last Sunday in December of each year. The
1995 fiscal year consisted of 53 weeks and the 1994 and 1993 fiscal years
consisted of 52 weeks.
UNAUDITED FIRST QUARTER 1996 RESULTS
Total revenues for the quarter ended March 31, 1996 were $76.7 million,
representing a 47.5% increase over revenues of $52.0 million for the same
period in 1995. Net income for the quarter ended March 31, 1996 was $3.5
million, or $0.20 per share, as compared to $2.2 million, or $0.14 per share,
for the first quarter of 1995.
Comparable store sales for the quarter ended March 31, 1996 reflected
increases of 8.6% for Company-owned restaurants and 5.1% for franchised
restaurants. During the quarter, 13 Company-owned and 43 franchised restaurants
were opened.
RESULTS OF OPERATIONS
The following tables set forth the percentage relationship to total revenues,
unless otherwise indicated, of certain income statement data and certain
restaurant data for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
DEC. 26, DEC. 25, DEC. 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Restaurant sales................................... 36.4% 41.0% 44.1%
Franchise royalties................................ 5.9 5.7 5.3
Franchise and development fees..................... 2.7 2.0 1.4
Commissary sales................................... 46.0 41.8 41.8
Equipment and other sales.......................... 9.0 9.5 7.4
----- ----- -----
Total revenues................................... 100.0 100.0 100.0
Costs and expenses:
Restaurant cost of sales(1)........................ 28.7 28.8 28.4
Restaurant operating expenses(1)................... 53.9 56.5 54.8
Commissary, equipment and other expenses(2)........ 95.5 93.7 93.1
General and administrative expenses(3)............. 8.3 7.6 7.9
Depreciation and amortization...................... 2.1 3.2 3.4
Total costs and expenses(3)...................... 93.0 93.8 93.8
----- ----- -----
Operating income(3).................................. 7.0 6.2 6.2
Other income:
Investment income.................................. 0.3 0.7 0.7
Other.............................................. 0.0 0.1 0.1
----- ----- -----
Income before income taxes(3)........................ 7.3 7.0 7.0
Income tax expense(3)................................ 2.7 2.5 2.6
----- ----- -----
Net income(3)...................................... 4.6% 4.5% 4.4%
===== ===== =====
</TABLE>
Notes on following page.
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
DEC. 26, DEC. 25, DEC. 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
RESTAURANT DATA:
Percentage increase in comparable Company-owned
restaurant sales(4)............................. 10.9% 13.8% 9.0%
Average sales for Company-owned restaurants open
full year....................................... $653,000 $663,000 $657,000
Number of Company-owned restaurants:
Beginning of period............................ 39 76 133
Opened......................................... 32 53 61
Acquired(5).................................... 5 4 23
-------- -------- --------
End of period.................................. 76 133 217
-------- -------- --------
Number of franchised restaurants:
Beginning of period............................ 181 324 499
Opened......................................... 148 180 190
Closed......................................... 0 (1) (5)
Sold to Company(5)............................. (5) (4) (23)
-------- -------- --------
End of period.................................. 324 499 661
-------- -------- --------
Total restaurants--end of period................. 400 632 878
======== ======== ========
</TABLE>
- --------
(1) As a percentage of restaurant sales.
(2) As a percentage of commissary sales and equipment and other sales on a
combined basis.
(3) Percentages for 1993 are presented on a pro forma basis, assuming that the
Company had been treated as a C Corporation rather than an S Corporation
for income tax purposes, and the Company's compensation program for the top
three executive officers that was adopted during 1993 had been in effect
for the entire year.
(4) Includes only Company-owned restaurants open throughout the periods being
compared.
(5) The number for 1994 is reduced by one restaurant sold by the Company to a
franchisee.
1995 COMPARED TO 1994
Revenues. Total revenues increased 56.8% to $253.4 million in 1995, from
$161.5 million in 1994.
Restaurant sales increased 68.6% to $111.7 million in 1995, from $66.3
million in 1994. This increase was primarily due to a 58.3% increase in the
number of equivalent Company-owned restaurants open during 1995 as compared to
1994. "Equivalent restaurants" represent the number of restaurants open at the
beginning of a given period, adjusted for restaurants opened or acquired during
the period on a weighted average basis. Also, comparable sales increased 9.0%
in 1995 over 1994, for Company-owned restaurants open throughout both years.
Franchise royalties increased 48.0% to $13.6 million in 1995, from $9.2
million in 1994. This increase was primarily due to a 44.7% increase in the
number of equivalent franchised restaurants open during 1995 as compared to
1994. Also, comparable sales increased 7.8% in 1995 over 1994, for franchised
restaurants open throughout both years.
Franchise and development fees increased 7.2% to $3.5 million in 1995, from
$3.3 million in 1994. This increase was primarily due to the 190 franchised
restaurants opened during 1995, as compared to 180 opened during 1994, an
increase of 5.6%.
Commissary sales increased 56.8% to $105.9 million in 1995, from $67.5
million in 1994. This increase was primarily due to the increase in equivalent
franchised restaurants and comparable sales for franchised restaurants noted
above. Additionally, sales for the Orlando commissary increased in 1995 as
compared to 1994 due to its conversion from a dough production facility to a
full-service commissary in August 1995.
15
<PAGE>
Equipment and other sales increased 21.9% to $18.7 million in 1995, from
$15.3 million in 1994. This increase was primarily due to the increase in
equivalent franchised restaurants open during 1995 as compared to 1994, the
increase in franchised restaurants opened during 1995 as compared to 1994 and a
full year of operations in 1995 by the Company's Printing & Promotions, Inc.
subsidiary. This subsidiary was established in March 1994, following the
Company's purchase of the assets of QC, Inc., a printing company which provided
printed marketing materials for the Company and many of its franchisees.
Costs and Expenses. Restaurant cost of sales, which consist of food, beverage
and paper costs, decreased as a percentage of restaurant sales to 28.4% in
1995, from 28.8% in 1994. This decrease was primarily due to lower product
costs resulting from increased purchasing power and the impact of a severe
winter storm which disrupted normal commissary distribution activities for
several days during the first quarter of 1994 and required many of the
Company's restaurants to utilize alternative, higher-cost suppliers during that
period.
Advertising and related costs increased as a percentage of restaurant sales
to 9.4% in 1995, from 8.9% in 1994. This increase was primarily due to
increased levels of advertising during 1995, including promotions related to
the Company's 10th Anniversary Celebration and the introduction of thin crust
pizza in test markets, as well as the establishment of local advertising
cooperatives as newer markets matured.
Occupancy costs were relatively consistent as a percentage of restaurant
sales at 5.3% in 1995, as compared to 5.1% in 1994.
Restaurant salaries and benefits decreased as a percentage of restaurant
sales to 26.8% in 1995, from 27.4% in 1994. Other restaurant operating expenses
decreased as a percentage of restaurant sales to 13.4% in 1995, from 15.1% in
1994. Other operating expenses include all other restaurant-level operating
costs, the material components of which are automobile mileage reimbursement
for delivery drivers, telephone costs, training costs and workers compensation
insurance. Other operating expenses also include an allocation of commissary
operating expenses equal to 3% of Company-owned restaurant sales in order to
assess a portion of the costs of dough production and food and equipment
purchasing and storage to Company-owned restaurants.
The decreases in restaurant salaries and benefits and other restaurant
operating expenses as a percentage of restaurant sales were primarily due to a
smaller relative number of new restaurants opened during 1995 (61 new
restaurants in relation to 133 existing restaurants, or 45.9%) compared to 1994
(53 new restaurants in relation to 76 existing restaurants, or 69.7%).
Restaurant operating expenses historically have been higher as a percentage of
restaurant sales in the early months of operations of new restaurants.
Commissary, equipment and other expenses include cost of sales and operating
expenses associated with sales of food, paper, equipment, printing and
promotional items to franchisees and other customers. These costs decreased as
a percentage of combined commissary sales and equipment and other sales to
93.1% in 1995, from 93.7% in 1994. This decrease was primarily due to increased
commissary volumes and efficiencies (particularly at the Jackson commissary
which was opened in May 1994, and accordingly had relatively higher costs in
1994 as compared to 1995), partially offset by the relatively higher costs
associated with the start-up of the new Orlando commissary opened in August
1995.
General and administrative expenses increased as a percentage of total
revenues to 7.9% in 1995, from 7.6% in 1994. This increase was primarily due to
the hiring of additional corporate and restaurant management personnel as the
Company continues to develop the infrastructure necessary to support its
planned growth for 1996 and beyond.
Depreciation and amortization increased as a percentage of total revenues to
3.4% in 1995, from 3.2% in 1994. This increase was primarily due to additional
capital expenditures by the Company, the amortization of intangibles related to
acquisitions and the amortization of deferred pre-opening costs for newly-
opened restaurants and commissaries and other deferred expenses, partially
offset by the impact of a change in the
16
<PAGE>
depreciable lives of certain restaurant equipment and signage effective at the
beginning of the third quarter of 1995 to more accurately reflect the economic
lives of such assets. The estimated useful life for ovens and certain other
restaurant equipment was extended from five to seven years, and the estimated
useful life for restaurant signage was extended from five to ten years.
Investment Income. Investment income increased to $1.7 million in 1995, from
$1.2 million in 1994. Average investment balances increased during 1995,
compared to 1994, as a result of the investment by the Company of the net
proceeds of public stock offerings in January and November 1994 and August
1995.
Income Tax Expense. Income tax expense reflects a combined federal, state and
local effective income tax rate of 36.8% in 1995, as compared to 36.7% in 1994.
This increase was primarily due to the impact of higher federal and state
statutory income tax rates in 1995 due to higher taxable income levels,
substantially offset by the impact of tax-exempt income generated by the
investment portfolio during 1995.
1994 COMPARED TO 1993
Revenues. Total revenues increased 81.0% to $161.5 million in 1994, from
$89.2 million in 1993.
Restaurant sales increased 103.9% to $66.3 million in 1994, from $32.5
million in 1993. This increase was primarily due to a 106.7% increase in the
number of equivalent Company-owned restaurants open during 1994 as compared to
1993. Also, comparable sales increased 13.8% in 1994 over 1993, for Company-
owned restaurants open throughout both years.
Franchise royalties increased 73.2% to $9.2 million in 1994, from $5.3
million in 1993. This increase was primarily due to a 63.9% increase in the
number of equivalent franchised restaurants open during 1994 as compared to
1993. Also, comparable sales increased 12.3% in 1994 over 1993, for franchised
restaurants open throughout both years.
Franchise and development fees increased 37.6% to $3.3 million in 1994, from
$2.4 million in 1993. This increase was primarily due to the 180 franchised
restaurants opened during 1994, as compared to 148 opened during 1993, an
increase of 21.6%, and an increase in the per unit franchise and development
fees related to franchised restaurants opened during 1994.
Commissary sales increased 64.6% to $67.5 million in 1994, from $41.0 million
in 1993. This increase was primarily due to the increases in equivalent
franchised restaurants and comparable sales for franchised restaurants noted
above. Equipment and other sales increased 90.4% to $15.3 million in 1994, from
$8.0 million in 1993. This increase was primarily due to the increase in
equivalent franchised restaurants open during 1994 as compared to 1993, the
increase in franchised restaurants opened during 1994 as compared to 1993 and
sales of $4.2 million generated by the Company's Printing & Promotions, Inc.
subsidiary in 1994.
Costs and Expenses. Restaurant cost of sales increased slightly as a
percentage of restaurant sales to 28.8% in 1994, from 28.7% in 1993. These
costs were somewhat higher in early 1994 due to a severe winter storm during
the first quarter which disrupted normal commissary distribution activities for
several days and required many of the Company's restaurants to utilize
alternative, higher-cost suppliers during this period.
Advertising and related costs increased as a percentage of restaurant sales
to 8.9% in 1994, from 7.5% in 1993. This increase was primarily due to
increased levels of advertising during 1994, as local advertising cooperatives
were established in maturing markets.
Occupancy costs increased as a percentage of restaurant sales to 5.1% in
1994, from 4.2% in 1993. This increase was primarily due to the majority of
restaurants opened during 1994 being in newer markets where rent and other
occupancy costs were higher than existing markets.
17
<PAGE>
Restaurant salaries and benefits increased as a percentage of restaurant
sales to 27.4% in 1994, from 27.2% in 1993. Other restaurant operating expenses
increased as a percentage of restaurant sales to 15.1% in 1994, from 15.0% in
1993. The increases in restaurant salaries and benefits and other restaurant
operating expenses as a percentage of restaurant sales were primarily due to an
increased percentage of Company-owned restaurants opening in new markets during
1994, as compared to 1993. Restaurant operating expenses historically have been
higher as a percentage of restaurant sales in the early months of operations of
new restaurants, particularly as new markets are being developed. Of the 53
Company-owned restaurants opened during 1994, only five were in the Company's
most mature markets of Louisville, Lexington and Nashville. The remainder were
in new markets, including Baltimore and St. Louis, or emerging markets such as
Atlanta and Charlotte.
Commissary, equipment and other expenses decreased as a percentage of
combined commissary sales and equipment and other sales to 93.7% in 1994, from
95.5% in 1993. This decrease was primarily due to increased operating
efficiencies in the Louisville commissary and the addition of relatively higher
margin sales of printing and promotional items during 1994, partially offset by
relatively higher costs during the early months of operations of the
commissaries in Raleigh, North Carolina and Jackson, Mississippi.
General and administrative expenses decreased as a percentage of total
revenues to 7.6% during 1994, from 8.3% (pro forma) during 1993. This decrease
was primarily due to the use of existing organizational infrastructure in 1994
while new Company-owned and franchised restaurants were opened.
Depreciation and amortization increased as a percentage of total revenues to
3.2% during 1994, from 2.1% during 1993. This increase was primarily due to
additional capital expenditures by the Company, the amortization of intangibles
related to acquisitions and the amortization of deferred pre-opening costs for
newly-opened restaurants and commissaries.
Investment Income. Investment income increased to $1.2 million in 1994, from
$247,000 in 1993. Average investment balances increased significantly during
1994, compared to 1993, as a result of the investment by the Company of the net
proceeds of its three public offerings of Common Stock in June 1993, January
1994 and November 1994.
Income Tax Expense. Income tax expense reflects a combined federal, state and
local effective tax rate of approximately 36.7% in 1994, as compared to a pro
forma rate of 37.0% in 1993. Actual income tax expense for 1993 reflects a
combined effective tax rate of only 22.1% due to the Company's conversion from
an S Corporation to a C Corporation in June 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the development and acquisition of
restaurants, the addition of new commissary and support services facilities and
equipment and the enhancement of corporate systems and facilities. Total
capital expenditures for 1995 were approximately $33.1 million, including
approximately $11.3 million for the opening of Company-owned restaurants, $7.3
million for development of a new commissary in Orlando, Florida, $3.5 million
for equipment and leasehold improvements at existing commissaries and
restaurants, $3.2 million for installing point of sale technology in existing
restaurants, $2.3 million for printing and other equipment for the Company's
Printing & Promotions, Inc. subsidiary, $1.5 million for completion of the
support services building, $1.5 million for land and improvements for
development of restaurants and other facilities and $2.5 million for corporate
office and other purposes.
