Papa Murphy's Holdings, Inc. (Form: S-1/A, Received: 04/04/2014 17:29:32)

Document

Responsible Party

Status

11.1(a) - Form of Assignment

11.1(b) - Form of Notice of Borrowing

11.1 (c) - Form of Revolving Note

11.1 (e) - Form of Term Note

As filed with the Securities and Exchange Commission on April 4, 2014

Registration No. 333-194488

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM S-1

REGISTRATION STATEMENT UNDER THE

SECURITIES ACT OF 1933

Papa Murphy’s Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)

5812

(Primary Standard Industrial

Classification Code Number)

27-2349094

(IRS Employer

Identification No.)

8000 NE Parkway Drive, Suite 350

Vancouver, WA 98662

(360) 260-7272

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Papa Murphy’s Holdings, Inc.

8000 NE Parkway Drive, Suite 350

Vancouver, WA 98662

(360) 260-7272

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Alexander D. Lynch, Esq.

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone: (212) 310-8000

Facsimile: (212) 310-8007

Victoria T. Blackwell, Esq.

Papa Murphy’s Holdings, Inc.

8000 NE Parkway Drive, Suite 350

Vancouver, WA 98662

Telephone: (360) 260-7272

Facsimile: (360) 397-6665

Marc D. Jaffe, Esq.

Ian D. Schuman, Esq.

Latham & Watkins LLP

885 Third Avenue

New York, New York 10022

Telephone: (212) 906-1200

Facsimile: (212) 751-4864

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, or the Securities Act, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

(Do not check if a smaller reporting company)

Smaller reporting company ¨

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion Dated April 4, 2014

PRELIMINARY PROSPECTUS

Shares

LOGO

Papa Murphy’s Holdings, Inc.

Common Stock

This is an initial public offering of shares of common stock of Papa Murphy’s Holdings, Inc. We are offering shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. We expect our initial public offering price will be between $ and $ per share. We have applied to list our common stock on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “FRSH”.

We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Prospectus Summary—Implication of Being an “Emerging Growth Company”.”

Investing in our common stock involves a high degree of risk. See “ Risk Factors ” beginning on page 21.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.


	PER SHARE	TOTAL
Public Offering Price	$	$
Discounts and Commissions ⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$

⁽¹⁾

We refer you to “Underwriting” beginning on page 138 of this prospectus for additional information regarding total underwriter compensation.

Delivery of the shares of common stock is expected to be made on or about , 2014. The selling stockholders identified in this prospectus have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase an additional shares of our common stock to cover over-allotments. We will not receive any proceeds from the sale of shares by the selling stockholders.


Jefferies		Baird		Wells Fargo Securities


William Blair		Raymond James		Stephens Inc.

Prospectus dated , 2014

TABLE OF CONTENTS


Prospectus Summary			1

Risk Factors			21

Forward-Looking Statements			47

Use of Proceeds			48

Dividend Policy			49

Capitalization			50

Dilution			51

Unaudited Pro Forma Condensed Combined Financial Statements			53

Selected Consolidated Financial and Other Data			57

Management’s Discussion and Analysis of Financial Condition and Results of Operations			62

Business			83

Management			104

Executive and Director Compensation			109

Certain Relationships and Related Person Transactions			118

Principal and Selling Stockholders			123

Description of Material Indebtedness			125

Description of Capital Stock			128

Shares Eligible for Future Sale			132

Material U.S. Federal Income and Estate Tax Considerations for Non-U.S. Holders			134

Underwriting			138

Legal Matters			146

Experts			146

Where You Can Find More Information			146

Index to Financial Statements			F-1

You should rely only on the information contained in this prospectus or in any free-writing prospectus we may authorize to be delivered or made available to you. Neither we, the selling stockholders, nor the underwriters (or any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we, the selling stockholders, nor the underwriters (or any of our or their respective affiliates) take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the selling stockholders and the underwriters (or any of our or their respective affiliates), are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is only accurate as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

TRADEMARKS AND TRADE NAMES

We own or have the rights to use various trademarks, service marks and trade names referred to in this prospectus, including, among others, Papa Murphy’s, Papa Murphy’s Take ‘N’ Bake Pizza, deLite and their respective logos. Solely for convenience, we refer to trademarks, service marks and trade names in this prospectus without the TM, SM and ^® symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks, service marks and trade names. Other trademarks, trade names or service marks appearing in this prospectus are the property of their respective owners. As indicated in this prospectus, we have included market data and industry forecasts that were obtained from industry publications and other sources.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We prepare our consolidated financial statements in U.S. dollars and in conformity with generally accepted accounting principles in the United States (“GAAP”). Certain amounts included in this prospectus and our audited consolidated financial statements as of and for fiscal years ended December 30, 2013, December 31, 2012 and January 2, 2012 have been rounded for ease of presentation. Percentage amounts included in this prospectus have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this prospectus may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements. Certain other amounts that appear in this prospectus may not sum due to rounding.

On May 4, 2010, affiliates of Lee Equity Partners, LLC (“Lee Equity”) acquired a majority of the capital stock of PMI Holdings Inc., our predecessor. The periods on or prior to May 4, 2010 are referred to as “Predecessor.” Papa Murphy’s Holdings, Inc. was incorporated on March 29, 2010 by affiliates of Lee Equity in connection with the acquisition, and all periods including and after such date are referred to as “Successor.” From March 29, 2010 to May 4, 2010, the date of the acquisition, Papa Murphy’s Holdings, Inc. had no activities other than the incurrence of transaction costs related to the acquisition.

MARKET AND INDUSTRY INFORMATION

Market data used throughout this prospectus is based on management’s knowledge of the industry and the good faith estimates of management. We also relied, to the extent available, upon management’s review of independent industry surveys and publications and other publicly available information prepared by a number of sources, including Zagat , Technomic , Nation’s Restaurant News , NPD Crest , Mintel , Empathica and Forbes . All of the market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although we believe that these sources are reliable, neither we nor the underwriters can guarantee the accuracy or completeness of this information, and neither we nor the underwriters have independently verified this information. While we believe the estimated market position, market opportunity and market size information included in this prospectus is reliable, such information, which in part is derived from management’s estimates and beliefs, is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates prepared by independent parties and by us.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the risks of investing in our common stock discussed under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus, before making an investment decision. Unless the context requires otherwise, references to “Papa Murphy’s,” “our company,” “we,” “us” and “our” refer to Papa Murphy’s Holdings, Inc. and its direct and indirect subsidiaries.

This prospectus contains consolidated financial statements of Papa Murphy’s Holdings, Inc. To match our operating cycle, we use a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal years 2013, 2012 and 2011 were 52-week periods ending on December 30, 2013 (“fiscal year 2013”), December 31, 2012 (“fiscal year 2012”) and January 2, 2012 (“fiscal year 2011”), respectively.

Our Company

Create. Take. Bake.

Papa Murphy’s is a high-growth franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States. Take ‘N’ Bake pizza restaurants sell uncooked pizzas that customers bake at home. We were founded in 1981 and have grown our footprint to a total of 1,418 franchise and company-owned stores (collectively “system-wide stores”) as of December 30, 2013, more than 20 times the stores of our nearest Take ‘N’ Bake pizza restaurant competitor. The Papa Murphy’s experience is different from traditional pizza restaurants. Our customers:

CREATE their fresh, customized pizza with high-quality ingredients in our stores or online;

TAKE their fresh pizza home; and

BAKE their pizza fresh in their ovens, at their convenience, for a home-cooked meal served hot.

We have been repeatedly rated the #1 pizza chain in the United States by multiple third-party consumer studies. In 2013, 2012 and 2011, we were rated the #1 pizza chain overall by Nation’s Restaurant New s , and in 2012, 2011 and 2010, we were rated the #1 pizza chain by Zagat . Compared to broader restaurant chain competition, we were also recognized by Technomic in 2013 as the #1 chain overall among all restaurants and all food categories, by Nation’s Restaurant New s in 2013 and 2012 as one of the Top 5 Overall limited service restaurant chains across all food categories, and by Zagat in 2012 as one of the Top 5 Overall fast food chains across all food categories. For fiscal years 2013 and 2012 we had total revenues of $80.5 million and $66.9 million, respectively, net loss of $(2.6) million and $(2.1) million, respectively, and Adjusted EBITDA of $24.4 million and $22.1 million, respectively. For a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net loss, see “—Summary Historical Consolidated Financial and other Data.”

We believe our leading consumer ratings are due to the broad appeal of our concept. However, we actively target mothers and families looking to solve the “dinnertime dilemma” of providing their family with a high-quality, home-cooked meal, without investing significant time or money. We believe that our target customer values the focus on freshness and quality that differentiates the Papa Murphy’s pizza-making process:

We make our dough fresh in each store, starting with flour, water and yeast;

We grate our cheese daily from blocks of 100% whole-milk mozzarella cheese;

We slice fresh, never-frozen vegetables by hand;

We feature specialty, premium ingredients like artichoke hearts, sun-dried tomatoes, feta cheese and fresh spinach;

We use only high-quality meats with no added fillers; and

We use no trans-fats.

Additionally, our guidelines provide that all pizza dough must be used to make pizzas within 72 hours of preparation, and we recommend our customers bake their pizza within 24 hours of preparation, resulting in a fresh pizza for our customers.

Our store model is also different from many other restaurant models. Because our stores do not have pizza ovens, venting hoods, freezers or dining areas and average 1,400 square feet in size, they require a lower capital investment than traditional pizza, limited service or fast casual restaurants. We also have lower operating costs than traditional pizza, limited service or fast casual restaurants because our stores do not require the hiring of delivery drivers or wait staff. Further, the simplicity of our operations and our shorter opening hours (typically 11:00 a.m. to 9:00 p.m.) are attractive to potential and current franchise owners and allow them to focus on making fresh, high-quality food for our customers.

As of December 30, 2013, our store base was 95.1% franchised, offering us strategic and financial benefits. Our franchise business model enables us to focus our company resources on menu innovation, marketing, franchise owner training and operations support and other initiatives to drive the overall success of our brand. Our franchise business model also allows us to grow our store base and brand awareness with limited corporate capital investment. As a result, our business model is designed to provide us with high operating margins, low capital expenditures, negative working capital and high operating cash flows.

As of December 30, 2013, we had 1,418 system-wide stores, consisting of 1,349 franchise and 69 company-owned stores, located in 38 states, Canada and the United Arab Emirates. We have increased our total store count 68.6% from 2004 to 2013. We currently have a strong new store pipeline and our franchise owners opened 98 stores in 2013, which represents a 27.3% increase in franchise store openings over the prior fiscal year. We have also experienced steady increases in our system-wide sales. From 2004 to 2013, our system-wide sales increased from $385.9 million to $785.6 million.

Total Stores at End of Period

LOGO

System-wide Sales

LOGO

We have experienced strong comparable store sales, revenue and Adjusted EBITDA growth. Our stores have generated positive comparable store sales growth in 35 out of the last 40 quarters through the end of fiscal year 2013, averaging approximately 4% throughout the last ten years. From fiscal year 2009 to fiscal year 2013, our total revenues increased from $54.1 million to $80.5 million, and Adjusted EBITDA increased from $16.5 million to $24.4 million. In fiscal year 2009, we had net income of $4.5 million compared to a net loss of $(2.6) million in fiscal year 2013.

Our Industry

Take ‘N’ Bake pizza is a fast-growing segment of the limited-service restaurant (“LSR”) pizza category. We are the market leader in the Take ‘N’ Bake segment with more than 20 times the number of stores of our next closest Take ‘N’ Bake competitor in the United States. In addition, we are the only national Take ‘N’ Bake LSR pizza chain. We are the fifth largest pizza chain in the United States as measured by system-wide sales and total number of stores. Mintel estimates that the pizza restaurant market grew from $32 billion in 2007 to $38 billion in 2012 and will grow to $44 billion in 2017. We believe the pizza restaurant market is an attractive category due to its size and growth, as well as its fragmented competitive landscape. The top five pizza chains accounted for only 40.8% of category sales in 2012, which provides the potential to take share from smaller pizza chains and independent pizza operators.

Our Competitive Strengths

Fresh Made. Fresh Baked. Love at 425°.

We believe we benefit from the following competitive strengths:

High-Quality Pizza at an Attractive Value. We were founded on the following core values—Great Quality, Great Value, Great Customer Service—and we strive to deliver on these values every day. We believe the manner in which we deliver these values to our customers provides a strong foundation for growth.

