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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Soliciting Material under §240.14a-12

 

Papa John's International, Inc.

(Name of Registrant as Specified In Its Charter)

 

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GRAPHIC

Notice of Annual Meeting
and Proxy Statement
  March 21, 2011

To the Stockholders:

The Annual Meeting of Stockholders of Papa John's International, Inc. will be held on Thursday, April 28, 2011 at 11:00 a.m. local time at the Company's corporate offices located at 2002 Papa John's Boulevard, Louisville, Kentucky, to:

A Proxy Statement describing matters to be considered at the Annual Meeting is attached to this Notice. Only stockholders of record at the close of business on March 1, 2011, are entitled to receive notice of and to vote at the meeting or any adjournment or postponement thereof.

Stockholders are cordially invited to attend the meeting. Following the formal items of business to be brought before the meeting, we will discuss our 2010 results and answer your questions. After the meeting, we hope you will join us for a slice of Papa John's pizza!

Thank you for your continued support of Papa John's. We look forward to seeing you on April 28.

    By Order of the Board of Directors,
     
    GRAPHIC
    John H. Schnatter
Founder, Chairman and Co-Chief Executive Officer



YOU CAN VOTE IN ONE OF FOUR WAYS:

(1)
Visit the Web site noted on your proxy card to vote via the Internet;

(2)
Use the toll-free telephone number on your proxy card to vote by telephone;

(3)
Sign, date and return your proxy card in the enclosed envelope to vote by mail; or

(4)
Attend the meeting in person.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on April 28, 2011—this Proxy Statement and the Papa John's 2010 Annual Report are available at www.papajohns.com/investor.


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  Page  

Questions and Answers about the Annual Meeting and Voting

    1  

Corporate Governance

    4  

Item 1, Election of Directors

    10  

Security Ownership of Certain Beneficial Owners and Management

    12  

Section 16(a) Beneficial Ownership Reporting Compliance

    14  

Executive Compensation/Compensation Discussion and Analysis

    14  

Certain Relationships and Related Transactions

    30  

Audit Committee Report

    33  

Item 2, Ratification of the Selection of Independent Auditors

    34  

Item 3, Approval of the Company's 2011 Omnibus Incentive Plan

    35  

Item 4, Advisory Resolution on Executive Compensation

    41  

Item 5, Advisory Vote on Frequency of Advisory Vote on Executive Compensation

    42  

Other Business

    42  

Stockholder Proposals

    42  

Annual Report

    42  

Annex A: Papa John's International, Inc. 2011 Omnibus Incentive Plan

       

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PAPA JOHN'S INTERNATIONAL, INC.
P.O. Box 99900
Louisville, Kentucky 40269-0900



PROXY STATEMENT



The Board of Directors of Papa John's International, Inc. (the "Company") is soliciting proxies for use at the Annual Meeting of Stockholders to be held on April 28, 2011, and at any adjournment or postponement of the meeting. This Proxy Statement and the enclosed proxy card are first being mailed or given to stockholders on or about March 21, 2011.


QUESTIONS AND ANSWERS ABOUT THE ANNUAL
MEETING AND VOTING

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders. These include the election of three directors to the Board of Directors; ratification of the selection of the Company's independent auditors for 2011; approval of the Papa John's International, Inc. 2011 Omnibus Incentive Plan; approval of an advisory resolution on executive compensation; and an advisory vote on the frequency of future advisory votes on executive compensation.

Who is entitled to vote at the Annual Meeting?

The Board has set March 1, 2011, as the record date ("Record Date") for the Annual Meeting. If you were a stockholder of record at the close of business on March 1, 2011, you are entitled to vote at the meeting. As of the Record Date, 25,801,750 shares of common stock, representing all of our voting stock, were issued and outstanding and eligible to vote at the meeting.

What are my voting rights?

Holders of the Company's common stock are entitled to one vote per share. There are no cumulative voting rights.

How many shares must be present to hold the Annual Meeting?

In accordance with the Company's amended and restated bylaws, shares equal to a majority of the voting power of the outstanding shares of common stock entitled to vote as of the Record Date must be present at the Annual Meeting in order to hold the meeting and conduct business. This is called a quorum. Shares are counted as present at the meeting if:

Abstentions and broker "non-votes" are counted as present and entitled to vote for purposes of determining whether a quorum exists. A broker "non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

What is the difference between a stockholder of record and a "street name" holder?

If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares, while you are considered the beneficial owner of those shares. In that case, your shares are said to be held in "street name." Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the method described below under "How can I submit my proxy?"

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How can I submit my proxy?

You can designate a proxy to vote stock you own. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. Two Company officers, Christopher J. Sternberg and Clara M. Passafiume, have been designated as proxies for the Company's 2011 Annual Meeting of Stockholders.

If you are a stockholder of record, you can submit a proxy to be voted at the Annual Meeting in any of the following ways:

The Internet and telephone voting procedures have been set up for your convenience. These procedures have been designed to authenticate your identity, allow you to give voting instructions, and confirm that those instructions have been recorded properly. When you vote by Internet or telephone, you reduce the Company's mailing and handling expenses. If you are a stockholder of record and would like to submit your proxy by Internet or telephone, please refer to the specific instructions provided on the enclosed proxy card. If you wish to vote using a paper proxy card, please return your signed proxy card promptly to ensure we receive it before the Annual Meeting.

If you hold your shares in street name, you must vote your shares in the manner prescribed by your broker, bank, trust or other nominee. Your broker, bank, trust or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker, bank, trust or other nominee how to vote your shares. In many cases, you may be permitted to submit your voting instructions by Internet or telephone.

How do I vote if I hold shares in the Papa John's International, Inc. 401(k) Plan?

If you hold shares of the Company's common stock in the Papa John's International, Inc. 401(k) Plan, please refer to the voting instructions from the plan's trustee. Your voting instructions must be received by the plan trustee at least three days prior to the Annual Meeting in order to count.

What does it mean if I receive more than one set of proxy materials?

If you receive more than one set of proxy materials or multiple control numbers for use in submitting your proxy, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or voting instruction card you receive or, if you submit your proxy by Internet or telephone, vote once for each card or control number you receive.

Can I vote my shares in person at the Annual Meeting?

If you are a stockholder of record, you may vote your shares in person at the Annual Meeting by completing a ballot at the Annual Meeting. Even if you currently plan to attend the Annual Meeting, the Company recommends that you also submit your proxy as described above so your vote will be counted if you later decide not to attend the Annual Meeting. If you submit your vote by proxy and later decide to vote in person at the Annual Meeting, the vote you submit at the Annual Meeting will override your proxy vote.

If you are a street name holder, you may vote your shares in person at the Annual Meeting only if you obtain and bring to the Annual Meeting a signed letter or other form of proxy from your broker, bank, trust or other nominee giving you the right to vote the shares at the Annual Meeting.

If you are a participant in the Company's 401(k) Plan, you may submit voting instructions as described above, but you may not vote your shares held in the Company's 401(k) Plan in person at the Annual Meeting.

How does the Board recommend that I vote?

The Board of Directors recommends a vote:

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What if I do not specify how I want my shares voted?

If you are a stockholder of record and submit a signed proxy card or submit your proxy by Internet or telephone but do not specify how you want to vote your shares on a particular item, your shares will be voted by the proxies as follows:

Your vote is important. The Company urges you to vote, or to instruct your broker, bank, trust or other nominee how to vote, on all matters before the Annual Meeting.

Can I change my vote after submitting my proxy?

If you are a stockholder of record, you may revoke your proxy and change your vote at any time before your proxy is voted at the Annual Meeting, in any of the following ways:

If you are a street name holder, you may change your vote only if you comply with the procedures contained in the voting instructions provided to you by your broker, bank, trust or other nominee.

If you are a participant in the Company's 401(k) Plan, you may change your vote only if you comply with the procedures contained in the voting instructions provided by the plan trustee.

What vote is required to approve each item of business included in the Notice of Annual Meeting?

A majority of votes cast at the meeting is required to elect directors. A majority of the votes cast means that the number of shares voted "FOR" a director must exceed the number of votes cast "AGAINST" that director (with abstentions and broker non-votes not counted as a vote cast with respect to that director) in order for the director to be elected. The affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter is required to ratify the selection of our independent auditor, approve the 2011 Omnibus Incentive Plan, and approve the advisory resolution on executive compensation. In determining whether these proposals have received the requisite number of affirmative votes, abstentions will not be counted and will have the same effect as a vote against the proposal. The vote on frequency of future advisory votes on executive compensation asks stockholders to express a preference for one of three choices for future advisory votes on executive compensation—every year, every other year, or every three years. The affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter is required to approve the frequency of future advisory votes on executive compensation. Because stockholders are given the option to vote on a number of choices, it is possible that no single choice will receive a majority vote. Moreover, because this vote is non-binding, the Board may determine the frequency of future advisory votes on executive compensation in its discretion. The Board intends to take into account the voting results on this proposal in making its determination. Abstentions on this proposal have the same effect as not expressing a preference. If your shares are held by a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen, depending on the type of proposal. For the ratification of the

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auditor, the broker may vote your shares in its discretion. For all other proposals, the broker may not vote your shares at all.

What is householding?

The Securities and Exchange Commission (SEC) has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as "householding," potentially provides extra convenience for stockholders and cost savings for companies. Brokers household our proxy materials and annual reports, delivering a single proxy statement and annual report to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders.

If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement or annual report, or if you are receiving multiple copies of either document and wish to receive only one, please contact the bank, broker or nominee directly or contact us at P. O. Box 99900, Louisville, Kentucky 40269-0900, Attention: Corporate Secretary (502-261-7272). We will deliver promptly upon written or oral request a separate copy of our annual report and/or proxy statement to a stockholder at a shared address to which a single copy of either document was delivered.

Who pays for the cost of proxy preparation and solicitation?

The accompanying proxy is solicited by the Board of Directors of the Company. This Proxy Statement is being mailed to the stockholders on or about March 21, 2011 concurrently with the mailing of the Company's 2010 Annual Report to Stockholders. We have also retained the firm of Georgeson, Inc. to aid in the solicitation of brokers, banks, institutional and other stockholders for a fee of approximately $6,500, plus reimbursement of expenses. All costs of the solicitation of proxies will be borne by the Company. The Company pays for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks, trusts or other nominees for forwarding proxy materials to street name holders. The Company is soliciting proxies primarily by mail. In addition, the Company's directors, officers and regular employees may solicit proxies by telephone or facsimile or personally. The Company's directors, officers and regular employees will receive no additional compensation for these services other than their regular compensation.


CORPORATE GOVERNANCE

Principles of corporate governance that guide the Company are set forth in the Company's Board of Director committee charters, the Company's Corporate Governance Guidelines and the Company's Code of Ethics and Business Conduct, all of which are available at www.papajohns.com by first clicking "Investor Relations" and then "Corporate Governance." (The information on the Company's website is not part of this Proxy Statement and is not soliciting material.) The principles set forth in those governance documents were adopted by the Board to ensure that the Board is independent from management, that the Board adequately performs its function as the overseer of management, and to help ensure that the interests of the Board and management align with the interests of the stockholders. The Board annually reviews its corporate governance documents in response to evolving best practices and the results of annual Board and committee reviews.

Our amended and restated bylaws provide for a majority voting standard for uncontested director elections and a mechanism for consideration of the resignation of an incumbent director who does not receive a majority of the votes cast in an uncontested election. Under the majority voting standard, a majority of the votes cast means that the number of shares voted "for" a director nominee must exceed the number of votes cast "against" that director nominee. In contested elections where the number of nominees exceeds the number of directors to be elected, the vote standard will be a plurality of votes cast. In addition, if an incumbent director is nominated in an uncontested election, the director nominee is required, as a condition of the director's nomination, to submit an irrevocable letter of resignation to the Chairman of the Board. If an incumbent director nominee does not receive a majority of the votes cast, the Corporate Governance and Nominating Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Committee's recommendation and publicly disclose its decision within 90 days from the date of certification of the election results. The director whose resignation is being considered will not participate in the recommendation of the Committee or the Board's decision.

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Code of Ethics and Business Conduct

The Company's Code of Ethics and Business Conduct, which is the Company's code of ethics applicable to all directors, officers and employees worldwide, embodies the Company's global principles and practices relating to the ethical conduct of the Company's business and its longstanding commitment to honesty, fair dealing and full compliance with all laws affecting the Company's business.

The Board has established a means for employees, customers, suppliers, stockholders and other interested parties to submit confidential and anonymous reports of suspected or actual violations of the Company's Code of Ethics and Business Conduct relating, among other things, to:

Any employee, stockholder, or interested party may contact the Company's General Counsel, or submit a confidential, anonymous report by following procedures established by the Company, approved by the Corporate Governance and Nominating Committee of the Company's Board of Directors and communicated to team members from time to time. Any employee, stockholder or interested party may also learn about these procedures for reporting issues and concerns by visiting our website at www.papajohns.com, by first clicking "Investor Relations" and then "Corporate Governance."

Director Independence

The Board of Directors has determined that the following six of the Company's nine current directors are "independent" as defined by applicable law and NASDAQ listing standards: Ms. Olivia F. Kirtley and Messrs. Norborne P. Cole, Jr., Philip Guarascio, Mark S. Shapiro, Alexander W. Smith and William M. Street. Each of our Audit, Compensation, and Corporate Governance and Nominating committees is composed only of independent directors, as identified below under the heading "Committees of the Board of Directors."

Based on such standards, Wade S. Oney is not independent because he is a Company franchisee as described under "Transactions with Related Persons" below, and John H. Schnatter and J. Jude Thompson are not independent because they are executive officers of the Company.

Ms. Kirtley, Chairman of the Audit Committee and a member of the Compensation Committee, is a member of the board of directors of U.S. Bancorp. We have a banking relationship with U.S. Bancorp that predates Ms. Kirtley's appointment to the U.S. Bancorp board of directors. Ms. Kirtley is also a member of the board of directors of Delta Dental. Based on a comprehensive request for proposal in 2009, the Company chose Delta Dental as its dental insurance carrier. The Board reviewed these relationships and determined that they do not impact Ms. Kirtley's independence.

Mr. Smith, Chairman of the Compensation Committee, is the President, CEO and member of the board of directors of Pier 1 Imports, Inc. We provide print and promotional services in the ordinary course of business of our subsidiary Preferred Marketing Solutions, Inc. to Pier 1. The Board reviewed this relationship and determined that it does not impact Mr. Smith's independence.

Board Leadership Structure and Risk Management

Our Board of Directors is committed to the highest standards of corporate governance. As stated in our Corporate Governance Guidelines, our Board of Directors has determined that it is in the best interests of the Company and our stockholders for both the positions of Chairman and Co-Chief Executive Officer to be held by our Founder, John Schnatter, at this time. If circumstances change in the future, the Board may determine that these positions should be separated. This policy allows the Board to evaluate regularly whether the Company is best served at any particular time by having the Founder and Co-Chief Executive Officer or another director hold the position of Chairman. Our Board considers this issue carefully in light of the structure the Board believes will be in the best interest of the Company and our stockholders. The positions are currently combined, but were separate during the years of 2005 through 2008.

The Board of Directors believes that Mr. Schnatter is best situated to serve as Chairman because, as our Founder, he is the director most familiar with our business and industry and our franchise system, and can lead the Board in identifying and prioritizing our strategies and initiatives. The combined role facilitates communication between the Board and management, and promotes development and

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implementation of our Board approved corporate strategy. We believe this current leadership structure is effective for our Company. Our non-management directors and management have different perspectives and roles in business and strategy development. Our independent directors bring experience, oversight and expertise from outside the Company and industry, while Mr. Schnatter offers specific Company and industry experience and expertise.

Under our Corporate Governance Guidelines, our independent directors elect a lead independent director. The Board believes the combined role of Chairman and Co-Chief Executive Officer, together with an independent lead director having the duties described below, is in the best interest of stockholders at this time because it provides the appropriate balance between strategy development and independent oversight of management. When the Board asked Mr. Schnatter to assume the position of Chief Executive Officer in 2009 in addition to continuing to act as Chairman of the Board, it reaffirmed the strong role of the lead independent director. This interaction with the lead independent director continued with the implementation of the Co-Chief Executive Officer management structure in April 2010, with John Schnatter and Jude Thompson being named as Co-Chief Executive Officers, allowing division of CEO-level responsibilities in a way that our Board has determined emphasizes the respective strengths of Mr. Schnatter and Mr. Thompson.

In addition, much of the work of the Board is conducted through its committees. Our Board has three standing committees—Audit, Compensation, and Corporate Governance and Nominating. Each of the Board committees is comprised solely of independent directors, with each of the three committees having a separate chair. One of the key responsibilities of the Board is to develop strategic direction for the Company, and provide management oversight for the execution of that strategy. The Board has an active role, as a whole and also at the committee level, in overseeing management of the Company's risks. The Board regularly reviews information regarding the Company's financial, strategic and operational issues, as well as the risks associated with each. At the committee level:

While each committee is responsible for evaluating and overseeing the management of such risks, the Board of Directors is regularly informed through committee reports about such risks. In addition, the Board and the committees receive regular reports from the Co-Chief Executive Officers, Chief Financial Officer, General Counsel and other Company officers with roles in managing risks.

Lead Independent Director

The Board of Directors has appointed Norborne P. Cole, Jr. to serve as the lead independent director of the Board. The lead independent director has the duties and responsibilities, as approved by the Board's Corporate Governance and Nominating Committee, to perform the following functions:

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Meetings of the Board of Directors

The Board held six meetings in 2010. Each incumbent director attended at least 75% of the meetings of the Board and the Board committees on which he or she served during the period of service in 2010.

Meetings of the Non-Employee and Independent Directors

At both the Board and committee levels, the Company's non-employee directors meet in regular executive sessions in which members of management do not participate. These sessions typically occur in conjunction with each regularly scheduled Board or committee meeting. The Company's independent directors meet in executive session at least annually and typically meet following each scheduled Board meeting. The lead independent director chairs these executive sessions.

Annual Meetings of Stockholders

The Company strongly encourages each of its directors to attend each Annual Meeting of the Company's stockholders whenever attendance does not unreasonably conflict with the director's other business and personal commitments. All of the Company's directors attended the 2010 Annual Meeting of Stockholders.