During 1995, the Company acquired eight franchised restaurants in purchase
transactions for a total acquisition price of approximately $2.0 million,
consisting of $773,000 in cash, $574,000 in credits toward future development
and franchise fees and $650,000 in common stock of the Company (36,113 shares
valued as of the date the purchase price was fixed). Also during 1995, the
Company acquired fifteen franchised restaurants in transactions accounted for
as poolings-of-interests, with a total value of approximately $6.0
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million (230,720 shares of Company common stock were exchanged, valued as of
the dates the exchange ratios were fixed). Approximately $1.2 million of long-
term debt was retired by the Company in connection with these pooling
transactions.
The Company has funded its requirements for capital principally through
internally generated funds and the proceeds from four public offerings of
Common Stock. Cash provided by operating activities was $12.0 million in 1995.
The Company received $30.0 million in net proceeds from the sale of Common
Stock in a public offering in August 1995.
Capital expenditures are expected to be approximately $34 million for fiscal
1996 and $35 to $45 million for fiscal 1997. Capital expenditures for 1996 will
be primarily for the development of restaurants and the construction of new
commissary and distribution facilities in Dallas, Texas (opened in March 1996),
Denver, Colorado and Phoenix, Arizona. The Company also expects to begin
construction during mid-1996 of a 150,000 to 200,000 square foot facility in
Louisville, Kentucky, scheduled for completion in mid-1997, approximately one-
half of which will accommodate relocation and expansion of the Louisville
commissary facility and the remainder of which will accommodate relocation and
consolidation of corporate offices. In addition, during each of 1996 and 1997
the Company expects to provide approximately $6 to $8 million in loans to
selected franchisees under a loan program recently adopted by the Company.
However, the amounts actually provided during 1996 and 1997 may vary as the
Company gains experience with the loan program. See "Business--Franchise
Program--Franchisee Loan Program." Capital resources available at December 31,
1995 include $44.3 million of cash and investments and $7.6 million available
under a line of credit expiring June 29, 1996. The Company expects to fund its
planned capital expenditures through 1997 from these resources, the net
proceeds to the Company from this offering and cash generated from operations.
IMPACT OF INFLATION
The Company does not believe inflation has materially affected earnings
during the past three years. Substantial increases in costs, particularly
labor, employee benefits or food costs, could have a significant impact on the
Company.
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BUSINESS
The Company operates and franchises pizza delivery and carry-out restaurants
under the trademark "Papa John's" in 25 states, principally in the Midwest,
Mid-Atlantic, South and Southeast. The first Company-owned restaurant opened in
1985 and the first franchised restaurant opened in 1986. The Papa John's system
has grown from 110 restaurants at the end of fiscal 1991 to 932 restaurants at
March 31, 1996, consisting of 230 Company-owned and 702 franchised restaurants.
STRATEGY
The Company's objective is to become the leading chain of pizza delivery
restaurants in each of its targeted markets. To accomplish this objective, the
Company has developed a strategy designed to achieve high levels of customer
satisfaction and repeat business, as well as to establish recognition and
acceptance of the Papa John's concept. The key elements of the Company's
strategy include:
Focused, High Quality Menu. Papa John's restaurants offer a focused menu of
high quality, value-priced pizza, breadsticks and cheesesticks. Papa John's
original, medium thick crust is made from fresh dough (never frozen) produced
in the Company's four regional commissaries. Every pizza is prepared using real
mozzarella cheese, pizza sauce made from fresh-packed tomatoes (not
concentrate), a proprietary mix of savory spices and a choice of high quality
meat and vegetable toppings in generous portions. The Company believes its
focused menu creates a strong identity in the marketplace and simplifies
operations.
Efficient Operating System. The Company believes that its operating and
distribution systems, restaurant layout and designated delivery areas result in
lower operating costs, improved food quality and superior customer service. The
Company's commissary and distribution system takes advantage of volume
purchasing of food and supplies, and provides consistency and efficiencies of
scale in dough production. This eliminates the need for each restaurant to
order food from multiple vendors and commit substantial labor and other
resources to dough preparation. Because Papa John's restaurants have a focused
menu and specialize in delivery and carry-out services, each employee can
concentrate on a well-defined function in preparing and delivering the
customer's order.
Commitment to Employee Training and Development. The Company is committed to
the development and motivation of its employees through on-going training
programs, incentive compensation and opportunities for advancement. Employee
training programs for the Company and its franchisees are conducted at ten
regional training centers. The Company offers financial and stock incentives to
employees at various levels based on the achievement of performance goals. The
Company's growth also provides significant opportunities for advancement. The
Company believes these factors create an entrepreneurial spirit through the
organization, resulting in a positive work environment and motivated, customer-
oriented employees.
Targeted, Cost-Effective Marketing. The Company's restaurant-level marketing
programs target the delivery area of each restaurant, making extensive use of
distinctive print materials in direct mail and store-to-door couponing. Local
marketing efforts also include a variety of community-oriented activities with
schools, sports teams and other organizations. In an increasing number of
markets in which the Company or its franchisees have a significant presence,
local marketing efforts are supplemented with radio and television advertising.
Management believes that its marketing programs are cost-effective and
significantly increase consumer awareness of Papa John's restaurants.
Franchise System. The Company is committed to developing a strong franchise
system by attracting experienced operators, expanding in a controlled manner
and ensuring that each franchisee adheres to the Company's high standards. The
Company seeks to attract franchisees with experience in multi-unit restaurant
operations and with the financial resources and management capability to open
and operate multiple restaurants. To ensure consistent food quality, each
franchisee is required to purchase dough and spice mix from the Company and all
other supplies either from the Company or its approved suppliers. The Company
devotes significant resources to provide its franchisees with assistance in
employee training, marketing, site selection and store design.
20
<PAGE>
UNIT ECONOMICS
The Company believes its unit economics have been significantly better than
most restaurant concepts. During the 53 weeks ended December 31, 1995, the 133
Company-owned restaurants that were open throughout the year generated average
revenues of $657,000, average cash flow (operating income plus depreciation) of
$114,000 and average restaurant operating income of $93,000 (or 14.1% of
revenues). A significant number of these restaurants were opened in new
markets. Sales and profitability in the initial months of operations at the
Company's restaurants, particularly in new markets, historically have been
lower than mature restaurants. The average cash investment for the 61 Company-
owned restaurants opened during the year ended December 31, 1995 was
approximately $205,000. This cash investment includes equipment, leasehold
improvements, fixtures and signage, but excludes land and pre-opening costs.
The Company opened a greater number of free-standing restaurants with increased
signage during 1994 and 1995 and expects to continue this strategy. Sales at
free-standing restaurants generally exceed sales at in-line restaurants. During
their first 13 weeks of operations, the 20 free-standing restaurants opened by
the Company during 1995 had average weekly sales of approximately $12,300,
29.5% higher than average weekly sales at the 41 in-line restaurants opened by
the Company during the same period. The Company expects the average cash
investment for restaurants opened in 1996 to approximate 1995 costs, although
there can be no assurance that these costs will not increase. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Restaurant Design and Site Selection." The Company leases the
majority of its properties and expects to continue to lease, rather than own,
most of its properties. Most leases are for five years or less and contain
renewal options.
EXPANSION
A total of 251 restaurants were opened during 1995, consisting of 61 Company-
owned and 190 franchised restaurants. In addition, the Company acquired 23
restaurants from its franchisees in 1995. The Company plans to open 60
restaurants and anticipates that its franchisees will open 215 restaurants in
1996, of which 13 Company-owned and 43 franchised restaurants were opened
during the first quarter ending March 31, 1996. The Company plans to open 65 to
70 restaurants and anticipates that its franchisees will open 220 to 230
restaurants in 1997. There can be no assurance that either the Company or its
franchisees will be able to open the number of restaurants planned to be opened
by them or that such restaurants will be opened on schedule. The Company
intends to open additional restaurants in Florida, Georgia, Indiana, Maryland,
Missouri, North Carolina, Texas and northern Virginia/Washington, D.C., as well
as to begin opening restaurants in Colorado during 1996. In addition, as part
of its growth strategy, the Company will continue to consider acquiring
franchised restaurants. Franchise expansion during 1996 and 1997 will be
directed primarily east of the Rockies (excluding the upper Northeast) and in
the Southwest.
The Company's expansion strategy is to cluster restaurants in targeted
markets, thereby increasing consumer awareness and enabling the Company to take
advantage of operational, distribution and advertising efficiencies. The
Company's experience in developing markets indicates that market penetration
through the opening of multiple restaurants within a particular market results
in increased average restaurant sales in that market. To accelerate penetration
of larger markets, the Company has co-developed markets with franchisees or
divided markets among franchisees, and will continue to utilize market co-
development in the future where appropriate. In determining which new markets
to develop, the Company considers many factors, including the size of the
market, demographics and population trends, competition, and real estate
availability and pricing. Before entering any market with Company-owned or
franchised restaurants, the Company analyzes detailed information of these
factors and each market is toured and evaluated by senior management.
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<PAGE>
RESTAURANT LOCATIONS
Company-owned Restaurants. The following table sets forth the location and
number of Company-owned restaurants as of March 31, 1996 (exclusive of four
restaurants under construction at such date):
<TABLE>
<CAPTION>
NUMBER OF
LOCATION RESTAURANTS
-------- -----------
<S> <C>
Atlanta, Georgia.............................................. 47
Baltimore, Maryland........................................... 31
Nashville, Tennessee.......................................... 27
Louisville, Kentucky.......................................... 21
Charlotte, North Carolina..................................... 21
Orlando/Central Florida....................................... 15
Indianapolis, Indiana......................................... 13
St. Louis/Columbia, Missouri.................................. 11
Lexington, Kentucky........................................... 11
Ft. Lauderdale/Miami, Florida................................. 12
Austin/Fort Worth, Texas...................................... 9
Northern Virginia............................................. 8
Tallahassee, Florida.......................................... 4
---
Total Company-owned Restaurants........................... 230
===
</TABLE>
Franchised Restaurants. The following table sets forth the number of
franchised restaurants open in each state as of March 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF
LOCATION RESTAURANTS
-------- -----------
<S> <C>
Alabama....................................................... 31
Arkansas...................................................... 12
Florida....................................................... 98
Georgia....................................................... 32
Illinois...................................................... 29
Indiana....................................................... 53
Iowa.......................................................... 1
Kansas........................................................ 3
Kentucky...................................................... 42
Louisiana..................................................... 19
Maryland...................................................... 5
Michigan...................................................... 8
Minnesota..................................................... 6
Mississippi................................................... 9
Missouri...................................................... 12
Nebraska...................................................... 1
North Carolina................................................ 33
Ohio.......................................................... 113
Pennsylvania.................................................. 18
South Carolina................................................ 23
Tennessee..................................................... 35
Texas......................................................... 47
Virginia...................................................... 53
West Virginia................................................. 13
Wisconsin..................................................... 6
---
Total Franchised Restaurants.............................. 702
===
</TABLE>
22
<PAGE>
MENU
Papa John's restaurants offer a focused menu of high quality, value-priced
pizza, breadsticks and cheesesticks, as well as canned soft drinks. Papa John's
original, medium thick crust is made from fresh dough (never frozen) produced
in the Company's regional commissaries. Every Papa John's pizza is prepared
using real mozzarella cheese, pizza sauce made from fresh-packed tomatoes (not
concentrate), a proprietary mix of savory spices and a choice of high quality
meat and vegetable toppings in generous portions. Fresh onions and green
peppers are chopped daily at all restaurants and are purchased from local
produce suppliers. Each pizza is complemented by the addition of a container of
Papa John's special garlic sauce (for dipping the crust) and two pepperoncinis.
The Company believes its focused menu helps create a strong identity among
consumers and simplifies operations, resulting in lower operating costs,
improved food quality and superior customer service. During the second half of
1995, the Company began testing a thin crust product in certain Company-owned
and franchised markets. The Company is continuing to test this product while
completing additional consumer research.
RESTAURANT DESIGN AND SITE SELECTION
The exterior of a Papa John's restaurant is generally characterized by
backlighted awnings, neon window designs and other visible signage. A typical
Papa John's restaurant ranges from 1,200 to 1,500 square feet and is designed
to facilitate a smooth flow of food orders through the restaurant. The layout
includes specific areas for order taking, pizza preparation and routing,
resulting in simplified operations, lower training and labor costs, increased
efficiency and improved consistency and quality of food products. The interior
of a Papa John's restaurant has a vibrant red and white color scheme with green
striping, and includes a bright menu board, custom counters and carry-out
customer area. The counters are designed to allow customers to watch the
employees slap out the dough and put sauce and toppings on pizzas.
The Company considers the location of a restaurant to be important and
therefore devotes significant resources to the investigation and evaluation of
potential sites. The site selection process focuses on trade area demographics,
target population density, household income levels and competitive factors.
Management inspects each potential Company-owned or franchised restaurant
location and the surrounding market before a site is approved. Papa John's
restaurants are typically located in strip shopping centers or free-standing
buildings that provide visibility, curb appeal and accessibility. The Company's
restaurant design may be configured to fit a wide variety of building shapes
and sizes, thereby increasing the number of suitable locations for Papa John's
restaurants.
During 1994 and 1995, the Company opened a greater number of free-standing
locations than in prior years. The Company seeks either existing buildings
suitable for conversion, or land suitable for the construction of its prototype
restaurant. Free-standing buildings generally provide more signage and better
visibility, accessibility and parking. The Company believes that these
locations improve Papa John's image and brand awareness and expects free-
standing and prototype units to approximate 15-20% of all Company-owned
restaurants. Sales at free-standing restaurants generally exceed sales at in-
line restaurants. During their first 13 weeks of operations, the 20 free-
standing restaurants opened by the Company during 1995 had average weekly sales
of approximately $12,300, 29.5% higher than average weekly sales at the 41 in-
line restaurants opened by the Company during the same period.
MARKETING PROGRAMS
The Company's restaurant-level marketing programs target the delivery area of
each restaurant, making extensive use of distinctive print materials in direct
mail and store-to-door couponing. Local marketing efforts also include a
variety of community-oriented activities with schools, sports teams and other
organizations. In an increasing number of markets in which the Company or its
franchisees have a significant presence, local marketing efforts are
supplemented with radio and television advertising. The Company believes that
its marketing programs are cost-effective and significantly increase Papa
John's visibility among potential customers.
In addition to extensive local store marketing, all Company-owned and
franchised Papa John's restaurants within a co-developed market are required to
join an advertising cooperative ("Co-op"). Each
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<PAGE>
member restaurant contributes a percentage of sales to the Co-op for market-
wide programs, such as radio, television and billboards. The rate of
contribution and uses of the monies collected is determined by a majority vote
of the Co-op's members. The restaurant-level and Co-op marketing efforts are
supported by print and electronic advertising materials that are produced by
the Papa John's Marketing Fund, Inc. (the "Marketing Fund") for use by both the
Company and its franchisees. The required Marketing Fund contribution can be up
to 1.5% of revenues as established from time to time by the governing board of
the Marketing Fund (currently .75%). The required contribution can be increased
above 1.5% only upon approval of not less than 60% of Marketing Fund members.
The Company provides every Papa John's restaurant with catalogs for (i)
uniforms and promotional items, and (ii) pre-approved, print marketing
materials. These products and services can be ordered from the Company through
toll-free "800" numbers.