Great Quality. We have continually focused on quality over the past 33 years, and we believe customers can taste the difference in our food. Unlike some of our national pizza chain competitors, we do not use frozen dough or pre-shredded, pre-packaged or frozen cheese. Our dough is made from scratch daily, and our pizzas are made with high-quality ingredients, including: (i) 100% whole-milk block mozzarella cheese grated in-store; (ii) a variety of sauces including traditional red sauce made from California tomatoes; (iii) fresh, never-frozen vegetables that are chopped by hand daily; (iv) high-quality meat with no added fillers; and (v) specialty toppings such as artichoke hearts, feta cheese, Italian salami, zucchini, sun-dried tomatoes and fresh spinach. Our menu offers customers a variety of original, thin crust and stuffed pizzas as well as the ability to create a customized pizza from a broad selection of crust, sauce and topping combinations. We were ranked #1 in Food Quality, Freshness of Food and Taste and Flavor of Food in numerous customer surveys, including Nation’s Restaurant News in 2013, 2012 and 2011 , Technomic in 2013 and NPD CREST in 2013, 2012, 2011 and 2010.

Great Value. We offer a high-quality pizza at a value price point. We were ranked #1 in the pizza value category by Nation’s Restaurant News in 2013, 2012 and 2011, and we were ranked the #1 limited service restaurant chain for value by Technomic in 2013. In 2013, our average transaction size was approximately $16, but because our pizzas serve more than one person, our average check per person was $5.39. We believe this is one of the lowest average checks per person among national pizza chains. Additionally, the Take ‘N’ Bake experience eliminates the need for tipping and delivery fees.

Great Customer Service. We offer our customers a consistent and convenient experience where they are able to create their customized pizza. We train our store crews to greet each customer, to promote the latest new product offers or promotions and to assist each customer in choosing the combination of fresh made pizzas or side items that complete their meal. Our pizzas are made fresh, and our customers can follow their pizza as it is made to order right in front of them. While we do offer pizzas with suggested pre-selected toppings, many pizzas sold in our stores are customized. We provide a fast and friendly in-store experience, with an average in-store service time of approximately four minutes. We were ranked #1 among all pizza chains in Fast and Efficient Service, Cleanliness, Likelihood to Return and Overall Customer Experience by numerous customer surveys including Nation’s Restaurant News in 2013, 2012 and 2011 , Technomic in 2013 , NPD CREST in 2013, 2012, 2011 and 2010 and Empathica in 2013.

Top-Rated, Award-Winning Pizza Chain. We have consistently been rated consumers’ #1 pizza chain and ranked among the top restaurant chains overall in the United States in third-party consumer studies.

Zagat National Restaurant Chain Survey

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#1 Rated Pizza Chain in 2012, 2011 and 2010

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Top 5 U.S. Fast Food Chain (all fast food categories, less than 5,000 locations) in 2012 (#2 Top Service and Top Food ), 2011 (#3 Top Service and Top Food ) and 2010 (#4 Overall )

Technomic 2013 Consumer Restaurant Brand Metrics Study

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#1 Chain Overall , among all restaurants and food categories surveyed

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#1 Pizza/Italian Chain

Nation’s Restaurant News Consumer Picks Survey

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#1 Pizza/Italian Chain in 2013, 2012 and 2011 (including the #1 ranking in 2013 and 2012 in 10 out of 11 categories such as Food Quality, Value, Service, Likely to Recommend and Likely to Return)

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Top Overall Limited Services Restaurant Chain in 2013 (#3), 2012 (#2) and 2011 (#1)

NPD CREST Customer Survey

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#1 Pizza Chain in 2013, 2012, 2011 and 2010 in (i) Taste and Flavor of Food; (ii) Quality of Food; (iii) Freshness of Food; (iv) Fast and Efficient Service; (v) Likelihood to Recommend; and (vi) Overall Customer Experience

Empathica 2013 Quick Service Restaurant Benchmark Study

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#1 Pizza/Pasta Chain in (i) Overall Customer Delight; (ii) Overall Customer Satisfaction; (iii) Good Value for What Customers Paid; (iv) Customer Likelihood to Revisit; and (v) Customer Likelihood to Recommend

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Top Carryout Pizza Chain

Loyal Customer Base. We have developed a loyal and diverse customer base that values (i) our ability to create a fresh, customized pizza; (ii) our high-quality ingredients; (iii) our fast and friendly in-store service; (iv) our bake-at-home convenience; and (v) our attractive price points. We believe our leading consumer ratings and success across a national footprint can be attributed to the broad appeal of our Take ‘N’ Bake concept, which resonates with both families and single adults and attracts both female and male customers across all ages, demographics and income levels. While we believe our concept has broad appeal, we actively target mothers and families looking to solve the “dinnertime dilemma” of providing a fresh, home-cooked meal for their family without investing significant time or money. We believe this core target customer is more loyal and seeks higher-quality pizza. As shown in research conducted by Nation’s Restaurant News , our customers are significantly more likely to recommend Papa Murphy’s as well as more likely to return to Papa Murphy’s stores than our competitors.


2013 Likely To Recommend		2013 Likely To Return

Franchised Business Model Provides Platform for Growth. As of December 30, 2013, our store base was 95.1% franchised, allowing us to focus on brand differentiation and product innovation while our franchise owners are responsible for day-to-day management with operational guidance from us. The growth of our brand requires limited financial investment by us, given that new store development and substantially all of our store advertising costs are funded by franchise owners. Consequently, our business model is designed to generate significant operating cash flows and an attractive return on assets. As a franchised model, we generate a significant portion of our revenues from ongoing royalties based on a percentage of net sales at franchise stores and fees paid to us by franchise owners opening new stores and renewing expiring franchise agreements, which collectively represented 51.2% of our total revenues for 2013. These royalties and fees provide us with consistent and diverse cash flow. Further, our franchise model minimizes our direct exposure to changes in commodity and other operating costs that may impact our company-owned stores, which represented 48.6% of our total revenues in 2013.

We strive to be the partner of choice for both individual family owner/operators and sophisticated franchise organizations because we understand that our franchise owners ultimately drive the success of our business. Additionally, our concept provides franchise owners access to financing sources, including loans guaranteed by the Small Business Administration (“SBA”).

Strategic Company-Owned Store Ownership and Execution. Strategic investment in our company-owned store base allows us to take a leadership role in executing brand initiatives, testing new products, training new employees and new franchise owners, and implementing operational improvements, all of which are focused on increasing revenue and profitability. We believe our direct involvement in store-level operations better aligns our interests with our franchise owners’ and demonstrates our commitment to franchise owner success. We believe that success in our company-owned stores allows us to demonstrate the potential of our brand and the impact of our growth initiatives to franchise owners. Additionally, we believe our company-owned stores serve as an important training ground for the development of future leaders within our organization.

Efficient Operating Model Generates Attractive Store-Level Economics. We believe our Take ‘N’ Bake model is efficient and offers franchise owners operating advantages that differentiate us from other restaurant concepts. Our stores (i) do not require ovens, freezers or other expensive cooking equipment because our customers bake their customized pizzas at home; (ii) do not offer delivery, thereby reducing operational complexity for franchise owners and their employees; (iii) maintain shorter opening hours (typically 11:00 a.m. to 9:00 p.m.) that are attractive to franchise owners and their employees; (iv) require fewer employees on duty during each shift as compared to most other franchise restaurant concepts, thereby resulting in lower labor costs; and (v) do not require dining areas, thereby resulting in lower occupancy and operating costs. We believe our simple, low cost operations create the opportunity for higher margins and attractive returns for franchise owners. In 2011, we were named to Forbes’ list of Top Franchises for the Money, which we believe highlights the attractive investment opportunity we offer franchise owners.

As of December 30, 2013, a majority of our franchise owners owned one store, and approximately 75% owned one or two stores. We believe many of these owners operate and manage their stores themselves. For fiscal year 2012, our domestic franchise stores that had been open for at least one full year generated average weekly sales (“AWS”) of approximately $11,100 and generated a store-level EBITDA margin in excess of 15% after royalties and advertising but before the impact of manager/owner salary. Additionally, our stores have a low breakeven AWS, which we estimate to be less than half the system average. Our operating model requires a low initial capital expenditure on average of approximately $200,000 per store. In the first full fiscal year after a store has been open, we believe that our franchise owners can earn, on average, a cash-on-cash return of approximately 20% after royalties and advertising but before the impact of manager/owner salary. We believe the combination of our efficient operating model, low initial cash investment and attractive store economics has resulted in our ability to generate consistent new store growth from both new and existing franchise owners, as evidenced by over 570 net new store openings since 2004.

Sophisticated New Product Testing and Selection Procedures . We have invested in our new product innovation team and have implemented a rigorous product development process that we believe enables us to focus on products that have the most potential to increase new customer visits and drive sales growth. This process engages franchise owners in the early stages of product development to help identify demand and evaluate operational complexity. We conduct qualitative and quantitative review of new product ideas with customers. Based on these assessments, we test a limited set of products meeting certain criteria in a small set of stores and ultimately expand our market testing to a larger store set. We use an analytical toolset to evaluate market test performance, and we consider a system-wide roll-out of products that demonstrate positive results.

Experienced Management Team. Our strategic vision and culture are driven by our executive management team under the leadership of Mr. Ken Calwell, our Chief Executive Officer, Mr. Mark Hutchens, our Chief Financial Officer and Mr. John Barr, our Chairman. Mr. Calwell is an industry veteran with more than 28 years of relevant restaurant and food experience, including roles as the Chief Marketing Officer and Chief Food Innovation Officer at Wendy’s International, Chief Marketing Officer and Executive Vice President of Research Development at Domino’s Pizza and Senior Director of Marketing at Pizza Hut. Mr. Hutchens has nearly 25 years of progressive financial leadership experience, with an extensive history in the restaurant and retail sector, including roles as the Vice President, Chief Financial Officer – International at Bloomin’ Brands Inc., Senior Vice President, Controller and Chief Accounting Officer at Office Depot, Inc. and Assistant Treasurer - Corporate Finance at YUM! Brands, Inc. Our executive management team has over 140 years of combined operational experience at restaurant chains, franchisors and large corporations including Domino’s Pizza, Donatos, McDonald’s, Pizza Hut, Potbelly Sandwich Works, Starbucks, Wendy’s, Penske and Quaker State. Our executive management team has a deep understanding of our concept, averaging approximately seven years with our Company. Mr. Calwell and Mr. Barr have built a team with significant talent in new product development, brand marketing, franchise development and operations, which we believe positions us well for continued long-term growth.

Our Growth Strategies

Our growth strategy has four key components: (i) opening new stores in existing and new markets; (ii) increasing system-wide comparable store sales; (iii) supporting operational improvement of our system-wide stores; and (iv) improving our profitability by leveraging our scale and infrastructure. We believe that the successful implementation of these components will support our growth and profitability.

Open Stores in Existing and New Markets. As of December 30, 2013, we had 1,396 stores in the United States, and we believe there are significant development opportunities remaining in the United States and select international markets. We estimate our total store potential in the United States is approximately 4,500 stores, including approximately 2,500 new stores in our existing markets.

We believe our significant unit growth potential, attractive store economics and the simplicity of our store operations will continue to attract new franchise owners and encourage existing franchise owners to expand their current footprint. We expect the majority of our expansion will result from new franchise store openings. Our franchise owners opened 98 stores in 2013. We expect our franchise owners to open at least 105 stores in 2014. We also plan to strategically expand our company-owned store base in select markets. Our new store strategy consists of the following:

Accelerate Growth in Existing Markets. We believe there is a significant near-term growth opportunity in our existing markets. We intend to focus on further developing our core markets in the West and Midwest, while expanding our store density in existing but less-penetrated developing markets in the South and East. Historically, new stores in existing markets tend to generate higher average unit volumes as markets become more penetrated. As a result, we expect to focus the majority of our near-term new store development in existing markets.

Pursue Growth in New Markets. We have historically proven our ability to expand into new markets as evidenced by the success of our stores in numerous markets across the United States. As we expand our footprint into new markets, we will continue to leverage our brand awareness and well-developed store support infrastructure to enhance new store performance and increase store density in these markets. Additionally, we are in the early stages of international expansion, which we believe represents a long-term growth opportunity. We currently have a 10-year master franchise agreement in Canada, with 18 stores open as of December 30, 2013, as well as a recent 20-year master franchise agreement to open up to 100 franchise stores in the Middle East, with four stores open as of December 30, 2013.