Committees of the Board of Directors

The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities: the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee. In accordance with NASDAQ listing standards, all of the committees are comprised solely of independent directors. Charters for each of our committees are available on the Company's website at www.papajohns.com by first clicking on "Investor Relations" and then "Corporate Governance." The charter of each committee is also available in print to any stockholder who requests it.

Audit Committee

    Members:   Olivia F. Kirtley, Chairman
Mark S. Shapiro(1)
Alexander W. Smith(2)
William M. Street
                                            
(1)   Mr. Shapiro became a member of the Audit Committee upon his appointment to the Board on February 17, 2011; he was not a member of the Audit Committee at the time of its approval of the Audit Committee Report included in this Proxy Statement.

(2)

 

Mr. Smith is not standing for re-election at the Annual Meeting. He will serve the remainder of his term as director through the Annual Meeting.

The Audit Committee's purpose is to assist the Board in fulfilling its oversight responsibilities for the accounting, financial reporting and internal control functions of the Company and its subsidiaries. The Audit Committee is responsible for the appointment, compensation and retention of the independent auditor, and oversees the performance of the internal auditing function and the Company's compliance program with respect to legal and regulatory requirements and risk management. The Audit Committee meets with management and the independent auditor to review and discuss the annual audited and quarterly unaudited financial statements, reviews the integrity of our accounting and financial reporting processes and audits of our financial statements, and prepares the Audit Committee Report included in this Proxy Statement. The responsibilities of the Audit Committee are more fully described in the Committee's Charter. The Audit Committee met five times during 2010.

As previously noted, each member of the Audit Committee is independent as determined by the Company's Board of Directors, based upon applicable laws and regulations and NASDAQ listing standards. In addition, the Board has determined that Ms. Kirtley is an "audit committee financial expert" as defined by SEC rules.

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Compensation Committee

      Members:        Alexander W. Smith, Chairman
Norborne P. Cole, Jr.
Olivia F. Kirtley

The Compensation Committee oversees the Company's compensation programs and is responsible for overseeing and making recommendations to the Board of Directors regarding the Company's overall compensation strategies. Specifically, the Compensation Committee reviews and approves annually the compensation of the Company's executive officers, including the named executive officers identified in the section of this Proxy Statement entitled "Compensation Discussion and Analysis." The Committee has the authority to administer our equity plans. The Committee is responsible for all determinations with respect to participation, the form, amount and timing of any awards to be granted to any such participants, and the payment of any such awards. The Committee has delegated authority to Mr. Schnatter and Mr. Jude Thompson to make limited equity grants to employees or service providers who are not executive officers of the Company. In addition, the Committee is responsible for recommending stock ownership guidelines for the executive officers and directors, for recommending the compensation and benefits to be provided to non-employee directors, and for reviewing and approving the establishment of broad-based incentive compensation, equity-based, and retirement or other material employee benefit plans. The Committee also reviews risks, if any, created by the Company's compensation policies and practices and provides recommendations to the Board on compensation-related proposals to be considered at the Annual Meeting.

The Committee has the authority to retain compensation consultants, outside counsel and other advisers. During 2010, the Committee engaged Mercer Human Resource Consulting to advise it and to prepare market studies of the competitiveness of components of the Company's compensation program for its senior executive officers, including the named executive officers. See "Compensation Discussion and Analysis" for a further description of the Compensation Committee's use of Mercer during 2010, as well as the role of our executive officers in determining or recommending the amount or form of compensation paid to our named executive officers during 2010, and the Committee's process in setting compensation.

The responsibilities of the Compensation Committee are more fully described in the Committee's Charter. The Compensation Committee met seven times during 2010.

Corporate Governance and Nominating Committee

    Members:   William M. Street, Chairman
Norborne P. Cole, Jr.
Philip Guarascio
Mark S. Shapiro(1)
                                            
(1)   Mr. Shapiro became a member of the Corporate Governance and Nominating Committee upon his appointment to the Board on February 17, 2011.

The Corporate Governance and Nominating Committee assists the Board in identifying qualified individuals for service as directors of the Company and as Board committee members. In addition, the Committee develops and monitors the process for evaluating Board effectiveness and oversees the development and administration of the Company's corporate governance policies. The Corporate Governance and Nominating Committee recommended the nominations of three directors for election to the Board at the 2011 Annual Meeting.

As provided in its charter, the Corporate Governance and Nominating Committee leads the search for qualified candidates to serve as new directors, evaluates incumbent directors before recommending renomination, and recommends all such approved candidates to the Board for appointment or nomination to the Company's stockholders. The Corporate Governance and Nominating Committee selects as candidates for appointment or nomination individuals of high personal and professional integrity and ability who can contribute to the Board's effectiveness in serving the interests of the Company's stockholders. The Corporate Governance and Nominating Committee oversees the Company's compliance program with respect to the Company's Code of Ethics and Business Conduct and also reviews and approves matters pertaining to possible conflicts of interest and related person transactions. See the discussion under "Approval of Related Person Transactions" below.

The responsibilities of the Corporate Governance and Nominating Committee are more fully described in the Committee's Charter. The Committee met five times during 2010.

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Communications with the Board

Stockholders of the Company may communicate with the Board in writing addressed to:

The Secretary will review each stockholder communication. The Secretary will forward to the entire Board (or to members of a Board committee, if the communication relates to a subject matter clearly within that committee's area of responsibility) each communication that (a) relates to the Company's business or governance, (b) is not offensive and is legible in form and reasonably understandable in content, and (c) does not merely relate to a personal grievance against the Company or a team member or further a personal interest not shared by the other stockholders generally.

Nominations for Directors

Identifying Candidates

The Corporate Governance and Nominating Committee assists the Board in identifying qualified persons to serve as directors of the Company. The Committee evaluates all proposed director nominees, evaluates incumbent directors before recommending renomination, and recommends all approved candidates to the Board for appointment or nomination to the Company's stockholders.

Our Corporate Governance and Nominating Committee considers diversity in its nomination of directors to the Board, and in its assessment of the effectiveness of the Board and its committees. In considering diversity, the Corporate Governance and Nominating Committee looks at a range of different personal factors in light of the business, customers, suppliers and employees of the Company. The range of factors includes diversity of personal and business backgrounds and prior board service, financial expertise, international experience, industry experience, leadership skills, including prior management experience, and a variety of subjective factors. The Corporate Governance and Nominating Committee reports regularly to the full Board on its assessment of the composition and functioning of the Board.

In composing the Board, the Company has focused on assembling a group of Board members who collectively possess the skills and experience necessary to oversee the business of the Company, structure and oversee implementation of the Company's strategic plan and maximize stockholder value in a highly competitive environment. In particular, the Company relies on the skills of its Board members described under Item 1, Election of Directors, below.

The Corporate Governance and Nominating Committee will consider candidates for election to the Board recommended by a stockholder in accordance with the Company's Certificate of Incorporation, and will do so in the same manner as the Committee evaluates any other properly recommended nominee. Any nomination by a stockholder of a person for election to the Board at an annual meeting of stockholders, or a special meeting of stockholders called by the Board for the purpose of electing directors, must be received at the Company's principal offices not less than 60 days nor more than 90 days prior to the scheduled date of the meeting, and must comply with certain other requirements set forth in the Company's Certificate of Incorporation.

Nominations must be addressed to the Chairman of the Corporate Governance and Nominating Committee in care of the Secretary of the Company at the Company's headquarters address listed below, and must be received on a timely basis in order to be considered for the next annual election of directors:

Director Qualifications

The Corporate Governance and Nominating Committee expects qualified candidates will have high personal and professional integrity and ability, and will be able to contribute to the Board's effectiveness in serving the interests of the Company's stockholders. In addition to the factors described above, when considering the diversity of the Board, the Committee also considers qualifications that include: business experience and skills, independence, judgment, integrity, the ability to commit sufficient time and attention to Board activities, and the absence of potential conflicts with the Company's interests. The Committee considers these criteria in the context of the perceived needs of the Board as a whole and seeks to achieve and maintain the diversity of the Board.

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ITEM 1, ELECTION OF DIRECTORS

The Company's Certificate of Incorporation provides for a classified board of directors, with three classes of directors each nearly as equal in number as possible. Each class serves for a three-year term and one class is elected each year. The Board of Directors is authorized to fix from time to time the number of directors within the range of three to fifteen members, and currently the Board size is set at nine members. Alexander W. Smith is not standing for re-election to our Board of Directors at the Annual Meeting. The Board has reduced the size of the Board to eight members effective immediately prior to the commencement of the Annual Meeting.

Upon the recommendation of the Corporate Governance and Nominating Committee, Messrs. Oney, Schnatter and Shapiro have been nominated as directors in the class to serve a term expiring at the 2014 Annual Meeting and until their successors are elected or appointed. Mr. Shapiro was appointed to the Board in February 2011. His appointment to the Board was recommended by a management director. The remaining five directors will continue to serve in accordance with their previous election.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR.

Set forth below is information concerning the nominees for election and each director whose term will continue after the 2011 Annual Meeting, and their ages as of the date of this Proxy Statement.

NOMINEES FOR ELECTION TO THE BOARD: TERM EXPIRING IN 2014

Name
  Age  
Company Position or Office
  Director
Since
 

Wade S. Oney

    49   Director     1999  

John H. Schnatter

    49   Founder, Chairman and Co-Chief Executive Officer     1990  

Mark S. Shapiro

    41   Director     2011  

Wade S. Oney.    Mr. Oney has been a franchisee of the Company since 1993. From 1995 to 1999, he served as Chief Operating Officer of the Company. From 2000 to 2005, Mr. Oney served as a part-time executive business advisor for the Company, providing advice to the executive leadership team on strategic Company initiatives. From 1992 to 1995, Mr. Oney served as the Company's Regional Vice President of Southeast Operations. From 1981 to 1992, Mr. Oney held various positions with Domino's Pizza, Inc. Mr. Oney brings a perspective to the Board as an operator of Papa John's franchises, as well as operations and management experience in other franchised restaurants. His prior service in Company management also brings to the Board an important perspective on the operations and management of the Company's business.

John H. Schnatter.    Mr. Schnatter created the Papa John's concept in 1984 and opened the first Company restaurant in 1985. He currently serves as Founder, Chairman and Co-Chief Executive Officer. He previously served as Interim Chief Executive Officer from December 2008 to April 2009, Executive Chairman of the Company from 2005 until May 2007, as Chairman of the Board and Chief Executive Officer from 1990 until 2005 and from April 2009 until April 2010, and as President from 1985 to 1990 and from 2001 until 2005. Mr. Schnatter's role as our Founder and brand spokesperson makes him uniquely qualified to chair the Board of Directors while also acting as our Co-Chief Executive Officer. Mr. Schnatter's experience and entrepreneurial skills offer vision in leading the Board and building our brand, with a consistent focus on maintaining product quality and providing a superior customer service experience. His experience in research and development, quality assurance and supply chain management are critical to our business and our franchise business model.

Mark S. Shapiro.    Mr. Shapiro was appointed to our Board of Directors in February 2011, and he brings to our board valuable executive management experience and experience on other boards. Mr. Shapiro has served as Chief Executive Officer of Dick Clark Productions since May 2010. Previously, he served as President and Chief Executive Officer of Six Flags, Inc., the world's largest regional theme park company, from 2005 to 2010. Six Flags filed a voluntary petition to restructure its debt obligations under Chapter 11 of the U.S. Bankruptcy Code on June 13, 2009 and emerged from Chapter 11 on May 3, 2010. Prior to joining Six Flags in 2005, Mr. Shapiro spent 12 years at ESPN, Inc. where he served as executive vice president, programming and production and in various other capacities. Mr. Shapiro has served as a director of Live Nation since 2008 and is a member of its compensation committee, has served as a director of Equity Residential since 2010 and is a member of its audit committee, and has served as a director of Frontier Communications Corporation since 2010 and is a member of its nominating and governance committee. Mr. Shapiro has also served as a director of The Tribune Company since 2008.

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We believe Mr. Shapiro's extensive experience with companies in the entertainment sector will provide valuable insight to our strategic branding and marketing.

DIRECTORS CONTINUING IN OFFICE

Name
  Age  
Company Position or Office
  Director
Since
 

Term Expiring in 2012

                 

Philip Guarascio

    69   Director     2003  

Olivia F. Kirtley

    60   Director     2003  

J. Jude Thompson

    49   President and Co-Chief Executive Officer and Director     2008  

Term Expiring in 2013

                 

Norborne P. Cole, Jr. 

    69   Director     2003  

William M. Street

    72   Director     2003  

Philip Guarascio.    Since 2000, Mr. Guarascio has been Chairman and Chief Executive Officer of PG Ventures LLC, a marketing consulting firm, and from 2000 to 2006, he served in a senior advisory capacity with the National Football League. Mr. Guarascio retired in 2000 as Vice President, Advertising and Corporate Marketing, of General Motors. He is Chairman of the Board of Arbitron, Inc., and has served on Arbitron's board since 2001 (including service on its compensation committee and chairman of its executive and governance committees). Mr. Guarascio's career with General Motors and in the advertising business brings experience in strategic advertising, marketing, public relations and media buying to our Board. His service and leadership on other boards provide the Board valuable insight into strategic marketing issues.

Olivia F. Kirtley.    Ms. Kirtley, a certified public accountant, is a business consultant on strategic and corporate governance issues. She has served in this capacity during the past five years. Ms. Kirtley brings extensive experience, expertise and insight to our Board in the areas of audit and corporate governance. In addition to her expertise in audit and tax issues developed in part as a senior manager at Ernst & Whinney (predecessor to Ernst & Young LLP), Ms. Kirtley also brings corporate management experience from her tenure at Vermont American Corporation, including the positions of Treasurer, Vice President-Finance and Chief Financial Officer at that company. She has served as Chairman of the American Institute of Certified Public Accountants, Chairman of the AICPA Board of Examiners, and is a U.S. member of the Board of the International Federation of Accountants. Ms. Kirtley has served as a director of U.S. Bancorp since 2006 (including as the chairman of its audit committee and a member of its governance and executive committees) and as a director of ResCare, Inc. since 1998 (including as the chairman of its audit committee), which became a privately held company in December 2010. Ms. Kirtley also served as a director of Alderwoods Group, Inc. from 2002 until its merger with Service Corporation International in 2006, including service as chairman of its audit committee, and as a director of Lancer Corporation from 1999 until it was acquired by Hoshizaki Electric Co., Ltd. in 2006, including service on its compensation committee and as chairman of its audit committee.

J. Jude Thompson.    Mr. Thompson was appointed President and Chief Operating Officer of Papa John's in April 2009 and Co-Chief Executive Officer in April 2010. From 2006 to 2008, Mr. Thompson served as Senior Vice President of WellPoint, Inc. and President, Individual Business of Anthem Blue Cross and Blue Shield, a division of WellPoint. Mr. Thompson previously held positions of increasing responsibility with Anthem Blue Cross and Blue Shield or its affiliates since 1989. Mr. Thompson brings to the Board marketing and business leadership skills from his prior experience as a senior executive in a highly competitive industry. His experience as our President and Chief Operating Officer since April 2009 and as a Board member since 2008 allows him to effectively communicate issues between the Board and management.

Norborne P. Cole, Jr.    Mr. Cole currently serves as Vice Chairman of the Board for Silver Eagle Distributors, L.P. of Houston, Texas, which distributes Anheuser-Busch InBev and other products. He also serves as the senior independent director of Randgold Resources Limited, Isle of Jersey, U.K. (including as chairman of its remuneration committee and as a member of its nominating and governance committee). Mr. Cole retired in 1998 after a 32-year career with the Coca-Cola Company and its bottlers, most recently serving as Managing Director and Chief Executive Officer of Coca-Cola Amatil in Sydney, Australia, and previously as President and Chief Executive Officer of Coca-Cola Bottling S.A. in Paris, France. Mr. Cole also served as a director of Lancer Corporation from 1999 until it was acquired by Hoshizaki Electric Co., Ltd. in 2006, including service as chairman of its compensation committee and on its audit and nominating and corporate governance committees. Mr. Cole's career with Coca-Cola

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Company and its bottlers brings extensive experience in distribution and marketing to the Board. This experience, together with his additional service on other public company boards and committees, has provided him with the leadership, business and governance skills and background to serve as our lead independent director.

William M. Street.    Mr. Street retired in 2003 from Brown-Forman Corporation, a diversified producer of high-quality wines and spirits, having served as its President from 2002 to 2003, its Vice Chairman from 1987 to 2002 and as President and Chief Executive Officer of its division, Brown-Forman Beverages Worldwide, from 1994 through 2003. He has served as a director of Brown-Forman Corporation since 1971 and currently chairs its audit committee. Mr. Street has an extensive background in sales, marketing and executive management. This experience, together with his service on the Brown-Forman board and its audit committee, provides extensive knowledge in audit and finance, management and corporate governance issues.

DIRECTOR NOT CONTINUING IN OFFICE

Alexander W. Smith.    Mr. Smith, age 58, has served on our Board since 2007. Since February 2007, Mr. Smith has served as a board member and President and Chief Executive Officer of Pier 1 Imports, Inc. Prior to Pier 1 Imports, he spent twelve years with the TJX Companies, Inc., an off-price retailer of apparel and home fashions in the U.S. under brands such as T.J. Maxx and Marshalls, and internationally with brand names such as T.K. Maxx in the UK. Mr. Smith has extensive experience in the retail industry, and has experience building international brands. His experience as a chief executive officer has provided an extensive background in financial reporting, corporate management, operations and compensation issues. The Board of Directors gratefully acknowledges the service of Alex Smith on the Board.

Family Relationships

Charles W. Schnatter, an executive officer of the Company until his retirement in June 2010, and formerly a director of the Company, is the brother of John Schnatter. There are no other family relationships among the Company's directors, executive officers and other key personnel.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 1, 2011 (except as noted otherwise), with respect to the beneficial ownership of common stock by (i) each of the named executive officers identified in the Summary Compensation Table in this Proxy Statement, (ii) each director or nominee for director of the Company, (iii) all directors and executive officers as a group and (iv) each person known to the Company to be the beneficial owner of more than five percent of the outstanding common stock.