PURCHASING
The Company sets quality standards for all products used in Papa John's
restaurants and designates approved outside suppliers of food and paper
products which meet the Company's quality standards. Produce is purchased
locally by both Company-owned and franchised restaurants to ensure freshness.
In order to ensure product quality and consistency, all Papa John's restaurants
are required to purchase proprietary spice mix and dough from the Company.
Franchisees may purchase other goods directly from approved suppliers or the
Company, which has negotiated purchasing agreements with most of its suppliers.
These agreements result in volume discounts to the Company, allowing it to sell
the products to franchisees at prices it believes are below those which
franchisees can normally obtain independently. Products are distributed to
restaurants by refrigerated trucks leased and operated by the Company or
transported by common carrier.
The Company operates full-service commissaries in Louisville, Kentucky,
Raleigh, North Carolina, Jackson, Mississippi and Orlando, Florida. The Company
opened a distribution center in Dallas, Texas during March 1996. The Company
expects to open a full-service commissary in Denver, Colorado during the second
quarter of 1996 and either a distribution center or full-service commissary in
Phoenix, Arizona during the first quarter of 1997.
All of the equipment, counters and smallwares needed to open a Papa John's
restaurant are supplied by the Company. The Company also provides layout and
design services and recommends subcontractors, signage installers and telephone
systems to its franchisees. Although not required to do so, substantially all
of the Company's franchisees purchase most of their equipment from the Company.
COMPANY OPERATIONS
Restaurant Personnel. A typical Papa John's restaurant employs a restaurant
manager, an assistant manager and approximately 20 hourly employees, most of
whom work part-time. The manager is responsible for the day-to-day operation of
the restaurant and for the maintenance of Company-established operating
standards. The Company seeks to hire experienced restaurant managers and staff
and motivate and retain them by providing opportunities for advancement and
performance-based, financial and stock incentives. The Company has a low
managerial turnover rate which it believes results in decreased training costs
and higher productivity.
The Company employs area supervisors, each of whom has responsibility for
overseeing three to five Company-owned restaurants. The Company also employs
regional vice presidents and district managers who oversee area supervisors and
managers within their respective markets. The Company's training and
compensation programs are intended to instill each restaurant manager and area
supervisor with a sense of ownership and pride in their restaurants and the
Company.
Training. The Company has 33 employees dedicated to training and new
restaurant openings, including a full-time coordinator in each of its markets.
The Company provides an on-site training team three days
24
<PAGE>
before and three days after the opening of each Company-owned restaurant. Each
regional vice president, district manager, area supervisor and restaurant
manager is required to complete the Company's two-week training program in
which instruction is given on all aspects of the Company's systems and
operations. The program includes classroom instruction and hands-on training at
an operating Papa John's restaurant. The programs are conducted at the
Company's ten regional training centers located within operating Company-owned
restaurants. The Company's training also includes an education and safety
program for its delivery drivers.
Point of Sale Technology. Point of sale technology was in place in 200
Company-owned restaurants and 327 franchised restaurants at March 31, 1996. The
Company believes that this technology increases speed and accuracy in order
taking and pricing, reduces paper work and allows the restaurant manager to
better monitor and control food and labor costs. During 1995, the Company
finalized development of a new proprietary point of sale system, The Papa
John's PROFIT SystemSM (the "PROFIT System") that will be installed in
substantially all Company-owned restaurants during 1996 and 1997. The Company
believes the PROFIT System will further enhance restaurant-level marketing
capabilities through the development of a data base with information on
customers and their buying habits with respect to the Company's products.
Polling capabilities will allow the Company to obtain current restaurant
reporting information, thereby improving the speed, accuracy and efficiency of
restaurant-level reporting.
Reporting. Managers at Company-owned restaurants prepare daily reports of
sales, cash deposits and operating costs. Physical inventories of all food and
beverage items are taken weekly. The Company's area supervisors prepare weekly
profit and loss statements for each of the restaurants under their supervision.
The Company's Chief Operating Officer meets on a monthly basis with regional
vice presidents, district managers and area supervisors to discuss restaurant
sales and operating personnel needs and product quality. The Company believe
that the PROFIT System will simplify and accelerate many of these reporting
functions.
Hours of Operations. Papa John's restaurants are open seven days a week,
typically from 11:00 a.m. to 12:00 midnight Sunday through Thursday, and from
11:00 a.m. to 1:30 a.m. on Friday and Saturday.
FRANCHISE PROGRAM
General. The success of the Company's concept, together with the relatively
low initial capital investment per restaurant, has allowed the Company to
attract a large number of franchisees with significant restaurant experience.
The Company considers its franchisees to be a vital part of the Company's
continued growth and believes its relationship with its franchisees is
excellent. At March 31, 1996, there were 702 franchised restaurants operating
in 25 states and the Company has development agreements which contemplate the
opening of approximately 510 additional franchised restaurants through 1998.
There can be no assurance that all of these restaurants will be opened or that
the development schedule set forth in the development agreements will be
achieved. During the 1995 fiscal year and the three months ended March 31,
1996, franchisees opened 190 and 43 restaurants, respectively.
Approval. Franchisees are approved on the basis of the applicant's business
background, restaurant operating experience and financial resources. The
Company generally seeks franchisees who will enter into development agreements
for multiple restaurants. The Company seeks franchisees that have restaurant
experience and who will be actively involved in managing their restaurants or,
in the case of franchisees who do not have restaurant experience, the Company
requires the franchisee to hire a full-time operator who has an equity interest
in the franchise operation.
Development and Franchise Agreements. The Company enters into development
agreements with its franchisees for the construction of one or more restaurants
over a defined period of time within a specified geographic area. Under the
Company's current standard development agreement, the franchisee is required to
pay, at the time of signing the agreement, a non-refundable fee of $5,000 per
restaurant covered by the development agreement. This amount is credited
against the Company's standard $20,000 franchise fee which
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<PAGE>
is payable to the Company upon signing the franchise agreement for a specific
location. Generally, a franchise agreement is executed when a franchisee
secures a location.
The Company's current standard franchise agreement provides for a term of ten
years (with one ten-year renewal option) and payment to the Company of a
royalty fee of 4% of sales. The current standard franchise agreement, as well
as substantially all existing franchise agreements, permit the Company to
increase the royalty fee up to 5% of sales after the agreement has been in
effect for five years. However, the royalty fee cannot be increased to an
amount greater than the percentage royalty fee then in effect for new
franchisees.
The Company has the right to terminate a franchise agreement for a variety of
reasons, including a franchisee's failure to make payments when due or failure
to adhere to the Company's policies and standards. Many state franchise laws
limit the ability of a franchisor to terminate or refuse to renew a franchise.
See "Business--Government Regulation."
The Company is considering opening, or granting franchises for, new
restaurants in markets or locations different from traditional Papa John's
restaurants. For example, the Company has recently entered into development and
franchise agreements for Papa John's restaurants in smaller markets and intends
to pursue this strategy in the future. Such agreements generally cover areas or
locations not originally targeted for development and may have terms differing
from the standard franchise agreement, including different initial franchise
fees, equipment requirements and royalty fees.
Franchise Restaurant Development. The Company furnishes each franchisee with
assistance in selecting sites and developing restaurants. The Company provides
its franchisees with the physical specifications for typical restaurants, both
for free-standing restaurants and restaurants located in strip shopping
centers. Each franchisee is responsible for selecting the location for its
restaurants but must obtain Company approval of each restaurant design and each
location based on accessibility and visibility of the site and targeted
demographic factors, including population, density, income, age and traffic.
The Company provides design plans, counters and equipment for most franchisee
locations at competitive prices.
Franchisee Loan Program. At the beginning of the second quarter of 1996, the
Company established a program under which selected franchisees developing ten
or more Papa John's restaurants may borrow funds for use in the construction
and development of their restaurants. Under the program, loans will typically
bear interest at the prevailing prime rate plus 1 1/2% and will be secured by
the fixtures, equipment and signage (and where applicable, the land) of each
restaurant and the ownership interests in the franchisee. In some instances,
the Company may obtain a purchase option with respect to the financed
restaurants. A franchisee utilizing the loan program must open at least 20% of
the restaurants covered by the franchisee's development agreement with its own
equity capital (with no amounts borrowed from any other source) prior to
receiving funds from the Company under the program.
Franchise Training and Support. Every franchisee is required to have a
principal operator approved by the Company who satisfactorily completes the
Company's two-week training program and who devotes his or her full business
time and efforts to the operation of the franchisee's restaurants. Each manager
of a franchised restaurant is also required to complete the Company's two-week
training program. In addition to this program, the Company provides an on-site
training crew three days before and after the opening of a franchisee's first
two restaurants and ongoing supervision thereafter. See "Business--Company
Operations--Training." Multi-unit franchisees are encouraged to hire a full-
time training coordinator to train new employees for their restaurants. The
Company's franchise consultants, reporting to the Vice President of Franchise
Operations, maintain constant communication with the franchise community,
relaying operating and marketing information and new ideas between the Company
and franchisees.
Franchise Operations. All franchisees are required to operate their Papa
John's restaurants in compliance with the Company's policies, standards and
specifications, including matters such as menu items, ingredients,
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<PAGE>
materials, supplies, services, fixtures, furnishings, decor and signs. Each
franchisee has full discretion to determine the prices to be charged to its
customers.
Franchise Advisory Board. The Company has established a Franchise Advisory
Board that consists of Company and franchisee representatives. The Advisory
Board holds quarterly meetings to discuss new marketing ideas, operations,
growth and other relevant issues.
Reporting. The Company collects weekly and monthly sales and other operating
information from its franchisees. As of March 31, 1996, point of sale
technology was in place in 327 franchised restaurants of which 48 were the
Company's proprietary PROFIT System. In 1995, the Company implemented a
requirement that new and existing franchisees purchase and install the PROFIT
System in their restaurants. See "Company Operations--Point of Sale
Technology." The Company has agreements with most of its franchisees permitting
the Company to electronically debit the franchisees' bank accounts for the
payment of royalties, Marketing Fund contributions and purchases of products
from the Company's commissaries and equipment, printing and promotional
operations. This system significantly reduces the resources needed to process
receivables, improves cash flow and virtually eliminates past-due accounts
receivables.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well established
competitors with substantially greater financial and other resources than the
Company. Such competitors include a large number of national and regional
restaurant chains, as well as local pizza operators. Some of the Company's
competitors have been in existence for a substantially longer period than the
Company and may be better established in the markets where the Company's
restaurants are, or may be, located. Within the pizza segment of the restaurant
industry, the Company believes that its primary competitors are the national
pizza chains, including Pizza Hut, Domino's and Little Caesar's. A change in
the pricing, marketing or promotional strategies or product mix of one or more
of these competitors could have an adverse impact on the Company's sales and
earnings.
The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of experienced management and hourly employees may adversely
affect the restaurant industry in general and the Company's restaurants in
particular.
With respect to the sale of franchises, the Company competes with many
franchisors of restaurants and other business concepts. In general, there is
also active competition for management personnel, capital and attractive
commercial real estate sites suitable for Papa John's restaurants.
GOVERNMENT REGULATION
The Company and its franchisees are subject to various federal, state and
local laws affecting their businesses. Each Papa John's restaurant is subject
to licensing and regulation by a number of governmental authorities, which
include health, safety, sanitation, building and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining or
failures to obtain required licenses or approvals can delay or prevent the
opening of a new restaurant in a particular area. The Company's commissary and
distribution facilities are licensed and subject to regulation by state and
local health and fire codes, and the operation of its trucks is subject to
Department of Transportation regulations. The Company is also subject to
federal and state environmental regulations, but these have not had a material
effect on the Company's operations.
The Company is subject to Federal Trade Commission ("FTC") regulation and
various state laws which regulate the offer and sale of franchises. Several
state laws also regulate substantive aspects of the franchisor-
27
<PAGE>
franchisee relationship. The FTC requires the Company to furnish to prospective
franchisees a franchise offering circular containing prescribed information. A
number of states in which the Company is currently franchising or may consider
franchising also regulate the sale of franchises and require registration of
the franchise offering circular with state authorities. Substantive state laws
that regulate the franchisor-franchisee relationship presently exist or are
being considered in a substantial number of states, and bills have been
introduced in Congress (one of which is now pending) which provide for federal
regulation of substantive aspects of the franchisor-franchisee relationship.
These current and proposed franchise relationship laws limit, among other
things, the duration and scope of non-competition provisions, the ability of a
franchisor to terminate or refuse to renew a franchise and the ability of a
franchisor to designate sources of supply.
Papa John's restaurant operations are also subject to federal and state laws
governing such matters as wages, working conditions, citizenship requirements
and overtime. Some states have set minimum wage requirements higher than the
federal level, and there are currently bi-partisan proposals in Congress to
increase the federal minimum wage. Significant numbers of hourly personnel at
Company and franchised restaurants are paid at rates related to the federal
minimum wage and, accordingly, further increases in the minimum wage could
increase labor costs at Company and franchised restaurants. Proposals to
increase the minimum wage, introduce a system of mandated health insurance or
other government initiatives, if implemented, could adversely affect the
Company and its franchisees as well as the restaurant industry in general. The
Company is also subject to the Americans With Disabilities Act of 1990, which,
among other things, may require certain minor renovations to its restaurants to
meet federally-mandated requirements. The cost of these renovations is not
expected to be material to the Company.
TRADEMARKS
The Company's rights in its trademarks and service marks are a significant
part of its business. The Company is the owner of the federal registration of
the trademark "Papa John's." The Company has also registered "Pizza Papa
John's" and design as a trademark and a service mark. The Company owns federal
registrations for the marks "Pizza Papa John's Delivering the Perfect Pizza!"
and design, "Call your Papa" and "Perfect Pizza Perfect Price." The Company has
applied for the registration of "Delivering the Perfect Pizza!", "Perfect
Pizza", "We Deliver Perfection", "Indoor Tailgate Party", "The Official Pizza
of Summer", and "Pizza Papa John's Print Network" and design as trademarks and
service marks. The Company is aware of the use by other persons in certain
geographic areas of names and marks which are the same as or similar to the
Company's marks. It is the Company's policy to pursue registration of its marks
whenever possible and to vigorously oppose any infringement of its marks.
EMPLOYEES
As of March 31, 1996, the Company employed 7,322 persons, of whom
approximately 6,325 were restaurant employees, 302 were restaurant management
and supervisory personnel, 267 were corporate personnel and 428 were commissary
and support services personnel. Most restaurant employees work part-time and
are paid on an hourly basis. None of the Company's employees is covered by a
collective bargaining agreement. The Company considers its employee relations
to be excellent.
PROPERTIES
Most of the Company's restaurants are located in leased space. The initial
terms of most of the Company's leases are three to seven years and provide for
one or more options to renew for at least one additional term. Virtually all of
the Company's leases specify a fixed annual rent, although certain of the
leases provide for fixed increases, or increases based on changes in the
Consumer Price Index, at various intervals during the lease term. Generally,
the leases are net leases which require the Company to pay all or a portion of
the cost of insurance, taxes, maintenance and utilities.