Supporting Operational Improvement of Our System-wide Stores. We believe that operational proficiency at our franchise and company-owned stores increases customer satisfaction and store-level profitability and is an integral element of our business. We use technology, scoring methods and other programs to enhance operational performance.

Significant Technology Implementation . We and our franchise owners have made a meaningful investment in point-of-sale technology with over 800 stores having installed the system as of December 30, 2013. We believe that point-of-sale is the foundational investment for improving store-level sales and profitability through increased speed of service, improved food cost management and better cash management. We also have initiated testing an online ordering platform that integrates with the point-of-sale system to drive sales growth and to improve customer service. We believe these investments position our system well for future implementation of consumer engagement technologies.

Operational Performance Tracking and Standards. We believe that store-level execution is critical to delivering a great customer experience. To improve our operational standards we established a set of metrics for tracking operational excellence and customer service. The program assesses stores on key measures including speed of service, cleanliness, customer satisfaction, food cost management and transaction-building. This program provides a means to identify opportunities for continual improvement at the store-level, and our operations support team works with franchise owners and their crews to leverage best practices against areas for improvement. Since we began implementing these procedures over the past two years, we have observed improved scores across the system as well as a correlation between operational improvement and sales growth.

Targeted Programs to Improve Store Profitability. We implement targeted programs designed to improve store profitability, accelerate development in certain markets or assist underperforming stores or markets, among others. For example, these programs may direct incremental marketing dollars to certain markets to help drive awareness, trial and repeat visits as markets grow toward media efficiency.

Increase System-wide Comparable Store Sales. We intend to increase comparable store sales by attracting new customers, converting first-time customers into repeat and loyal users and increasing average transaction sizes. While the short-term benefit of increasing comparable store sales is an increase in franchise royalties and company store revenues, it also provides the significant long-term benefit of improved franchise owner profitability, which we believe will contribute to future store growth.

Attract New Customers. We will continue to invest in our brand to further grow customer awareness, build customer loyalty and educate the marketplace on the benefits of Take ‘N’ Bake pizza. As our franchise store base continues to grow and we further penetrate our markets, we will be able to use increased marketing funds to expand our brand recognition through a combination of traditional print and television advertising and through social media.

points ranging from our FAVES line, generally marketed for $5 per pizza, to our Stuffed line of pizzas, generally marketed for $15 per pizza. Our FAVES line of pizzas consists of three simple pizza classics at attractive price points. We began testing the FAVES line of pizzas in November 2012 and rolled out nationally in December 2013. We believe the introduction of this option has helped increase transactions and comparable store sales growth. Our Fresh Pan Pizza is a new product at a higher price point that features a fresh, thicker, buttery crust that attracts new customers who prefer a thicker pan-style crust. We began testing the Fresh Pan Pizza in October 2013 and rolled out nationally in February 2014. For a premium price, we also offer gourmet toppings not typically available at large pizza chains such as artichoke hearts, sun-dried tomatoes, feta cheese and fresh spinach. We believe this balanced approach to menu innovation attracts a broader base of customers, drives new customer trial and increases brand loyalty.

Increase Customer Frequency. We focus on converting first-time users into repeat customers and providing loyal customers with reasons to use our brand more frequently. We believe the high quality of our ingredients, our customizable menu and the opportunity for families to provide a home-cooked meal keep customers dedicated to our brand.

We believe that providing a fast and friendly in-store experience drives customer frequency. Our Take ‘N’ Bake concept allows our employees to focus on providing personal service to every customer rather than rushing customer interactions or prioritizing incoming phone delivery orders. We also recently introduced online ordering, which will provide an additional convenience to our customers. In tests in approximately 300 stores in 2013, our online channel resulted in increases in customer frequency and average transaction size. We are also in the early stages of testing a store remodel program, which we believe will enhance our customer experience and drive customer frequency.

In addition, in the past we have made media investments to drive repeat visits with a focus on limited time only product offers and promotions. Recent offers and promotions such as our Taco Grande Pizza and Greek Pepperoni Pizza have generated strong customer interest, which we believe resulted in increases in transactions, the average transaction size and customer frequency.

Increase Transaction Size. Over the past year, we have focused our training and support teams on improving up-sell strategies to drive incremental revenue per transaction. Papa Murphy’s features both large, 14” pizzas that serve two to three people and family size, 16” pizzas that serve four to six people. Our store crews are trained to upsell customers from the large to the family size—approximately 30% more pizza for an incremental charge of approximately $2, which we believe is a great value for the customer. We also present in-store messaging of “meal deals” where a customer can purchase a pizza with either a side item and two liter beverage or two side items for a bundle discount.

We are also leveraging our new product innovation capabilities to drive higher revenue per transaction. For example, our Fresh Pan Pizza is marketed at a price above our regular menu items, demonstrating the potential for increasing our average transaction size. We believe we have other pricing opportunities for gourmet products already found on our menu and plan to thoughtfully test opportunities to re-position these products to better align with customer value perceptions. We are also leveraging our supplier networks to help us expand our line of sides, salads and desserts.

Improve Profitability and Leverage Our Infrastructure. Through opening stores in existing and new markets and increasing system-wide comparable store sales, we believe we will increase our revenues and Adjusted EBITDA. With 1,396 stores across the United States and 548 domestic franchise owners as of December 30, 2013, we believe we have an established infrastructure to support future growth. We plan to continue to invest strategically in this infrastructure. Our teams located across the country provide support to our franchise owners and company-owned stores in operations, store technology, training, marketing, new store development and other areas. Therefore, as we continue to grow our store base and increase sales, we believe we will be able to realize certain benefits from economies of scale.

Recent Developments

Project Pie Investment

In December 2013, we purchased preferred convertible units of Project Pie, LLC (“Project Pie”), a fast casual custom-pizza restaurant chain with one store located in San Diego, California and one located in Las Vegas, Nevada as of December 31, 2013, for an aggregate purchase price of $2.0 million. In March 2014, we made an additional $500,000 investment in Project Pie for 97 preferred convertible units. These investments represent approximately 30.3% of all issued and outstanding Project Pie common units on a fully converted basis. We retained certain rights and obligations in connection with our investment in Project Pie. For additional information, see “Management’s Discuss and Analysis of Financial Condition and Results of Operations—Project Pie” and “Certain Relationships and Related Person Transactions—Project Pie.”

Reorganization Transactions

Prior to the completion of this offering, we intend to effect certain reorganization transactions consisting of (i) the automatic conversion of all of our outstanding Series A Preferred Stock and Series B Preferred Stock (together, the “Preferred Shares”) to shares of common stock; (ii) a 1 for stock split of our common stock; and (iii) the amendment and restatement of our certificate of incorporation. We refer to these transactions collectively as the “Reorganization Transactions.” Unless otherwise indicated, all information in this prospectus assumes the completion of our Reorganization Transactions in preparation of this offering. Except for pro forma data and as otherwise indicated, financial data does not give effect to the automatic conversion of our Preferred Shares for common stock in connection with this offering.

Our Private Equity Sponsor

Lee Equity is a middle-market private equity investment firm managing more than $1 billion of equity capital. Lee Equity invests in a variety of industries including consumer/retail, business services, distribution/logistics, financial services, healthcare services and media. Immediately prior to this offering, Lee Equity and its affiliates owned approximately 65% of our outstanding capital stock. Immediately following the consummation of this offering, Lee Equity will own approximately % of our outstanding capital stock, or % if the underwriters’ option to purchase additional shares from the selling stockholders is fully exercised. Lee Equity may acquire or hold interests in businesses that compete directly with us, or may pursue acquisition opportunities that are complementary to our business, making such acquisitions unavailable to us. In addition, upon completion of this offering, a majority of the directors serving on our board will have been designated by Lee Equity and under the terms of a new stockholder’s agreement, Lee Equity will have the right to designate two directors to our board as long as it owns 20% or more of the issued and outstanding shares of our common stock and the right to designate one director to our board for as long as it owns 10% or more of our issued and outstanding common stock. Our amended and restated certificate of incorporation will contain provisions renouncing any interest or expectancy held by our directors affiliated with Lee Equity in certain corporate opportunities. In addition, so long as Lee Equity owns 25% or more of the outstanding shares of our common stock, under a new stockholder’s agreement (as described herein), certain actions by us, including among others, certain change of control transactions, issuances of equity securities, the incurrence of significant indebtedness, declaration or payment of non-pro rata dividends, significant investments in or acquisitions or dispositions of assets, adoption of any new equity-based incentive plan, any material increase in the salary of our Chief Executive Officer, certain amendments to our organizational documents, any material change to our business, or any change to the number of directors serving on our board will require Lee Equity’s prior written approval. See “Risk Factors – Risks Related to Our Company and Our Ownership Structure – Lee Equity may acquire interests and positions that could present potential conflicts with our and our stockholders’ interests,” “Risk Factors—Risks Related to Our Company and Our Ownership Structure—Lee Equity will continue to have significant influence over us after this offering, which could limit your ability to influence the outcome of key transactions, including change of control,” “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—Existing Stockholders’ Agreement and Registration

Rights Provisions” and “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—New Stockholder’s Agreement.”

Implication of Being an “Emerging Growth Company”

As a company with less than $1.0 billion in revenues during its last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other regulatory requirements for up to five years that are otherwise applicable generally to public companies. These provisions include, among other matters:

a requirement to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;

exemption from the auditor attestation requirement on the effectiveness of our system of internal control over financial reporting;

exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

an exemption from the requirement to seek non-binding advisory votes on executive compensation and golden parachute arrangements; and

reduced disclosure about executive compensation arrangements.

We will remain an emerging growth company for five years unless, prior to that time, we have more than $1.0 billion in annual revenues, have a market value for our common stock held by non-affiliates of more than $700 million as of June 30 of the year a determination is made whether we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or issue more than $1.0 billion of non-convertible debt over a three-year period. We have availed ourselves of the reduced reporting obligations and executive compensation disclosure in this prospectus, and expect to continue to avail ourselves of the reduced reporting obligations available to emerging growth companies in future filings. In addition, an emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we plan to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

As a result of our decision to avail ourselves of certain provisions of the JOBS Act, the information that we provide may be different than what you may receive from other public companies in which you hold an equity interest. In addition, it is possible that some investors will find our common stock less attractive as a result of our elections, which may cause a less active trading market for our common stock and more volatility in our stock price.

Corporate Information

We are a Delaware corporation and were incorporated in March 2010. Our principal executive office is located at 8000 NE Parkway Drive, Suite 350, Vancouver, WA 98662. Our telephone number at our principal executive office is (360) 260-7272. Our corporate website is www.papamurphys.com . The information on our corporate website is not part of, and is not incorporated by reference into, this prospectus.

Risks Associated With our Business

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our common stock. If any of these risks actually occur, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the principal risks that we face.

the highly competitive nature of the limited service restaurant pizza category and restaurant sector overall;

changes in consumer preferences, consumption habits and perceptions as well as changes in regulations;

our dependence on our relationship with our franchise owners and the success of their existing and new stores;

our ability to increase revenues by opening new domestic and international franchise and company-owned stores on a timely basis;

our ability to identify, recruit and contract with a sufficient number of qualified franchise owners;

our ability to manage the planned rapid increase in the number of our stores;

opening new stores in existing markets may negatively affect sales at existing stores, and new stores may not be profitable;

risks associated with expansion into international markets;

damage to our reputation or the Papa Murphy’s brand;

our dependence on key members of our management team; and

increased costs of being a public company.

THE OFFERING

Common stock offered by us

shares.

Option to purchase additional shares of common stock from the selling stockholders

The underwriters may also purchase up to a maximum of additional shares of common stock from the selling stockholders named in this prospectus to cover over-allotments. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Common stock to be outstanding after this offering

shares.

Use of proceeds

We estimate that the net proceeds to us from our sale of shares of common stock in this offering will be approximately $ million, after deducting estimated underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus. We intend to use these net proceeds to repay $ million in aggregate principal amount of indebtedness under our new senior secured credit facilities, to pay a termination fee associated with our advisory services and monitoring agreement with Lee Equity and to use the remainder for general corporate purposes. If the underwriters exercise their option to purchase additional shares of our common stock from the selling stockholders, which include entities affiliated with members of our Board of Directors (the “Board”), and certain of our executive officers, we will not receive any proceeds from such sale. See “Use of Proceeds.”