Name of Beneficial Owner
  Amount and Nature
of Beneficial Ownership
(1)(2)
  Percent of
Common Stock
Outstanding
 

John H. Schnatter
P.O. Box 991339
Louisville, Kentucky 40269

    6,123,954 (3)   23.4 %

Norborne P. Cole, Jr. 

    80,045     *  

J. David Flanery

    118,730 (4)   *  

Philip Guarascio

    54,323     *  

Olivia F. Kirtley

    92,122 (5)   *  

Wade S. Oney

    57,945     *  

Mark S. Shapiro

    1,984     *  

Alexander W. Smith

    47,633 (6)   *  

Christopher J. Sternberg

    76,704 (7)   *  

William M. Street

    90,657     *  

Anthony N. Thompson

    44,679 (8)   *  

J. Jude Thompson

    160,042 (9)   *  

Andrew M. Varga

    23,177     *  

All directors and current executive officers as a group

    6,931,580 (10)   26.0 %
 

(16 persons)

             

*
Represents less than one percent of class.

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Other 5% Beneficial Owners
  Amount and
Nature of
Beneficial
Ownership(1)
  Percent of
Common Stock
Outstanding
 

FMR LLC(11)
82 Devonshire Street
Boston, Massachusetts 02109

    2,851,064     11.1 %

BlackRock, Inc.(12)
40 East 52nd Street
New York, NY 10022

    1,807,951     7.0 %

JPMorgan Chase & Co.(13)
270 Park Avenue
New York, NY 10017

    1,663,788     6.4 %

(1)
Based upon information furnished to the Company by the named persons and information contained in filings with the SEC. Under SEC rules, a person is deemed to beneficially own shares over which the person has or shares voting or investment power or of which the person has the right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the named persons have sole voting and investment power with respect to their shares and such shares are not subject to any pledge.

(2)
Includes the following shares subject to options exercisable within 60 days after March 1, 2011, and time-based restricted stock over which the named persons have sole voting power.

Name
  Options
exercisable
within 60 days
  Restricted
Stock
 
Name
  Options
exercisable
within 60 days
  Restricted
Stock
 
John H. Schnatter     397,588     29,251   Alexander W. Smith     29,886     3,121  
Norborne P. Cole, Jr     57,336     7,598   Christopher J. Sternberg     51,865     17,105  
J. David Flanery     94,026     15,342   William M. Street     42,085     5,105  
Philip Guarascio     42,085     5,105   Anthony N. Thompson     25,070     17,643  
Olivia F. Kirtley     42,085     5,105   J. Jude Thompson     122,003     32,731  
Wade S. Oney     42,085     5,105   Andrew M. Varga     4,813     15,382  
Mark S. Shapiro     0     1,984                  
(3)
Includes 1,268,052 shares held in a family limited partnership and 90,000 shares held in a 501(c)(3) charitable foundation of which Mr. Schnatter has both voting and investment power.

(4)
Mr. Flanery retired as our Chief Financial Officer and Treasurer effective February 28, 2011. His employment with the Company will continue through a transition period and his ownership is as of the Record Date. Mr. Flanery also holds units deemed invested in 9,421 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported.

(5)
Ms. Kirtley also holds units deemed invested in 25,337 shares of common stock through a deferred compensation plan provided by the Company, 16,299 of which are distributable in an equivalent number of shares of common stock within 60 days of termination of service on the Board and are included in the shares reported, and 9,038 of which are not included in the shares reported.

(6)
Mr. Smith also holds units deemed invested in 1,493 shares of common stock through a deferred compensation plan provided by the Company, all of which are distributable in an equivalent number of shares of common stock within 60 days of termination of service on the Board and are included in the shares reported.

(7)
Mr. Sternberg also holds units deemed invested in 4,675 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported.

(8)
Mr. Anthony Thompson also holds units deemed invested in 2,012 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported.

(9)
Mr. Jude Thompson also holds units deemed invested in 6,420 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported.

(10)
Includes 889,535 shares subject to options exercisable within 60 days, 186,144 shares of unvested restricted stock and 17,792 shares which may be acquired within 60 days of termination of service under the deferred compensation plan, held by all directors and executive officers. Holders of units deemed invested in common stock under the deferred compensation plan have no voting or investment power over any of these units.

(11)
All information regarding FMR LLC and its affiliates is based on an amendment to Schedule 13G filed with the SEC on February 14, 2011, by FMR LLC and Edward C. Johnson 3d. As of December 31, 2010, FMR LLC and Edward C. Johnson 3d each had sole dispositive power over all of the shares indicated, and sole power to vote 101,000 shares. Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC and an investment adviser, was

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(12)
All information regarding BlackRock, Inc. and affiliates is based on a Schedule 13G filed with the SEC on February 7, 2011 by Blackrock, Inc.

(13)
All information regarding JPMorgan Chase & Co. is based on a Schedule 13G filed with the SEC on January 24, 2011 by JPMorgan Chase & Co. and its wholly owned subsidiary, J.P. Morgan Investment Management Inc. The reporting entities have sole voting power with respect to 1,540,558 of the shares reported, and sole dispositive power with respect to 1,663,788 of the shares reported.


SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who own more than ten percent of the Company's common stock, to file stock ownership reports and reports of changes in ownership with the SEC. Based on a review of those reports and written representations from the reporting persons, the Company believes that all applicable Section 16(a) reporting requirements were complied with for all common stock transactions in 2010.


EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS

2010 Compensation Philosophy and Objectives

The Compensation Committee of the Board is responsible for creating compensation programs to create value for our stockholders by driving our financial, strategic and operational objectives. In developing an effective compensation program, the Committee's focus is on performance measures that will create stockholder value by accomplishing both short-term and long-term goals. Our compensation programs are designed to measure and reward our financial, strategic and operational success, and to align the interests of our executives with those of our stockholders. We believe this is best accomplished by structuring "total direct compensation" (defined below) to be industry competitive, allowing us to attract, motivate and retain qualified executives; paying for performance with incentive-based compensation, so that each executive has an incentive to achieve corporate, business unit and individual objectives; paying a substantial portion of total direct compensation to our executive officers in the form of stock-based awards; and requiring that our executives achieve and maintain a designated level of ownership in the Company's stock.

2010 Pay for Performance

We were very pleased with company performance driven by our management team in 2010 in a very challenging environment, resulting in enhanced payouts under our short-term incentive plan. Our metrics for the short-term incentive plan ("MIP") for 2010 consisted of post-MIP, pre-tax income (excluding BIBP and income from our food service subsidiary as further discussed below), net domestic store development, combined domestic comparable sales and comparable transactions, and domestic online sales. In 2010, the pizza category experienced unprecedented levels of advertising and discounting, in an environment of continued economic uncertainty. Our team delivered solid sales and profitability performance in this very challenging consumer and competitive environment.

While focusing on maintaining our quality position in the pizza category, we achieved positive results against the performance targets under the MIP, and as a result, compensation to our management team and other employees participating in MIP during 2010 reflected that strong performance. Our results reflect a 26.5% increase in post-MIP, pre-tax income (excluding BIBP and our food service subsidiary) over the prior year. Compensation to our named executive officers for 2010 ("NEOs") and other employees covered by the plan was awarded based on our strong results in the competitive environment, reflecting our compensation philosophy of rewarding measurable pay for performance as described in this Compensation Discussion and Analysis (CD&A).

Key 2010 compensation actions to support our strategy, and pay competitively for performance, included the following:

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Our executive compensation program for 2010 consists of the following components: (1) base salary, to provide a guaranteed level of cash compensation; (2) short-term cash incentives (which may be realized to the extent that organizational and personal performance targets are met), to focus our executives' attention on the key business objectives for the year; and (3) long-term compensation, consisting of equity-based incentives (a combination of time-based restricted stock and stock options), to encourage executives to focus on the long-term success and enhanced wealth of the Company and its stockholders. We refer to these three elements as "total direct compensation."

In general, the Company desires to provide its executives with total direct compensation packages in the range of the median level for a select peer group (see "Annual Compensation Peer Group Review"), after adjusting for several other factors discussed below. The Company believes that it has been successful in fulfilling this objective, although each component taken individually may not necessarily be in line with the market as established by the peer group review. We believe that our base salaries are somewhat overweighted, and our targeted short-term incentives and long-term compensation are underweighted, relative to our peers. During 2010, the Company continued to take steps towards achieving a balance in the compensation mix reflective of market competitive components. Based on the Company's 2010 performance, as described in Management's Discussion and Analysis of Financial Condition and Results of Operations included within our Form 10-K filed with the SEC on February 22, 2011, we believe that the total direct compensation for each of our NEOs was appropriate relative to our 2010 operating results.

Compensation of Founder, Chairman and Co-Chief Executive Officers

Mr. Schnatter is the Company's founder and Chairman of the Board. Mr. Schnatter agreed to assume the role of Interim Chief Executive Officer of the Company in December 2008. At that time, the Compensation Committee and Mr. Schnatter agreed that it would be appropriate for his compensation for his service as Interim Chief Executive Officer during 2008 and 2009 to be in the form of stock options and cash bonus, with no cash base salary. At the beginning of the 2010 fiscal year, Mr. Schnatter's base salary package for 2010 was comprised of $300,000 in cash base salary and a non-qualified stock option with a grant date fair value of $320,000.

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In April 2010, the Board of Directors approved a Co-Chief Executive Officer management structure, with our President and Chief Operating Officer, Jude Thompson, promoted to serve as Co-CEO with Mr. Schnatter. The Compensation Committee approved Co-CEO compensation at an annualized base salary of $700,000 for Mr. Schnatter and $650,000 for Mr. Thompson, with each having a bonus target under the MIP of 75% of base salary based on the achievement of Company and individual performance expectations. Mr. Schnatter and Mr. Thompson each participated in the Quality and Service Incentive Plan ("QSIP") with a targeted $12,000 total award. In conjunction with the Company's long term incentive grant in April 2010, Mr. Schnatter and Mr. Jude Thompson each received a grant of non-qualified stock options having a grant date fair value of $250,000 and restricted shares with a grant date fair value of $250,000.

The Compensation Committee also approved the EEOI program to motivate and retain executives, and to further align their interests with the Company's stockholders. Pursuant to the program, each share purchased by a Company executive under the Company's 2008 Omnibus Incentive Plan ("2008 Plan") at full fair market value on the grant date of April 28, 2010 ("Match Eligible Shares"), was matched with grants under the 2008 Plan of either five restricted shares, fifteen stock options, or a combination at the election of the executive. Mr. Jude Thompson received a matching grant of restricted stock under this program with a value of $95,000, subject to vesting requirements. In February 2011, the Compensation Committee approved an EEOI matching program for 2011, to further align the long term interests of management and stockholders. Both Mr. Schnatter, who will receive his base salary entirely in cash for 2011, and Mr. Jude Thompson will participate in the program for 2011.

As our Founder and Chairman, Mr. Schnatter also receives compensation under the August 9, 2007 Agreement for Services as Chairman (the "Chairman Agreement"), Agreement for Services as Founder (the "Founder Agreement") and Exclusive License Agreement (the "License Agreement"). These agreements define Mr. Schnatter's continuing roles in the Company, including chairing the Company's Board of Directors, attending major corporate events, making visits to domestic and international franchises, participating in monthly quality meetings, participating in meetings with investors, and acting as advertising and brand spokesperson for the Company. Under the Chairman and Founder Agreements, we agreed to make annual grants of stock options to Mr. Schnatter with a minimum value of $600,000 ($300,000 under each agreement), or such greater amount as may be determined by the Compensation Committee. The Company will continue to make these grants while Mr. Schnatter is Co-CEO. The Chairman Agreement will remain in effect so long as Mr. Schnatter is a director of the Company and remains Chairman as elected by our Board of Directors. The Founder Agreement will remain in effect until terminated by either party on 30 days' notice. Under the License Agreement, Mr. Schnatter granted the Company an exclusive right to use his identity in the Company's current and future operation, and franchising, of pizza delivery and carry-out businesses and restaurants, including sales of related goods and services under the Papa John's brand, in the United States and internationally. This license grant allows the Company to use Mr. Schnatter's image, voice, photographs and film footage in connection with the Company's marketing and promotion of the Papa John's brand, both in the United States and internationally. We agreed that in exchange for the exclusive license grant, we will grant stock options in accordance with the provisions of the Founder Agreement for a period of 15 years following the execution of the License Agreement (whether or not the Founder Agreement is terminated), subject to termination provisions contained in the License Agreement.

Annual Compensation Peer Group Review

In 2010, the Compensation Committee continued its annual practice of reviewing our total direct compensation against an industry peer group. In 2010, for our annual peer group review, base salary, total cash (base salary plus bonuses and short-term incentive compensation), long-term incentive values and total compensation were reviewed against the following peer group:

California Pizza Kitchen, Inc.   DineEquity, Inc.   P.F. Chang's China Bistro, Inc.
CEC Entertainment   Domino's Pizza, Inc.   Red Robin Gourmet Burgers Inc.
The Cheesecake Factory Incorporated   Krispy Kreme Doughnuts Inc.   Ruby Tuesday, Inc.
Chipotle Mexican Grill, Inc.   Landry's Restaurants Inc.   Sonic Corp.
Denny's Corp   O'Charley's, Inc.   Texas Roadhouse Inc.
    Panera Bread Company    

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The Compensation Committee selected this peer group based on data provided by Mercer Human Resource Consulting, because it believed the Company shares many distinguishing characteristics with these companies, including a common industry, similar market capitalization or certain other financial criteria and year-over-year consistency in the peer group. The peer group data include tally sheets for individual officer positions which include base salary, short-term cash, long-term equity, and total compensation historical and market comparison data. While the Compensation Committee generally targets the median of the peer group for each NEO, the Committee determines each NEO's compensation and its components based on its subjective review and assessment of several different factors, including the individual's performance, scope of responsibilities, depth and breadth of overall leadership experience, regional variations in compensation and cost of living, and the importance of the position to achieving our strategies. In addition, the components of each NEO's package are compared to executives from both the external peers listed above and other members of our executive team for relational equity.

Elements of Compensation

The Company's focus is on total direct compensation, including a portion that is assured and a portion that is incentive-based, comprised of the following mix of elements:

Base Salary

Annual base salary increases are typically considered at the beginning of each year and upon organizational changes that may occur throughout the year. The analysis for adjustments to base salary compensation takes into account all of the factors described under "Annual Compensation Peer Group Review" above. Base salaries were increased for Mr. Schnatter and Mr. Jude Thompson in connection with the approval of the Co-CEO management structure. Base salary increases were also approved for Mr. Tony Thompson and Mr. Sternberg in 2010, reflecting promotions and increased responsibilities. Base salaries for the other NEOs were not adjusted for 2010.

Short-Term Cash Incentive Compensation

In 2010, our short-term incentive program consisted of MIP, which provides quarterly and annual cash payouts to the NEOs and others within the Company upon achievement of pre-determined performance goals, and QSIP.

In 2010, the performance metrics and the target and actual results of the MIP included:

Metric
  Definition   Target   Full Year
Actual Results
  Actual
Payout
Percentage
  Weighting(1)   Award
Frequency

Pre-MIP Operating Income

  Consolidated pre-tax corporate operating income, excluding PJ Food Service income and the impact of consolidation of the franchisee-owned BIBP Commodities, Inc. cheese purchasing entity (BIBP).(2)   $45,100,000   $43,700,000   86.36%   40%   Annual

Net Development

  Domestic system-wide store openings less store closings.   50 units   90 units   189.00%   20%   Annual

Combined Domestic Comparable Sales and Comparable Transactions

  Domestic system-wide comparable sales (average same-store, year-over-year sales), an industry standard used to measure company growth plus domestic system-wide comparable transactions, an internal metric used as an indicator of market share growth when considered in conjunction with industry statistics.   (3)   (3)   251.88%   30%   Quarterly

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Metric
  Definition   Target   Full Year
Actual Results
  Actual
Payout
Percentage
  Weighting(1)   Award
Frequency

Online Sales

  Percentage of domestic system-wide sales recorded through all online orders and emerging channels.   6.15 percentage
point increase
over 2009
  0.79 percentage
point increase
over 2009
  18.04%   10%   Quarterly

(1)
As discussed above, the original plan design for the MIP provided for 30% weighting of the pre-MIP operating income component and 40% weighting of the domestic combined comparable sales and comparable transactions component of the plan. At the suggestion of the executive management team, the weighting of the metrics shifted upon approval of the Compensation Committee, effective in the second quarter to better reflect our core operating results. As a result of this action, the operating income metric, an annual payment component of the plan, was weighted at 30% for the first quarter and 40% for the final three quarters of 2010, and the domestic combined comparable sales and comparable transactions metric, a quarterly payment component of the plan, was weighted at 40% for the first quarter and 30% for the final three quarters of 2010.

(2)
BIBP is a special-purpose entity formed at the direction of our Franchise Advisory Council for the sole purpose of reducing cheese price volatility to domestic system-wide restaurants. We exclude the impact of BIBP in calculating the MIP results because BIBP is an independent, franchisee-owned corporation that purchases cheese at the market price and sells it to our distribution subsidiary. We exclude PJ Food Service income from the operating income component of the MIP results to appropriately incentivize our management team to control food costs for our franchise and corporate restaurants.

(3)
Under the rules of the SEC, we are not required to disclose comparable transactions for competitive reasons. For our 2008 and 2009 fiscal years, comparable transactions and comparable sales were each separate components of our short term incentive plan. Over the prior two years, (i) the transactions component of our MIP yielded a 137% award in 2009 and a 0% award in 2008, expressed as a percentage of target award; and (ii) the comparable sales component of our MIP yielded a 95.33% award in 2009 and a 66.85% award in 2008, expressed as a percentage of target award.