28
<PAGE>
The Company leases approximately 31,000 square feet of corporate office space
and approximately 35,000 square feet of adjacent warehouse space for a full-
service commissary in Louisville, Kentucky. The leases for these spaces expire
in December 1997. The Company leases approximately 30,000 square feet for its
commissary in Jackson, Mississippi and approximately 23,000 square feet for its
commissary in Raleigh, North Carolina. In addition, the Company has entered
into leases for approximately 12,000 square feet for the distribution center in
Dallas, Texas and approximately 21,000 square feet for its planned commissary
in Denver, Colorado. The Company's 63,000 square foot full-service commissary
in Orlando, Florida is located on approximately five acres owned by the
Company. The Company believes that it will continue to need additional office
and commissary space.
The Company owns approximately 31 acres in Louisville, Kentucky, and has
entered into a contract to purchase an additional six acres of adjoining land.
The Company has constructed a 40,000 square foot building on the land
consolidating its printing and promotional operations. The Company plans to
begin construction of an additional 150,000 to 200,000 square foot facility on
the land in 1996, approximately 50% of which will accommodate relocation and
expansion of the Louisville commissary operation and the remaining 50% will
accommodate relocation and consolidation of corporate offices. The facility is
scheduled for completion in mid-1997.
LITIGATION
The Company is a party to routine contract, negligence and employment-related
litigation matters in the ordinary course of business. No such pending matters,
individually or in the aggregate, are believed by management to be material to
the business or financial condition of the Company.
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John H. 34 Founder, Chairman and Chief Executive Officer
Schnatter
Charles W. 33 Senior Vice President, General Counsel,
Schnatter Secretary and Director
Blaine E. 39 Executive Vice President and Chief Administrative Officer
Hurst
E. 42 Senior Vice President, Chief Financial Officer and Treasurer
Drucilla
Milby
Wade S. 34 Chief Operating Officer
Oney
Robert J. 40 President--PJ Food Service, Inc.
Wadell
Richard J. 40 Vice President and Senior Counsel
Emmett
Philip C. 56 Senior Vice President--Development
deMena,
Jr.
J. David 39 Vice President and Corporate Controller
Flanery
Sylvester 54 Vice President--Marketing and Support Services
J.
Sosnowski
O. Wayne 63 Director
Gaunce
Jack A. 61 Director
Laughery
Michael W. 44 Director
Pierce
Richard F. 52 Director
Sherman
</TABLE>
29
<PAGE>
UNDERWRITING
Montgomery Securities and Alex. Brown & Sons Incorporated (the
"Underwriters") have severally agreed, subject to the terms and conditions
contained in the underwriting agreement (the "Underwriting Agreement"), to
purchase from the Company the number of shares of Common Stock indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of such shares if they purchase any.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------ -------
<S> <C>
Montgomery Securities................................................ 425,000
Alex. Brown & Sons Incorporated...................................... 425,000
-------
Total............................................................ 850,000
=======
</TABLE>
The Company has been advised that the Underwriters propose initially to offer
the Common Stock to the public on the terms set forth on the cover page of this
Prospectus. The Underwriters may allow a concession of not more than $ per
share to selected dealers, and the Underwriters may allow, and such dealers may
reallow, a concession of not more than $ per share to certain other dealers.
After the offering, the offering price and other selling terms may be changed
by the Underwriters. No reduction in such terms shall change the amount of
proceeds to be received by the Company as set forth on the cover page of this
Prospectus. The Common Stock is offered subject to receipt and acceptance by
the Underwriters, and to certain other conditions, including the right to
reject an order in whole or in part.
In connection with this offering, the Underwriters and selling group members
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market immediately prior to the commencement of sales in this
offering, in accordance with Rule 10b-6A under the Exchange Act. Passive market
making consists of displaying bids on the Nasdaq National Market limited by the
bid prices of independent market makers and purchases limited by such prices
and effected in response to order flow. Net purchases by a passive market maker
on each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified prior
period and must be discontinued when such limit is reached. Passive market
making may stabilize the market price of the Common Stock at a level above that
which might otherwise prevail and, if commenced, may be discontinued at any
time.
The Company has granted an option to the Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum of
127,500 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial 850,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act of 1933, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.
The Company and its executive officers and directors, who will beneficially
own in the aggregate 6,867,713 shares of Common Stock after the closing of this
Offering, have agreed, subject to certain limited exceptions, not to offer,
sell or otherwise dispose of any shares of Common Stock of the Company for a
period of 90 days after the date of this Prospectus without the prior written
consent of Montgomery Securities.
30
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Greenebaum Doll & McDonald PLLC, Louisville, Kentucky, and
for the Underwriters by Locke Purnell Rain Harrell (A Professional
Corporation), Dallas, Texas. A member of Greenebaum Doll & McDonald PLLC
participating in the preparation of the Registration Statement beneficially
owns 2,250 shares of Common Stock of the Company.
EXPERTS
The Company's consolidated financial statements incorporated by reference in
its annual report on Form 10-K for the fiscal year ended December 31, 1995 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
[PHOTO OF "PIZZA AND INGREDIENTS"]
31
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any in-
formation to or make any representations other than those contained in this
Prospectus in connection with this offering and, if given or made, such infor-
mation or representation must not be relied upon as having been authorized by
the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or solicitation of an offer to buy, any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer in such jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that the information herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of the Company since
such date.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by
Reference................................................................. 3
Prospectus Summary......................................................... 4
The Company................................................................ 6
Risk Factors............................................................... 6
Use of Proceeds............................................................ 9
Dividend Policy............................................................ 9
Price Range of Common Stock................................................ 9
Capitalization............................................................. 10
Selected Consolidated Financial Data....................................... 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................ 13
Business................................................................... 20
Management................................................................. 29
Underwriting............................................................... 30
Legal Matters.............................................................. 31
Experts.................................................................... 31
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
850,000 SHARES
LOGO
COMMON STOCK
-----------------
PROSPECTUS
-----------------
Montgomery Securities
Alex. Brown & Sons
Incorporated
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated fees and expenses associated
with the issuance and distribution of the Common Stock being registered, other
than underwriting discounts and commissions. All fees and expenses incurred in
connection with the offering will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 13,399
NASD filing fee................................................. 7,500
Nasdaq Filing Fee............................................... 17,500
Blue Sky fees and expenses...................................... 12,000
Printing and engraving expenses................................. 50,000
Legal fees and expenses......................................... 40,000
Accounting fees and expenses.................................... 25,000
Transfer agent and registrar fees and expenses.................. 3,000
Miscellaneous expenses.......................................... 31,601
--------
Total....................................................... $200,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware provides
that a Delaware corporation may indemnify any persons, including directors and
officers, who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), if, in connection with the matters in issue, they acted in
good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of the corporation, and in connection with any criminal
suit or proceeding, if in connection with the matters at issue, they had no
reasonable cause to believe their conduct was unlawful. Section 145 also
permits a Delaware corporation to indemnify its officers and directors in an
action by or in the right of the corporation under the same conditions against
expenses incurred by such persons in connection with the defense or settlement
of such action, except that no such indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director
actually and reasonably incurred.
Article Twelfth of the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") provides:
"A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing shall
not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of Delaware or (iv) for any transaction from which
the director derived an improper personal benefit. If the General
Corporation Law of Delaware is hereafter amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the General Corporation Law of Delaware
as so amended. Any repeal or modification of this Article TWELFTH shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification."
II-1
<PAGE>
Article Sixteenth of the Company's Restated Certificate provides:
"Each person who was or is made a party or is threatened to be made a
party to or is involved (including, without limitation, as a witness) in
any actual or threatened action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer or agent or in any other capacity while serving as such a director
or officer, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the General Corporation Law of Delaware,
as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), or by other
applicable law as then in effect, against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes under the
Employee Retirement Income Security Act of 1974, as amended from time to
time ("ERISA"), penalties and amounts to be paid in settlement) actually
and reasonably incurred or suffered by such indemnitee in connection
therewith.
A. Procedure. Any indemnification under this Article SIXTEENTH (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the General Corporation law of Delaware, as the same
exists or hereafter may be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment). Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding (the
"Disinterested Directors"), or (ii) if such a quorum of Disinterested
Directors is not obtainable, or, even if obtainable a quorum of
Disinterested Directors so directs, by independent legal counsel in a
written opinion or (iii) by the stockholders. The majority of Disinterested
Directors may, as they deem appropriate, elect to have the Corporation
indemnify any other employee, agent or other person acting for or on behalf
of the Corporation.
B. Advances for Expenses. Costs, charges and expenses (including
attorneys' fees) incurred by a director or officer of the Corporation, or
such other person acting on behalf of the Corporation as determined in
accordance with Paragraph A, in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer or other person to
repay all amounts so advanced in the event that it shall ultimately be
determined that such director, officer or other person is not entitled to
be indemnified by the Corporation as authorized in this Article SIXTEENTH.
The majority of the Disinterested Directors may, in the manner set forth
above, and upon approval of such director, officer, employee, agent or
other person acting on behalf of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit
or proceeding.
C. Procedure for Indemnification. Any indemnification or advance of
costs, charges and expenses under this Article SIXTEENTH, shall be made
promptly, and in any event within 60 days upon the written request of the
person seeking indemnification or advancement of expenses (hereinafter a
"claimant"). The right to indemnification or advances as granted by this
Article SIXTEENTH shall be enforceable by the claimant in any court of
competent jurisdiction, if the Corporation denies such request, in whole or
in part, or if no disposition thereof is made within 60 days. The
claimant's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and
II-2
<PAGE>
expenses under this Article SIXTEENTH where the required undertaking, if
any, has been received by the Corporation) that the claimant has not met
the standard of conduct set forth in the General Corporation Law of
Delaware, as the same exists or hereafter may be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in the General Corporation Law
of Delaware, as the same exists or hereafter may be amended (but, in the
case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), nor the fact
that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be
a defense to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
D. Other Rights; Continuation of Right to Indemnification. The
indemnification and advancement of expenses provided by this Article
SIXTEENTH shall not be deemed exclusive of any other rights to which a
claimant may be entitled under any law (common or statutory), by-law,
agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in
another capacity while holding office or while employed by or acting as
agent for the Corporation, and shall continue as to a person who has ceased
to be a director, officer, employee or agent of the Corporation, and shall
inure to the benefit of the estate, heirs, executors and administrators of
such person. All rights to indemnification under this Article SIXTEENTH
shall be deemed to be a contract between the Corporation and each director
and officer of the Corporation who serves or served in such capacity at any
time while this Article SIXTEENTH is in effect. Any repeal or modification
of this Article SIXTEENTH or any repeal or modification of relevant
provisions of the General Corporation Law of Delaware or any other
applicable laws shall not in any way diminish any rights to indemnification
of such director or officer or the obligations of the Corporation arising
hereunder with respect to any action, suit or proceeding arising out of, or
relating to, any actions, transactions or facts occurring prior to the
final adoption of such modification or repeal. For the purposes of this
Article SIXTEENTH, references to "the Corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting
or surviving corporation, so that any person who is or was a director or
officer of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this
Article SIXTEENTH, with respect to the resulting or surviving corporation,
as he would if he or she had served the resulting or surviving corporation
in the same capacity.
E. Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred
by him or her on his or her behalf in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions
of this Article SIXTEENTH; provided, however, that such insurance is
available on acceptable terms, which determination shall be made by a vote
of a majority of the Board of Directors.
F. Savings Clause. If this Article SIXTEENTH or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each person entitled to
indemnification under the first paragraph of this Article SIXTEENTH as to
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes, penalties and
II-3
<PAGE>
amounts to be paid in settlement) actually and reasonably incurred or
suffered by such person and for which indemnification is available to such
person pursuant to this Article SIXTEENTH to the full extent permitted by
any applicable portion of this Article SIXTEENTH that shall not have been
invalidated and to the full extent permitted by applicable law."
The Company has liability insurance coverage for its officers and directors
which entitle the Company to be reimbursed up to $1 million for certain
indemnity payments it may be required or permitted to make to its directors and
officers with respect to actions arising out of the performance of such
officer's or director's duty in his or her capacity as such.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 The Company's Amended and Restated Certificate of Incorporation. Exhibit
3.1 to the Company's Registration Statement on Form S-1 (Registration No.
33-61366) is incorporated herein by reference.
3.2 The Company's Restated By-Laws. Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (Registration No. 33-61366) is incorporated herein
by reference.
4.1 Specimen Common Stock Certificate. Exhibit 4.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21660) is incorporated herein by reference.
4.2 Amended and Restated Certificate of Incorporation and Restated By-Laws
(See 3.1 and 3.2 above).
5 Opinion and consent of Greenebaum Doll & McDonald PLLC as to the legality
of the Common Stock being registered.
10.1 Consulting Agreement dated March 29, 1991, between the Company and Richard
F. Sherman. Exhibit 10.4 to the Company's Registration Statement on Form
S-1 (Registration No. 33-61366) is incorporated herein by reference.
10.2 Lease dated November 7, 1990, including amendments thereto, between the
Company and C-W-K #7, a Texas limited partnership, relating to the
Company's corporate offices. Exhibit 10.5 to the Company's Registration
Statement on Form S-1 (Registration No. 33-61366) is incorporated herein
by reference.
10.3 Lease dated November 9, 1990, including amendments thereto, between the
Company and Crow-Kessler, a Texas limited partnership, relating to the
Company's commissary and distribution facility in Louisville, Kentucky.
Exhibit 10.6 to the Company's Registration Statement on Form S-1
(Registration No. 33-61366) is incorporated herein by reference.
10.4 Lease dated January 15, 1993, between the Company and C-W-K #7, a Texas
limited partnership, relating to the Company's corporate offices. Exhibit
10.7 to the Company's Registration Statement on Form S-1 (Registration No.
33-61366) is incorporated herein by reference.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.5 Papa John's International, Inc. 1993 Stock Ownership Incentive Plan.
Exhibit 10.9 to the Company's Registration Statement on Form S-1
(Registration No. 33-61366) is incorporated herein by reference.
10.6 Papa John's International, Inc. 1993 Stock Option Plan for Non-Employee
Directors. Exhibit 10.10 to the Company's Registration Statement on Form
S-1 (Registration No. 33-61366) is incorporated herein by reference.
10.7 Employment and Non-Competition Agreement dated January 1, 1993, between
the Company and Richard J. Emmett. Exhibit 10.14 to the Company's
Registration Statement on Form S-1 (Registration No. 33-61366) is
incorporated herein by reference.
10.8 The Company's standard Franchise Agreement. Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (Registration No. 33-61366) is
incorporated herein by reference.
10.9 Lease dated May 14, 1993, between PJ Food Service, Inc. and Sample
Properties relating to the Company's commissary facility in Raleigh, North
Carolina. Exhibit 10.16 to the Company's Registration Statement on Form S-
1 (Registration No. 33-61366) is incorporated herein by reference.
10.10 Amendment IV to Lease dated November 7, 1990 (and related leases), by and
between the Company and C-W-K #7, a Texas limited partnership, relating to
the Company's corporate offices. Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (Registration No. 33-73530) is
incorporated herein by reference.
10.11 Lease dated November 1, 1993, between PJ Food Service, Inc. and Jackson
Developers, a Missouri general partnership, relating to the Company's
commissary facility in Jackson, Mississippi. Exhibit 10.18 to the
Company's Registration Statement on Form S-1 (Registration No. 33-73530)
is incorporated herein by reference.
10.12 Amended and Restated Loan Agreement dated June 30, 1994, between the
Company and PNC Bank, Kentucky, Inc. Exhibit 10.21 to the Company's
Registration Statement on Form S-3 (Registration No. 33-86144) is
incorporated herein by reference.