Dividend Policy

We do not anticipate paying any dividends on our common stock in the foreseeable future; however, we may change this policy in the future. See “Dividend Policy.”

Directed share program

At our request, the underwriters have reserved for sale, at the initial public offering price, up to common shares offered by this prospectus for sale to some of our directors, officers, employees, and persons with whom we have a relationship. If these persons purchase reserved common shares, this will reduce the number of common shares available for sale to the public. Any reserved common shares that are not so purchased will be offered by the underwriters to the public on the same terms as the other common shares offered by this prospectus.

Risk factors

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 21 of this prospectus for a discussion of factors you should carefully consider before investing in our common stock.

Proposed NASDAQ trading symbol

“FRSH”.

Unless otherwise indicated, the number of shares of our common stock to be outstanding after this offering is based on shares of common stock outstanding as of , 2014, and:

excludes shares of our common stock issuable upon the exercise of stock options at a weighted average exercise price of $ per share;

excludes an aggregate of shares of common stock that will initially be available for future equity awards under our 2014 Equity Incentive Plan (the “2014 Plan”);

includes shares of outstanding restricted common stock;

gives effect to the automatic conversion of our Preferred Shares to shares of common stock and a 1 for stock split of our common stock prior to the completion of this offering;

gives effect to our amended and restated certificate of incorporation and our amended and restated bylaws, which will be in effect prior to the consummation of this offering; and

assumes no exercise of the underwriters’ over-allotment option to purchase up to additional shares from the selling stockholders.

Unless otherwise indicated, this prospectus assumes an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth our summary historical consolidated financial and other data for the periods ending on and as of the dates indicated. We derived the consolidated statements of operations data for the fiscal years 2013, 2012 and 2011 and the consolidated balance sheet data as of December 30, 2013 from our audited consolidated financial statements and related notes thereto included elsewhere in this prospectus.

The following tables set forth certain financial data on a pro forma basis reflecting adjustments set forth in the notes below. The pro forma adjustments are based upon currently available information and certain assumptions that are factually supportable and that we believe are reasonable under the circumstances. The pro forma financial information does not purport to present what our actual consolidated results of operations would have been had the transactions occurred on the dates indicated, nor are they necessarily indicative of results that may be expected for any future period.

Our historical results are not necessarily indicative of future results of operations. You should read the information set forth below together with “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.


	FISCAL YEAR									PRO FORMA ⁽¹⁾
	2013			2012			2011			2013
	(dollars in thousands, except share, per share and selected operating data, unless otherwise noted)
Consolidated statement of operations data:
Revenues
Franchise royalties	$	36,897		$	35,113		$	33,687		$	36,561
Franchise and development fees		4,330			2,826			2,398			4,330
Company-owned store sales		39,148			28,813			15,619			45,861
Lease income		120			164			218			120

Total revenues		80,495			66,916			51,922			86,872
Costs and expenses
Store operating costs:
Cost of food and packaging		14,700			10,741			6,088			17,114
Compensation and benefits		10,687			8,160			4,710			12,106
Advertising		3,820			2,711			1,514			4,316
Occupancy		2,365			1,980			1,102			2,765
Other store operating costs		3,988			2,961			1,722			4,250
Selling, general and administrative		24,180			21,225			20,833			24,446
Depreciation and amortization		6,973			6,187			5,798			7,786
Loss on disposal or impairment of property and equipment		847			193			263			847

Total costs and expenses		67,560			54,158			42,030			73,630

Operating income		12,935			12,758			9,892			13,242

Interest expense		10,523			10,462			10,410			12,389
Interest income		(94	)		(94	)		(183	)		(94	)
Loss on early retirement of debt		4,029			5,138			—			4,029
Other expense, net		44			248			41			44

Loss before income taxes		(1,567	)		(2,996	)		(376	)		(3,126	)
Provision (benefit) for income taxes		1,024			(882	)		230			440

Net loss		(2,591	)		(2,114	)		(606	)		(3,566	)
Net loss attributable to noncontrolling interests		19			—			—			19

Net loss attributable to Papa Murphy’s	$	(2,572	)	$	(2,114	)	$	(606	)	$	(3,547	)


	FISCAL YEAR									PRO FORMA ⁽¹⁾
	2013			2012			2011			2013
	(dollars in thousands, except share, per share and selected operating data, unless otherwise noted)
Loss per common share:
Basic	$	(5.29	)	$	(5.28	)	$	(4.52	)	$	(5.86	)
Diluted		(5.29	)		(5.28	)		(4.52	)		(5.86	)
Weighted average of common shares outstanding:
Basic		1,700,360			1,623,171			1,591,262			1,700,360
Diluted		1,700,360			1,623,171			1,591,262			1,700,360
Pro forma as adjusted net income per common share ⁽²⁾ :
Basic
Diluted
Pro forma as adjusted weighted average common shares outstanding ⁽²⁾ :
Basic
Diluted

Consolidated statement of cash flows:
Cash flows from operating activities	$	9,874		$	9,356		$	11,804
Cash flows from investing activities		(15,249	)		(5,904	)		(16,062	)
Cash flows from financing activities		6,613			(5,864	)		(2,563	)

Other Financial Data:
Adjusted EBITDA ⁽³⁾	$	24,421		$	22,126		$	19,740		$	25,541
Net working capital ⁽⁴⁾		(1,588	)		(5,003	)		(1,973	)
Capital expenditures ⁽⁵⁾		3,037			1,343			2,193

Selected Operating Data:
Number of stores at end of period
Domestic franchise		1,327			1,270			1,232
Domestic company-owned		69			59			51
International		22			18			18

Total		1,418			1,347			1,301
Number of comparable stores at end of period ⁽⁶⁾
Domestic franchise		1,226			1,194			1,164
Domestic company-owned		68			57			50
International		17			15			16

Total		1,311			1,266			1,230
Domestic average weekly sales per store (whole dollars) ⁽⁷⁾	$	11,099		$	10,923		$	10,640
System-wide comparable store sales growth ⁽⁸⁾		2.8	%		2.9	%		5.7	%
System-wide sales ⁽⁹⁾	$	785,630		$	739,091		$	701,770
System-wide sales growth ⁽¹⁰⁾		6.3	%		5.3	%		7.4	%


	AS OF DECEMBER 30, 2013
	ACTUAL		PRO FORMA ⁽²⁾	PRO FORMA AS ADJUSTED ⁽²⁾
	(dollars in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	3,705	$	$
Total current assets		16,377
Total current liabilities		17,965
Total debt ⁽¹¹⁾		170,000
Total assets		264,502
Total shareholders’ equity		33,925

⁽¹⁾

We present consolidated statements of operations data on a pro forma basis to give pro forma effect to (i) the entry in October 2013 into a new $177.0 million senior secured term loan facility, which includes a $2.5 million letter of credit subfacility (collectively, the “new senior secured credit facilities”), the proceeds of which were used to repay our existing credit facilities, to make a $31.5 million payment to holders of our Preferred Shares and to fund investments (such transactions, the “Recapitalization”) and (ii) two acquisitions of franchise stores, in each case involving four stores, completed in 2013 (the “2013 Store Acquisitions”) as if the transactions had occurred as of January 1, 2013. See “Unaudited Pro Forma Condensed Combined Financial Statements.”

⁽²⁾

We present certain share data on a pro forma as adjusted basis to give pro forma effect to (i) the Reorganization Transactions, including the automatic conversion of our Preferred Shares to shares of common stock and the 1 for stock split of common stock prior to the completion of this offering, (ii) the repurchase of an aggregate of 48,516 shares of our outstanding common stock from certain of our executive officers in March 2014 (the “Share Repurchase”), (iii) the Recapitalization and (iv) the 2013 Store Acquisitions, as further adjusted to give effect to the sale by us of shares of common stock in this offering at an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, less estimated underwriting discounts and commissions and estimated expenses and the application of the net proceeds to be received by us from this offering, including the repayment of certain indebtedness and payment of fees associated with the termination of our advisory services and monitoring agreement with Lee Equity, as more fully described in “Use of Proceeds.”

We present certain balance sheet data (a) on a pro forma basis to give pro forma effect to (i) the Reorganization Transactions, including the automatic conversion of our Preferred Shares to shares of common stock and the 1 for stock split of common stock prior to the completion of this offering, and (ii) the Share Repurchase and (b) on a pro forma as adjusted basis to give effect to the aforementioned transaction and to give further effect to the sale by us of shares of common stock in this offering at an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, less estimated underwriting discounts and commissions and estimated expenses and the application of the net proceeds to be received by us from this offering, including the repayment of certain indebtedness and payment of fees associated with the termination of our advisory services and monitoring agreement with Lee Equity, as more fully described in “Use of Proceeds.”

⁽³⁾

Adjusted EBITDA is calculated as net income (loss) before interest expense, income taxes, depreciation and amortization as adjusted for:

all non-cash losses or expenses (including, but not limited to non-cash share-based compensation expenses and the non-cash portion of rent expenses relating to the difference between GAAP and cash rent expenses), excluding any non-cash loss or expense that is an accrual of a reserve for a cash expenditure or payment to be made, or anticipated to be made, in a future period;

non-recurring or unusual cash fees, costs, charges, losses and expenses;

fees, costs and expenses related to acquisitions and debt refinancing costs;

pre-opening costs with respect to a new store;

management fees and expenses incurred under our advisory services and monitoring agreement with Lee Equity;

fees and expenses incurred in connection with the issuance of debt under the new senior secured credit facilities and related transactions; and

non-cash expenses resulting from purchase accounting adjustments made in accordance with GAAP with respect to acquisitions.

Adjusted EBITDA eliminates the effects of items that we do not consider indicative of our operating performance. Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income (loss), as determined GAAP, and our calculation of Adjusted EBITDA may not be comparable to that reported by other companies.

results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry.

Management uses Adjusted EBITDA and other similar measures:

as a measurement used in comparing our operating performance on a consistent basis;

to calculate incentive compensation for our employees;

for planning purposes, including the preparation of our internal annual operating budget;

to evaluate the performance and effectiveness of our operational strategies; and

to assess compliance with various metrics associated with our new senior secured credit facilities.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacements; and

Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes.

To address these limitations, we reconcile Adjusted EBITDA to the most directly comparable GAAP measure, net income. Further, we also review GAAP measures and evaluate individual measures that are not included in Adjusted EBITDA.

The following table provides a reconciliation of our net income (loss) to Adjusted EBITDA for the periods presented:


	FISCAL YEAR									PRO FORMA ^(a)
	2013			2012			2011			2013
	(dollars in thousands)
Net loss	$	(2,591	)	$	(2,114	)	$	(606	)	$	(3,566	)
Depreciation and amortization		6,973			6,187			5,798			7,786
Income tax provision (benefit)		1,024			(882	)		230			440
Interest expense, net		10,429			10,368			10,227			12,295

EBITDA		15,835			13,559			15,649			16,955
(Gain) loss on settlement of liabilities ^(b)		3,943			5,138			(58	)		3,943
Loss on disposal or impairment of property and equipment ^(c)		847			193			263			847
Management transition and restructuring costs ^(d)		587			490			1,783			587
Expenses not indicative of future operations ^(e)		1,293			967			—			1,293
Management fees and related expenses ^(f)		586			537			797			586
Transaction costs ^(g)		402			24			59			402
New store pre-opening expenses ^(h)		19			52			12			19
Non-cash expenses and non-income based state taxes ⁽ⁱ⁾		909			1,166			1,235			909

Adjusted EBITDA	$	24,421		$	22,126		$	19,740		$	25,541

⁽ ^a)

We present consolidated statements of operations data on a pro forma basis to give pro forma effect to (i) the Recapitalization and (ii) the 2013 Store Acquisitions. See “Unaudited Pro Forma Condensed Combined Financial Statements.”

^(b)

Represents (gains) losses resulting from refinancing of long-term debt and settlement of asset retirement obligations.

^(c)

Represents non-cash losses resulting from disposal or impairment of property and equipment, including divested company stores.

^(d)

Represents non-recurring management transition and restructuring costs, consisting of severance, retention, recruitment, relocation and other costs in connection with restructuring of our corporate development function and transition of certain members of management.

