Papa Johns 2007 Annual Report Download - page 93

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17. Lease Commitments and Contingencies (continued)
In addition, as a condition of the sale of the Perfect Pizza operations in March 2006, we remain
contingently liable for payment under approximately 74 lease arrangements, primarily associated with
Perfect Pizza restaurant sites. The leases have varying terms, the latest of which expires in 2017. As of
December 30, 2007, the potential amount of undiscounted payments we could be required to make in the
event of non-payment by the new owner of Perfect Pizza and associated franchisees was $10.3 million.
We believe our cross-default provisions with the Perfect Pizza franchisor significantly reduce the risk
that we will be required to make payments under these leases. Accordingly, we have not recorded any
liability with respect to such leases at December 30, 2007 and December 31, 2006.
We are subject to claims and legal actions in the ordinary course of business. We believe that all such
claims and actions currently pending against us are either adequately covered by insurance or would not
have a material adverse effect on us if decided in a manner unfavorable to us.
18. Share Repurchase Program
The Papa John’s Board of Directors has authorized the repurchase of up to $725.0 million of common
stock under a share repurchase program that began in December 1999, and runs through December 28,
2008. Funding for the share repurchase program has been provided through a credit facility, operating
cash flow, stock option exercises and the liquidation of available investments, cash and cash equivalents.
Through December 30, 2007, a total of 40.8 million shares with an aggregate cost of $675.0 million have
been repurchased under this program.
Subsequent to year-end (through February 19, 2008), an additional 104,000 shares with an aggregate cost
of $2.3 million were repurchased.
19. Stockholder Protection Rights Agreement
On February 14, 2000, the Board of Directors of the Company adopted a Stockholder Protection Rights
Agreement (the “Rights Plan”). Under the terms of the Rights Plan, one preferred stock purchase right
was distributed as a dividend on each outstanding share of Papa John’s common stock held of record as
of the close of business on March 1, 2000. The rights generally would not become exercisable until a
person or group acquired beneficial ownership of 15% or more of the Company’s common stock in a
transaction that was not approved in advance by the Board of Directors. In December 2002, the Board of
Directors of the Company adopted an amendment to the Rights Plan to permit a stockholder who
becomes the owner of 15% or more of the Company’s outstanding common stock due to the Company’s
repurchase of outstanding shares to acquire up to an additional 1% of the outstanding shares without
triggering the Rights Plan’s dilution provisions. The Company’s Founder and Executive Chairman, John
Schnatter, who owns approximately 22% of the outstanding common stock, will be excluded from
operation of the Rights Plan unless (together with his affiliates and family members) he acquires more
than 40% of the Company’s common stock.
If the rights are triggered, then each right owned by a stockholder other than the unapproved acquirer
entitles its holder to purchase shares of Company common stock at 50% of its market price. In addition,
after the rights are triggered, if the Company is acquired by an unapproved acquirer in a merger or other
business combination transaction, each right that has not previously been exercised will entitle its holder
to purchase, at the right’s current exercise price, common shares of such other entity having a value of
twice the right’s exercise price. The Company may redeem the rights for a nominal amount at any time
prior to an event that causes the rights to become exercisable.