10.13 Amendment V to Lease dated November 7, 1990 (and related leases), by and
between the Company and CWK #7, a Texas limited partnership, relating to
the Company's corporate offices. Exhibit 10.22 to the Company's
Registration Statement on Form S-1 (Registration No. 33-73530) is
incorporated herein by reference.
10.14 Loan Agreement among Mississippi Business Finance Corporation (acting for
and on behalf of the State of Mississippi), Bank of Mississippi (as
Servicing Trustee) and PJFS of Mississippi, Inc. Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter ended March 27,
1994 (Commission File No. 0-21660) is incorporated herein by reference.
10.15 Contract for Sale and Purchase of Real Property dated March 24, 1994, by
and between PJ Food Service, Inc. and Orlando Central Park, Inc. Exhibit
10.2 to the Company's quarterly report on Form 10-Q for the quarter ended
March 27, 1994 (Commission File No. 0-21660) is incorporated herein by
reference.
10.16 Agreement of Purchase and Sale dated April 19, 1994, by and among Papa
John's USA, Inc., NTS/Crossings Corporation and NTS Bluegrass Commonwealth
Park. Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the
quarter ended March 27, 1994 (Commission File No. 0-21660) is incorporated
herein by reference.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.17 Amendment dated November 18, 1994, to Amended and Restated Loan Agreement
dated June 30, 1994, between the Company and PNC Bank, Kentucky, Inc.
Exhibit 10.28 to the Company's Registration Statement on Form S-3
(Registration No. 33-86144) is incorporated herein by reference.
10.18 Assets Purchase Agreement dated January 23, 1995, by and among the
Company, Papa John's USA, Inc., P & G Pizza, Incorporated ("P & G Pizza")
and all of the stockholders of P & G Pizza. Exhibit 2 to the Company's
Current Report on Form 8-K (Commission File No. 0-21660) is incorporated
herein by reference.
10.19 Amendment VI to Lease dated November 7, 1990 (and related leases), between
the Company and CWK #7, a Texas Limited Partnership, relating to the
Company's corporate offices. Exhibit 10.28 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 25, 1994 (Commission File
No. 0-21660) is incorporated herein by reference.
10.20 Agreement for Purchase and Sale of Real Estate dated March 20, 1995, by
and among Papa John's USA, Inc., NTS/Crossings Corporation and NTS
Bluegrass Commonwealth Park. Exhibit 10.1 to the Company's quarterly
report on Form 10-Q for the quarterly period ended March 26, 1995
(Commission File No. 0-21660) is incorporated herein by reference.
10.21 Memorandum of Employment dated March 31, 1995, by and between the Company
and Wade S. Oney. Exhibit 10.2 to the Company's quarterly report on Form
10-Q for the quarterly period ended March 26, 1995 (Commission File No. 0-
21660) is incorporated herein by reference.
10.22 Second Amended and Restated Loan Agreement, and related promissory note,
each dated June 30, 1995, by and between the Company and PNC Bank,
Kentucky, Inc. Exhibit 10.1 to the Company's quarterly report on Form 10-Q
for the quarterly period ended June 25, 1995 (Commission File No. 0-21660)
is incorporated herein by reference.
10.23 Agreement and Plan of Merger dated December 1, 1995, by and among the
Company, Papa John's USA, Inc., Kentuckiana Pizza, Ltd., Kentuckiana
Pizza, Ltd., II (collectively, "Kentuckiana Pizza") and all of the
stockholders of Kentuckiana Pizza. Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 1, 1995 (Commission File No. 0-21660) is
incorporated herein by reference.
10.24 Agreement and Plan of Merger dated October 16, 1995, by and among the
Company, Papa John's USA, Inc., NRG, Inc. ("NRG") and all of the
stockholders of NRG. Exhibit 2.2 to the Company's Current Report on Form
8-K dated December 1, 1995 (Commission File No. 0-21660) is incorporated
herein by reference.
10.25 1996 Papa John's International, Inc. Executive Option Program. Exhibit
10.26 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (Commission File No. 0-21660) is incorporated
herein by reference.
10.26 Amendment to Chief Operating Officer Agreement dated February 12, 1996, by
and between the Company and Wade S. Oney. Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21660) is incorporated herein by reference.
10.27 Lease dated November 29, 1995, by and between PJ Food Service, Inc. and
Arlington-OP&F, Inc., a Delaware corporation, relating to the Company's
distribution facility in Dallas, Texas. Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21660) is incorporated herein by reference.
10.28 Lease dated January 3, 1996, by and between PJ Food Service, Inc. and
Fraser, L.L.C., a Colorado Limited Liability Company, relating to the
Company's commissary facility to be opened in Denver, Colorado. Exhibit
10.29 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (Commission File No. 0-21660) is incorporated
herein by reference.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.29 Amendment VII to Lease dated November 7, 1990 (and related leases),
between the Company and CWK #7 Limited Partnership, related to the
Company's corporate offices. Exhibit 10.30 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 (Commission File
No. 0-21660) is incorporated herein by reference.
10.30 Lease dated January 23, 1996, by and between PJ Food Service, Inc. and CWK
#8, a Texas Limited Partnership, relating to commercial and corporate
office space in Louisville, Kentucky. Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21660) is incorporated herein by reference.
10.31 Agreement for Purchase and Sale of Real Estate dated February 28, 1996, by
and among Papa John's USA, Inc., NTS/Crossings Corporation and NTS
Bluegrass Commonwealth park, relating to approximately 6 acres of land in
Louisville, Kentucky. Exhibit 10.32 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (Commission File No. 0-
21660) is incorporated herein by reference.
21 Subsidiaries of the Company:
(a) PJ Food Service, Inc., a Kentucky corporation
(b) Papa John's USA, Inc., a Kentucky corporation
(c) Printing & Promotions, Inc., a Kentucky corporation
(d) PJFS of Mississippi, Inc., a Mississippi corporation
23.1 Consent of Greenebaum Doll & McDonald PLLC (included in its opinion filed
as Exhibit 5).
23.2 Consent of Ernst & Young LLP.
24 Powers of Attorney (included on Signature Page of the Registration
Statement).
99.1 Cautionary Statements. Exhibit 99.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (Commission File No. 0-
21660) is incorporated herein by reference.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934), that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions set forth in Item 15, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(c) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF LOUISVILLE, KENTUCKY, ON THE 19TH DAY OF APRIL,
1996.
Papa John's International, Inc.
/s/ Charles W. Schnatter
By: _________________________________
Charles W. Schnatter
Senior Vice President, Secretary
and General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John H. Schnatter, Charles W. Schnatter and E. Drucilla Milby, and each of them
with full power to act without the others, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his or
her behalf, individually and in each capacity stated below, all amendments
(including post-effective amendments) to this Registration Statement on Form S-
3 and to file the same, with all exhibits thereto and any other documents in
connection therewith, with the Securities and Exchange Commission under the
Securities Act of 1933, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
and to all intents and purposes as each might or could do in person, hereby
ratifying and confirming each act that said attorneys-in-fact and agents, or
any of them, may lawfully do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John H. Schnatter
- ------------------------------------
John H. Schnatter Chairman, Chief Executive
Officer and Director
(Principal Executive
Officer) April 19, 1996
/s/ Charles W. Schnatter
- ------------------------------------
Charles W. Schnatter Senior Vice President,
Secretary, General Counsel
and Director April 19, 1996
/s/ O. Wayne Gaunce
- ------------------------------------
O. Wayne Gaunce Director April 19, 1996
/s/ Jack A. Laughery
- ------------------------------------
Jack A. Laughery Director April 19, 1996
/s/ Michael W. Pierce
- ------------------------------------
Michael W. Pierce Director April 19, 1996
/s/ Richard F. Sherman
- ------------------------------------
Richard F. Sherman Director April 19, 1996
/s/ E. Drucilla Milby
- ------------------------------------
E. Drucilla Milby Chief Financial Officer and
Treasurer (Principal
Financial Officer) April 19, 1996
/s/ J. David Flanery
- ------------------------------------
J. David Flanery Vice President and Corporate
Controller (Principal
Accounting Officer) April 19, 1996
</TABLE>
II-8
<PAGE>
__________ Shares
PAPA JOHN'S INTERNATIONAL, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
May ___, 1996
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. Introductory. Papa John's International, Inc., a Delaware
corporation (the "Company"), proposes to issue and sell 800,000 shares of its
authorized but unissued Common Stock, $.01 par value per share (the "Common
Stock"), to the underwriters named in Schedule A annexed hereto
("Underwriters"). Said shares, are herein referred to as the "Firm Common
Shares." In addition, the Company proposes to grant to the Underwriters an
option to purchase up to 120,000 additional shares of Common Stock (the
"Optional Common Shares"), as provided in Section 4 hereof. The Firm Common
Shares and, to the extent such option is exercised, the Optional Common Shares
are hereinafter collectively referred to as the "Common Shares."
You have advised the Company that the Underwriters propose to make a public
offering of the Common Shares on the effective date of the registration
statement hereinafter referred to, or as soon thereafter as in their judgment is
advisable.
The Company hereby confirms its agreement with respect to the purchase of
the Common Shares by the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-________) with
respect to the Common Shares has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission. The Company has met all of the eligibility
requirements for the use
<PAGE>
of a registration statement on Form S-3. There have been delivered to the
Underwriters three signed copies of such registration statement and
amendments, together with three copies of each exhibit filed therewith.
Conformed copies of such registration statement and amendments (but without
exhibits) and of the related preliminary prospectus have been delivered to
each of the Underwriters in such reasonable quantities as each of them has
requested. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, or (ii)
a final prospectus in accordance with Rules 430A and 424(b) of the Rules
and Regulations. As filed, such amendment and form of final prospectus, or
such final prospectus, shall include all Rule 430A Information and, except
to the extent that the Underwriters shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
the Underwriters prior to the date and time that this Agreement was
executed and delivered by the parties hereto, or, to the extent not
completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously advised
the Underwriters would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date (as hereinafter defined), shall
also mean such registration statement as so amended; provided, however,
that such term shall also include all Rule 430A Information deemed to be
included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean the prospectus relating to the Common Shares
in the form in which it is first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations or, if no filing pursuant to Rule
424(b) of the Rules and Regulations is required, shall mean the form of
final prospectus included in the Registration Statement at the time such
registration statement becomes effective. The term "Rule 430A Information"
means information with respect to the Common Shares and the offering
thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A of the Rules and Regulations. Any
reference herein to the Registration Statement, the Prospectus, any
amendment or supplement thereto or any Preliminary Prospectus shall be
deemed to refer and include the documents incorporated by reference
therein, and any reference herein
-2-
<PAGE>
to the terms "amend," "amendment," or "supplement," with respect to the
Registration Statement or Prospectus shall be deemed to refer and include
the filing after the execution hereof of any document with the Commission
deemed to be incorporated by reference therein.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to and
including each Closing Date hereinafter mentioned, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
will contain all material statements and information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of circumstances under which they were made; provided, however, no
representation or warranty contained in this subsection 2(b) shall be
applicable to information contained in or omitted from any Preliminary
Prospectus, the Registration Statement, the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
specifically for use in the preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed
in Exhibit 21 to the Registration Statement, and any reference herein to
the Company's "subsidiaries" shall mean the subsidiaries listed in such
Exhibit 21. The Company and each of the subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, with
full corporate power and authority (corporate and other) to own and lease
their properties and conduct their respective businesses as described in
the Prospectus; on the First Closing Date, the Company will own all of the
outstanding capital stock of its subsidiaries; the Company and its
subsidiaries are in possession of and are operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders
material to the conduct of their respective businesses, except where
noncompliance would not have a material adverse effect
-3-
<PAGE>
on the business or financial condition of the Company and its subsidiaries,
taken as a whole; the Company and each of its subsidiaries are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which the ownership or leasing of properties or the
conduct of their respective businesses requires such qualification, except
for jurisdictions in which the failure to so qualify would not have a
material adverse effect upon the Company and its subsidiaries, taken as a
whole; and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail,
such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as
set forth under the headings "Prospectus Summary - The Offering" and
"Capitalization" in the Prospectus; the issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid
and nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities,
and conform to the description thereof contained in the documents
incorporated by reference in the Prospectus. As of the Closing Dates (as
hereinafter defined), the Company will have no outstanding shares of
preferred stock. All issued and outstanding shares of capital stock of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable and are owned by the Company free and clear of
any lien, claim, equity or other encumbrance of any kind or character.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, incorporated by
reference into the Prospectus, neither the Company nor any of its
subsidiaries has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's outstanding
stock options, and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus,
accurately and fairly present in all material respects the information
required to be shown with respect to such options, plans, arrangements, and
rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
documents incorporated by reference into the Prospectus; and when duly
countersigned by the Company's transfer agent and registrar, and delivered
to the Underwriters in accordance with
-4-
<PAGE>
the provisions of this Agreement, good and valid title thereto will pass to
the Underwriters free and clear of any liens, claims, equities or other
encumbrances of any kind or character. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance and
sale of the Common Shares by the Company pursuant to this Agreement.
Except for the registration rights set forth in that certain Asset Purchase
Agreement dated January 23, 1995 by and among P&G Pizza, Incorporated, O.
Wayne Gaunce, Patrick Gaunce, Ruel Houchens, V.S. Hunsaker, Jim Hunsaker,
Papa John's USA, Inc. and Papa John's International, Inc. (the "Asset
Purchase Agreement"), no stockholder of the Company has any right to
require the Company to register the sale of any shares owned by such
stockholder under the Act in the public offering contemplated by this
Agreement.
(f) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
(i) the validity and binding effect and enforcement of this Agreement may
be limited by any applicable bankruptcy, reorganization, moratorium, or
similar laws of general application, (ii) the availability of equitable
remedies may be limited by principles of equity, whether considered in a
proceeding at law or in equity, and (iii) the terms thereof may be limited
by applicable securities laws and the policies embodied therein. The
making and performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not violate any
provisions of the Company's Amended and Restated Certificate of
Incorporation or Restated Bylaws and will not conflict with, result in the
breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective properties
may be bound or affected, any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company
or its subsidiaries or any of their respective properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with the
Act, the Blue Sky laws and Canadian securities laws applicable to the
public offering of the Common Shares by the several Underwriters and the
clearance of such offering with the National Association of Securities
Dealers, Inc. (the "NASD").
-5-
<PAGE>
(g) Ernst & Young, who have expressed their opinion with respect to
the financial statements filed with the Commission as a part of the
Registration Statement and included or incorporated by reference in the
Prospectus and in the Registration Statement, are independent accountants
as required by the Act and the Rules and Regulations.
(h) The financial statements of the Company, and the related notes
thereto, included or incorporated by reference in the Registration
Statement and the Prospectus, present fairly the financial position of the
Company (and the affiliated companies indicated therein) as of the
respective dates of such financial statements, and the results of
operations and changes in financial position of the Company (and the
affiliated companies indicated therein) for the respective periods covered
thereby. Such statements and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis. The Consolidated Financial Statements and related notes
thereto for the Company's fiscal years ended December 27, 1992, December
26, 1993, December 25, 1994 and December 31, 1995 have been certified by
Ernst & Young, the Company's independent accountants. No other financial
statements or schedules are required to be included or incorporated by
reference in the Registration Statement. The financial and statistical
data set forth in the Prospectus under the captions "Prospectus Summary,"
"Risk Factors," "Use of Proceeds," "Dividend Policy," "Price Range of
Common Stock," "Capitalization," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and "Management" fairly present the information set
forth therein on the basis stated in the Registration Statement.