^(e)

Represents (i) non-recurring losses on guaranteed lease payments for company stores acquired by franchise owners; (ii) non-recurring roll-out costs of new uniform program; (iii) a one-time valuation allowance of an international notes receivable resulting from the sale of company-owned restaurants; and (iv) non-recurring advisory expenses in connection with this offering.

^(f)

Represents the elimination of management fees and related costs paid to Lee Equity for advisory services provided pursuant to an advisory services and monitoring agreement. See “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—Advisory Services and Monitoring Agreement.”

^(g)

Represents transaction costs relating to acquisitions and divestitures.

^(h)

Represents expenses directly associated with the opening of new stores and incurred prior to the opening of new stores, including wages, benefits, travel for the training of opening teams and other store operating costs.

⁽ⁱ⁾

Represents (i) non-cash expenses related to equity-based compensation; (ii) non-cash expenses related to the difference between GAAP and cash rent expense; (iii) non-cash expenses related to the fair valuation of certain common stock and Series A Preferred Stock subject to put options; and (iv) non-income based state taxes.

⁽⁴⁾

Represents current assets less current liabilities.

⁽⁵⁾

Represents long-lived asset capital expenditures related to the acquisition of property and equipment and excludes expenditures relating to acquisitions of businesses.

⁽⁶⁾

A comparable store is a store that has been open for at least 52 weeks from the comparable date, which is the Tuesday following the opening date.

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Domestic AWS consists of the average weekly sales of domestic franchise and company-owned stores over a specified period of time. Domestic AWS is calculated by dividing the total net sales of our domestic system-wide stores for the relevant time period by the number of weeks these same stores were open in such time period.

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System-wide comparable store sales growth represents year-over-year sales comparisons for comparable stores.

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System-wide sales include net sales by all of our system-wide stores.

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System-wide sales growth represents year-over-year sales comparisons for system-wide sales.

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Represents total outstanding indebtedness, including current portion.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should consider carefully the following risk factors and the other information in this prospectus, including our consolidated financial statements and related notes to those statements, before you decide to invest in our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

Risks Relating to Our Business and Industry

The limited service restaurant pizza category and restaurant sector overall are highly competitive and such competition could adversely affect our business, financial condition and results of operations.

The restaurant industry in general, and the limited service restaurant pizza category in particular, are highly competitive with respect to price, value, food quality, ambience, convenience, concept, service and location. A substantial number of restaurant operations compete with us for customer traffic. We compete against other major national limited service restaurant pizza chains and regional and local businesses, including other chains offering Take ‘N’ Bake pizza products as well as dine-in, carry-out and delivery services. We also compete on a broader scale with limited service and other international, national, regional and local limited-service restaurants. Many of our competitors have significantly greater financial, marketing, personnel and other resources as well as greater brand recognition than we do and may have lower operating costs, more and better locations and more effective marketing than we do. Many of our competitors are well established in markets in which our franchise owners and we have existing stores or intend to locate new stores. In addition, many of our competitors emphasize lower-cost value options or meal packages or have loyalty programs, which provide discounts on certain menu offerings, and they may continue to do so in the future. For example, in recent years, several national pizza chains have offered significant price discounts for pizza products, and we have developed similarly priced products in response. In addition, we face increasing competition from pizza product offerings available at grocery stores and convenience stores, which offer Take ‘N’ Bake, frozen and carry-out pizzas.

We also compete for employees, suitable real estate sites and qualified franchise owners. If we are unable to compete successfully and maintain or enhance our competitive position, or if customers have a poor experience at a Papa Murphy’s store, whether company-owned or franchised, we could experience downward pressure on customer traffic, prices, lower demand for our products, reduced margins, the inability to take advantage of new business opportunities and the loss of market share, all of which could have a material adverse effect on our business, financial condition and results of operations.

The food service market is affected by consumer preferences and perceptions. Changes in these preferences and perceptions may lessen the demand for our products, which would reduce sales and harm our business.

Food service businesses are affected by changes in consumer tastes, international, national, regional and local economic conditions and demographic trends. For instance, if prevailing health or dietary preferences cause consumers to avoid pizza and other products we offer in favor of foods that are perceived as more healthy, our business, financial condition and results of operations would be materially adversely affected. In addition, if consumers no longer seek pizza that they can bake at home in favor of pizza that is already baked and/or delivered, our business, financial condition and results of operations would be materially adversely affected. Moreover, because we are primarily dependent on a single product, if consumer demand for pizza in general, and Take ‘N’ Bake pizza in particular, should decrease, our business would be adversely affected more than if we had a more diversified menu, as many other food service businesses do.

Our business and results of operations depend significantly upon the success of our and our franchise owners’ existing and new stores.

Our business and results of operations are significantly dependent upon the success of our franchise owners and our company-owned stores. We and our franchise owners may be adversely affected by:

declining economic conditions, including housing market downturns, rising unemployment rates, lower disposable income, credit conditions, fuel prices and consumer confidence and other events or factors that adversely affect consumer spending in the markets that we serve;

increased competition in the restaurant industry, particularly in the pizza, casual and fast-casual dining segments;

changes in consumer tastes and preferences;

demographic trends;

customers’ budgeting constraints;

customers’ willingness to accept menu price increases that we may make to offset increases in key input and operating costs;

adverse weather conditions;

our reputation and consumer perception of our concepts’ offerings in terms of quality, price, value, ambience and service; and

customers’ experiences in our stores.

Our company-owned stores and our franchise owners are also susceptible to increases in certain key operating expenses that are either wholly or partially beyond our control, including:

food, particularly mozzarella cheese and other raw materials costs, many of which we do not or cannot effectively hedge;

labor costs, including wage, workers’ compensation, minimum wage requirements, health care and other benefits expenses;

rent expenses and construction, remodeling, maintenance and other costs under leases for our new and existing stores;

compliance costs as a result of changes in legal, regulatory or industry standards;

energy, water and other utility costs;

insurance costs;

information technology and other logistical costs; and

litigation expenses.

If we fail to open new domestic and international franchise and company-owned stores on a timely basis, our ability to increase our revenues could be materially adversely affected.

A significant component of our growth strategy includes the opening of new domestic and international franchise stores. Our franchise owners opened 98 stores in 2013. We and our franchise owners face many challenges associated with opening new stores, including:

identification and availability of suitable store locations with the appropriate size, visibility, traffic patterns, local residential neighborhoods, local retail and business attractions and infrastructure that will drive high levels of customer traffic and sales per store;

competition with other restaurants and retail concepts for potential store sites and anticipated commercial, residential and infrastructure development near new or potential stores;

ability to negotiate acceptable lease arrangements;

availability of financing and ability to negotiate acceptable financing terms;

recruiting, hiring and training of qualified personnel;

construction and development cost management;

completing our construction activities on a timely basis;

obtaining all necessary governmental licenses, permits and approvals and complying with local, state and federal laws and regulations to open, construct or remodel and operate our stores;

unforeseen engineering or environmental problems with the leased premises;

avoiding the impact of adverse weather during the construction period; and

other unanticipated increases in costs, delays or cost overruns.

As a result of these challenges, we and our franchise owners may not be able to open new stores as quickly as planned or at all. We and our franchise owners have experienced, and expect to continue to experience, delays in store openings from time to time and have abandoned plans to open stores in various markets on occasion. Any delays or failures to open new stores by us or our franchise owners could materially and adversely affect our growth strategy and our results of operations.

Our progress in opening new stores from quarter to quarter may occur at an uneven rate. If we do not open new stores in the future according to our current plans, the delay could materially adversely affect our business, financial condition or results of operations.

If we fail to identify, recruit and contract with a sufficient number of qualified franchise owners, our ability to open new franchise stores and increase our revenues could be materially adversely affected.

The opening of additional franchise stores depends, in part, upon the availability of prospective franchise owners who meet our criteria. Because most of our franchise owners open and operate one or two stores, our growth strategy requires us to identify, recruit and contract with a significant number of new franchise owners each year. We may not be able to identify, recruit or contract with suitable franchise owners in our target markets on a timely basis or at all. In addition, our franchise owners may not have access to the financial or management resources that they need to open the stores contemplated by their agreements with us, or they may elect to cease store development for other reasons. If we are unable to recruit suitable franchise owners or if franchise owners are unable or unwilling to open new stores as planned, our growth may be slower than anticipated, which could materially adversely affect our ability to increase our revenues and materially adversely affect our business, financial condition and results of operations.

The planned rapid increase in the number of our stores may make our future results unpredictable and, if we fail to manage such growth effectively, our business, financial condition and results of operations may be materially adversely affected.

Our franchise owners opened 98 stores in 2013. This growth strategy and the investment associated with the development of each new store may cause our results to fluctuate and be unpredictable or materially adversely affect our results of operations. In addition, our franchise owners and our ability to successfully develop new stores in new markets may be adversely affected by a lack of awareness or acceptance of our brand and the Take ‘N’ Bake concept as well as by a lack of existing marketing efforts and operational execution in these new markets. Stores in new markets may also face challenges related to being early into market and having less marketing funds related to low store density when compared to competitors. To the extent that we are unable to foster name recognition and affinity for our brand and concept in new markets and implement effective advertising and promotional programs, our and our franchise owners’ new stores may not perform as expected and our growth may be significantly delayed or impaired. Moreover, as has happened when other store concepts have tried to expand, we may find that our concept has limited appeal in new markets or we may experience a decline in the popularity of our concept in the markets in which we operate. New stores may also have difficulty securing adequate financing, particularly in new markets, where there may be a lack of adequate sales history and brand familiarity. Newly opened stores or our future markets and stores may not be successful or our system-wide average store sales may not increase at historical rates, which could materially adversely affect our business, financial condition or results of operations.

Our existing store management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We believe our

culture—from the store level up through management—is an important contributor to our success. As we grow, however, we may have difficulty maintaining our culture or adapting it sufficiently to meet the needs of our operations. Among other important factors, our culture depends on our ability to attract, retain and motivate employees who share our enthusiasm and dedication to our concept. We may not respond quickly enough to the changing demands that our expansion will impose on our management, store teams, existing infrastructure and culture, which could materially adversely affect our business, financial condition or results of operations.

New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits that could adversely affect our results of operations.

Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the adverse health effects of consuming certain menu offerings. These changes have resulted in, and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings, and they have resulted, and may continue to result in, laws and regulations affecting permissible ingredients and menu offerings. For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose to consumers certain nutritional information, or have enacted legislation restricting the use of certain types of ingredients in restaurants. These requirements may be different or inconsistent with requirements under the Patient Protection and Affordable Care Act of 2010 (the “PPACA”), which establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus. Specifically, the PPACA requires chain restaurants with 20 or more locations operating under the same name and offering substantially the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake. These inconsistencies could be challenging for us to comply with in an efficient manner. The PPACA also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus and menu boards about the availability of this information upon request. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our products and materially adversely affect our business, financial condition and results of operations.

Compliance with current and future laws and regulations regarding the ingredients and nutritional content of our menu items may be costly and time-consuming. Additionally, if consumer health regulations or consumer eating habits change significantly, we may be required to modify or discontinue certain menu items, and we may experience higher costs associated with the implementation of those changes. We cannot predict the impact of the new nutrition labeling requirements under the PPACA until final regulations are promulgated. The risks and costs associated with nutritional disclosures on our menus could also impact our operations, particularly given differences among applicable legal requirements and practices within the restaurant industry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants, and the need to rely on the accuracy and completeness of nutritional information obtained from third-party suppliers.

Our results of operations and growth strategy depend in significant part on the success of our franchise owners, and we are subject to a variety of additional risks associated with our franchise owners.

A substantial portion of our revenues comes from royalties generated by our franchise stores. We anticipate that franchise royalties will represent a substantial part of our revenues in the future. As of December 30, 2013, we had 548 domestic franchise owners operating 1,327 domestic stores. Our largest franchise owner operated 37 stores and our top 10 franchise owners operated a total of 221 stores as of December 30, 2013. Accordingly, we are reliant on the performance of our franchise owners in successfully opening and operating their stores and paying royalties to us on a timely basis. Our franchise system subjects us to a number of risks, any one of which may impact our ability to collect royalty payments from our franchise owners, may harm the goodwill associated with our brands, and may materially adversely affect our business and results of operations.

