Starboard delivered a letter to Papa John's International regarding Governance agreement

Key summary: In Feb 2019, Papa John's got $200M investment from Starboard, appointing Jeffrey C. Smith as Chairman. In Oct 2018, Legion Partners raised concerns and Schnatter requested changes to a "poison pill".

Market Cap: $2.9 billion| Papa John's International, Inc. operates and franchises pizza delivery and carryout restaurants under the Papa John's trademark in the United States and internationally.

SUMMARY

Starboard Value

• On February 4, 2019, the company announced that it has entered into a securities purchase agreement with Starboard Value LP pursuant to which Starboard is making a $200 million strategic investment in the Company. In connection with the investment, the Board expanded to include two new independent directors, including Jeffrey C. Smith, CEO of Starboard, who was appointed Chairman of the Papa John’s Board, and Anthony M. Sanfilippo, former Chairman and CEO of Pinnacle Entertainment, Inc. and Papa John’s President and CEO Steve Ritchie has been appointed to the Board

• On January 13, 2020, Starboard, in accordance with the terms of the Governance Agreement dated February 4, 2019, delivered a letter to the company electing to exercise the Continuation Option under the Governance Agreement, thereby continuing the Standstill Period for all purposes of the Governance Agreement until the earlier of (x) the date that is 15 business days prior to the deadline for the submission of stockholder nominations for the  2021 Annual Meeting of Stockholders pursuant to the Charter or (y) the date that is 100 days prior to the first anniversary of the 2020 Annual Meeting. As a result of Starboard’s exercise of the Continuation Option, the Governance Agreement provides that, subject to certain conditions, including the absence of a Resignation Event, the Board shall take all necessary actions to nominate the Appointed Directors for election as directors at the 2020 Annual Meeting and recommend, support and solicit proxies for the election of the Appointed Directors at the 2020 Annual Meeting in the same manner as it recommends, supports, and solicits proxies for the election of all other directors. Source

• On January 4, 2021, Starboard, in accordance with the terms of the Governance Agreement, delivered a letter to the company electing to again exercise the continuation option under the Governance Agreement, thereby continuing the standstill period for all purposes of the Governance Agreement until the earlier of (x) the date that is 15 business days prior to the deadline for the submission of stockholder nominations for the company’s 2022 annual meeting of stockholders pursuant to the Charter or (y) the date that is 100 days prior to the first anniversary of the 2021 Annual Meeting. As a result of Starboard’s exercise of the continuation option, the Governance Agreement provides that, subject to certain conditions, including the absence of a resignation event, the board shall take all necessary actions to nominate the appointed directors for election as directors at the 2021 annual meeting and recommend, support and solicit proxies for the election of the appointed directors at the 2021 annual meeting in the same manner as it recommends, supports, and solicits proxies for the election of all other directors. Source

Legion Partners

• On October 1, 2018, Legion Partners disclosed 5.46% and stated its belief that the current market price does not reflect the company's intrinsic value.  Based on preliminary interactions with the company's Special Committee, Legion Partners is encouraged by the actions taken by the Special Committee to begin to move the Company past recent controversies to meaningfully improve shareholder value. Legion Partners also believes multiple potential paths to significantly higher valuations exist for the company through strategic partnerships or improving operations as a stand-alone company. Source

• On October 18, 2018, John H. Schnatter (30.9%), founder and director of the company, sent a letter to the Board asking to revise a "poison pill" provision that prevents him from working with potential investors. According to CNBC, Schnatter has asked to the board to remove a so-called wolf-pack provision placed inside the "poison pill" the board adopted in July to restrict Schnatter from acquiring more stake.

• Note: On January 1, 2018, Mr. Schnatter ceased serving as the company’s CEO. On July 12, 2018, and July 16, 2018, Mr. Schnatter resigned as Chairman of the Board (though he remained as a director of the company) and the company purportedly terminated Mr. Schnatter’s services under the Founders Agreement, dated August 9, 2007, between the company and Mr. Schnatter. Source

• On December 7, 2018, Mr. Schnatter stated that he has engaged a financial advisor on November 30, 2018 to assist him in reviewing the financial prospects of the Company and in assessing alternatives for increasing shareholder value. Source

• On February 4, 2019, Mr. Schnatter stated that on February 2, 2019, promptly after learning about the proposed Starboard Transaction, Mr. Schnatter sent a non-binding proposal to the Board stating that Mr. Schnatter was willing to make an investment in the company of up to $250 million on terms that were substantially similar to, but superior to, the Starboard Transaction, including that (a) Mr. Schnatter offered a lower dividend rate, thereby reducing costs to the company, and (b) Mr. Schnatter offered to limit the voting rights of the newly issued shares. The Special Committee of the company, however, rejected the Schnatter Proposal. In light of the Starboard Transaction, Mr. Schnatter is withdrawing the Schnatter Proposal. Mr. Schnatter is also evaluating the legal remedies available to him in connection with the company’s decision to enter into the Starboard Transaction. Source

• On February 18, 2019, Mr. Schnatter filed a complaint against the company and certain of its directors seeking (i) invalidation of the Rights Plan, (ii) invalidation of certain voting commitments contained in the governance agreement, dated February 4, 2019, between the company and Starboard Value, and (iii) additional related relief. Source

• On March 4, 2019, Mr. Schnatter (31.08%) and the company entered into an agreement and pursuant to it, the company agreed to, (i) amended the rights agreement, dated July 22, 2018, to remove the “acting in concert” provisions in the Rights Plan, (ii) amend the Governance Agreement, dated February 4, 2019, between the company and certain funds affiliated with, or managed by, Starboard Value LP, to delete the requirement that the Starboard Entities vote in favor of the nominees selected by the Board and generally in accordance with the recommendations of the Board on most other matters, and (iii) produce the books and records as ordered to be produced by the Court pursuant to the action Mr. Schnatter brought under Section 220 of the General Corporation Law of the State of Delaware. Mr. Schnatter agreed to dismiss the action that he brought against the Company and various directors in the Court of Chancery. Also under the terms of the Agreement, Mr. Schnatter and the company have agreed to identify a mutually acceptable independent director to serve on the Board (the “Founder Independent Designee”). Mr. Schnatter has also agreed to withdraw his notice to the company nominating himself for election to the Board at the 2019 annual meeting of stockholders, which was delivered to the company on March 1, 2019, and to step down from the Board on the earlier of the date the Founder Independent Designee is appointed to the Board or at the 2019 Annual Meeting.

• On March 30, 2020, Mr. Schnatter reduced his stake to 3.9%.