(i) The Company is not in violation or default of any provision of
its Amended and Restated Certificate of Incorporation; none of the
Company's subsidiaries is in violation or default of its Articles of
Incorporation; neither the Company nor any of its subsidiaries is in
violation or default of any provision of its Bylaws or is in breach of or
default with respect to any provision of any judgment, decree or order, or
is in breach of or default with respect to any provision of any material
agreement, mortgage, deed of trust, lease, loan agreement, security
agreement, license, indenture, permit or other instrument to which it is a
party or by which it or any of its properties are bound; and there does not
exist any state of facts which constitutes an event of default on the part
of the Company or any of its subsidiaries as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event
of default.
(j) There are no documents required to be incorporated by reference
in the Registration Statement and the Prospectus by the Act or by the Rules
and
-6-
<PAGE>
Regulations or by the requirements of Form S-3 which have not been so
incorporated. There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which
have not been described or filed as required. The contracts so described
in the Prospectus are in full force and effect on the date hereof; and
neither the Company nor any of its subsidiaries, nor to the best of the
Company's or any subsidiaries's knowledge any other party, is in breach of
or default under any material provision of any such contract which would
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(k) There are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or may be a party or with respect to
which property owned or leased by the Company or any of its subsidiaries is
or may be the subject, or related to environmental, employment of aliens,
sexual harassment or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise),
properties, business, results of operations or prospects of the Company and
its subsidiaries, taken as a whole, and no labor disturbance by the
employees of the Company or its subsidiaries exists or, to the knowledge of
the Company or any of its subsidiaries, is imminent which might be expected
to result in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects of the
Company or its subsidiaries, taken as a whole. Neither the Company nor
any of its subsidiaries is a party to, or subject to the provisions of, any
material injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body.
(l) The Company and each of its subsidiaries have good and marketable
title to all the properties and assets reflected as owned by them,
respectively, in the financial statements hereinabove described (or as
reflected or described in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such financial statements (or in the Prospectus), or (ii)
those which do not materially adversely affect the use made and proposed to
be made of such property by the Company or any of its subsidiaries. The
Company and each of its subsidiaries hold their respective leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company or its
subsidiaries. Except as disclosed in the Prospectus, the Company and each
of its subsidiaries own or lease all such properties as are necessary to
their respective operations as now conducted.
-7-
<PAGE>
(m) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus (i) neither the Company nor any
of its subsidiaries has incurred any liabilities or obligations, direct,
indirect or contingent, or entered into any verbal or written agreement or
other transaction which is not in the ordinary course of business and which
reasonably could be expected to result in a material reduction in the
future earnings of the Company or its subsidiaries, taken as a whole; (ii)
the Company and its subsidiaries, taken as a whole, have not sustained any
material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity, whether
or not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and
the Company and its subsidiaries are not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has
not been any change in the capital stock (other than upon the sale of the
Common Shares hereunder) or indebtedness material to the Company and its
subsidiaries, taken as a whole; and (v) there has not been any material
adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
(n) The Company has validly registered in the principal register with
the U.S. Patent and Trademark Office "Papa John's" as a service mark,
"Pizza Papa John's" and design as a trademark, and "Pizza Papa John's
Delivering the Perfect Pizza!" and design as a trademark and as a
servicemark, and the Company and its subsidiaries have sufficient
trademarks, trade names, patent rights, mask works, copyrights, licenses,
approvals and governmental authorizations to conduct their respective
businesses as now conducted; and the Company has no knowledge of any
infringement by it or its subsidiaries of trademarks, trade name rights,
trade dress, patent rights, mask works, copyrights, licenses, trade secret
or other similar rights of others; and except as disclosed in the
Prospectus, the Company has no knowledge of any infringement by others of
its or its subsidiaries' trademarks, trade name rights, trade dress, patent
rights, mask works, copyrights, licenses, trade secrets or other similar
rights that would be material to the business or financial condition of the
Company and its subsidiaries taken as a whole; and there is no claim being
made against the Company or any of its subsidiaries or any of its
franchisees regarding trademark, trade name, trade dress, patent right,
mask work, copyright, license, trade secret or other infringement which
could have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company and
its subsidiaries, taken as a whole.
-8-
<PAGE>
(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal employment, truth-in-
advertising, franchising, immigration and environmental laws and
regulations, except where failure to be so in compliance would not
materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
(p) The Company and each of its subsidiaries have filed all federal,
state and foreign income and franchise tax returns or extensions therefor
required to be filed and have paid all taxes shown as due thereon; and the
Company has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company or any of its subsidiaries which
could materially and adversely affect the business, operations or
properties of the Company and its subsidiaries, taken as a whole.
(q) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
and (iii) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(r) The Company is not required to make, and following receipt of the
proceeds from the sale of the Common Shares will not be required to make,
any filing or to register under the Investment Company Act of 1940, as
amended.
(s) There is no proceeding pending or threatened (or, to the
knowledge of the Company or any of its subsidiaries or any officer of the
Company or its subsidiaries, any basis therefor) which may lead to the
revocation, suspension, termination or nonrenewal of any certificate,
order, license, permit, easement, consent, waiver, approval, franchise,
grant, authorization or concession required to conduct the business of the
Company or its subsidiaries as now conducted and as proposed to be
conducted and which are material to the Company and its subsidiaries, taken
as a whole.
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<PAGE>
(t) Neither the Company nor to the best of the Company's knowledge
any franchisee of the Company sells alcoholic beverages at any of the
Company's restaurants or at any restaurant operated by a franchisee of the
Company.
(u) The documents incorporated by reference in the Registration
Statement and Prospectus comply in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder, and any additional documents deemed to be incorporated by
reference in the Prospectus will, when they are filed with the Commission,
comply in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission thereunder, and both the
documents incorporated by reference in the Prospectus and any additional
documents deemed to be incorporated by reference in the Prospectus do not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they are
made, not misleading.
SECTION 3. Representations and Warranties of the Underwriters. The
Underwriters represent and warrant to the Company that the information set forth
(i) on the cover page of the Prospectus with respect to price, underwriting
discounts and commissions and terms of the offering and (ii) under
"Underwriting" in the Prospectus furnished to the Company by the Underwriters
for use in connection with the preparation of the Registration Statement and the
Prospectus is correct in all material respects. The Company acknowledges that
this information is the sole information furnished to the Company by the
Underwriters for inclusion in the Registration Statement, any Preliminary
Prospectus, any Prospectus, or any amendment or supplement thereto.
SECTION 4. Purchase, Sale and Delivery of Common Shares. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
to the Underwriters 800,000 Firm Common Shares, and the Underwriters agree,
severally and not jointly, to purchase from the Company the number of Firm
Common Shares set forth opposite their respective names in Schedule A hereto.
The purchase price per share to be paid by the Underwriters to the Company and
the Firm Selling Stockholders shall be $________ per share.
Delivery of the certificate(s) for the Firm Common Shares to be purchased
by the Underwriters shall be made by or on behalf of the Company to the
Underwriters or to the account of Montgomery Securities at the Depositary Trust
Corporation, New York, New York ("DTC"), as Montgomery Securities may direct,
for the respective accounts of the Underwriters. In the event certificates are
delivered to the Underwriters other than through DTC, such delivery shall be
made at the offices of Greenbaum Doll & McDonald
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<PAGE>
PLLC, 3300 National City Tower, Louisville, Kentucky 40202-3197 (or such other
place as may be agreed upon by the Company and the Underwriters). Delivery of
certificates, whether through DTC or otherwise, shall be made at such time and
date, not later than the third (or, if the Firm Common Shares are priced, as
contemplated by Rule 15cb-1(c) promulgated under the Securities Exchange Act of
1934, as amended, after 4:30 p.m. Washington D.C. Time, the fourth) full
business day following the first date that any of the Common Shares are released
by the Underwriters for sale to the public, as the Underwriters shall designate
(the "First Closing Date"); provided, however, that if the Prospectus is at any
time prior to the First Closing Date recirculated to the public, the First
Closing Date shall occur upon the later of the third or fourth, as the case may
be, full business day following the first date that any of the Common Shares are
released by the Underwriters for sale to the public or the date that is forty-
eight hours after the date that the Prospectus has been so recirculated. The
certificates for the Firm Common Shares shall be registered in such names and
denominations as the Underwriters shall have requested at least two full
business days prior to the First Closing Date and shall be made available for
checking and packaging on the business day preceding the First Closing Date at a
location in New York, New York, as may be designated by the Underwriters. Time
shall be of the essence, and delivery at the time and place specified in this
Agreement as a further condition to the obligations of the Underwriters.
Payment by the Underwriters for the purchase price for the Firm Common Shares
shall be made by wire transfer in same day funds to ____________________ bank,
account number ________________, as designated by the Company.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriters to purchase up to 120,000
Optional Common Shares at the purchase price per share to be paid for the Firm
Common Shares, for use solely in covering any over-allotments made by the
Underwriters in the sale and distribution of the Firm Common Shares. The option
granted hereunder may be exercised at any time (but not more than once) within
30 days after the first date that any of the Firm Common Shares are released by
the Underwriters for sale to the public upon notice by the Underwriters to the
Company setting forth the aggregate number of Optional Common Shares as to which
the Underwriters are exercising the option, the names and denominations in which
the certificates for such shares are to be registered and the time and place at
which such certificates will be delivered. Such time of delivery (which may not
be earlier than the First Closing Date), being herein referred to as the "Second
Closing Date," shall be determined by the Underwriters, but if at any time other
than the First Closing Date shall not be earlier than three nor later than five
full business days after delivery of such notice of exercise. The number of
Optional Common Shares to be purchased by each Underwriter shall be determined
by multiplying the aggregate number of Optional Common Shares to be sold by the
Company pursuant to such notice of exercise
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<PAGE>
by a fraction, the numerator of which is the number of Firm Common Shares to be
purchased by such Underwriter as set forth opposite its name in Schedule A and
the denominator of which is 800,000 (subject to such adjustments to eliminate
any fractional share purchases as the Underwriters in their discretion may
make). Certificates for the Optional Common Shares will be made available for
checking and packaging on the business day preceding the Second Closing Date at
a location in New York, New York, designated by you. The manner of payment for
and delivery of the Optional Common Shares shall be the same as for the Firm
Common Shares purchased, as specified in this Section 4. At any time before
lapse of the option, the Underwriters may cancel such option by giving written
notice of such cancellation to the Company. If the option is canceled or
expires unexercised in whole or in part, the Company will deregister under the
Act the number of Optional Common Shares as to which the option has not been
exercised.
Subject to the terms and conditions hereof, the Underwriters propose to
make a public offering of their respective portions of the Firm Common Shares,
and of the Optional Common Shares if and to the extent that the Underwriters
exercise their option to purchase Optional Common Shares, as soon after the
effective date of the Registration Statement as in the judgment of the
Underwriters is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.
SECTION 5. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective. If the Registration Statement has become or becomes
effective pursuant to Rule 430A of the Rules and Regulations, or the filing
of the Prospectus is otherwise required under Rule 424(b) of the Rules and
Regulations, the Company will file the Prospectus, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide evidence
satisfactory to the Underwriters of such timely filing. The Company will
promptly advise the Underwriters in writing (i) of the receipt of any
comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or
after it becomes effective), any Preliminary Prospectus or the Prospectus
or for additional information, (iii) when the Registration Statement shall
have become effective and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
the institution of any proceedings for that purpose. If the Commission
shall enter any such stop order at any time, the Company will use its best
efforts to obtain the lifting of such order at the earliest possible
moment. The Company will not file any amendment or supplement to the
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<PAGE>
Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus of which the Underwriters have not
been furnished with a copy a reasonable time prior to such filing or to
which the Underwriters reasonably object in writing or which is not in
compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the Underwriters' request, any amendments or supplements to the
Registration Statement or the Prospectus which in the Underwriters'
judgment may be necessary or advisable to enable the several Underwriters
to continue the distribution of the Common Shares and will use its best
efforts to cause the same to become effective as promptly as possible. The
Company will fully and completely comply with the provisions of Rule 430A
of the Rules and Regulations with respect to information omitted from the
Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in
Section 10(a)(3) of the Act during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event occurs,
as a result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or if it is necessary at any
time to amend the Prospectus, including any amendments or supplements, to
comply with the Act or the Rules and Regulations, the Company will promptly
advise the Underwriters thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment or supplement which will
effect such compliance and will use its best efforts to cause the same to
become effective as soon as possible; and, in case any Underwriter is
required to deliver a prospectus after such nine-month period, the Company,
upon request, but at the expense of such Underwriter, will promptly prepare
such amendment or amendments to the Registration Statement and such
Prospectus or Prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the end
of the first quarter ending after one year following the "effective date of
the Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security
holders an earnings statement (which need not be audited) covering a period
of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
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<PAGE>
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to in
Section 10(a)(3) of the Act, will furnish to the Underwriters or mail
copies of the Registration Statement, the Prospectus, the Preliminary
Prospectus and all amendments and supplements to any such documents in each
case as soon as available and in such quantities as the Underwriters may
request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with the Underwriters and their
counsel in order to qualify or register the Common Shares for sale under
(or obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions, and, in the case of jurisdictions in Canada, under Canadian
securities laws, as the Underwriters designate, will comply with such laws
and will continue such qualifications, registrations and exemptions in
effect so long as reasonably required for the distribution of the Common
Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise the
Underwriters promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Common Shares for
offering, sale or trading in any jurisdiction or any initiation or overt
threat of any proceeding for any such purpose, and in the event of the
issuance of any order suspending such qualification, registration or
exemption, the Company, with the Underwriters' cooperation, will use its
best efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Underwriters: (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report to Stockholders of the
Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows
for the year then ended and the opinion thereon of the Company's
independent public accountants; (ii) as soon as practicable after the
filing thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Report on Form 8-K or other report filed by
the Company with the Commission, the NASD or any securities exchange; and
(iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its Common Stock.
(h) During the period of 90 days from the date of the Prospectus,
without the prior written consent of either Montgomery Securities or the
Underwriters acting jointly (the giving or withholding of such written
consent being in the sole discretion of Montgomery Securities, or the
Underwriters acting jointly, as the case
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<PAGE>
may be), the Company will not issue, offer, sell, grant options to purchase
or otherwise dispose of any of the Company's equity securities or any other
securities convertible into or exchangeable with its Common Stock or other
equity security, except for (i) the grant of options in the ordinary course
of business pursuant to existing stock option plans; (ii) the issuance of
shares of Common Stock pursuant to the exercise of director, officer or
employee stock options that are disclosed in the Registration Statement or
Prospectus or the other documents incorporated by reference therein and are
outstanding on the date of the Prospectus; [or (iii) the issuance of up to
a maximum of 250,000 shares of Common Stock for the acquisition of
additional restaurants or properties.]
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain
exemptions from the application of) the Blue Sky laws of the State of
California (and thereby permit market making transactions and secondary
trading in the Company's Common Stock in California), will comply with such
Blue Sky laws and will use its best efforts to maintain such
qualifications, registrations and exemptions in effect for a period of five
years after the date hereof.