Franchise owner independence. Franchise owners are independent operators, and their employees are not our employees. Accordingly, their actions are outside of our control. Although we have developed criteria to evaluate and screen prospective franchise owners, we cannot be certain that our franchise owners will have the business acumen or financial resources necessary to operate successful franchises in their area approved locations and state franchise laws may limit our ability to terminate or modify these franchise agreements. Moreover, despite our training, support and monitoring, franchise owners may not successfully operate stores in a manner consistent with our standards and

requirements, or may not hire and adequately train qualified managers and other store personnel. The failure of our franchise owners to operate their franchises successfully and actions taken by their employees could have a material adverse effect on our reputation, our brand and our ability to attract prospective franchise owners, our business, financial condition or results of operations.

Franchise agreement termination or nonrenewal. Each franchise agreement is subject to termination by us as the franchisor in the event of a default, generally after expiration of applicable cure periods, although under certain circumstances a franchise agreement may be terminated by us upon notice without an opportunity to cure. The default provisions under the franchise agreements are drafted broadly and include, among other things, any failure to meet operating standards and actions that may threaten our licensed intellectual property.

In addition, each franchise agreement has an expiration date. Upon the expiration of the franchise agreement, we or the franchise owner may, or may not, elect to renew the franchise agreements. If the franchise owner agreement is renewed, the franchise owner will receive a successive franchise agreement for an additional term. Such option, however, is contingent on the franchise owner’s execution of the then-current form of franchise agreements (which may include increased royalty payments, advertising fees and other costs), the satisfaction of certain conditions (including modernization of the restaurant and related operations) and the payment of a renewal fee. If a franchise owner is unable or unwilling to satisfy any of the foregoing conditions, we may elect to not renew the expiring franchise agreement, in which event the franchise agreement will terminate upon expiration of the term.

Franchise owner insurance . The franchise agreements require each franchise owner to maintain certain insurance types and levels. Certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks. Moreover, any loss incurred could exceed policy limits and policy payments made to franchise owners may not be made on a timely basis. Any such loss or delay in payment could have a material and adverse effect on a franchise owner’s ability to satisfy obligations under the franchise agreement, including the ability to make royalty payments.

Product liability exposure. We require franchise owners to maintain general liability insurance coverage to protect against the risk of product liability and other risks and demand strict franchise owner compliance with health and safety regulations. However, franchise owners may receive or produce defective food or beverage products, which may materially adversely affect our brand’s goodwill and our business. Further, a franchise owner’s failure to comply with health and safety regulations, including requirements relating to food quality or preparation, could subject them, and possibly us, to litigation. Any litigation, including the imposition of fines or damage awards, could adversely affect the ability of a franchise owner to make royalty payments, or could generate negative publicity, or otherwise adversely affect us.

Franchise owners’ participation in our strategy. Our franchise owners are an integral part of our business. We may be unable to successfully implement our growth strategy if our franchise owners do not actively participate in such implementation. From time to time, franchise owners, individually or through the Papa Murphy’s Franchise Association (the “PMFA”), which is an independent association of franchise owners, have disagreed with or resisted elements of our strategy including new product initiatives and investments in their stores such as remodeling and implementing a point-of-sale system. Franchise owners may also fail to participate in our marketing initiatives, which could materially adversely affect their sales trends, AWS and results of operations. In addition, the failure of our franchise owners to focus on the fundamentals of restaurant operations, such as quality, service and cleanliness, would have a negative impact on our success. It also may be difficult for us to monitor our international franchise owners’ implementation of our growth strategy due to our lack of personnel in the markets served by such franchise owners.

Franchise owner litigation and conflicts with franchise owners. Franchise owners are subject to a variety of litigation risks, including, but not limited to, customer claims, personal-injury claims, environmental claims, employee allegations of improper termination and discrimination, claims related to violations of the ADA, religious freedom, the Fair Labor Standards Act (“FLSA”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), advertising laws and intellectual-property claims. Each of these claims may increase costs and limit the funds available to make royalty payments and reduce the execution of new franchise agreements. We also may be named in lawsuits against our franchise owners. In addition, the nature of the franchisor-franchise owner relationship

may give rise to conflict. For example, in September 2013, we received a letter from the PMFA outlining a number of concerns and disagreements that the franchise owners it represents had with our company, including concern over a lack of franchise owner involvement in strategic decision-making, inadequate assistance in increasing and difficulty maintaining franchise store profitability in a higher cost environment, disagreement with marketing initiatives and product launches, and dissatisfaction with costs associated with the new store remodel program and with the implementation of a new point-of-sale system. Our senior management team has engaged with the PMFA, including as part of off-site meetings, to address these concerns and resolve specific issues raised by the franchise owners. Such discussions and meetings may not result in a resolution satisfactory to the franchise owners or us and may materially adversely affect our ability to grow our franchise system and maintain relationships with our franchise owners, may damage our reputation and our brand, and may materially adversely affect our results of operations.

We also may become subject to litigation with our franchise owners. For example, in January 2014 eight franchise owners claimed that we misrepresented our sales volumes, made false claims and charged excess advertising fees, among other things. We engaged in mediation and are in ongoing discussions with these franchise owners in order to address and resolve these claims. If we do not reach an agreement with these franchise owners, they may file a lawsuit against us, which may be costly and time consuming to defend and may further distract management. We also may engage in litigation with franchise owners to enforce the terms of our franchise agreements and compliance with our brand standards as determined necessary to protect our brand, the consistency of our products and the customer experience. Such litigation may be time consuming and costly. Any negative outcome of these or any other claims could materially adversely affect our results of operations as well as our ability to expand our franchise system and may damage our reputation and our brand.

Americans with Disabilities Act. Restaurants located in the United States must comply with Title III of the Americans with Disabilities Act of 1990, as amended (the “ADA”). Although we believe newer restaurants meet the ADA construction standards and, further, that franchise owners have historically been diligent in the remodeling of older restaurants, a finding of noncompliance with the ADA could result in the imposition of injunctive relief, fines, awards of damages to private litigants or additional capital expenditures to remedy such noncompliance. Any imposition of injunctive relief, fines, damage awards or capital expenditures could adversely affect the ability of a franchise owner to make royalty payments, or could generate negative publicity, or otherwise adversely affect us.

Access to credit. Our franchise owners typically finance new operations and new store openings with loans or other forms of credit. If our franchise owners are unable to access credit or obtain sufficient credit, if interest rates on loans that our franchise owners use to finance operations of current stores or to open new stores increase or if franchise owners are unable to service their debt, our franchise owners may have difficulty operating their stores or opening new stores, which could materially adversely affect our results of operations as well as our ability to expand our franchise system.

Franchise owner bankruptcy. The bankruptcy of a multi-unit franchise owner could negatively impact our ability to collect payments due under such franchise owner’s franchise agreement. In a franchise owner bankruptcy, the bankruptcy trustee may reject its franchise agreements pursuant to Section 365 under the United States bankruptcy code, in which case there would be no further royalty payments from such franchise owner. There can be no assurance as to the proceeds, if any, that may ultimately be recovered in a bankruptcy proceeding of such franchise owner in connection with a damage claim resulting from such rejection.

Opening new stores in existing markets may negatively affect sales at existing stores.

We intend to continue opening new franchise stores in our existing markets as a core part of our growth strategy. Expansion in existing markets may be affected by local economic and market conditions. Further, the customer target area of our stores varies by location, depending on a number of factors, including population density, other local retail and business attractions, area demographics and geography. As a result, the opening of a new store in or near markets in which stores already exist could adversely affect the sales of these existing stores. We and our franchise owners may selectively open new stores in and around areas of existing stores. Sales cannibalization between stores may become significant in the future as we continue to expand our operations and could affect sales growth, which could, in turn, materially adversely affect our business, financial condition or results of operations.

New stores may not be profitable and the increases in AWS and comparable store sales that we have experienced in the past may not be indicative of future results.

New stores may not be profitable and their sales performance may not follow historical patterns. In addition, our AWS and comparable store sales may not increase at the rates achieved over the past several years. AWS for new domestic stores can be influenced by a number of factors, including the mix of new stores opening in core, developing, and new markets or in high-AWS and low-AWS markets. Other factors that may impact AWS, comparable store sales, and performance of new stores are the level of media efficiency, pricing structure, and the competitive activity in any market, our overall marketing plans, and the timing of new store openings, which is impacted by the seasonal nature of our sales cycle. In addition, in the second half of 2013, we modified our new store grand opening plan to focus less on driving opening day sales and instead delivering a more sustainable sales level and extending sales momentum well into the first full fiscal year of operations. Although this new plan may allow for steadier and more sustainable growth, it may also result in lower AWS in earlier periods. Profits and sales performance for new stores in newer, less-penetrated markets may further be adversely affected by a lack of awareness or acceptance of our brand and concept as well as by a lack of existing marketing efforts and operational execution in these markets.

If new stores do not perform as planned, or if we or our franchise owners are unable to achieve our expected AWS in the new stores, our business, financial condition or results of operations could be materially adversely affected.

Our expansion into international markets exposes us to a number of risks that may differ in each country where we have franchise stores.

We currently have franchise stores in Canada and the United Arab Emirates and plan to continue to grow internationally. Our international operations are in early stages, historically have not been profitable and have achieved lower margins than our domestic stores. We expect this financial performance to continue in the near-term. Expansion in international markets may also be affected by local economic and market conditions. Therefore, as we expand internationally, our franchise owners may not experience the operating margins we expect, and our results of operations and growth may be materially and adversely affected. Our financial condition and results of operations may be adversely affected if global markets in which our franchise stores compete are affected by changes in political, economic or other factors. These factors, over which neither our franchise owners nor we have control, may include:

recessionary or expansive trends in international markets;

changing labor conditions and difficulties in staffing and managing our foreign operations;

increases in the taxes we pay and other changes in applicable tax laws;

legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws;

changes in inflation rates;

changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds;

difficulty in protecting our brand, reputation and intellectual property;

difficulty in collecting our royalties and longer payment cycles;

expropriation of private enterprises;

increases in anti-American sentiment and the identification of the Papa Murphy’s brand as an American brand;

political and economic instability; and

other external factors.

Termination of area development agreements (“ADAs”) or master franchise agreements with certain franchise owners could adversely impact our revenues.

We enter into ADAs with certain domestic franchise owners that plan to open multiple Papa Murphy’s stores in a designated market area (a “DMA”), and we have entered into master franchise agreements with third parties to develop and operate stores in Canada and in the Middle East. These franchise owners are granted certain rights with respect to specified territories, and at their discretion, these franchise owners may open more stores than specified in their agreements. In fiscal years 2013, 2012 and 2011 we derived 25.2%, 14.5% and 15.4%, respectively, of

our franchise and development fees from ADAs or master franchise owner arrangements. The termination of ADAs or an arrangement with a master franchise owner or a lack of expansion by these franchise owners could result in the delay of the development of franchised restaurants, discontinuation or an interruption in the operation of one of our brands in a particular market or markets. We may not be able to find another operator to resume development activities in such market or markets. Any such delay, discontinuation or interruption would result in a delay in, or loss of, royalty income to us by way reduced sales and could materially and adversely affect our business, financial condition or results of operations.

We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases for stores that we operate.

We do not own any of the real property where our company-owned stores operate. Payments under our operating leases account for a portion of our operating expenses, and we expect the new company-owned stores we open in the future similarly will be leased. Our leases generally have an initial term of five years and generally can be extended only in five-year increments (at increased rates). All of our leases require a fixed annual rent, although some require the payment of additional rent if store sales exceed a negotiated amount. Generally, our leases are net leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases. If an existing or future store is not profitable, resulting in its closure, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, we may fail to negotiate renewals as each of our leases expires, either on commercially

acceptable terms or at all, which could cause us to pay increased occupancy costs or to close stores in desirable locations. These potential increased occupancy costs and closed stores could materially adversely affect our business, financial condition or results of operations.

The impact of negative economic factors, including the availability of credit, on our and our franchise owners’ landlords could negatively affect our results of operations.

Negative effects on our and our franchise owners’ existing and potential landlords due to the inaccessibility of credit and other unfavorable economic factors may, in turn, adversely affect our business and results of operations. If our or our franchise owners’ landlords are unable to obtain financing or remain in good standing under their existing financing arrangements, they may be unable to provide construction funding to us or satisfy other lease covenants. In addition, if our franchise owners or our landlords are unable to obtain sufficient credit to continue to properly manage their retail sites, we may experience a drop in the level of quality of such retail centers. The development of new stores may also be adversely affected by the negative financial situations of developers and potential landlords. Landlords may try to delay or cancel recent development projects (as well as renovations of existing projects) due to the instability in the credit markets and recent declines in consumer spending, which could reduce the number of appropriate locations available that we would consider for our new stores. Furthermore, the failure of landlords to obtain licenses or permits for development projects on a timely basis, which is beyond our control, may negatively impact our ability to implement our development plan.