Performance targets for each performance metric were set equal to the Company's targets contained in the annual budget and operating plan. Achievement of these metrics beyond the targets established by the Compensation Committee results in payouts beyond the target award for each NEO, capped at 300% of the NEO's base salary. In determining each NEO's target incentive award for 2010, the Compensation Committee considered the market medians of the peer group analysis outlined above in the context of the perceived challenge of achieving operating plan levels. In 2010, the MIP awards (expressed as a percentage of base salary and an actual dollar amount), and actual payment amounts for each NEO were as follows:

Named Executive Officer
  Title   Target
Short-Term
Incentive
Award (%
of Base Salary)
  Target
Short-Term
Incentive
Award
$
  Actual
Short-Term
Incentive
Award
$
  Actual
Award (% of
2010
Salary)
 

John H. Schnatter (1)

  Founder, Chairman and Co-Chief Executive Officer     75.0%   $ 517,500   $ 795,581     113%  

J. Jude Thompson

  President and Co-Chief Executive Officer     75.0%   $ 465,269   $ 698,782     113%  

J. David Flanery

  Senior Vice President, Chief Financial Officer and Treasurer     37.5%   $ 165,759   $ 249,313     58%  

Andrew M. Varga

  Senior Vice President and Chief Marketing Officer     37.5%   $ 123,750   $ 192,158     58%  

Christopher J. Sternberg

  Senior Vice President, Corporate Communications and General Counsel     37.5%   $ 122,813   $ 189,704     59%  

Anthony N. Thompson

  Executive Vice President, North American Operations; President, PJ Food Service     37.5%   $ 119,531   $ 183,110     60%
 

(1)
Mr. Schnatter's annualized base salary consisted of a combination of cash ($380,000) and stock options ($320,000). For purposes of setting Mr. Schnatter's short-term target incentive award, the Compensation Committee assumed a $700,000 base salary level.

Each performance metric target reflects the expected operational outcomes based on the successful execution of the operating plan and the achievement of related Board-approved goals. By tying the targets to the Board-approved budget and operating plan, we believe that the plan payments will correlate to our achievement of operating results in a given year.

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Each NEO's actual annual incentive award payment in the table above is based on two components. The first component, comprising 90% of the full year award, is determined and payable solely by formula based on the Company's achievement of the pre-established performance targets discussed above. The remaining 10% of the budgeted bonus pool was discretionary and subject to award by the Compensation Committee based on the Committee's performance review assessment of the Co-CEOs, and, for each NEO other than the Co-CEOs, the Co-CEOs' performance review assessment of each NEO. This resulted in an allocation process that is cost-neutral to the Company because the size of the award pool is funded based upon the performance metrics in the table above. The discretionary component, utilized in determining the award, but not in the funding of the plan, provides flexibility in tailoring grants to individuals according to their achievements against individual objectives and annual corporate goals.

Actual 2010 results funded an award pool equal to 152.4% of the target award pool, reflecting favorable results relative to the established plan targets. As discussed above, the Compensation Committee's actions to adjust the MIP plan at the request of management, to ensure that the operating results supported the plan payout on the combined domestic comparable sales and comparable transactions metric, reduced the award pool by approximately $2.2 million.

The QSIP was introduced in 2009. Our NEOs participated in this plan, which did not materially increase their short term incentive potential, but did underscore the basic customer service and quality fundamentals of our business. A $12,000 per participant total award was targeted based on an indexed achievement level with a maximum award of $30,000 per participant. Each of our NEOs received total awards under the QSIP of $15,759 for 2010.

Long-Term Incentive Compensation

In 2010, our annual long-term incentive awards consisted of two components: stock options and time-based restricted shares. The determination of annual grant value levels is a function of a number of factors considered by the Compensation Committee, including market competitiveness, level of position within the organization, significance of the individual to the Company's strategy and success, and the level of "total direct compensation" deemed to be appropriate for the NEO. Once determined, the estimated value of the long term incentive for each NEO was distributed equally between stock options and time-based restricted shares.

The Compensation Committee has a goal of moving toward a different balance of cash and long-term equity incentives over time. This includes considering methods for providing greater long-term incentive values while controlling base salary increases. In 2010, the Compensation Committee approved Mr. Schnatter's recommendation to approve the regular long-term incentive grant values equal to the values granted in 2009. In addition, the Committee approved the EEOI matching grant program as an additional component of the long-term equity incentive in order to strengthen stock ownership and motivate and retain our key executives.

Stock Options.    We award stock options because they are inherently performance-based, meaning that their value only increases if the market price of our common stock increases. In addition, stock options provide long-term compensation to our NEOs in the form of additional equity, helping to build a culture of ownership among our executives. Finally, we believe that stock options are a strong executive retention tool.

Time-Based Restricted Shares.    In 2010, we granted time-based restricted shares to our NEOs, intended to focus participants on our long-range objectives, while at the same time serving as a retention mechanism. The inclusion of time-based restricted shares was designed to more closely reflect the market weighting of long-term incentive vehicles determined through benchmarking, as well as strengthen the retention benefits of our long-term incentive package. The shares awarded in 2010 have a three-year graded vesting schedule.

Executive Equity Ownership Incentive Program.    Our Compensation Committee approved the EEOI program to motivate and retain our senior executives and to further align their interests with the Company's stockholders. The matching grants under the program have a three-year cliff vest from the date of grant, provided that the Match Eligible Shares purchased by the executive are held for the entire vesting period. Each NEO other than Mr. Schnatter acquired 696 shares of the Company's Common Stock under the EEOI for total payment by each executive to the Company of $18,973. Each such officer elected to receive matching grants in the form of restricted stock, resulting in a grant of 3,480 restricted shares to each of them on April 28, 2010.

Equity Grant Practices.    In 2010, our Compensation Committee awarded the annual executive equity grant at the Compensation Committee meeting coinciding with our annual meeting of stockholders. The date of the grant is the date of the Compensation Committee approval of the award. The exercise price

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of each stock option awarded is the closing price of our common stock on the NASDAQ Stock Market on the date of grant. For 2011, the Compensation Committee approved the annual executive equity grant on February 16, 2011, with the effective date of grant and the exercise price of each stock option awarded at the closing price of our common stock on the NASDAQ Stock Market on February 24, 2011, two days after the release of our fourth quarter and full-year 2010 earnings.

Stock Ownership Guidelines

Stock ownership by our NEOs is a key component of our compensation objectives and fosters a culture of ownership. We believe that executive ownership of our stock demonstrates to investors that our executives have a significant stake in the Company and its future.

Level
  Ownership Guideline as a
Multiple of Base Salary
 

Co-Chief Executive Officers

    5.0×  

Key Staff and Business Unit Executives

    1.0×  

Other Key Positions

    0.5×
 

Specifically applied to the NEOs, the ownership guidelines are:

NEO   Title   Guideline (x)   Guideline ($)  

John H. Schnatter

  Founder, Chairman and Co-Chief Executive Officer     5.0x     $3,500,000  

J. Jude Thompson

  President and Co-Chief Executive Officer     5.0x     $3,250,000  

J. David Flanery

  Senior Vice President, Chief Financial Officer and Treasurer     1.0x     $   415,000  

Andrew M. Varga

  Senior Vice President and Chief Marketing Officer     1.0x     $   330,000  

Christopher J. Sternberg

  Senior Vice President, Corporate Communications and General Counsel     1.0x     $   330,000  

Anthony N. Thompson

  Executive Vice President, North American Operations; President PJ Food Service     1.0x     $   375,000
 

The NEOs have five years from becoming subject to the ownership requirement to achieve the ownership level, with annual progress required as follows: Year 1, 10%; Year 2, 25%; Year 3, 45%; Year 4, 70%; and Year 5, 100%.

Ownership levels at any particular time are calculated based on the purchase price of shares owned or the actual price on the measurement date, whichever is higher. The following are considered to be valid sources of ownership for measurement purposes:

The Compensation Committee reviews the Stock Ownership Guidelines on an annual basis when considering any annual equity grant. The ownership review occurred in conjunction with the annual consideration of broad-based equity grants just prior to the 2010 Annual Meeting of Stockholders. All NEOs who were employed by the Company at that time met or exceeded the guidelines. In addition to this regular review, the Compensation Committee is apprised of ownership level achievement through periodic reports during Compensation Committee meetings. Our short-term incentive program gives the Committee the discretion to award any portion of resulting payouts in the form of stock, instead of cash, to assist a participant in meeting the guidelines.

Tax and Accounting Policies

Deductibility of compensation expense under IRC Section 162(m) has not been a material consideration for our Compensation Committee to date based on the levels and types of compensation we pay.

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However, in the future, we expect IRC Section 162(m) deductibility may play a role if compensation expenses regularly begin to exceed $1,000,000 for our most highly compensated executives. We expense the cost of employee stock options in accordance with the fair value method contained in the Financial Accounting Standards Board Accounting Standards Codification "Compensation—Stock Compensation." We recorded stock-based compensation expense of $6.1 million in 2010, $5.8 million in 2009, and $2.6 million in 2008. As a result, the expense related to equity compensation has been and will continue to be a material consideration in our overall compensation program design.

Compensation Committee Report

The Compensation Committee of the Board has reviewed and discussed with management of the Company the Compensation Discussion and Analysis included in this Proxy Statement. In reliance on the review and discussions referred to above, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Annual Report on Form 10-K for the year ended December 26, 2010 and in this Proxy Statement.

    COMPENSATION COMMITTEE

 

 

Alexander W. Smith, Chairman
Norborne P. Cole, Jr.
Olivia F. Kirtley

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.

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Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the NEOs for each of the last three fiscal years (if applicable).

Name and Principal
Position
  Year   Salary
($)
  Bonus
($)
  Stock
Awards
($)(1)
  Option
Awards
($)(2)
  Non-Equity
Incentive
Plan
Compen-
sation
($)(3)
  Change in
Pension
Value and
Non-
qualified
Deferred
Compen-
sation
Earnings
($)
  All Other
Compen-
sation
($)(4)
  Total
($)
 

John H. Schnatter

    2010     703,231 (5)       249,974     849,971 (6)   811,340             2,614,516  
 

Founder, Chairman and

    2009     620,074 (5)       249,980     849,990 (6)   599,599             2,319,643  
 

Co-Chief Executive Officer

    2008                 600,000 (6)               600,000  

J. Jude Thompson

   
2010
   
616,538
   
   
344,839
   
249,980
   
714,541
   
   
   
1,925,898
 
 

President and Co-Chief

    2009     374,423         249,980 (7)   1,025,669 (7)   273,912         26,000 (7)   1,949,984  
 

Executive Officer

                                                       

J. David Flanery

   
2010
   
429,000

(8)
 
   
249,838
   
154,993
   
265,072
   
   
   
1,098,903
 
 

Senior Vice President,

    2009     454,695 (8)       139,999     253,409     215,907         5,145     1,069,155  
 

Chief Financial Officer

    2008     461,962 (8)       146,889     139,994     133,147         4,830     886,822  
 

and Treasurer

                                                       

Andrew M. Varga

   
2010
   
330,000
   
   
194,854
   
99,986
   
207,917
   
   
   
832,757
 
 

Senior Vice President,

                                                       
 

Chief Marketing Officer

                                                       

Christopher J. Sternberg

   
2010
   
323,077
   
   
184,850
   
89,989
   
205,463
   
   
   
803,379
 
 

Senior Vice President,

    2009     308,865         85,990     199,407     162,561         5,145     761,968  
 

Corporate Communications

                                                       
 

and General Counsel

                                                       

Anthony N. Thompson

   
2010
   
305,769
   
   
194,854
   
99,986
   
198,869
   
   
   
799,478
 
 

Executive Vice President,
North American Operations;
President, PJ Food Service

                                                       

(1)
The amounts in the Stock Awards column reflect the aggregate grant date fair value for each respective fiscal year related to time-based restricted stock, and for Mr. Flanery, for performance-based restricted shares granted in 2008, the final year of the program. All fair values were computed in accordance with the applicable Accounting Standards Codification (ASC) Stock Compensation topic. Assumptions used in the calculation of these amounts are included in Footnote 17 to the Company's audited financial statements for the fiscal years ended December 26, 2010, December 27, 2009, and December 28, 2008, respectively, included in the Company's Annual Report on Form 10-K.

(2)
The amounts in the Option Awards column reflect the aggregate grant date fair value for each respective fiscal year related to stock options granted in 2008, 2009, and 2010, respectively, computed in accordance with the ASC Stock Compensation topic. Assumptions used in the calculation of these amounts are included in Footnote 17 to the Company's audited financial statements for the fiscal years ended December 26, 2010, December 27, 2009, and December 28, 2008, respectively, included in the Company's Annual Report on Form 10-K.

(3)
The amounts in the Non-Equity Incentive Plan Compensation column for 2008, 2009 and 2010 include payments earned by each NEO pursuant to the 2008, 2009 and 2010 Management Incentive Plans, each based on corporate, unit and individual performance for the applicable year. The amounts in the Non-Equity Incentive Plan Compensation column for 2008 also includes payments earned by the NEO pursuant to the 2006 performance unit grants, each based on performance for the applicable three-year period. The amounts in the Non-Equity Incentive Plan Compensation column for 2009 and 2010 also include payments earned by the NEO pursuant to the 2009 and 2010 Quality and Service Incentive Plan ("QSIP"), based on corporate performance during 2009 and 2010.

For the year ended December 26, 2010, the annual components of the MIP and the fourth quarter of the quarterly components of the MIP, to the extent not deferred by the executive, were paid in February, 2011. The first three installments of the quarterly components of the MIP, to the extent not deferred by the executive, were paid in May, August, and November, 2010, respectively. Amounts in the table above for 2010 include a $15,759 payment under the QSIP for each NEO; all other amounts are pursuant to the MIP.

For the year ended December 27, 2009, the annual components of the MIP and the fourth quarter of the quarterly components of the MIP, to the extent not deferred by the executive, were paid in March, 2010. The first three installments of the quarterly components of the MIP, to the extent not deferred by the executive, were paid in May, August, and November, 2009, respectively. Amounts for 2009 include a payment under the QSIP ($16,615 for Messrs. Schnatter, Flanery and Sternberg and $11,638 for Mr. Jude Thompson); all other amounts are pursuant to the MIP.

For the year ended December 28, 2008, amount includes $49,412 for Mr. Flanery for the 2006 performance unit grant, as determined by the Compensation Committee and paid in January, 2009; Mr. Schnatter was not eligible for an award.

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    Amount for 2008 also includes $83,735 for Mr. Flanery for the MIP and, to the extent not deferred by the executive, paid in March, 2009. Mr. Schnatter was not eligible for an MIP award in 2008.

(4)
Except as otherwise indicated, amounts in the All Other Compensation column represent the amount of the Company's matching contribution to the NEO's account in the Company's 401(k) Plan (or, to the extent required by applicable regulations, retained in the executive's nonqualified deferred compensation account). Excludes certain de minimis imputed income related to family members or guests traveling with NEOs on business travel during 2010, at no incremental cost to the Company.

(5)
In lieu of receiving all his base salary in cash for 2010, Mr. Schnatter elected to receive a portion in the form of a nonqualified stock option grant, on December 28, 2009, with a total fair value of $320,000. See footnotes (3) and (4) to the Grants of Plan-Based Awards table. All of Mr. Schnatter's base salary for 2009 was paid in nonqualified stock option grants on December 28, 2008 and April 30, 2009 with a total fair value of $620,074.

(6)
Pursuant to the terms of the Chairman Agreement, Founder Agreement and License Agreement described above in the CD&A, we agreed to make annual grants of stock options to Mr. Schnatter with a minimum value of $600,000 ($300,000 under each of the Founder Agreement and Chairman Agreement), or such greater amount as may be determined by the Compensation Committee. The specific terms of each grant of stock options, including the grant date and exercise price, will be determined by the Compensation Committee. We also agreed to reimburse Mr. Schnatter for expenses incurred by him in connection with Company business pursuant to Company policy, but the reimbursement for air travel aboard private aircraft (including any aircraft owned by Mr. Schnatter) under these agreements may not exceed $300,000 per year without the written consent of the Compensation Committee. Of the value in the Option Awards column for Mr. Schnatter for 2009 and 2010, $600,000 of this amount is related to the grants under the Founder Agreement and Chairman Agreement, and for 2008 all of the value is related to these grants.

(7)
On December 31, 2008, Mr. Jude Thompson received a stock option grant of 30,543 shares valued at $170,045 for his non-executive role as a Board member acting as a liaison to the Board during a management transition. On April 23, 2009, he received a stock option grant of 70,000 shares valued at $605,626 as a sign-on incentive upon his appointment as President and Chief Operating Officer. On April 30, 2009, he received a stock option grant for 28,133 shares valued at $249,998 and a time-based restricted stock grant of 9,419 shares valued at $249,980 as a participant in the annual equity award program. Mr. Jude Thompson also received $26,000 in retainer and meeting fees for his services as a non-employee Director prior to his hire date of April 23, 2009.

(8)
Mr. Flanery retired as our Chief Financial Officer effective February 28, 2011. Mr. Flanery's base salary for 2008 included a $1,000 per week stipend as additional compensation for his responsibilities for our International operations. For 2009, this stipend continued until July 26, 2009 and his MIP award was based on this additional amount. In 2010, he was responsible for overseeing our international business for fourteen weeks and his compensation and MIP base again reflect a $1,000 per week stipend.

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Grants of Plan-Based Awards

The following table presents information with respect to the grants of plan-based awards made by the Company to each of its NEOs during the fiscal year ended December 26, 2010.