The Underwriters may, in their sole discretion, waive in writing the
performance by the Company of any one or more of the foregoing covenants or
extend the time for their performance.
SECTION 6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder, including without
limiting the generality of the foregoing, (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and engraving
costs), (ii) all fees and expenses of the registrar and transfer agent of the
Common Stock, (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Common Shares to the Underwriters,
(iv) all fees and expenses of the Company's counsel and the Company's
independent accountants, (v) all costs and expenses incurred in connection with
the preparation, printing, filing, shipping and distribution to the Underwriters
and dealers of the Registration Statement, each Preliminary Prospectus and the
Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers
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<PAGE>
Agreement, the Underwriters' Questionnaire, the Underwriters' Power of Attorney
and the preliminary Blue Sky memorandum and final Blue Sky memorandum, (vi) all
filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the Blue Sky laws and applicable Canadian
securities laws, (vii) the filing fee of the NASD and attorneys fees and
expenses incurred by the Company or the Underwriters in obtaining a letter of no
objection from the NASD, and (viii) all other fees, costs and expenses referred
to in Item 14 of the Registration Statement. Except as provided in this Section
6, Section 8 and Section 10 hereof, the Underwriters shall pay all of their own
expenses, including the fees and disbursements of their counsel (excluding those
relating to qualification, registration or exemption under the Blue Sky laws,
Canadian securities laws, the Blue Sky memoranda and relating to obtaining a
letter of no objection from the NASD, referred to above).
SECTION 7. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase and pay for the Firm Common Shares
on the First Closing Date and the Optional Common Shares on the Second Closing
Date shall be subject to the accuracy of the representations and warranties on
the part of the Company herein set forth as of the date hereof and as of the
First Closing Date or the Second Closing Date, as the case may be, to the
accuracy of the statements of Company officers made pursuant to the provisions
of this Agreement, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Washington D.C. time, on the date of this Agreement, or at
such later time as shall have been consented to by you; if the filing of
the Prospectus, or any supplement thereto, is required pursuant to Rule
424(b) of the Rules and Regulations, the Prospectus shall have been filed
in the manner and within the time period required by Rule 424(b) of the
Rules and Regulations; and prior to such Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
shall be pending or, to the knowledge of the Company or the Underwriters,
shall be contemplated by the Commission; and any request of the Commission
for inclusion of additional information in the Registration Statement, or
otherwise, shall have been complied with to the Underwriters' satisfaction.
(b) The Underwriters shall be satisfied that since the respective
dates as of which information is given in the Registration Statement and
Prospectus, (i) there shall not have been any change in the capital stock
(other than pursuant to the exercise of director, officer or employee stock
options disclosed in the Registration Statement or Prospectus and
outstanding as of the date of the Prospectus) of the
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Company or its subsidiaries or any material change in the indebtedness of
the Company or its subsidiaries, (ii) except as set forth in or
contemplated by the Registration Statement or the Prospectus, no material
verbal or written agreement or other transaction shall have been entered
into by the Company or its subsidiaries which is not in the ordinary course
of business and which reasonably could be expected to result in a material
reduction in the future earnings of the Company or its subsidiaries, taken
as a whole, (iii) no loss or damage (whether or not insured) to the
property of the Company or its subsidiaries shall have been sustained which
materially and adversely affects the condition (financial or otherwise),
business, results of operations or prospects of the Company or its
subsidiaries, taken as a whole, (iv) no legal or governmental action, suit
or proceeding affecting the Company or its subsidiaries which could have a
material adverse effect upon the Company and its subsidiaries, taken as a
whole, or which affects or may affect the transactions contemplated by this
Agreement shall have been instituted or threatened and (v) there shall not
have been any material change in the condition (financial or otherwise),
business, management, results of operations or prospects of the Company and
its subsidiaries taken as a whole which makes it impractical or inadvisable
in the judgment of the Underwriters to proceed with the public offering or
purchase of the Common Shares as contemplated hereby.
(c) There shall have been furnished to the Underwriters on each
Closing Date, in form and substance satisfactory to the Underwriters, such
documents and certificates as the Underwriters shall reasonably request,
including the following:
(i) An opinion of Greenebaum Doll & McDonald PLLC, counsel for
the Company, addressed to the Underwriters and dated the First Closing
Date, or the Second Closing Date, as the case may be, to the effect
that:
(1) Each of the Company and its subsidiaries, respectively,
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction
of incorporation, is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions
where the ownership or leasing of properties or the conduct of
its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company or its subsidiaries, as
the case may be, and each has full corporate power and authority
to own its properties and conduct its business as described in
the Registration Statement;
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<PAGE>
(2) The authorized capital stock of the Company is as set
forth under the caption "Capitalization" in the Prospectus, and
the number of shares of Common Stock that will be issued and
outstanding after consummation of the transactions contemplated
hereby is as set forth under the caption "Prospectus Summary -
The Offering" (assuming the Underwriters do not elect to purchase
any of the Optional Common Shares); all necessary and proper
corporate proceedings have been taken in order to validly
authorize such authorized Common Stock and to validly issue such
issued and outstanding Common Stock; all outstanding shares of
Common Stock (including the Firm Common Shares and Optional
Common Shares, if any) have been duly and validly authorized and
issued, are fully paid and nonassessable, were not issued in
violation of any preemptive rights or other rights to subscribe
for or purchase any securities and conform to the description
thereof contained in the documents incorporated by reference into
the Prospectus; without limiting the foregoing, there are no
preemptive or other rights to subscribe for or purchase any of
the Common Shares to be sold by the Company hereunder; neither
the Amended and Restated Certificate of Incorporation nor
Restated Bylaws of the Company, nor does any contract, contain
any restriction upon the voting or transfer of any of the shares
of capital stock of the Company (including the Firm Common Shares
and the Option Common Shares), except such restrictions as may be
imposed by federal and state securities laws or as may be
expressly described in the Prospectus;
(3) All of the issued and outstanding shares of capital
stock of the Company's subsidiaries have been duly and validly
authorized and issued, are fully paid and nonassessable, and good
and valid title thereto is held by the Company free and clear of
all liens, claims, equities or other encumbrances of any kind or
character;
(4) The certificate(s) evidencing the Common Shares to be
delivered hereunder are in due and proper form under Delaware
law, and when duly countersigned by the Company's transfer agent
and registrar, and delivered to the Underwriters or to the order
of the Underwriters against payment of the agreed consideration
therefor in accordance with the provisions of this Agreement,
good and valid title to the Common Shares (including the Firm
Common Shares to be sold by the Company and the Optional Common
Shares to be sold by the Company to the extent that the over-
allotment option is exercised)
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<PAGE>
will pass to the Underwriters free and clear of any liens,
claims, equities or other encumbrances of any kind or character,
and the Common Shares represented by such certificate(s) will be
duly authorized and validly issued, fully paid and nonassessable,
will not have been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase
securities, and will conform to the description thereof contained
in the documents incorporated by reference into the Prospectus;
(5) Except as disclosed in the Prospectus, there are no
outstanding options, warrants or other rights calling for the
issuance of, and no commitments or obligations to issue, any
shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the
Company;
(6) (a) The Company has met all of the eligibility
requirements for the use of a registration statement on Form S-3.
(b) The Registration Statement has become effective
under the Act, and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending
or overtly threatened by the Commission; any required filing of
the Prospectus and any supplement thereto pursuant to Rule 424(b)
of the Rules and Regulations has been made in the manner and
within the time period required by such Rule 424(b);
(c) The Registration Statement, the Prospectus and
each amendment or supplement thereto (except for the financial
statements and schedules and other statistical financial data and
schedules included therein, as to which such counsel need express
no opinion) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations; and
(d) The documents incorporated by reference in the
Prospectus (except for the financial statements and schedules and
other statistical financial data and schedules included therein,
as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder.
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(e) To such counsel's knowledge, there are no
franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement,
the Prospectus, the documents incorporated by reference in the
Prospectus, or to be filed as exhibits to the Registration
Statement or the documents incorporated by reference into the
Prospectus which are not disclosed or filed, as required;
(7) The Company has full right, corporate power and
authority to enter into this Agreement and to sell and deliver
the Common Shares to be sold by it to the Underwriters; this
Agreement has been duly and validly authorized by all necessary
corporate action by the Company, has been duly and validly
executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except to the extent
that (i) the validity and binding effect and enforcement of this
Agreement may be limited by any applicable bankruptcy,
reorganization, moratorium, or similar laws of general
application, (ii) the availability of equitable remedies may be
limited by principles of equity, whether considered in a
proceeding at law or in equity, and (iii) the terms hereof may be
limited by applicable securities laws and the policies embodied
therein; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with
any court, regulatory, administrative or other governmental body
is required for the execution and delivery of this Agreement by
the Company or the consummation of the transactions contemplated
by this Agreement, except such as have been obtained and are in
full force and effect under the Act and such as may be required
under applicable Blue Sky laws and applicable Canadian securities
laws in connection with the purchase and distribution of the
Common Shares by the Underwriters and the obtaining of a letter
of no objection from the NASD with respect to such offering;
(8) The execution and performance of this Agreement, the
sale of the Common Shares and the consummation of the
transactions herein contemplated will not violate any of the
provisions of the Amended and Restated Certificate of
Incorporation or Restated Bylaws of the Company or the Articles
of Incorporation or Bylaws of any of its subsidiaries or, to such
counsel's knowledge, conflict with, result in the breach of, or
constitute, either by itself or upon notice or the passage of
time or both, a default under any agreement, mortgage,
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deed of trust, lease, franchise, license, indenture, permit or
other instrument to which the Company or its subsidiaries is a
party or by which the Company or its subsidiaries or any of its
or their property may be bound or affected, or violate any
statute, judgment, decree, order, rule or regulation of any
court or government body having jurisdiction over the Company or
its subsidiaries or any of its or their property (other than
state securities or Blue Sky laws and regulations as to which
counsel need not express any opinion);
(9) The Company is not in violation of its Amended and
Restated Certificate of Incorporation or Restated Bylaws and the
Company's subsidiaries are not in violation of their Articles of
Incorporation or Bylaws, and, to such counsel's knowledge neither
the Company nor its subsidiaries is in breach of or default with
respect to any provision of any agreement, mortgage, deed of
trust, lease, loan agreement, security agreement, license,
indenture, permit or other instrument to which the Company or its
subsidiaries is a party or by which the Company or any of its
properties or the Company's subsidiaries or any of their
properties may be bound or affected, except where such default
would not materially adversely affect the Company or its
subsidiaries, taken as a whole; and, to such counsel's knowledge,
the Company and its subsidiaries are in compliance with all laws,
rules, regulations, judgments, decrees, orders and statutes of
any court or jurisdiction to which they are subject, except where
noncompliance would not materially adversely affect the Company
or its subsidiaries, taken as a whole;
(10) To such counsel's knowledge, there are no legal
actions, suits or governmental proceedings pending or threatened
before any court or governmental agency, authority or body which,
if determined adversely to the Company or its subsidiaries, would
individually or in the aggregate have a material adverse effect
on the financial position, stockholders' equity or results of
operations of the Company or its subsidiaries, taken as a whole;
(11) Except to the extent the registration rights granted
pursuant to the Asset Purchase Agreement have not been waived
pursuant to the waivers annexed to such counsel's opinion, to
such counsel's knowledge, no holders of securities of the Company
have rights to the registration of shares of Common Stock or
other securities which would be required to be included in the
Registration
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Statement filed by the Company or included in the offering
contemplated thereby;
(12) No transfer taxes are required to be paid under the
laws of the Commonwealth of Kentucky in connection with the sale
and delivery of the Common Shares to the Underwriters hereunder;
In rendering such opinion, such counsel may rely, as to matters
of fact, on certificates of the officers of the Company and of
governmental officials, in which case their opinion shall state that
they are so doing and that the Underwriters are justified in relying
on such certificates and copies of such certificates are to be
attached to the opinion.
In addition, such counsel shall state that they have participated
in conferences with officers, employees and other representatives of
the Company, counsel for the Underwriters, representatives of the
independent public accountants for the Company and representatives of
the Underwriters at which the contents of the Registration Statement
and Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility
for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and has not
made any independent check or verification thereof, on the basis of
the foregoing (relying as to materiality to a large extent upon the
statements of officers, employees and other representatives of the
Company), no facts have come to such counsel's attention that lead
them to believe that either the Registration Statement at the time
such Registration Statement became effective contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made, not
misleading, or the Prospectus as of its date contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that
such counsel need express no opinion with respect to the financial
statements, schedules and other statistical financial data included in
the Registration Statement or Prospectus.
(ii) Such opinion or opinions of Locke Purnell Rain Harrell (A
Professional Corporation), counsel for the Underwriters, dated the
First Closing Date or the Second Closing Date, as the case may be,
with respect to the incorporation of the Company and its subsidiaries,
the sufficiency of all corporate proceedings and other legal matters
relating to this Agreement,
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the validity of the Common Shares, the Registration Statement and the
Prospectus and other related matters as the Underwriters may
reasonably require, and the Company shall have furnished to such
counsel such documents and shall have exhibited to them such papers
and records as they reasonably may request for the purpose of enabling
them to pass upon such matters. In connection with such opinions,
such counsel may rely on representations or certificates of the
officers of the Company and governmental officials.
(iii) A certificate of the Company executed by the Chairman of
the Board and Chief Executive Officer and the Chief Financial or
Accounting Officer of the Company, dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied on or prior to such
Dates, respectively;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best of
the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or overtly threatened
under the Act;
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus;
in his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements
thereto contain all statements required to be stated therein
regarding the Company and its subsidiaries, and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading;
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(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any Prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there
has not been any material adverse change or a development
involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations,
management or prospects of the Company and its subsidiaries,
taken as a whole; and no legal or governmental action, suit or
proceeding is pending or threatened against the Company or its
subsidiaries which is material to the Company or its
subsidiaries, whether or not arising from transactions in the
ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; neither the Company
nor its subsidiaries has entered into any verbal or written
agreement or other transaction which is not in the ordinary
course of business or which reasonably could be expected to
result in a material reduction in the future earnings of the
Company or its subsidiaries, or incurred any material liability
or obligation, direct, contingent or indirect, made any change in
its capital stock, made any material change in its short-term
debt or long-term debt or repurchased or otherwise acquired any
of the Company's capital stock; and the Company has not declared
or paid any dividend, or declared or made any other distribution,
with respect to its outstanding capital stock payable to
stockholders of record, except as disclosed in the Prospectus, on
a date prior to the First Closing Date or Second Closing Date, as
the case may be; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, neither the
Company nor its subsidiaries has sustained a material loss or
damage by strike, fire, flood, windstorm, accident or other
calamity (whether or not insured).
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(iv) On the date before this Agreement is executed and also on
the First Closing Date and the Second Closing Date, a letter addressed
to the Underwriters from Ernst & Young, independent accountants, the
first one to be dated the day before the date of this Agreement, the
second one to be dated the First Closing Date and the third one (in
the event of a Second Closing) to be dated the Second Closing Date, in
form and substance satisfactory to you.