Damage to our reputation and the Papa Murphy’s brand and negative publicity relating to our stores, including our franchise stores, could reduce sales at some or all of our other stores and could negatively impact our business, financial condition and results of operations.

Our success is dependent in part upon our ability to maintain and enhance the value of the Papa Murphy’s brand, consumers’ connection to our brand and positive relationships with our franchise owners. We may, from time to time, be faced with negative publicity relating to food quality, store facilities, customer complaints or litigation alleging illness or injury, health inspection scores, integrity of our or our suppliers’ food processing, employee and franchise owner relationships, franchise owner litigation or other matters, regardless of whether the allegations are valid or whether we are held to be responsible. The risks associated with such negative publicity cannot be completely eliminated or mitigated and may materially adversely affect our business, financial condition and results of operations and result in damage to our brand. For multi-location food service businesses such as ours, the negative impact of adverse publicity relating to one store or a limited number of stores may extend far beyond the stores or franchise owners involved to affect some or all of our other stores. The risk of negative publicity is particularly great with respect to our franchise stores because we are limited in the manner in which we can regulate them, especially on a real-time basis. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own operations.

There has been a marked increase in the use of social media platforms and similar devices, including weblogs (blogs), social media websites and other forms of Internet-based communications which allow individuals to access a broad audience of consumers and other interested persons. Consumers value readily available information concerning goods and services that they purchase and may act on such information without further investigation or authentication. The availability of information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our company may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for dissemination of trade secret information, compromising valuable company assets. In general, the dissemination of information online could materially adversely affect our business, financial condition and results of operations, regardless of the information’s accuracy.

Our success depends in part upon effective advertising and marketing campaigns, which may not be successful, and franchise owner support of such advertising and marketing campaigns.

We believe the Papa Murphy’s brand is critical to our business. We expend resources in our marketing efforts using a variety of media, including social media. We expect to continue to conduct brand awareness programs and customer initiatives to attract and retain customers. Additionally, some of our competitors have greater financial resources, which enable them to spend significantly more on marketing and advertising than us. Should our competitors increase spending on marketing and advertising, or should our advertising and promotions be less effective than our competitors, our business, financial condition and results of operations could materially adversely affected.

The support of our franchise owners is critical for the success of our advertising and marketing campaigns we seek to undertake, and the successful execution of these campaigns will depend on our ability to maintain alignment with our franchise owners. Our franchise owners are required to spend approximately five percent of net sales directly on local advertising or contribute to a local fund managed by franchise owners in certain market areas to fund the purchase of advertising media. Our franchise owners are also required to contribute two percent of their net sales to a national fund to support the development of new products, brand development and national marketing programs. In addition, we, our franchise owners and other third parties have contributed additional advertising funds in the past. While we maintain control over advertising and marketing materials and can mandate certain strategic initiatives pursuant to our franchise agreements, we need the active support of our franchise owners if the implementation of these initiatives is to be successful. Additional advertising funds are not contractually required, and we, our franchise owners and other third parties may choose to discontinue contributing additional funds in the future. Any significant decreases in our advertising and marketing funds or financial support for advertising activities could significantly curtail our marketing efforts, which may in turn materially adversely affect our business, financial condition and results of operations.

Our sales and profits could be adversely affected if comparable store sales are less than we expect.

The level of comparable store sales, which represent the change in year-over-year sales for stores open for at least 53 weeks, excluding the week the store opened, will affect our sales growth and will continue to be a critical factor affecting our profits because the profit margin on comparable store sales is generally higher than the profit margin on new store sales. Our franchise owners’ and our ability to increase comparable store sales depends in part on our ability to successfully implement our initiatives to build sales. It is possible such initiatives will not be successful, that we will not achieve our target comparable store sales growth or that the change in comparable store sales could be negative, which may cause a decrease in sales and our profits that would materially adversely affect our business, financial condition or results of operations.

We experience the effects of seasonality.

Seasonal factors and the timing of holidays cause our revenues to fluctuate from quarter to quarter. We typically follow family eating patterns at home, with our strongest sales levels occurring in the months of September through May, and our lowest sales levels occurring in the months of June, July and August. Therefore, our revenues per store are typically higher in the first and fourth quarters and lower in the second and third quarters.

Additionally, our new store openings have historically been concentrated in the fourth and first quarters because new franchise owners may seek to benefit from historically stronger sales levels occurring in these periods. We believe that new store openings will continue to be weighted towards the fourth quarter. As a result of these factors, our quarterly and annual results of operations and comparable store sales may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable store sales for any particular future period may decrease and materially adversely affect our business, financial condition or results of operations.

Changes in economic conditions, including continuing effects from the recent recession and adverse weather and other unforeseen conditions, could materially adversely affect our business, financial condition and results of operations.

The restaurant industry depends on consumer discretionary spending. The recent recession, coupled with high unemployment rates, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, rising fuel prices, reduced access to credit and reduced consumer confidence, has impacted consumers’ ability and willingness to spend discretionary dollars. Economic conditions may remain volatile and may continue to depress consumer confidence and discretionary spending for the near term. If the weak economy continues for a prolonged period of time or worsens, customer traffic could be adversely impacted if our customers have less discretionary income or reduce the amount they spend on quick service meals. We believe that if the current negative economic conditions persist for a long period of time or become more pervasive, consumers might make long-lasting changes to their discretionary spending behavior, including dining out less frequently. In addition, given our geographic concentrations in the West and Midwest, economic conditions in these particular areas of the country could have a disproportionate impact on our overall results of operations, and regional occurrences such as local strikes, terrorist attacks, increases in energy prices, adverse weather conditions, tornadoes, earthquakes, hurricanes, floods, droughts, fires or other natural or man-made disasters could materially adversely affect our business, financial condition and results of operations. Adverse weather conditions may also impact customer traffic at our stores, and, in more severe cases, cause temporary store closures, sometimes for prolonged periods. If store sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales. Reductions in staff levels, asset impairment charges and potential store closures could result from prolonged negative store sales. There can be no assurance that the macroeconomic environment or the regional economics in which we operate will improve significantly or that government stimulus efforts will improve consumer confidence, liquidity, credit markets, home values or unemployment, among other things.

Food safety and foodborne illness concerns could have an adverse effect on our business.

We cannot guarantee that our supply chain and food safety controls and training will be fully effective in preventing all food safety issues at our stores, including any occurrences of foodborne illnesses such as salmonella, E. coli and hepatitis A. In addition, there is no guarantee that our franchise locations will maintain the high levels of internal controls and training we require at our company-owned stores. Furthermore, our franchise owners and we rely on third-party vendors, making it difficult to monitor food safety compliance and increasing the risk that foodborne illness would affect multiple locations rather than a single store. Some foodborne illness incidents could be caused by third-party vendors and transporters outside of our control. New illnesses resistant to our current precautions may develop in the future, or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or more instances of foodborne illness in any of our stores or markets or related to food products we sell could negatively affect our store sales nationwide if highly publicized on national media outlets or through social media. This risk exists even if it were later determined that the illness was wrongly attributed to us or one of our stores. A number of other restaurant chains have experienced incidents related to foodborne illnesses that have had a material adverse effect on their operations. The occurrence of a similar incident at one or more of our stores, or negative publicity or public speculation about an incident, could materially adversely affect our business, financial condition or results of operations.

Changes in food availability and costs could adversely affect our results of operations.

Our profitability and operating margins are dependent in part on our ability to anticipate and react to changes in food costs, particularly the costs of mozzarella cheese and flour. We are party to national supply agreements for core ingredients with certain key third party suppliers, including Saputo Cheese Inc. and Davisco Foods for cheese, Pizza Blends, Inc. for flour and dough mix, Neil Jones Foods Company for tomatoes for sauce and several suppliers for meat, pursuant to which we lock in pricing for our franchise owners and company-owned stores. We rely on Sysco

Corporation as the primary distributor of food and other products to our franchise owners and company-owned stores. Our pricing arrangements with national suppliers typically have terms from three months to a year after which the pricing may be renegotiated. Each store purchases food supplies directly from these suppliers and purchases produce locally through a produce buying group.

The type, variety, quality, availability and price of produce, meat and cheese are volatile and are subject to factors beyond our control, including weather, governmental regulation, availability and seasonality, each of which may affect our and our franchise owners’ food costs or cause a disruption in our supply. For example, cheese pricing is higher in the summer months due to a drop off in milk production in higher temperatures. Our food distributors and suppliers also may be affected by higher costs to produce and transport commodities used in our stores, higher minimum wage and benefit costs and other expenses that they pass through to their customers, which could result in higher costs for goods and services supplied to us. We may not be able to anticipate and react to changing food costs through our purchasing practices and menu price adjustments in the future. As a result, any increase in the prices charged by suppliers would increase the food costs for our company-owned stores and for our franchise owners and could adversely impact their profitability. In addition, because we provide moderately priced food, we may choose not to, or may be unable to, pass along commodity price increases to consumers, and any price increases that are passed along to consumers may materially adversely affect store sales which would lower revenues generated from company-owned stores and franchise owner royalties. These potential changes in food and supply costs and availability could materially adversely affect our business, financial condition or results of operations.

Our dependence on a sole supplier or a limited number of suppliers for some ingredients could result in disruptions to our business.

Sysco Corporation is the primary distributor of our food and other products to our domestic franchise owners and company-owned stores and any disruption to this distribution due to work stoppages, strikes or other business interruption may materially adversely affect our franchise owners and us. Additionally, we do not have formal long-term arrangements with all of our suppliers, and therefore our suppliers may implement significant price increases or may not meet our requirements in a timely fashion, or at all. Any material interruptions in our supply chain, such as a material interruption of ingredient supply due to the failures of third-party distributors or suppliers, or interruptions in service by common carriers that ship goods within our distribution channels, may result in significant cost increases and reduce store sales. We may not be able to find alternative distributors or suppliers on a timely basis or at all. Our company-owned and franchise stores could also be harmed by any prolonged disruption in the supply of products from or to our key suppliers due to weather, crop disease and other events beyond our control. Insolvency of key suppliers could also negatively impact our business. Our focus on a limited menu would make the consequences of a shortage of a key ingredient, such as cheese or flour, more severe, and affected stores could experience significant reductions in sales during the shortage.

Changes in laws related to electronic benefit transfer (“EBT”) systems, could adversely impact our results in operations.

Because our products are not cooked, we and our franchise owners currently are able to accept EBT payments, or food stamps, at stores in the United States. Changes in state and federal laws governing where EBT cards may be used and what they may be used for may limit our ability to accept such payments and could significantly reduce sales. Reductions in food stamp benefits occurred in November 2013, and further additional reductions in food stamp benefits have been proposed separately by the Senate and Congress. The recent reductions to and the potential future reductions in food stamp benefits may reduce sales, which could materially adversely affect our business, financial condition and results of operations.

Changes in employment laws may adversely affect our business.

Various federal and state labor laws govern the relationship with our employees and employees of our franchise owners, which may impact our and our franchise owners’ operating costs. These laws include employee classification as exempt/non-exempt for overtime and other purposes, minimum wage requirements, unemployment tax rates, mandatory health benefits, workers’ compensation rates, immigration status, tax reporting and other wage and benefit requirements. A substantial number of employees at our company-owned and franchise stores are paid at rates related to the U.S. federal minimum wage, and increases in the U.S. federal minimum wage may increase labor costs. Any such increases in labor costs might result in franchise owners inadequately staffing restaurants. Understaffed restaurants could reduce sales at such restaurants, decrease royalty payments and adversely affect our brands.