 
   
  Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)   Estimated Future Payouts Under Equity Incentive Plan Awards   All Other Stock Awards: Number of Shares of Stock or Units (#)(2)   Other Option Awards: Number of Securities Underlying Options (#)(3)    
  Grant Date Fair Value of Stock and Option Awards ($)(4)  
 
   
  Exercise or Base Price of Option Awards ($/Sh)  
Name
  Grant Date   Threshold ($)   Target ($)   Maximum ($)   Threshold (#)   Target (#)   Maximum (#)  

John H. Schnatter

    12/28/2009     0     517,500     2,040,000                              

    12/28/2009     0     12,000     30,000                              

    12/28/2009                                 37,912 (i)   24.21     319,992  

    4/28/2010                             9,170 (i)           249,974  

    4/28/2010                                 26,254 (ii)   27.26     249,980  

    4/28/2010                                 32,766 (iii)   27.26     299,996  

    4/28/2010                                 32,766 (iii)   27.26     299,996  

J. Jude Thompson

   
12/28/2009
   
0
   
465,269
   
1,875,000
   
   
   
   
   
   
   
 

    12/28/2009     0     12,000     30,000                              

    4/28/2010                             9,170 (i)           249,974  

    4/28/2010                             3,480 (ii)           94,865  

    4/28/2010                                 26,254 (ii)   27.26     249,980  

    4/28/2010                                 696 (iv)   27.26      

J. David Flanery

   
12/28/2009
   
0
   
165,759
   
1,287,000
   
   
   
   
   
   
   
 

    12/28/2009     0     12,000     30,000                              

    4/28/2010                             5,685 (i)           154,973  

    4/28/2010                             3,480 (ii)           94,865  

    4/28/2010                                 16,278 (ii)   27.26     154,993  

    4/28/2010                                 696 (iv)   27.26      

Andrew M. Varga

   
12/28/2009
   
0
   
123,750
   
990,000
   
   
   
   
   
   
   
 

    12/28/2009     0     12,000     30,000                              

    4/28/2010                             3,668 (i)           99,990  

    4/28/2010                             3,480 (ii)           94,865  

    4/28/2010                                 10,501 (ii)   27.26     99,986  

    4/28/2010                                 696 (iv)   27.26      

Christopher J. Sternberg

   
12/28/2009
   
0
   
122,813
   
975,000
   
   
   
   
   
   
   
 

    12/28/2009     0     12,000     30,000                              

    4/28/2010                             3,301 (i)           89,985  

    4/28/2010                             3,480 (ii)           94,865  

    4/28/2010                                 9,451 (ii)   27.26     89,989  

    4/28/2010                                 696 (iv)   27.26      

Anthony N. Thompson

   
12/28/2009
   
0
   
119,531
   
937,500
   
   
   
   
   
   
   
 

    12/28/2009     0     12,000     30,000                              

    4/28/2010                             3,668 (i)           99,990  

    4/28/2010                             3,480 (ii)           94,865  

    4/28/2010                                 10,501 (ii)   27.26     99,986  

    4/28/2010                                 696 (iv)   27.26      

(1)
The amounts in the Estimated Possible Payouts Under Non-Equity Incentive Plan Awards columns represent plan awards pursuant to our annual MIP and QSIP, respectively, for the period commencing December 27, 2009. For the actual amounts paid to the NEOs pursuant to the MIP and QSIP during 2010, see the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above.

(2)
The amounts in the All Other Stock Awards column represent grants of time-based restricted stock, issued pursuant to our 2008 Plan. In the event that the Company pays dividends to holders of its common stock, recipients of restricted stock would have the right to deferred dividends until the restrictions lapse. The 2010 restricted stock grant vest dates are indicated as follows: (i) one-third on each of April 28, 2011, 2012 and 2013; and (ii) all shares on April 28, 2013.

(3)
The amounts in the Other Option Awards column represent grants of stock options pursuant to the 2008 Plan. The options vest(ed) as follows:

(i)
all shares on June 28, 2010;
(ii)
one-third of the shares on each of April 28, 2011, 2012 and 2013;
(iii)
all shares on April 28, 2012;
(iv)
all shares fully vested on date of grant of April 28, 2010.

(4)
The amounts in the Grant Date Fair Value of Stock and Option Awards column represent the full grant date fair value of each stock option award and time-based restricted stock award, as computed in accordance with the ASC Stock Compensation topic, as follows:

Equity Type
  Grant Date   Full Grant Date
Fair Value/Share
  Vesting
Stock Options   December 28, 2009   $ 8.4404   6-month cliff
    April 28, 2010   $ 9.5216   3-year graded
    April 28, 2010   $ 9.1557   2-year cliff
    April 28, 2010     0   immediate
Time-Based Restricted Stock   April 28, 2010   $ 27.26   3-year graded
    April 28, 2010   $ 27.26   3-year cliff

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to the outstanding equity awards at 2010 fiscal year-end for the Company's NEOs.

 
  Option Awards   Stock Awards  
 
   
   
   
   
   
   
   
  Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned Shares,
Units or
Other Rights
That Have Not
Vested
($)
 
 
   
   
   
   
   
   
  Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or
Other Rights
That Have Not
Vested
(#)(4)
 
 
   
   
   
   
   
  Market
Value of
Shares or
Units of
Stock
That Have Not
Vested
($)(3)
 
 
  Number of Securities Underlying Unexercised Options    
   
  Number of
Shares or
Units
That Have Not
Vested
(#)(2)
 
Name
  Exercisable
(#)
  Unexercisable
(#)(1)
  Exercise
Price
($)
  Expiration
Date
 

John H. Schnatter

    25,542         32.65     4/19/2011                  

    64,856         33.69     5/10/2012                  

    85,110         26.31     5/8/2013                  

    52,103         18.43     12/31/2013                  

    37,102         26.54     4/30/2014                  

    37,912         24.21     12/28/2014                  

    9,377     18,756 (i)   26.54     4/30/2014                  

        67,458 (ii)   26.54     4/30/2014                  

        32,766 (iii)   27.26     4/28/2015                  

        32,766 (iii)   27.26     4/28/2015                  

        26,254 (iv)   27.26     4/28/2015                  

                    6,280 (i)   173,705          

                    9,170 (ii)   253,642          

J. Jude Thompson

   
2,729
   
   
24.23
   
2/20/2013
   
   
   
   
 

    14,326         26.31     5/8/2013                  

    30,543         18.43     12/31/2013                  

    23,800     46,200 (v)   25.93     4/23/2014                  

    9,377     18,756 (i)   26.54     4/30/2014                  

        26,254 (iv)   27.26     4/28/2015                  

                    6,280 (i)   173,705          

                    9,170 (ii)   253,642          

                    3,480 (iii)   96,257          

J. David Flanery

   
17,544
   
   
32.65
   
4/19/2011
   
   
   
   
 

    20,153         33.92     5/9/2012                  

    7,240         25.39     8/8/2012                  

    13,162     6,581 (vi)   26.31     5/8/2013                  

    5,251     10,503 (i)   26.54     4/30/2014                  

        20,000 (vii)   18.43     12/31/2013                  

        16,278 (iv)   27.26     4/28/2015                  

                    2,660 (iv)   73,576          

                    3,517 (i)   97,280          

                    5,685 (ii)   157,247          

                    3,480 (iii)   96,257          

Andrew M. Varga

   
1,313
   
2,628

(viii)
 
24.61
   
9/16/2014
   
   
   
   
 

        10,501 (iv)   27.26     4/28/2015                  

                    903 (v)   24,977          

                    3,668 (ii)   101,457          

                    3,480 (iii)   96,257          

Christopher J. Sternberg

   
7,663
   
   
32.65
   
4/19/2011
   
   
   
   
 

    8,350         33.92     5/9/2012                  

    6,252     3,126 (vi)   26.31     5/8/2013                  

    3,225     6,452 (i)   26.54     4/30/2014                  

        20,000 (vii)   18.43     12/31/2013                  

        9,451 (iv)   27.26     4/28/2015                  

                    1,263 (iv)   34,935          

                    2,161 (i)   59,773          

                    3,301 (ii)   91,305          

                    3,480 (iii)   96,257          

Anthony N. Thompson

   
398
   
   
31.46
   
11/6/2011
   
   
   
   
 

    3,057         33.92     5/9/2012                  

    2,491     1,246 (vi)   26.31     5/8/2013                  

    2,812     5,627 (i)   26.54     4/30/2014                  

        10,000 (vii)   18.43     12/31/2013                  

        10,501 (iv)   27.26     4/28/2015                  

                    503 (iv)   13,913          

                    1,884 (i)   52,111          

                    3,668 (ii)   101,457          

                    3,480 (iii)   96,257          

(1)
The vesting schedule is as follows:

(i)
one-half of the shares on each of April 30, 2011 and 2012;
(ii)
all shares on April 30, 2011;
(iii)
all shares on April 28, 2012;
(iv)
one-third of the shares on each of April 28, 2011, 2012 and 2013;
(v)
one-half of the shares on each of April 23, 2011 and 2012;
(vi)
all shares on May 8, 2011;

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    (vii)
    all shares on December 31, 2010;
    (viii)
    one-half of the shares on each of September 16, 2011 and 2012.

(2)
The vesting schedule is as follows:

(i)
one-half of the shares on each of April 30, 2011 and 2012;
(ii)
one-third of the shares on each of April 28, 2011, 2012 and 2013;
(iii)
all shares on April 28, 2013 if the 696 shares acquired pursuant to the EEOI program on April 28, 2010 are held for the vesting period;
(iv)
all shares on May 8, 2011;
(v)
one-half of the shares on each of September 16, 2011 and 2012.

(3)
Value determined by multiplying the number of time-based restricted shares by the closing price of our common stock at fiscal year end, $27.66.

(4)
We granted performance-based restricted shares in 2008 with a vesting date of May 8, 2011; such shares were forfeited in February 2011 upon the Compensation Committee's determination that the performance goals for such awards had not been met, and accordingly such awards are not included in the table above. Messrs. Flanery, Sternberg and Anthony Thompson forfeited 2,923, 1,388 and 553 unvested performance-based restricted shares, respectively, in February, 2011. These performance-based restricted shares had a three-year performance period, with vesting determined upon the Company's compounded annual growth rate (CAGR) operating income performance. At December 26, 2010, our performance was below threshold for all performance-based restricted shares.

Option Exercises and Stock Vested

The following table sets forth information with respect to stock options exercised and restricted stock vesting by our NEOs during the 2010 fiscal year.

 
  Option Awards   Stock Awards  
Name
  Number of
Shares Acquired
on Exercise
  Value Realized on Exercise ($)(1)   Number of Shares Acquired
on Vesting
  Value Realized on Vesting ($)(2)  

John H. Schnatter

    115,000     1,070,232     3,139     86,009  

J. Jude Thompson

    696         3,139     86,009  

J. David Flanery

    43,870     431,062     1,758     48,169  

Andrew M. Varga

    696         2,482     64,011  

Christopher J. Sternberg

    696         1,079     29,565  

Anthony N. Thompson

    696         941     25,783  

(1)
Value realized on exercise calculated based on the difference between the market price of our common stock on the date of exercise and the option exercise price, multiplied by the number of shares exercised. Each NEO other than Mr. Schnatter acquired 696 shares of common stock under the EEOI program, by exercising an option for 696 shares which was fully vested on the date of grant and immediately exercised, with the exercise price being the full fair market value on the date of exercise.

(2)
Value determined by multiplying the number of vested shares by the closing market price of our common stock on the vesting date.

Nonqualified Deferred Compensation

Name
  Executive Contributions in Last Fiscal Year ($)(1)   Registrant Contributions in Last Fiscal Year ($)(2)   Aggregate Earnings in Last Fiscal Year ($)   Aggregate Withdrawals/ Distributions ($)   Aggregate Balance at Last Fiscal Year End ($)(3)  

John H. Schnatter

            20,566     (11,269 )   158,722  

J. Jude Thompson

    163,935         21,650         287,432  

J. David Flanery

    280,768     5,145     273,604         2,676,492  

Andrew M. Varga

    47,688         6,752         64,914  

Christopher J. Sternberg

    79,281     5,145     103,633     (59,152 )   740,683  

Anthony N. Thompson

    24,462     5,145     6,896         75,956  

(1)
The amounts in the Executive Contributions in Last Fiscal Year column represent amounts disclosed in the Summary Compensation Table above, as follows: (i) for Mr. Jude Thompson, $92,481 of salary and $71,454 of 2010 incentive compensation; (ii) for Mr. Flanery, $214,500 of salary, and $66,268 of 2010 incentive compensation; (iii) for Mr. Varga, $16,500 of salary, and $31,188 of 2010 incentive compensation; (iv) for Mr. Sternberg, $48,461 of salary, and $30,819 of 2010 incentive compensation; and (v) for Mr. Anthony Thompson, $24,462 of salary.

(2)
The amounts in the Registrant Contributions in Last Fiscal Year column represent the Company's matching contribution to the NEOs which mirrors the match in the 401(k) plan, awarded to executives and credited to their deferral account in 2010 as a result of deferrals in the 2009 fiscal year, as previously reported in our prior year's proxy statement.

(3)
The amounts in the Aggregate Balance at Last Fiscal Year End column, other than earnings on deferred compensation, have all been previously disclosed in Summary Compensation Tables in our prior proxy statements or in note (1) above.

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Eligibility for participation in the nonqualified deferred compensation plan is limited to a select group of management or highly compensated employees (as defined under ERISA) who are specifically designated as eligible to participate by our chief executive officer or another officer authorized to make those determinations, including our named officers.

Participants can defer up to 100% of their base salary and up to 100% of their short-term incentive award payments into the nonqualified deferred compensation plan each plan year. For benchmarking purposes, the plan provides that participant accounts are deemed to be invested in one or more publicly traded mutual funds or our common stock. Participants may direct the investment of their accounts among the options made available under the plan, and can change their investment options (except company stock) on any business day. Deferral elections may be changed once per calendar year, generally in December, and such changes are effective for compensation earned in the following year. We pay certain administrative costs of the plan. We match the amounts deferred by the same discretionary match percentage announced for the 401(k) Plan for the plan year.

Change in Control and Termination Payments

We have no pre-determined executive severance or change in control programs applicable to our NEOs beyond those provided generally to our salaried employees or as provided with respect to vesting in our equity plans, as generally described below.

Equity Plan Provisions

Under the terms of our 2008 Plan, upon a change in control in a corporate transaction in which awards are not assumed: (i) all grantees of shares of restricted stock and options will be credited with an additional 12 months of service from the grant date for purposes of vesting; and (ii) notice will be given to grantees of vested options that such options will remain exercisable for a period of fifteen days and thereafter terminated, or the Board may elect, in its sole discretion, to cancel any outstanding awards of options and/or restricted stock and pay to the holder of vested options and/or restricted stock an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of restricted stock, equal to the price per share paid to holders of shares of stock and, in the case of options, equal to the product of the number of shares of stock subject to the option multiplied by the amount, if any, by which the price per share paid to holders of shares of stock pursuant to the transaction exceeds the option price. In the event of a transaction in which awards are assumed, options and restricted stock shall continue in the manner and under the terms provided in the event of any transaction to the extent that provision is made in writing in connection with the transaction for the assumption or continuation of the options and restricted stock granted, or for the substitution for options and restricted stock for new common stock options and restricted stock relating to the stock of a successor entity, with appropriate adjustments as to the number of shares and option exercise prices.

Under the terms of our 1999 Team Member Stock Ownership Plan ("1999 Plan"), upon a change in control, (i) any then-outstanding stock options held by participants will become fully vested and immediately exercisable; and (ii) any restrictions and other conditions pertaining to restricted stock, including but not limited to vesting requirements, will lapse and those shares will be immediately transferable and no longer subject to forfeiture.

In addition, if an NEO is terminated for cause (as defined below), then all outstanding options under our equity plans, whether or not exercisable, will terminate immediately. If the NEO is terminated for any reason other than for cause, death, disability or retirement, to the extent then outstanding options are exercisable and subject to the provisions of the relevant option agreement, the options may be exercised by the officer or his personal representative within 60 days after the date of termination in the case of the 1999 Plan, or 90 days after the date of termination in the case of the 2008 Plan. In the event of retirement, an NEO may exercise exercisable options under the 1999 Plan within one year after the date of retirement. In the event of an NEO's death or disability while employed by the Company, all then outstanding options become fully vested and immediately exercisable, and may be exercised at any time within one year after the date of death or determination of disability.

Under the 1999 and 2008 Plans, if an NEO's employment is terminated for any reason other than death or disability prior to the expiration of the restriction period applicable to shares of restricted stock, the shares will be immediately forfeited and returned to us. In the event of death or disability prior to the expiration of the restriction period, any restrictions or other conditions including vesting requirements, will immediately lapse.

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Table of Contents

The following table is intended to reflect projected potential payouts under our equity plans, other than those available generally on a nondiscriminatory basis to all salaried employees. The table provides for a range of potential separation events for each of the NEOs, calculated as if the separation event occurred on December 26, 2010. The actual amounts to be paid can only be determined at the time of the actual event.

Name
  Change in Control(1)($)   Involuntary
(Not for Cause)
Termination
($)(2)
  Retirement ($)   Death/Disability ($)  

John H. Schnatter

                         

Salary

                 

Stock Options(3)

    868,218     778,662     778,662     911,936  

Restricted Stock(4)

    173,069             427,347  
                   

Totals:

    1,041,287     778,662     778,662     1,339,283  

J. Jude Thompson

                         

Salary

                 

Stock Options(3)

    416,254     362,289     362,289     473,723  

Restricted Stock(4)

    173,069             523,604  
                   

Totals:

    589,323     362,289     362,289     997,327  

J. David Flanery

                         

Salary

                 

Stock Options(3)

    241,620     40,085     40,085     251,844  

Restricted Stock(4)

    175,669             424,360  
                   

Totals:

    417,289     40,085     40,085     676,204  

Andrew M. Varga

                         

Salary

                 

Stock Options(3)

    9,409     4,005     4,005     16,220  

Restricted Stock(4)

    46,994             222,691  
                   

Totals:

    56,403     4,005     4,005     238,911  

Christopher J. Sternberg

                         

Salary

                 

Stock Options(3)

    205,744     12,052     12,052     211,879  

Restricted Stock(4)

    95,842             282,270  
                   

Totals:

    301,586     12,052     12,052     494,149  

Anthony N. Thompson

                         

Salary

                 

Stock Options(3)

    105,044     6,512     6,512     110,997  

Restricted Stock(4)

    74,461             263,738  
                   

Totals:

    179,505     6,512     6,512     374,735  

(1)
Generally, pursuant to the plans and agreements, a change of control is deemed to occur if any person acquires 50% or more of the Company's voting stock; approval by our stockholders of a merger or consolidation of the Company which would result in the stock of the Company outstanding immediately prior to the merger not continuing to represent at least 50% of the voting stock outstanding immediately after the merger or consolidation; or a complete liquidation or sale of all or substantially all of the assets of the Company.

(2)
Termination for cause is generally defined under the equity plans as failure to render services to the Company amounting to gross neglect or insubordination, fraud or embezzlement, conviction of a felony or failing to contest a felony prosecution, or material breach of employment or non-competition agreement.