(v) On or before the First Closing Date, letters from each
director and officer of the Company, in form and substance
satisfactory to you, confirming that for a period of 90 days from the
date of the Prospectus such person or entity will not directly or
indirectly sell or offer to sell or otherwise dispose of any shares of
Common Stock or any right to acquire such shares without the prior
written consent of either Montgomery Securities or the Underwriters
acting jointly, which consent may be withheld at the sole discretion
of Montgomery Securities, or the Underwriters acting jointly, as the
case may be.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably
satisfactory to the Underwriters and to Locke Purnell Rain Harrell (A
Professional Corporation), counsel for the Underwriters. The Company and
the Selling Stockholders shall furnish the Underwriters with such manually
signed or conformed copies of such opinions, certificates, letters and
documents as the Underwriters request. Any certificate signed by any
officer of the Company and delivered to the Underwriters shall be deemed to
be a representation and warranty by the Company to the Underwriters as to
the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at the election of the Underwriters will terminate upon
notification by the Underwriters to the Company without liability on the
part of any Underwriter or the Company, except for the expenses to be paid
or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except
to the extent provided in Section 10 hereof.
SECTION 8. Reimbursement of Underwriters' Expenses. If this Agreement
shall be terminated by the Underwriters pursuant to Section 7, or if the sale to
the Underwriters of the Common Shares at the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or to comply with any provision hereof,
the Company agrees to reimburse the Underwriters upon demand for all out-of-
pocket expenses that shall have been reasonably incurred by
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the Underwriters in connection with the proposed purchase and the sale of the
Common Shares, including but not limited to fees and disbursements of
Underwriters' counsel, printing expenses, travel expenses, postage, telecopy
charges and telephone charges relating directly to the offering contemplated by
the Prospectus. Any such termination shall be without liability of any party to
any other party, except that the provisions of this Section 8, Section 6 and
Section 10 shall at all times be effective and shall apply.
SECTION 9. Effectiveness of Registration Statement. The Underwriters and
the Company will use their respective best efforts to cause the Registration
Statement to become effective, to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement and, if such stop
order be issued, to obtain as soon as possible the lifting thereof.
SECTION 10. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of the Company and the Selling Stockholders),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference into the Prospectus, or arise out of or are based
upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in
any of them not misleading, or arise out of or are based in whole or in
part on any inaccuracy in the representations and warranties of the Company
contained herein or any failure of the Company to perform its obligations
hereunder or under law; and will reimburse each Underwriter and each such
controlling person for any legal and other expenses as such expenses are
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance
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upon and in conformity with the information furnished to the Company by the
Underwriters pursuant to Section 3 hereof; and provided further, that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any Preliminary Prospectus, the indemnity agreement
contained in this paragraph shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Common Shares concerned (or
to the benefit of any person controlling such Underwriter) to the extent
that any such loss, claim, damage, liability or expense of such Underwriter
or controlling person results from the fact that a copy of the Prospectus
was not sent or given to such person at or prior to the written
confirmation of sale of such Common Shares to such person as required by
the Act, and if the untrue statement or omission has been corrected in the
Prospectus, unless such failure to deliver the Prospectus was a result of
noncompliance by the Company with its obligations under Section 5(e)
hereof.
(b) In addition to their other obligations under this Section 10 the
Company and the Selling Stockholders jointly and severally agree that, as
an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, or any inaccuracy in the
representations and warranties of the Company herein or failure by the
Company to perform its obligations hereunder, all as described in Section
10(a), the Company will reimburse each Underwriter on a quarterly basis for
all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligations to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter
shall promptly return such payment to the Company, together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
announced from time to time by Bank of America NT&SA, San Francisco,
California (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Underwriter within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability
which the Company otherwise may have.
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(c) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages,
liabilities or expenses to which the Company, or any such director,
officer, or controlling person may become subject under the Act, the
Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with the information furnished to the
Company pursuant to Section 3 hereof (which information is the sole
information furnished to the Company by the Underwriters for inclusion in
the Registration Statement, any Preliminary Prospectus, any Prospectus, or
any amendment or supplement thereto); and will reimburse the Company, or
any such director, officer or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director, officer
or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. In addition to its other obligations under this Section
10(c), each Underwriter severally agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(c) which
relates to information furnished to the Company pursuant to Section 4
hereof, it will reimburse the Company (and, to the extent applicable, each
officer, director or controlling person) on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Underwriters'
obligation to reimburse the Company (and, to the extent applicable, each
officer, director, or controlling person) for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and,
to the extent applicable, each
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officer, director or controlling person) shall promptly return such payment
to the Underwriters, together with interest, compounded daily, determined
on the basis of the Prime Rate. Any such interim reimbursement payments
which are not made within 30 days of a request for reimbursement, shall
bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such
Underwriter otherwise may have.
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise hereunder to the extent it is not
materially prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified
party shall have employed such counsel in connection with the assumption of
legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one separate counsel, approved
by the Underwriters in the case of Section 10(a), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time
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after notice of commencement of the action, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(e) If the indemnification provided for in this Section 10 is
required by its terms, but for any reason is held to be unavailable to or
otherwise insufficient to hold harmless any indemnified party under
paragraphs (a), (b), (c) or (d) in respect of any losses, claims, damages,
liabilities or expenses as referred to herein, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Underwriters
from the offering of the Common Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, then such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Underwriters in connection with the statements or omissions or
inaccuracies in their representations and warranties herein which resulted
in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The respective relative benefits
received by the Company and the Underwriters shall be deemed to be in the
same proportion, in the case of the Company as the total price paid to the
Company for the Common Shares sold by it to the Underwriters (before
deducting expenses), and in the case of Underwriters as the underwriting
commissions received by them, bears to the total of such amounts paid to
the Company and the amounts received by the Underwriters as underwriting
commissions. The relative fault of the Company and the Underwriters shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged
inaccurate representations and/or warranty relates to the information
supplied by the Company or the Underwriters and the parties relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations
set forth in subsection (d) of this Section 10, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim. The provisions set forth in subsection
(d) of this Section 10 with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this subsection
(e); provided, however, that no additional notice shall be required with
respect to any action for which notice has been given under subsection (d)
for the purposes of indemnification. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to
this Section 10 were determined solely by pro rata allocation (even if
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the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in this subsection (e). Notwithstanding the
provisions of this Section 10, no Underwriter shall be required to
contribute any amount in excess of the amount of the total underwriting
commissions received by such Underwriter in connection with the Common
Shares underwritten by it and distributed to the public. No person guilty
of fraudulent misrepresentation (within a meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 10 are several in proportion to their
respective underwriting commitments and not joint.
(f) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in this Section 10,
including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board
of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written notice
of intention to arbitrate, therein electing the arbitration tribunal. In
the event the party demanding arbitration does not make such designation of
an arbitration tribunal in such demand or notice, then the party responding
to said demand or notice is authorized to do so. Such an arbitration would
be limited to the operation of the interim reimbursement provisions
contained in this Section 11 and would not resolve the ultimate propriety
or enforceability of the obligation to reimburse expenses which is created
by the provisions of this Section 10.
SECTION 11. Default of Underwriters. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares in the
manner described herein, that, except as hereinafter in this paragraph provided,
each of the Underwriters shall purchase and pay for all the Common Shares agreed
to be purchased by such Underwriter hereunder upon tender to the Underwriters of
all such shares in accordance with the terms hereof. If ANY UNDERWRITER
defaults in its obligation to purchase Common Shares hereunder on either the
First or Second Closing Date and the aggregate number of Common Shares that such
defaulting Underwriter agreed but failed to purchase on such Closing Date does
not exceed 10% of the total number of Common Shares which the Underwriters are
obligated severally, in proportion to their respective commitments hereunder, to
purchase on such Closing Date, the non-defaulting Underwriters shall be
obligated to purchase the Common Shares that such defaulting Underwriter agreed
but failed to purchase on such Closing Date. If any Underwriter so defaults and
the aggregate number of Common Shares with
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respect to which such default occurs is more than the above percentage and
arrangements satisfactory to the Underwriters and the Company for the purchase
of such Common Shares by other persons are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of the non-
defaulting Underwriters or the Company (except for the expenses to be paid by
the Company pursuant to Section 6 hereof and except to the extent provided in
Section 10 hereof).
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Underwriters and the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than three business days
in order that the necessary changes in the Registration Statement, Prospectus
and any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 12. Effective Date. This Agreement shall become effective at such
time as the Registration Statement has become effective and you shall have
released the Firm Common Shares for sale to the public; provided, however, that
the provisions of Sections 6, 8, 10 and 13 hereof shall at all times be
effective. For the purposes of this Section 12, the Firm Common Shares shall be
deemed to have been so released upon the release by the Underwriters for
publication, at any time after the Registration Statement has become effective,
of any newspaper advertisement relating to any of the Common Shares, or upon the
release by the Underwriters of any of the Common Shares for sale to the public,
whichever may occur first.
SECTION 13. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to the
Underwriters or by the Underwriters by notice to the Company at any time
prior to the time this Agreement shall become effective as to all its
provisions, and any such termination shall be without liability on the part
of the Company to the Underwriters (except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 6 and 8 hereof and except to
the extent provided in Section 10 hereof) or of any Underwriter to the
Company (except to the extent provided in Section 10 hereof).
(b) This Agreement may also be terminated by the Underwriters prior
to the First Closing Date or prior to the Second Closing Date, as the case
may be, by notice to the Company and the Selling Stockholders (i) if
additional material governmental
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<PAGE>
restrictions not in force and effect on the date hereof shall have been
imposed upon trading in securities generally or minimum or maximum prices
shall have been generally established on the New York Stock Exchange or on
the American Stock Exchange or in the NASDAQ National Market or in the over
the counter market by the NASD, or trading in securities generally shall
have been suspended on either such Exchange or in the NASDAQ National
Market or in the over the counter market by the NASD or the Commission, or
a general banking moratorium shall have been established by federal, New
York, Kentucky or California authorities, (ii) if an outbreak of
hostilities or other national or international calamity or any material
change in political, financial or economic conditions shall have occurred
or shall have accelerated to such an extent that the effect on the
financial markets shall, in the judgment of the Underwriters, affect
adversely the marketability of the Common Shares, (iii) if any adverse
event shall have occurred or shall exist which makes untrue or incorrect in
any material respect any statement or information contained in the
Registration Statement or the Prospectus or any document incorporated by
reference into the Prospectus or which is not reflected in the Registration
Statement or the Prospectus or any document incorporated by reference into
the Prospectus but should be reflected therein in order to make the
statements or information contained therein not misleading in any material
respect, or (iv) if there shall be any action, suit or proceeding pending
or threatened, or there shall have been any development involving
particularly the business or properties or securities of the Company or its
subsidiaries or the transactions contemplated by this Agreement, which, in
the judgment of the Underwriters, may materially and adversely affect the
business or earnings of the Company and its subsidiaries taken as a whole
or makes it impracticable to offer or sell the Common Shares. Any
termination pursuant to this subsection (b) shall be without liability on
the part of the Underwriters to the Company or on the part of the Company
to the Underwriters (except for expenses to be paid or reimbursed by the
Company pursuant to Sections 6 or 8 hereof and except to the extent
provided in Sections 10 and 14).
SECTION 14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its officers, and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters or the
Company or any of their partners, officers or directors or any controlling
person, as the case may be, and will survive delivery of and payment for the
Common Shares sold hereunder and any termination of this Agreement.
SECTION 15. Notices. All communications hereunder shall be in writing
and, if sent to the Underwriters, shall be mailed, delivered or telecopied or
telegraphed and
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<PAGE>
confirmed to the Underwriters at Montgomery Securities, 600 Montgomery Street,
San Francisco, California 94111, Attention: General Counsel, and Alex. Brown &
Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202,
Attention: Mark Goodman, with a copy to Locke Purnell Rain Harrell (A
Professional Corporation), 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201,
Attention: Dan Busbee; and if sent to the Company shall be mailed, delivered or
telecopied or telegraphed and confirmed to the Company at 11492 Bluegrass
Parkway, Louisville, Kentucky 40299, Attention: Charles W. Schnatter, with a
copy to Greenebaum Doll & McDonald PLLC, 3300 National City Tower, Louisville,
Kentucky, 40202, Attention: Ivan Diamond. The Company or the Underwriters may
change the address for receipt of communications hereunder by giving notice to
the others.
SECTION 16. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 11 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not
include any purchaser of the Common Shares as such from any of the Underwriters
merely by reason of such purchase.
SECTION 17. Partial Unenforceability. The invalidity or unenforceability
of any Section, subsection, paragraph or provision of this Agreement shall not
affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, subsection, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.
SECTION 18. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of Kentucky.
SECTION 19. General. This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this
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<PAGE>
Agreement. This Agreement may be amended or modified, and the observance of any
term of this Agreement may be waived, only by a writing signed by the Company
and the Underwriters.
If the foregoing is in accordance with the Underwriters' understanding of
our agreement, kindly sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement among the Company and the
Underwriters, all in accordance with its terms.
Very truly yours,
PAPA JOHN'S INTERNATIONAL, INC.
By:
--------------------------------------
Charles W. Schnatter,
Senior Vice President, General Counsel
and Secretary
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written
by the undersigned Underwriters.
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
By: MONTGOMERY SECURITIES
By:
----------------------------------
Its: Managing Director
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<PAGE>
SCHEDULE A
Number of Firm Common
Name of Underwriter Shares to be Purchased
- -------------------- ----------------------
Montgomery Securities
-------
Alex. Brown & Sons Incorporated
-------
TOTAL 800,000
=======
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<PAGE>
[LETTERHEAD OF GREENEBAUM DOLL & McDONALD PLLC]
April 22, 1996
PAPA JOHN'S INTERNATIONAL, INC.
11492 Bluegrass Parkway, Suite 175
Louisville, Kentucky 40299
Ladies and Gentlemen:
We have acted as legal counsel in connection with the preparation of a
Registration Statement on Form S-3 under the Securities Act of 1933, as amended
("Registration Statement"), covering an aggregate of 977,500 shares of common
stock, par value $.01 per share (the "Common Stock"), of Papa John's
International, Inc., a Delaware corporation (the "Company"), of which 977,500
shares (including 127,500 shares subject to an over-allotment option granted to
the Underwriters) are being offered by the Company.
We have examined and are familiar with the Amended and Restated Certificate
of Incorporation and Restated By-Laws of the Company, and the various corporate
records and proceedings relating to the organization of the Company and the
proposed issuance of the Common Stock. We have also examined such other
documents and proceedings as we have considered necessary for the purpose of
this opinion.
Based on the foregoing, it is our opinion that the Common Stock has been
duly authorized and, when issued and paid for in accordance with the terms of
the Registration Statement, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and with such state securities administrators as may
require such opinion of counsel for the registration of the Common Stock, and to
the reference to this firm under the heading "Legal Matters" in the Prospectus.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
GREENEBAUM DOLL & McDONALD PLLC
GD&M/abc
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" in the Registration Statement on
Form S-3 and related Prospectus of Papa John's International, Inc. for the
registration of 850,000 shares of its common stock and to the incorporation by
reference therein of our report dated February 27, 1996, with respect to the
consolidated financial statements of Papa John's International, Inc. and
subsidiaries incorporated by reference in its Annual Report (Form 10-K) for the
fiscal year ended December 31, 1995, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Louisville, Kentucky
April 18, 1996