(3)
Assumed stock option value calculated for in-the-money stock options based on $27.66 per share, the closing price of our common stock at fiscal year end, less the exercise price per share.

(4)
No values were included for the 2008 performance-based restricted stock grant because the following shares were forfeited in February 2011, for failure to satisfy the performance conditions of such awards: Mr. Flanery, 2,923 shares; Mr. Sternberg, 1,388 shares; and Mr. Anthony Thompson, 553 shares.


Assumed 2008, 2009 and 2010 time-based restricted stock grants receive twelve months additional vesting credit in case of change-in-control and fully vested in case of death/disability. Assumed values were calculated at $27.66 per share, the closing price of our common stock at fiscal year end.

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Director Compensation

We pay four primary components of compensation to our non-management directors: an annual cash retainer, meeting fees, committee chairman fees, and equity awards, generally comprising stock options and restricted stock. Board members may also from time to time receive fees for service on ad hoc committees. Within five years of their election to the Board of Directors, all non-management directors are required to hold five times the standard annual cash retainer of $35,000, or $175,000, in our common stock, and all have attained the required ownership level or are in compliance with the phased-in ownership requirement of the policy.

In 2009, Mercer Human Resource Consulting reviewed market competitiveness for all of the components of our director compensation program. Based on their recommendations, we confirmed our 2009 director compensation levels. In analyzing director compensation, the Compensation Committee looked at a peer group that was substantially similar to the one used for management, as well as an alternative peer group of similarly sized companies in other industries to provide a broader basis for comparison which more properly reflected the marketplace for directors.

For 2010, all components of director compensation remain unchanged.

Members of Company management who also serve as members of the Board of Directors are not eligible for compensation for their service in their capacity as director, other than the compensation paid to Mr. Schnatter under the Chairman and Founder Agreements as described in the CD&A. The following table sets forth the types and amounts of compensation paid to our non-management directors:

Annual Retainer:

  Standard   $ 35,000  

  Audit Committee Chairman—additional   $ 15,000  

  Other Committee Chairman—additional   $ 10,000  

  Lead Director—additional   $ 20,000  

Meeting Fees:

 

Board meeting

 
$

2,000
 

  Telephonic attendance at in-person Board meeting   $ 1,000  

  Committee meeting   $ 1,500  

  Telephonic attendance at in-person Committee meeting   $ 750  

Annual Equity Grant(1)

 
  Restricted Stock   Stock Option Shares

Standard

  1,852 shares   5,303 shares

Lead Director

  2,769 shares   7,929 shares

(1)
The 2010 annual equity grants, awarded in equal values of restricted stock and stock option shares, have three-year graded vesting and the options have a five-year term. The annual equity grant award level is determined annually by the Board of Directors.

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Non-management directors also receive reimbursement for reasonable out-of-pocket expenses incurred in connection with their Board or committee service.

The following table sets forth the compensation paid to directors during 2010:

Name
  Fees Earned or Paid in Cash ($)   Restricted Stock Awards ($)(1)   Option Awards ($)(2)   Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)   Total ($)  

Norborne P. Cole Jr. 

    89,500     75,483     75,497         240,480  

Philip Guarascio

    53,000     50,486     50,493         153,979  

Olivia F. Kirtley

    80,000     50,486     50,493         180,979  

Wade S. Oney

    47,000     50,486     50,493         147,979  

Alexander W. Smith

    75,000     50,486     50,493         175,979  

William M. Street

    70,500     50,486     50,493         171,479  

(1)
The full grant date fair value of the 2010 restricted stock awards to non-employee directors was $27.26 per share. All fair values were computed in accordance with the applicable ASC Stock Compensation topic. Assumptions used in the calculation of these amounts are included in Footnote 17 to the Company's audited financial statements for the fiscal year ended December 26, 2010 included in the Company's Annual Report on Form 10-K. The following chart sets forth unvested restricted awards granted under the 2008 Plan held by each director in the table above as of December 26, 2010.

Name
  Number of
Unvested
Restricted Shares
 

Norborne P. Cole, Jr. 

    4,665  

Philip Guarascio

    3,121  

Olivia F. Kirtley

    3,121  

Wade S. Oney

    3,121  

Alexander W. Smith

    3,121  

William M. Street

    3,121  
(2)
The full grant date fair value of the 2010 equity awards to non-employee directors utilized a $9.5220 per share Black-Scholes value. All fair values were computed in accordance with the applicable ASC Stock Compensation topic. Assumptions used in the calculation of these amounts are included in Footnote 17 to the Company's audited financial statements for the fiscal year ended December 26, 2010 included in the Company's Annual Report on Form 10-K. The following chart sets forth vested and unvested option awards granted under the 2008 Plan and the 2003 Stock Option Plan for Non-Employee Directors held by each director in the table above as of December 26, 2010.

Name
  Number of Vested Options   Number of Unvested Options  

Norborne P. Cole, Jr. 

    51,862     13,593  

Philip Guarascio

    38,425     9,092  

Olivia F. Kirtley

    38,425     9,092  

Wade S. Oney

    38,425     9,092  

Alexander W. Smith

    26,226     9,092  

William M. Street

    38,425     9,092  

In addition, a nonqualified deferred compensation plan is available to all of our directors. Directors can elect to defer their annual retainer and meeting fees (up to 100%) into a deferred compensation plan that offers deemed investments in certain publicly-available mutual funds or our common stock, as is the case for our executives and other eligible employees. We do not contribute to director accounts in the deferred compensation plan, but do pay certain administrative costs of the plan.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Compensation Committee Interlocks and Insider Participation

The Compensation Committee, comprised entirely of independent, non-management directors, is responsible for establishing and administering the Company's policies involving the compensation of its executive officers. No employee of the Company serves on the Compensation Committee. The Committee members have no interlocking relationships as defined by the SEC.

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Approval of Related Person Transactions

Generally

Under our written Related Party Transaction Policies and Procedures, the Corporate Governance and Nominating Committee will review the material facts of all transactions with related persons that require the Corporate Governance and Nominating Committee's approval and either approve or disapprove of the entry into the transaction. Advance Corporate Governance and Nominating Committee approval is generally required for such transactions; however, if such advance approval is not feasible, then the transaction will be considered and, if the Corporate Governance and Nominating Committee determines it to be appropriate, ratified at its next regularly scheduled meeting or, if not ratified, the appropriate action taken as determined by the Committee. In determining whether to approve or ratify such a transaction, the Corporate Governance and Nominating Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no more favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party's interest in the transaction. The policy sets forth certain categories of transactions that have standing approval, which include transactions that are deemed not to involve a direct or indirect material interest on behalf of the related person. In addition, the Board of Directors has delegated to the Chair of the Corporate Governance and Nominating Committee the authority to pre-approve or ratify (as applicable) a transaction with a related party in which the aggregate amount involved is expected to be less than $1 million computed in accordance with Item 404 of Regulation S-K.

Many transactions that constitute related person transactions are ongoing and some arrangements predate any relationship with the director or officer or predate the director's or officer's relationship with the Company. When a transaction is ongoing, any amendments or changes are reviewed for reasonableness and fairness to the Company.

Procedures for Identifying Possible Related Person Transactions

On an annual basis, each director, nominee for director and executive officer completes a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. The Company then compiles a list of all such persons and entities, including all subsidiaries of the entities identified. Once the list of persons and entities has been compiled, it is distributed within the Company to identify any potential transactions.

All ongoing transactions, along with payment and receipt information, are compiled for each person and entity. Any related person transaction identified through this process is presented to the Corporate Governance and Nominating Committee in order to obtain approval or ratification of the transactions and for review in connection with its recommendations to the Board on the independence determinations of a director or director nominee.

The Corporate Governance and Nominating Committee and the Board also have approved a written policy regarding transactions that may occur between the Company and an entity in which Mr. John Schnatter has an investment. The purpose of that policy is to ensure that any goods or services that entity may obtain or purchase from the Company will be at fair market value, or for services for which a fair price is not readily determinable, to ensure that each proposed service or transaction will be approved on a case by case basis for its entire fairness. The Company periodically reports to the Corporate Governance and Nominating Committee regarding compliance with this policy.

Special Procedures for Franchisee Relationships

The Corporate Governance and Nominating Committee and the Board have adopted special policies and procedures for consideration of restaurant development, acquisition and disposition transactions involving franchisees in which directors or executive officers of the Company, or their immediate families, have significant ownership, generally defined as ten percent or more. Under the policy, the Corporate Governance and Nominating Committee ultimately must consider and determine whether to approve or disapprove any subject transaction involving a related party. Proposed acquisitions and dispositions of restaurants involving the Company and related parties must be evaluated in light of an appraisal by a reputable, disinterested third party. With respect to proposed new development by related parties, if the Company declines to exercise its right of first refusal, the policy requires that the opportunity be made available to qualified franchisees without related-party ownership. Similarly, with respect to a proposed acquisition of a restaurant by a related party from another franchisee, if the Company declines to exercise its right of first refusal, the Company must consider making recommendations concerning possible alternative, nonrelated-party franchisee parties. Finally, the policy requires that any proposed

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disposition of a restaurant by a related party to another franchisee must be disclosed to the Corporate Governance and Nominating Committee, and must be approved by the Committee if the proposed transaction includes any consideration by or from the Company outside the ordinary course of business with other franchisees. The Corporate Governance and Nominating Committee has also used the procedures set forth in this policy to review the Company's transactions with Hampton Airways, Inc., discussed under "Transactions with Related Persons" below.

Transactions with Related Persons

This section describes certain transactions during the fiscal year ended December 26, 2010, and transactions presently contemplated that involve directors and executive officers of the Company and their affiliates.

Franchise and Development Arrangements

Executive officers and directors of the Company hold equity interests in entities that are franchisees of the Company, as described in the table below. Some of those individuals acquired their interests before the Company's 1993 initial public offering, and some of the entities in which they hold interests acquired development rights at reduced development fees and also pay a reduced franchise fee when each restaurant is opened. We have since entered into additional franchise and development agreements with non-employee directors and executive officers of the Company and entities in which they have equity interests, and may continue to do so in the future. Under the Company's policy governing transactions with related-person franchisees, which is described above, any such franchise arrangements we enter into in the future will be on terms no more favorable to directors and officers than with independent third parties.

The following table describes franchise and development arrangements during 2010 between the Company and entities in which the Company's executive officers and directors, as well as their immediate family members, had an equity interest as of the end of the fiscal year and the amount of royalties and franchise and development fees earned by or paid to the Company from those entities during 2010. Those franchisees also purchase various food and other products from the Company's commissary system and may purchase from or through the Company certain goods and services, including insurance and certain accounting and related services, needed to operate a Papa John's restaurant. All such purchases and sales are made on terms and at rates identical to those that may be obtained from the Company by an independent franchisee.

Name and Percentage Owned
  Franchise Entity—Amounts Earned
Annette Schnatter (100%)   Joe K Corporation—Operates one restaurant in Louisville, Kentucky. Royalties earned by the Company in 2010 from this franchisee were $60,700. Annette Schnatter is John Schnatter's wife.

Charles W. Schnatter (30.65%)
Timothy C. O'Hern (36.7%)
Steve M. Ritchie (2%)

 

Capital Pizza, Inc.—Operates 19 restaurants in Illinois and Indiana. Royalties earned by the Company in 2010 from this franchisee were $694,500. Mr. Charles Schnatter retired as an officer of the Company in June, 2010, and Mr. O'Hern and Mr. Ritchie are officers of the Company.

Wade S. and Elizabeth Oney (95.0%)

 

Bam-Bam Pizza, Inc.—Operates 26 restaurants in Florida. Royalties earned by the Company in 2010 from this franchisee were $1,190,300. Elizabeth Oney is Mr. Oney's wife.

Wade S. Oney (95.0%)

 

L-N-W Pizza, Inc.—Operates 11 restaurants in Florida. Royalties earned by the Company in 2010 from this franchisee were $651,700.

Wade S. Oney (34.9%)
Richard Brown (50.0%)

 

Brown's Pizza, Inc.—Operates two restaurants in Florida. Royalties earned by the Company in 2010 from this franchisee were $133,100. Richard Brown is Mr. Oney's father-in-law.

Wade S. Oney (90.0%)

 

Eagle Eye Pizza, Inc.—Operates three restaurants in Oregon. Royalties earned by the Company in 2010 from this franchisee were $96,800.

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Name and Percentage Owned
  Franchise Entity—Amounts Earned
Wade S. Oney (46.2%)
Pat Brown (0.45%)
  Oney Bayside, LLC—Operates nine restaurants in Florida. Royalties earned by the Company in 2010 from this franchisee were $364,500. Pat Brown is Wade Oney's mother-in-law.

Other Transactions

During 2010, the Company paid $443,000 to Hampton Airways, Inc. ("Hampton"), for charter aircraft services. Hampton's sole shareholder is John Schnatter, our Founder, Chairman and Co-Chief Executive Officer. The Company periodically reviews pricing data from other, independent air charter services and, on that basis, believes that the rates charged by Hampton to the Company were at the market rates that could have been obtained from the independent third parties for similar aircraft. In December 2009, the Company entered into a Sublease Agreement with Evergreen Real Estate, LLC, an entity that is wholly owned by Mr. Schnatter. The sublease provides for the nonexclusive use of certain office space in the Company's headquarters by Evergreen Real Estate and its employees. The sublease provides for a 10 year term and annual lease payments of $12,000. For a discussion of certain additional arrangements between the Company and Mr. Schnatter, please see "Compensation of Founder, Chairman and Co-Chief Executive Officers" under "Compensation Discussion and Analysis."

Charles W. Schnatter, the brother of John Schnatter, was an officer of the Company from 1991 until his retirement from the Company in June 2010. His compensation in fiscal year 2010, including the value of equity compensation, totaled approximately $269,000.

Michele O'Hern, the wife of our Senior Vice President, Development, Tim O'Hern, works for us in marketing. She has been employed by us for ten years. Her compensation in fiscal 2010, including the value of equity compensation, totaled approximately $136,000.

In 1999, the Papa John's Franchise Advisory Council, an advisory group comprised of certain Papa John's franchisees that meets periodically to discuss issues of importance to the Company and its franchisees, initiated a program that allows the cost of cheese to Papa John's restaurants to be established on a quarterly basis. Certain franchisees of the Company formed a corporation, BIBP Commodities, Inc. (BIBP), that purchases cheese at the prevailing market price and sells it to the Company's distribution subsidiary, PJ Food Service, Inc. (PJFS), at a fixed quarterly price based in part upon historical average market prices. PJFS in turn sells cheese to Papa John's domestic restaurants at a set quarterly price (modified in 2009 to set more frequently). Our subsidiary, Capital Delivery, Ltd., has made available a $40 million line of credit to BIBP to fund cash deficits as they may arise; as of December 26, 2010, there was an outstanding balance of $15.9 million under the line of credit. The shareholders of BIBP include Wade S. Oney (9.09%). BIBP has paid its shareholders a total annual dividend equal to eight percent of each shareholder's initial investment; payment of dividends is at the discretion of BIBP's board of directors and depends upon the financial condition of BIBP and general business conditions.


AUDIT COMMITTEE REPORT

The Audit Committee of the Board represents and assists the Board in fulfilling its oversight responsibilities for the accounting, financial reporting and internal control functions of the Company and its subsidiaries, including the appointment, compensation, retention and oversight of the work of the independent auditor, and oversees the performance of the internal auditing function. The Committee has the sole authority and responsibility to select, appoint, compensate, evaluate and, if necessary, replace the Company's independent auditors. Each member of the Committee is independent as determined by the Company's Board of Directors, based upon applicable laws and regulations and NASDAQ listing standards.

In fulfilling its oversight responsibilities with respect to the Company's financial statements, the Committee reviews and discusses with both management and the Company's independent auditors all annual and quarterly financial statements (including any required management certifications), and the Company's quarterly earnings announcements, prior to issuance. Management has the primary responsibility for preparing the financial statements and complying with the reporting process, including the systems of internal controls. The independent auditors are responsible for expressing an opinion on the conformity of audited financial statements with accounting principles generally accepted in the United States and for providing their judgments as to the quality, not just the acceptability, of the Company's accounting principles.

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During 2010, Company management advised the Audit Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles, and reviewed significant accounting and disclosure matters with the Audit Committee. The Audit Committee discussed with Ernst & Young LLP, the independent auditors, the matters required to be discussed with the Committee by Statement on Auditing Standards (SAS) No. 61, as amended. The Audit Committee also discussed with the independent auditors matters relating to their independence from management and the Company, including the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors' communications with the Committee concerning independence. The Audit Committee pre-approved all audit and non-audit fees paid to the independent auditors. As a result, the Audit Committee concluded that Ernst & Young LLP is independent from management and the Company.

The Audit Committee discussed with the Company's independent auditors and the Company's internal audit management the overall scope and plans for their audits. The Audit Committee meets with both the independent auditors and the Company's internal audit management to discuss the results of their examinations and their evaluations of the Company's internal controls. The Audit Committee also meets in separate executive sessions periodically with the Company's independent auditors, Director of Internal Audit, Chief Financial Officer and General Counsel, as well as in private sessions.

In reliance upon the reviews and discussions referred to above, the Audit Committee recommended to the Board the inclusion of the Company's audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 26, 2010.

    AUDIT COMMITTEE

 

 

Olivia F. Kirtley, Chairman
Alexander W. Smith
William M. Street

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.


ITEM 2, RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

The Audit Committee of the Board of Directors has reappointed Ernst & Young LLP, independent auditors, to audit the consolidated financial statements of the Company for the fiscal year ending December 25, 2011. Ernst & Young LLP has audited the Company's financial statements since 1991. Fees paid to Ernst & Young LLP by the Company for each of the last two fiscal years, in each of the following categories, were as follows:

 
  Fiscal Year Ended December 26, 2010   Fiscal Year Ended December 27, 2009  

Audit Fees

  $ 719,075   $ 710,125  

Audit-Related Fees

    13,382     18,292  

Tax Fees

    87,686     92,750  

All Other Fees

         
           

Total

  $ 820,143   $ 821,167  
           

Fees for audit services included fees associated with the annual audit of the Company and certain subsidiaries and the reviews of the Company's quarterly reports on Form 10-Q. Audit-related services were primarily related to the audit of a pension fund and letters issued concerning debt compliance. Tax fees included tax compliance and consultation services.

All audit-related and tax services for 2010 and 2009 were pre-approved by the Audit Committee, which concluded that the provision of those services by Ernst & Young LLP was compatible with the maintenance of the auditors' independence in the conduct of the auditing functions. The Audit Committee has adopted a policy that requires pre-approval of all services by the independent auditors. The policy also authorizes the Chairman of the Audit Committee to pre-approve non-audit services at or below a certain dollar threshold, provided that the Chairman promptly notifies the other members of the Audit Committee of the approved engagement. Individual engagements anticipated to exceed the dollar threshold must be separately approved.

Representatives of Ernst & Young LLP will be present at the Annual Meeting to make a statement if they desire to do so and to respond to questions by stockholders.

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Although stockholder ratification is not required, the appointment of Ernst & Young LLP is being submitted for ratification as a matter of good corporate practice with a view towards soliciting stockholders' opinions that the Audit Committee will take into consideration in future deliberations. If Ernst & Young LLP's selection is not ratified at the Annual Meeting of Stockholders, the Audit Committee will reconsider whether to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines such a change would be in the best interests of Papa John's and its stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY.


ITEM 3, APPROVAL OF THE COMPANY'S 2011 OMNIBUS INCENTIVE PLAN

This section provides a summary of the terms of the 2011 Omnibus Incentive Plan and the proposal to approve the plan.

The Board of Directors approved the 2011 Omnibus Incentive Plan on February 17, 2011 ("2011 Plan"), subject to approval from our stockholders at this meeting. We are asking our stockholders to approve the 2011 Plan as we believe that approval of the plan is essential to our continued success. The purpose of the 2011 Plan is to provide eligible officers, directors, key employees and other key individuals an incentive to contribute to the success of the Company and to operate and manage our business in a manner that will provide for the Company's long term growth and profitability and provide a means of obtaining, rewarding and retaining key personnel. In the judgment of the Board of Directors, awards under the 2011 Plan will be a valuable incentive and will serve to the ultimate benefit of stockholders by aligning more closely the interests of 2011 Plan participants with those of our stockholders.

If our stockholders approve the 2011 Plan, the number of shares of Common Stock reserved for issuance under the 2011 Omnibus Incentive Plan will be Two Million Seven Hundred Fifty Thousand (2,750,000), plus the number of shares of Common Stock currently available for issuance under the 2008 Omnibus Incentive Plan ("2008 Plan") as of the date of stockholder approval of the 2011 Plan. If our stockholders approve the 2011 Plan, no further awards will be made pursuant to the 2008 Plan, and all available shares under the 2008 Plan (2,397,451 as of December 26, 2010) will be transferred to the 2011 Plan and available for grant under the 2011 Plan, in addition to the 2,750,000 new shares authorized under the 2011 Plan.

On the Record Date, the closing price of our Common Stock was $29.00 per share.

Unless otherwise indicated, properly executed proxies will be voted in favor of the Proposal to approve the 2011 Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE 2011 OMNIBUS INCENTIVE PLAN.

Description of the Plan

A description of the provisions of the 2011 Plan is set forth below. This summary is qualified in its entirety by the detailed provisions of the 2011 Plan, a copy of which is attached as Annex A to this proxy statement.

Administration.    The 2011 Plan is administered by the Compensation Committee of the Board of Directors. The members of the Compensation Committee qualify as "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code, meet the requirements of Rule 16b-3 of the Exchange Act and comply with the independence requirements of the NASDAQ Stock Market. Subject to the terms of the plan, the Compensation Committee may select participants to receive awards, determine the types and amounts of awards and terms and conditions of awards, and interpret provisions of the plan. Members of the Compensation Committee serve at the pleasure of the Board of Directors. The Board of Directors may also appoint one or more separate committees, each composed of one or more directors who need not satisfy the independence requirements described above to administer the 2011 Plan with respect to employees or other service providers who are not officers or directors of the Company.

Common Stock Reserved for Issuance under the Plan.    The Common Stock issued or to be issued under the 2011 Plan consists of authorized but unissued shares or, to the extent permitted by applicable law, issued shares that have been reacquired by the Company. The 2011 Plan provides for a so-called "fungible share pool" pursuant to which awards of options and stock appreciation rights ("SARs") will be counted against the plan limit as one share for every one share subject to an option or SAR granted under the plan, and awards of all "full value" awards (all awards other than options and SARs) will be

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counted against the plan limit as 2.15 shares for every one share subject to such a full value award. If any shares covered by an award are not purchased or are forfeited, or if an award otherwise terminates without delivery of any Common Stock, then the number of shares of Common Stock counted against the aggregate number of shares available under the plan with respect to the award will, to the extent of any such forfeiture or termination, again be available for making awards under the 2011 Plan. The number of shares of Common Stock available for issuance under the 2011 Plan will not be increased by any shares tendered or withheld or award surrendered in connection with the purchase of shares of Common Stock upon exercise of an option or any shares of Common Stock deducted from an award payment in connection with the Company's tax withholding obligations.

Eligibility.    Awards may be made under the 2011 Plan to directors, or employees of or consultants to the Company or any of our affiliates, including any such employee who is an officer or director of us or of any affiliate, and to any other individual whose participation in the plan is determined to be in the best interests of the Company by the Board of Directors.

Amendment or Termination of the Plan.    The Board of Directors may terminate or amend the plan at any time and for any reason. The 2011 Plan shall terminate in any event seven years after the date of stockholder approval of the plan. Amendments will be submitted for stockholder approval to the extent required by the Internal Revenue Code or other applicable laws, rules or regulations.

Options.    The 2011 Plan permits the granting of options to purchase shares of Common Stock intended to qualify as incentive stock options under the Internal Revenue Code and stock options that do not qualify as incentive stock options.

Other Awards.    The Compensation Committee may also award:

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Effect of Certain Corporate Transactions.    Unless an applicable award agreement provides otherwise, certain change of control transactions involving us, such as a sale of the Company, will cause grantees of restricted stock, stock units, stock appreciation rights and options to be credited with an additional 12 months of service for purposes of vesting in such awards, unless the awards are continued or substituted for in connection with the change of control transaction.

Adjustments for Stock Dividends and Similar Events.    The Compensation Committee will make appropriate adjustments in outstanding awards and the number of shares available for issuance under the 2011 Plan, including the individual limitations on awards (described below), to reflect stock splits and other similar events.

Section 162(m) of the Internal Revenue Code.    Section 162(m) of the Internal Revenue Code limits publicly-held companies such as the Company to an annual deduction for federal income tax purposes of $1 million for compensation paid to their covered employees. However, performance-based compensation is excluded from this limitation. The 2011 Plan is designed to permit the Compensation Committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m).

To qualify as performance-based:

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In the case of compensation attributable to stock options, the performance goal requirement (summarized in (i) above) is deemed satisfied, and the certification requirement (summarized in (iv) above) is inapplicable, if the grant or award is made by the compensation committee; the plan under which the option is granted states the maximum number of shares with respect to which options may be granted during a specified period to an employee; and under the terms of the option, the amount of compensation is based solely on an increase in the value of the common stock after the date of grant.

Under the 2011 Plan, one or more of the following business criteria, on a consolidated basis, and/or with respect to specified subsidiaries or business units, where appropriate, are used exclusively by the Compensation Committee in establishing performance goals:

Business criteria may be measured on an absolute or relative basis and on a GAAP or non-GAAP basis.

Under the Internal Revenue Code, a director is an "outside director" of the Company if he or she is not a current employee of the Company; is not a former employee who receives compensation for prior services (other than under a tax-qualified retirement plan); has not been an officer of the Company; and does not receive, directly or indirectly (including amounts paid to an entity that employs the director or in which the director has at least a five percent ownership interest), remuneration from the Company in any capacity other than as a director.

The maximum number of shares of Common Stock subject to options or stock appreciation rights that can be granted under the 2011 Plan to any person is 350,000 per twelve month period, provided that in a grantee's year of hire the applicable limit is 500,000. The maximum number of shares of Common Stock that can be granted under the 2011 Plan to any person, other than pursuant to an option or stock appreciation right, is 175,000 per twelve month period, provided that in a grantee's year of hire the

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applicable limit is 250,000. The maximum amount that may be paid as an annual incentive award or other cash award in any twelve month period to any one person is $3,000,000 and the maximum amount that may be paid as a performance award or other cash award in respect of a performance period to any one person is $9,000,000.

Federal Income Tax Consequences

Incentive Stock Options.    The grant of an option will not be a taxable event for the grantee or for the Company. A grantee will not recognize taxable income upon exercise of an incentive stock option (except that the alternative minimum tax may apply), and any gain realized upon a disposition of our Common Stock received pursuant to the exercise of an incentive stock option will be taxed as long-term capital gain if the grantee holds the shares of Common Stock for at least two years after the date of grant and for one year after the date of exercise (the "holding period requirement"). We will not be entitled to any business expense deduction with respect to the exercise of an incentive stock option, except as discussed below.

For the exercise of an option to qualify for the foregoing tax treatment, the grantee generally must be our employee or an employee of our subsidiary from the date the option is granted through a date within three months before the date of exercise of the option.

If all of the foregoing requirements are met except the holding period requirement mentioned above, the grantee will recognize ordinary income upon the disposition of the Common Stock in an amount generally equal to the excess of the fair market value of the Common Stock at the time the option was exercised over the option exercise price (but not in excess of the gain realized on the sale). The balance of the realized gain, if any, will be capital gain. We will be allowed a business expense deduction to the extent the grantee recognizes ordinary income, subject to our compliance with Section 162(m) of the Internal Revenue Code and to certain reporting requirements.

Non-Qualified Options.    The grant of an option will not be a taxable event for the grantee or the Company. Upon exercising a non-qualified option, a grantee will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the Common Stock on the date of exercise. Upon a subsequent sale or exchange of shares acquired pursuant to the exercise of a non-qualified option, the grantee will have taxable capital gain or loss, measured by the difference between the amount realized on the disposition and the tax basis of the shares of Common Stock (generally, the amount paid for the shares plus the amount treated as ordinary income at the time the option was exercised).

If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

A grantee who has transferred a non-qualified stock option to a family member by gift will realize taxable income at the time the non-qualified stock option is exercised by the family member. The grantee will be subject to withholding of income and employment taxes at that time. The family member's tax basis in the shares of Common Stock will be the fair market value of the shares of Common Stock on the date the option is exercised. The transfer of vested non-qualified stock options will be treated as a completed gift for gift and estate tax purposes. Once the gift is completed, neither the transferred options nor the shares acquired on exercise of the transferred options will be includable in the grantee's estate for estate tax purposes.

In the event a grantee transfers a non-qualified stock option to his or her ex-spouse incident to the grantee's divorce, neither the grantee nor the ex-spouse will recognize any taxable income at the time of the transfer. In general, a transfer is made "incident to divorce" if the transfer occurs within one year after the marriage ends or if it is related to the end of the marriage (for example, if the transfer is made pursuant to a divorce order or settlement agreement). Upon the subsequent exercise of such option by the ex-spouse, the ex-spouse will recognize taxable income in an amount equal to the difference between the exercise price and the fair market value of the shares of common stock at the time of exercise. Any distribution to the ex-spouse as a result of the exercise of the option will be subject to employment and income tax withholding at this time.

Restricted Stock.    A grantee who is awarded restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award, provided that the shares of Common Stock are subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of forfeiture). However, the grantee may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the Common Stock on the date of the award (less the purchase price, if any), determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of

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the Common Stock on the date the restrictions lapse (less the purchase price, if any) will be treated as compensation income to the grantee and will be taxable in the year the restrictions lapse and dividends paid while the Common Stock is subject to restrictions will be subject to withholding taxes. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Stock Units.    There are no immediate tax consequences of receiving an award of stock units under the 2011 Plan. A grantee who is awarded stock units will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such grantee at the end of the restriction period or, if later, the payment date. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Dividend Equivalent Rights.    Participants who receive dividend equivalent rights will be required to recognize ordinary income in an amount distributed to the grantee pursuant to the award. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Stock Appreciation Rights.    There are no immediate tax consequences of receiving an award of stock appreciation rights under the 2011 Plan. Upon exercising a stock appreciation right, a grantee will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the Common Stock on the date of exercise. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Performance and Annual Incentive Awards.    The award of a performance or annual incentive award will have no federal income tax consequences for us or for the grantee. The payment of the award is taxable to a grantee as ordinary income. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Unrestricted Common Stock.    Participants who are awarded unrestricted common stock will be required to recognize ordinary income in an amount equal to the fair market value of the shares of common stock on the date of the award, reduced by the amount, if any, paid for such shares. If we comply with applicable reporting requirements and with the restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.

Section 280G.    To the extent payments which are contingent on a change in control are determined to exceed certain Code limitations, they may be subject to a 20% nondeductible excise tax and the Company's deduction with respect to the associated compensation expense may be disallowed in whole or in part.

Section 409A.    The Company intends for awards granted under the plan to comply with Section 409A of the Code. To the extent a grantee would be subject to the additional 20% excise tax imposed on certain nonqualified deferred compensation plans as a result of a provision of an award under the plan, the provision will be deemed amended to the minimum extent necessary to avoid application of the 20% excise tax.

New Plan Benefits

On the Record Date, there were approximately nine (9) executive officers, one hundred eight (108) other employees and seven (7) non-employee directors of the Company and its subsidiaries who are participants in equity grants under the 2008 Plan.

Because future awards of stock options, restricted stock or other equity awards under the 2011 Plan will be made at the discretion of the Compensation Committee, no data can be provided regarding the benefits or amounts that will be received by any participant or groups of participants if the 2011 Plan is approved.

Our 2011 MIP awards and all annual long term incentive awards made in February 2011 were pursuant to the 2008 Plan.

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Equity Compensation Plan Information

The following table provides information as of December 26, 2010 regarding the number of shares of the Company's Common Stock that may be issued under the Company's equity compensation plans.

Plan Category
  (a) Number of
securities to be
issued upon
exercise of
outstanding options,
warrants and rights
  (b) Weighted
average exercise
price of outstanding
options, warrants
and rights
  (c) Number of
securities remaining
available for future
issuance under
equity
compensation
plans, excluding
securities reflected
in column (a)
 

Equity compensation plans approved by security holders

    1,931,004 (1) $ 26.80     2,397,451  

Equity compensation plans not approved by security holders

    91,031 (2)        
               

Total

    2,022,035 (3) $ 26.80     2,397,451 (3)
               

(1)
The weighted average remaining contractual term for all outstanding stock options is 2.73 years at fiscal year end.

(2)
Of the 91,031 shares in the table above, 64,202 represent shares of common stock issuable to current and former employees pursuant to deferrals of cash salary and bonus under the deferred compensation plan. The remaining 26,829 shares of common stock represent shares issuable to current non-employee directors of the Company pursuant to deferral of director meeting fees and cash retainer; there are no Company matching contributions for non-employee directors participating in the deferred compensation plan. All of such shares are nondilutive and included in the calculation of basic earnings per common share in our Form 10-K for the fiscal year ended December 26, 2010.

(3)
Column (a) of the table above does not include 284,000 shares of unvested restricted stock; such shares are included in outstanding shares as of the Record Date. Upon approval of the 2011 Plan, all available shares under the 2008 plan will be transferred to the 2011 Plan and available for grant under the new plan, in addition to the 2,750,000 new shares authorized under the 2011 Plan.


ITEM 4, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION

We are providing our stockholders an opportunity to indicate whether they support our named executive officer compensation as described in this proxy statement. This advisory vote, commonly referred to as "say on pay," is not intended to address any specific item of compensation, but instead relates to the Compensation Discussion and Analysis, the tabular disclosures regarding named executive officer compensation, and the narrative disclosure accompanying the tabular presentation. These disclosures allow you to view the trends in our executive compensation program and the application of our compensation philosophies for the years presented.

We actively monitor our executive compensation practices in light of the industry in which we operate and the marketplace for talent in which we compete. We are focused on compensating our executive officers fairly and in a manner that incentivizes high levels of performance while providing the Company tools to attract and retain the best talent.

As discussed in the Compensation Discussion and Analysis section of this proxy statement, we believe that our executive compensation program properly links executive compensation to Company performance and aligns the interests of our executive officers with those of our stockholders. For example:

Accordingly, the Board unanimously recommends that stockholders vote in favor of the following resolution:

"Resolved, that the stockholders approve the compensation of the Company's named executive officers as disclosed in this proxy statement pursuant to the rules of the Securities and Exchange

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Commission, including the Compensation Discussion and Analysis, the compensation tables and the related footnotes and narrative disclosures."

Although this vote is advisory and is not binding on the Company, the Compensation Committee of the Board will take into account the outcome of the vote when considering future executive compensation decisions.

THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" THIS PROPOSAL.


ITEM 5, ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION

We are seeking an advisory vote on the frequency with which say on pay votes, similar to Item 4 in this proxy statement, should be held in the future. This advisory vote is commonly referred to as "say on frequency." Stockholders may vote to indicate their preference for conducting a say on pay vote:

Stockholders may also abstain from voting on this proposal. Our Board has determined that holding a say on pay vote every year is the most appropriate alternative for the Company. In recommending an annual advisory vote on executive compensation, our Board considered that an annual vote will allow our stockholders to provide us with timely feedback on our compensation policies and practices as disclosed in the proxy statement every year, which will allow us to consider taking action, if appropriate, on a real-time basis.

Because this proposal is advisory, it will not be binding on the Company, and the Board and the Compensation Committee may decide to hold an advisory vote on executive compensation more or less frequently than the option selected by our stockholders. However, the Board values our stockholders' opinions, and will consider the outcome of the vote when determining the frequency of future advisory votes on executive compensation. Please note that although the Board is making a recommendation with respect to this proposal, you are only being asked to vote on the choices specified above, and not whether you agree or disagree with the Board's recommendation.

THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION "EVERY YEAR".


OTHER BUSINESS

The Board of Directors is not aware of any matters to be presented at the Annual Meeting other than those set forth in the Notice of Annual Meeting and routine matters incident to the conduct of the meeting. If any other matters should properly come before the Annual Meeting or any adjournment or postponement thereof, the persons named in the proxy, or their substitutes, intend to vote on such matters in accordance with their best judgment.


STOCKHOLDER PROPOSALS

In order for a stockholder proposal to be considered for inclusion in the Company's Proxy Statement for next year's Annual Meeting, the written proposal must be received by the Company no later than November 22, 2011. Such proposals must comply with SEC regulations regarding the inclusion of stockholder proposals in Company-sponsored proxy materials. Similarly, in order for a stockholder proposal to be introduced at next year's Annual Meeting, written notice must be received by the Company not less than 60 nor more than 90 days prior to the scheduled date of the meeting. All stockholder proposals must comply with certain requirements set forth in the Company's Certificate of Incorporation. A copy of the Certificate of Incorporation may be obtained by written request to the Secretary of the Company at the Company's principal offices at P.O. Box 99900, Louisville, Kentucky 40269-0900.


ANNUAL REPORT

The Company's Annual Report to Stockholders for the fiscal year ended December 26, 2010 accompanies this Proxy Statement.

    By Order of the Board of Directors

Louisville, Kentucky
March 21, 2011

 

CLARA M. PASSAFIUME
Corporate Counsel and Secretary

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ANNEX A


PAPA JOHN'S INTERNATIONAL, INC.
2011 OMNIBUS INCENTIVE PLAN



TABLE OF CONTENTS

 
   
   
   
  Page  
1.   PURPOSE     1  
2.   DEFINITIONS     1  
3.   ADMINISTRATION OF THE PLAN     4  
      3.1.   Committee.      4  
      3.2.   Board.      5  
      3.3.   Terms of Awards.      5  
      3.4.   No Repricing.      6  
      3.5.   Deferral Arrangement.      6  
      3.6.   No Liability.      6  
      3.7.   Stock Issuance; Book-Entry.      6  
4.   STOCK SUBJECT TO THE PLAN     7  
      4.1.   Number of Shares of Stock Available for Awards.      7  
      4.2.   Adjustments in Authorized Shares of Stock.      7  
      4.3.   Share Usage.      7  
5.   EFFECTIVE DATE, DURATION AND AMENDMENTS     7  
      5.1.   Effective Date.      7  
      5.2.   Term.      8  
      5.3.   Amendment and Termination.      8  
6.   AWARD ELIGIBILITY AND LIMITATIONS     8  
      6.1.   Service Providers and Other Persons.      8  
      6.2.   Limitation on Shares of Stock Subject to Awards and Cash Awards.      8  
      6.3.   Stand-Alone, Additional, Tandem and Substitute Awards.      8  
7.   AWARD AGREEMENT     9  
8.   TERMS AND CONDITIONS OF OPTIONS     9  
      8.1.   Option Price.      9  
      8.2.   Vesting.      9  
      8.3.   Term.      9  
      8.4.   Termination of Service.      9  
      8.5.   Limitations on Exercise of Option.      9  
      8.6.   Method of Exercise.      10  
      8.7.   Rights of Holders of Options.      10  
      8.8.   Delivery of Stock.      10  
      8.9.   Transferability of Options.      10  
      8.10.   Family Transfers.      10  
      8.11.   Limitations on Incentive Stock Options.      10  
      8.12.   Notice of Disqualifying Disposition.      10  
9.   TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS     11  
      9.1.   Right to Payment and Grant Price.      11  
      9.2.   Other Terms.      11  
      9.3.   Term.      11  
      9.4.   Transferability of SARS.      11  
      9.5.   Family Transfers.      11  
10.   TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS     11  
      10.1.   Grant of Restricted Stock or Stock Units.      11  
      10.2.   Restrictions.      12  
      10.3.   Restricted Stock Certificates; Book-Entry Registration.      12  

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  Page  
      10.4.   Rights of Holders of Restricted Stock.      12  
      10.5.   Rights of Holders of Stock Units.      12  
            10.5.1.   Voting and Dividend Rights.      12  
            10.5.2.   Creditor's Rights.      13  
      10.6.   Termination of Service.      13  
      10.7.   Purchase of Restricted Stock and Shares of Stock Subject to Stock Units.      13  
      10.8.   Delivery of Shares of Stock.      13  
11.   TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS     13  
12.   FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK     14  
      12.1.   General Rule.      14  
      12.2.   Surrender of Shares of Stock.      14  
      12.3.   Cashless Exercise.      14  
      12.4.   Other Forms of Payment.      14  
13.   TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS     14  
      13.1.   Dividend Equivalent Rights.      14  
      13.2.   Termination of Service.      15  
14.   TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS     15  
      14.1.   Grant of Performance Awards and Annual Incentive Awards.      15  
      14.2.   Value of Performance Awards and Annual Incentive Awards.      15  
      14.3.   Earning of Performance Awards and Annual Incentive Awards.      15  
      14.4.   Form and Timing of Payment of Performance Awards and Annual Incentive Awards.      15  
      14.5.   Performance Conditions.      15  
      14.6.   Performance Awards or Annual Incentive Awards Granted to Designated Covered Employees.      15  
            14.6.1.   Performance Goals Generally.      15  
            14.6.2.   Timing For Establishing Performance Goals.      16  
            14.6.3.   Settlement of Awards; Other Terms.      16  
            14.6.4.   Performance Measures.      16  
            14.6.5.   Evaluation of Performance.      17  
            14.6.6.   Adjustment of Performance-Based Compensation.      17  
            14.6.7.   Committee Discretion.      17  
      14.7.   Status of Awards Under Code Section 162(m).      17  
15.   PARACHUTE LIMITATIONS     17  
16.   REQUIREMENTS OF LAW     18  
      16.1.   General.      18  
      16.2.   Rule 16b-3.      18  
17.   EFFECT OF CHANGES IN CAPITALIZATION     19  
      17.1.   Changes in Stock.      19  
      17.2.   Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Corporate Transaction.      19  
      17.3.   Corporate Transaction in which Awards are not Assumed.      19  
      17.4.   Corporate Transaction in which Awards are Assumed.      20  
      17.5.   Adjustments     21  
      17.6.   No Limitations on Company.      21  
18.   GENERAL PROVISIONS     21  
      18.1.   Disclaimer of Rights.      21  
      18.2.   Nonexclusivity of the Plan.      21  
      18.3.   Withholding Taxes.      21  
      18.4.   Captions.      22  
      18.5.   Other Provisions.      22  
      18.6.   Number and Gender.      22  
      18.7.   Severability.      22  
      18.8.   Governing Law     22  
      18.9.   Section 409A of the Code.      22  

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PAPA JOHN'S INTERNATIONAL, INC.

2011 OMNIBUS INCENTIVE PLAN

Papa John's International, Inc., a Delaware corporation (the "Company"), sets forth herein the terms of its 2011 Omnibus Incentive Plan (the "Plan"), as follows:

1.     PURPOSE

The Plan is intended to (a) provide eligible persons with an incentive to contribute to the success of the Company and to operate and manage the Company's business in a manner that will provide for the Company's long-term growth and profitability, and (b) provide a means of obtaining, rewarding and retaining key personnel. To this end, the Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, stock units (including deferred stock units), unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward the holders of such awards for the achievement of annual or long-term performance goals in accordance with the terms of the Plan. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

2.     DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

2.1    "Affiliate" means any company or other trade or business that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including any Subsidiary. For purposes of grants of Options or Stock Appreciation Rights, an entity may not be considered an Affiliate unless the Company holds a "controlling interest" in such entity within the meaning of Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that (a) except as specified in clause (b) below, an interest of "at least 50 percent" shall be used instead of an interest of "at least 80 percent" in each case where "at least 80 percent" appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i) and (b) where the grant of Options or Stock Appreciation Rights is based upon a legitimate business criterion, an interest of "at least 20 percent" shall be used instead of an interest of "at least 80 percent" in each case where "at least 80 percent" appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).

2.2    "Annual Incentive Award" means an Award, denominated in cash, made subject to the attainment of performance goals (as provided in Section 14) over a Performance Period of up to one (1) year, which shall be the Company's fiscal year, unless otherwise specified by the Committee.

2.3    "Applicable Laws" means the legal requirements relating to the Plan and the Awards under (a) applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government orders of any jurisdiction applicable to Awards granted to residents therein and (b) the rules of any stock exchange on which the Stock is listed.

2.4    "Award" means a grant under the Plan of an Option, a Stock Appreciation Right, Restricted Stock, a Stock Unit, Unrestricted Stock, a Dividend Equivalent Right, a Performance Award, an Other Equity-Based Award, an Annual Incentive Award or cash.

2.5    "Award Agreement" means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.

2.6    "Benefit Arrangement" shall have the meaning set forth in Section 15.

2.7    "Board" means the Board of Directors of the Company.

2.8    "Cause" means, as determined by the Board and unless otherwise provided in an applicable agreement between the Grantee and the Company or an Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

2.9    "Code" means the Internal Revenue Code of 1986, as amended, as now in effect or as hereafter amended, and any successor thereto.

2.10    "Committee" means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section 3.1 (or, if no Committee has been so designated, the entire Board itself).

2.11    "Company" means Papa John's International, Inc., a Delaware corporation.


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2.12    "Corporate Transaction" means (i) the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) which results in any person or entity owning 50% or more of the combined voting power of all classes of stock of the Company.

2.13    "Covered Employee" means a Grantee who is a "covered employee" within the meaning of Code Section 162(m)(3).

2.14    "Disability" means, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee's Service, the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

2.15    "Dividend Equivalent Right" means a right, granted to a Grantee pursuant to Section 13, to receive cash, Stock, other Awards or other property equal in value to dividends or other periodic payments paid or made with respect to a specified number of shares of Stock.

2.16    "Effective Date" means April     , 2011, the date on which the Plan was approved by the shareholders.

2.17    "Exchange Act" means the Securities Exchange Act of 1934, as amended, as now in effect or as hereafter amended.

2.18    "Fair Market Value" means the fair market value of a share of Stock for purposes of the Plan, which shall be determined as follows:

Notwithstanding this Section 2.18 or Section 18.3, for purposes of determining taxable income and the amount of the related tax withholding obligation pursuant to Section 18.3, for any shares of Stock subject to an Award that are sold by or on behalf of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date).

2.19    "Family Member" means, with respect to any Grantee as of any date of determination, (a) a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of such Grantee, (b) any person sharing such Grantee's household (other than a tenant or employee), (c) a trust in which any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more than fifty percent (50%) of the beneficial interest, (d) a foundation in which any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) control the management of assets, and (e) any other entity in which one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more than fifty percent (50%) of the voting interests.

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2.20    "Grant Date" means, as determined by the Committee, the latest to occur of (a) the date as of which the Company completes the corporate action constituting the Award, or (b) such date subsequent to the date specified in clause (a) as may be specified by the Committee.

2.21    "Grantee" means a person who receives or holds an Award under the Plan.

2.22    "Incentive Stock Option" means an "incentive stock option" within the meaning of Code Section 422, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

2.23    "Non-qualified Stock Option" means an Option that is not an Incentive Stock Option.

2.24    "Option" means an option to purchase one or more shares of Stock pursuant to the Plan.

2.25    "Option Price" means the exercise price for each share of Stock subject to an Option.

2.26    "Other Agreement" shall have the meaning set forth in Section 15.

2.27    "Outside Director" means a member of the Board who is not an officer or employee of the Company or any Subsidiary.

2.28    "Other Equity-Based Award" means an Award representing a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, other than an Option, a Stock Appreciation Right, Restricted Stock, a Stock Unit, Unrestricted Stock, a Dividend Equivalent Right, a Performance Award or an Annual Incentive Award.

2.29    "Performance Award" means an Award made subject to the attainment of performance goals (as provided in Section 14) over a Performance Period of up to ten (10) years.

2.30    "Performance-Based Compensation" means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain qualified performance-based compensation paid" to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for "qualified performance-based compensation" within the meaning of and pursuant to Code Section 162(m) does not constitute performance-based compensation for other purposes, including the purposes of Code Section 409A.

2.31    "Performance Measures" means measures as specified in Section 14 on which the performance goals under Performance Awards and Annual Incentive Awards are based and which are approved by the Company's shareholders pursuant to the Plan in order to qualify such Performance Awards and Annual Incentive Awards as Performance-Based Compensation.

2.32    "Performance Period" means the period of time during which the performance goals under Performance Awards and Annual Incentive Awards must be met in order to determine the degree of payout and/or vesting with respect to any such Performance Awards or Annual Incentive Awards.

2.33    "Plan" means this Papa John's International, Inc. 2011 Omnibus Incentive Plan, as amended from time to time.

2.34    "Prior Plan" means the Papa John's International, Inc. 2008 Omnibus Incentive Plan.

2.35    "Purchase Price" means the purchase price, if any, for each share of Stock subject to an Award of Restricted Stock, Stock Units or Unrestricted Stock.

2.36    "Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act, or any successor provision.

2.37    "Restricted Stock" means shares of Stock awarded to a Grantee pursuant to Section 10.

2.38    "SAR Exercise Price" means the per share exercise price of a SAR granted to a Grantee pursuant to Section 9.

2.39    "Securities Act" means the Securities Act of 1933, as amended, as now in effect or as hereafter amended.

2.40    "Service" means service of a Grantee as a Service Provider to the Company or any Affiliate. Unless otherwise provided in the applicable Award Agreement, a Grantee's change in position or duties with the Company or any Affiliate shall not result in interrupted or terminated Service, so long as the Grantee continues to be a Service Provider to the Company or any Affiliate. Any determination by the Committee whether a termination of Service shall have occurred for purposes of the Plan shall be final, binding and conclusive.

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2.41    "Service Provider" means, as of any date of determination, an employee, officer, or director of the Company or an Affiliate, or a consultant (who is a natural person) or adviser (who is a natural person) of the Company or any Affiliate who provides services to the Company or any Affiliate.

2.42    "Stock" means the common stock, par value $0.01 per share, of the Company, or any security for which the shares of Stock may be exchanged or into which the shares of Stock may be converted.

2.43    "Stock Appreciation Right" or "SAR" means a right granted to a Grantee pursuant to Section 9.

2.44    "Stock Unit" means a bookkeeping entry representing the equivalent of one share of Stock awarded to a Grantee pursuant to Section 10.

2.45    "Subsidiary" means any corporation (other than the Company) or non-corporate entity with respect to which the Company and Subsidiaries collectively own, directly or indirectly, fifty percent (50%) or more of the total combined voting power of all classes of stock, membership interests or other ownership interests of any class or kind ordinarily having the power to vote for the directors, managers or other voting members of the governing body of such corporation or non-corporate entity. In addition, any other entity may be designated by the Committee as a Subsidiary, provided that (a) such entity could be considered as a subsidiary according to generally accepted accounting principles in the United States of America and (b) in the case of an Award of Options or Stock Appreciation Rights, such Award would be considered to be granted in respect of "service recipient stock" under Code Section 409A.

2.46    "Substitute Award" means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted under a compensatory plan by a business entity acquired or to be acquired by the Company or an Affiliate or with which the Company or an Affiliate has combined or will combine.

2.47    "Ten Percent Shareholder" means a natural person who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding voting securities of the Company, the Company's parent (if any) or any of the Company's Subsidiaries. In determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

2.48    "Unrestricted Stock" shall have the meaning set forth in Section 11.

Unless the context otherwise requires, all references in the Plan to "including" shall mean "including without limitation."

References in the Plan to any Code Section shall be deemed to include, as applicable, regulations promulgated under such Code Section.

3.     ADMINISTRATION OF THE PLAN

3.1. Committee.

The Committee shall administer the Plan and shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's articles of incorporation and bylaws and Applicable Laws. Without limiting the generality of the foregoing, the Committee shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan which the Committee deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions and determinations shall be made by (a) the affirmative vote of a majority of the members of the Committee present at a meeting, or (b) the unanimous consent of the members of the Committee executed in writing in accordance with the Company's articles of incorporation and bylaws and Applicable Laws. Unless otherwise expressly determined by the Board, the interpretation and construction by the Committee of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive whether or not expressly provided for in any provision of the Plan, such Award or such Award Agreement.

In the event that the Plan, any Award or any Award Agreement provides for any action to be taken by or any determination to be made by the Board, such action may be taken or such determination may be made by the Committee or another committee constituted in accordance with Section 3.1 if the Board has delegated the power and authority to do so to the Committee or such other committee pursuant to this Section 3.1. Unless otherwise expressly determined by the Board, any such action or determination by the Committee or other committee shall be final, binding and conclusive whether or not expressly provided for in any provision of the Plan, such Award or such Award Agreement.

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Except as provided in Section 3.2 and except as the Board may otherwise determine, the Committee shall consist of two or more Outside Directors of the Company who: (a) qualify as "outside directors" within the meaning of Section 162(m) of the Code and who (b) meet such other requirements as may be established from time to time by the Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act and who (c) comply with the independence requirements of the stock exchange on which the Common Stock is listed.

The Board may also appoint one or more committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, who may administer the Plan with respect to employees or other Service Providers who are not "executive officers" as defined in Rule 3b-7 under the Exchange Act or directors of the Company, may grant Awards under the Plan to such employees or other Service Providers, and may determine all terms of such Awards, subject to the requirements of Code Section 162(m), Rule 16b-3 under the Exchange Act and, for so long as the Stock is listed thereon, the rules of the NASDAQ Stock Market. Any reference to "Committee" in the Plan, any Award or any Award Agreement shall be deemed, as applicable, to refer to any committee appointed by the Board pursuant to this Section 3.1.

3.2. Board.

The Board from time to time may exercise all of the powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 and other applicable provisions, as the Board shall determine, consistent with the Company's articles of incorporation and bylaws and Applicable Laws.

3.3. Terms of Awards.

Subject to the other terms and conditions of the Plan, the Committee shall have full and final authority to:

The Committee shall have the right, in its discretion, to make Awards in substitution or exchange for any award granted under another compensatory plan of the Company, any Affiliate, or any business entity acquired or to be acquired by the Company or an Affiliate or with which the Company or an Affiliate has combined or will combine, except as such practice is prohibited by Section 3.4 herein. The Committee may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on account of actions taken by such Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, agreement prohibi