In addition, various states are considering or have already adopted new immigration laws or enforcement programs. The U.S. Congress and Department of Homeland Security from time to time consider and may implement changes to federal immigration laws, regulations or enforcement programs as well. Some of these changes may increase obligations for compliance and oversight, which could subject us to additional costs and make the hiring process for us and our franchise owners more cumbersome, or reduce the availability of potential employees. Although we require all of our employees, including at our company-owned stores, to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. We currently participate in the “E-Verify” program, an Internet-based, free program run by the United States government to verify employment eligibility, in states in which participation is required, and we plan to introduce its use throughout our stores. However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment. In addition, our franchise owners are responsible for screening any employees they hire. Unauthorized workers are subject to deportation and may subject us or our franchise owners to fines or penalties, and if any of our or our franchise owners’ workers are found to be unauthorized it may become more difficult for us to hire and keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt store operations and cause temporary increases in our or our franchise owners’ labor costs as we train new employees. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. These factors could materially adversely affect our business, financial condition or results of operations.

If our franchise owners or we face labor shortages or increased labor costs, our growth and operating results could be adversely affected.

Labor is a primary component in the cost of operating our company-owned stores and for franchise owners. If our franchise owners or we face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates, increases in the federal, state or local minimum wage or other employee benefits costs (including costs associated with health insurance coverage), our operating expenses could increase and our growth could be adversely affected. In addition, our success depends in part upon our franchise owners’ and our ability to attract, motivate and retain a sufficient number of well-qualified store operators and management personnel, as well as a sufficient number of other qualified employees, to keep pace with our expansion schedule. Qualified individuals needed to fill these positions are in short supply in some geographic areas. In addition, restaurants have traditionally experienced relatively high employee turnover rates. Although we have not yet experienced significant problems in recruiting or retaining employees, our franchise owners’ and our ability to recruit and retain such individuals may delay the planned openings of new stores or result in higher employee turnover in existing stores, which could have a material adverse effect on our business, financial condition or results of operations.

An increase in the cost of labor could adversely affect our business and our growth. Competition for employees could require us or our franchise owners to pay higher wages, which could result in higher labor costs. In addition increases in the minimum wage would increase our labor costs. Additionally, costs associated with workers’ compensation are rising, and these costs may continue to rise in the future. We may be unable to increase our menu prices in order to pass these increased labor costs on to consumers, in which case our margins would be negatively affected, which could materially adversely affect our business, financial condition or results of operations.

We invest in developing new product offerings, some of which may not be successful.

We invest in continually developing new potential product offerings as well as in marketing and advertising our new products. For example, we recently tested and rolled out nationally Fresh Pan Pizza, which is marketed at a price above our regular menu items. Our new product offerings may not be well-received by consumers and may not be successful, which could materially adversely affect our results of operations.

From time to time we may invest in enhancements to our franchise platform, on which we may not see a return.

We may not see a return on investments we make in our franchise platform. For example, we have invested in a point-of-sale system that we continue to implement across our franchise base in order to better manage our business. As part of this investment, in September 2013 we purchased approximately $4.5 million of point-of-sale software licenses, and we intend to sell these licenses directly to our franchise owners. We may not be able to sell these licenses to our existing franchise owners on a timely basis, or at all. Our failure to capitalize on investments may materially adversely affect our financial condition.

The effect of changes to healthcare laws in the United States may increase the number of employees who choose to participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our results of operations and our franchise owners.

In 2010, the PPACA was signed into law in the United States to require health care coverage for many uninsured individuals and expand coverage for those already insured. We currently offer and subsidize comprehensive healthcare coverage, primarily for our salaried employees. The healthcare reform law will require us to offer healthcare benefits to all full-time employees (including full-time hourly employees) that meet certain minimum requirements of coverage and affordability, or face penalties. If we elect to offer such benefits, we may incur substantial additional expense. If we fail to offer such benefits, or the benefits we elect to offer do not meet the applicable requirements, we may incur penalties. The healthcare reform law also requires individuals to obtain coverage or face individual penalties, so employees who are currently eligible but elect not to participate in our healthcare plans may find it more advantageous to do so when such individual mandates take effect. It is also possible that by making changes or failing to make changes in the healthcare plans offered by us, we will become less competitive in the market for our labor. Finally, implementing the requirements of healthcare reform is likely to impose additional administrative costs. The costs and other effects of these new healthcare requirements cannot be determined with certainty, but they may significantly increase our healthcare coverage costs and could materially adversely affect our business, financial condition or results of operations.

Restaurant companies have been the target of class actions and other litigation alleging, among other things, violations of federal and state law. We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us to material money damages and other remedies.

We are subject to lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. In recent years, a number of restaurant companies have been subject to claims by customers, employees, franchise owners and others regarding issues such as food safety, personal injury and premises liability, employment-related claims, harassment, discrimination, disability, compliance with advertising laws, including the Telephone Consumer Protection Act, and other operational issues common to the foodservice industry. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. An adverse judgment or settlement that is not insured or is in excess of insurance coverage could have an adverse impact on our profitability and could cause variability in our results compared to expectations. We carry insurance policies for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, employer’s liability, health benefits and other insurable risks. A judgment in excess of our insurance coverage for any claims could materially adversely affect our business, financial condition and results of operations. Regardless of whether any claims that may be brought against us are valid or whether we are ultimately determined to be liable, our business, financial condition and results of operations could also be adversely affected by negative publicity, litigation costs resulting from the defense of these claims, and the diversion of time and resources from our operations.

Although we have experienced no customer lawsuits to date, our customers occasionally allege we caused an illness or injury they suffered at or after a visit to our stores, or that we have problems with food quality or operations. We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, discrimination and similar matters. We may also be named as a defendant in any such claims brought against any of our franchise owners. In addition, we could become subject to class action or other lawsuits related to these or different matters in the future. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment in excess or outside of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations.

In addition, the restaurant industry has been subject to a growing number of claims based on the nutritional content of food products sold and disclosure and advertising practices. We may also be subject to this type of proceeding in the future and, even if we are not, publicity about these matters (particularly directed at the limited service or fast casual segments of the industry) may harm our reputation and could materially adversely affect our business, financial condition or results of operations.

Our business operations and future development could be significantly disrupted if we lose key members of our management team.

The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, both individually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate these senior officers and key employees. Although we have employment agreements in place with certain senior officers and key employees, we cannot prevent them from terminating their employment with us. The loss of the services of our Chief Executive Officer, Chief Financial Officer, other senior officers or other key employees could materially adversely affect our business and plans for future development. We have no reason to believe that we will lose the services of any of our current senior officers and key employees in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in the industry and special role in our operations. We do not maintain any key man life insurance policies for any of our employees.

Our indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with our financial covenants, our liquidity and results of operations could be adversely affected.

As of December 30, 2013, we had $170.0 million of outstanding indebtedness and $10.0 million of availability under a revolving credit facility, and after giving effect to this offering and the use of proceeds therefrom, which will be used primarily to repay debt, we would have had $ million of outstanding indebtedness, including $ million outstanding under our new senior secured credit facilities. We may, from time to time, incur additional indebtedness.

The agreement governing our new senior secured credit facilities places certain conditions on us, including that it:

requires us to utilize a substantial portion of our cash flow from operations to make payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity and other general corporate purposes;

increases our vulnerability to adverse general economic or industry conditions;

limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate;

makes us more vulnerable to increases in interest rates, as borrowings under our new senior secured credit facilities are at variable rates;

limits our ability to obtain additional financing in the future for working capital or other purposes; and

places us at a competitive disadvantage compared to our competitors that have less indebtedness.

Our new senior secured credit facilities place certain limitations on our ability to incur additional indebtedness. However, subject to the qualifications and exceptions in our new senior secured credit facilities, we may be permitted to incur substantial additional indebtedness and may incur obligations that do not constitute indebtedness under the terms of the new senior secured credit facilities. The new senior secured credit facilities also place certain limitations on, among other things, our ability to enter into certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure and to guarantee certain indebtedness. The new senior secured credit facilities also place certain restrictions on the payment of dividends and distributions and certain management fees. These restrictions limit or prohibit, among other things, our ability to:

pay dividends on, redeem or repurchase our stock or make other distributions;

incur or guarantee additional indebtedness;

sell stock in our subsidiaries;

create or incur liens;

make acquisitions or investments;

transfer or sell certain assets or merge or consolidate with or into other companies;

make certain payments or prepayments of indebtedness subordinated to our obligations under our new senior secured credit facilities; and

enter into certain transactions with our affiliates.

Failure to comply with certain covenants or the occurrence of a change of control under our new senior secured credit facilities could result in the acceleration of our obligations under the new senior secured credit facilities, which would have an adverse effect on our liquidity, capital resources and results of operations.

Our new senior secured credit facilities also require us to comply with certain financial covenants regarding our capital expenditures, total leverage ratio and our interest coverage ratio. Changes with respect to these financial covenants may increase our interest rate and failure to comply with these covenants could result in a default and an acceleration of our obligations under the new senior secured credit facilities, which would have an adverse effect on our liquidity, capital resources and results of operations. See “Description of Material Indebtedness.”

We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would adversely affect our financial condition and results of operations.

Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future and is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us in amounts sufficient to fund our other liquidity needs, our business financial condition and results of operations could be materially adversely affected. If we cannot generate sufficient cash flow from operations to make scheduled principal and interest payments in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity. If we are unable to refinance any of our indebtedness on commercially reasonable terms or at all or to effect any other action relating to our indebtedness on satisfactory terms or at all, our business, financial condition and results of operations could be materially adversely affected.

Any acquisitions, partnerships or joint ventures that we make could disrupt our business and harm our financial condition.

From time to time, we may evaluate potential strategic acquisitions of existing stores or complementary businesses as well as partnerships or joint ventures with third parties, including potential franchisors, to facilitate our growth, particularly our international expansion. We may not be successful in identifying acquisition, partnership and joint venture candidates. In addition, we may not be able to continue the operational success of any stores we acquire or successfully finance or integrate any businesses that we acquire or with which we form a partnership or joint venture. We may have potential write-offs of acquired assets and an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. For example, our Chairman, John Barr, co-invested in Project Pie with us and agreed to serve as the chairman of the Project Pie board of managers and as chairman of Project Pie, which may divert his attention from our business and result in potential conflicts of interest. In addition, Project Pie may require us to invest additional capital in the future and also may compete with our stores in certain markets. For a description of our investment in Project Pie, see “Certain Relationships and Related Person Transactions—Project Pie.”

Any acquisition, partnership or joint venture may not be successful, may reduce our cash reserves, may negatively affect our earnings and financial performance and, to the extent financed with stock or the proceeds of debt, may be dilutive to our stockholders or increase our already high levels of indebtedness. We cannot ensure that any acquisition, partnership or joint venture we make will not have a material adverse effect on our business, financial condition and results of operations.

Security breaches of confidential customer information in connection with our electronic processing of credit and debit card transactions may adversely affect our business.

The majority of our store sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information of their customers has been stolen. We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our customers’ credit or debit card information. In addition, most states have enacted legislation

requiring notification of security breaches involving personal information, including credit and debit card information. Any such claim, proceeding, or mandatory notification could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition and results of operations. Further, adverse publicity resulting from these allegations could harm our reputation and could materially adversely affect our business, financial condition and results of operations.

We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brand and adversely affect our business.

Our ability to implement our business plan successfully depends in part on our ability to build brand recognition in the markets served by our stores using our trademarks and other proprietary intellectual property, including our brand names and logos. We have registered or applied to register a number of our trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our goods and services, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands.

We rely on our franchise owners to assist us in identifying issues at the local level. We enforce our rights through a number of methods, including the issuance of cease-and-desist letters. If it became necessary, we would make infringement claims in federal court. If our efforts to register, maintain and protect our trademarks or other intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on our intellectual property, the value of our brand may be harmed, which could have a material adverse effect on our business and might prevent our brand from achieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. A successful claim of infringement against us could result in our being required to pay significant damages or enter into costly licensing or royalty agreements in order to obtain the right to use a third party’s intellectual property, any of which could have a negative impact on our results of operations and harm our future prospects. If such royalty or licensing agreements are not available to us on acceptable terms or at all, we may be forced to stop the sale of certain products or services. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, and divert management’s attention.

We also rely on trade secrets and proprietary know-how to protect our brand. Our methods of safeguarding this information may not be adequate. Moreover, we may face claims of misappropriation or infringement of third parties’ rights that could interfere with our use of this information. Defending these claims may be costly and, if unsuccessful, may prevent us from continuing to use this proprietary information in the future and may require us to pay monetary damages. We do not maintain confidentiality agreements with all of our team members. Even with respect to the confidentiality agreements we have, we cannot assure you that those agreements will not be breached, that they will provide meaningful protection, or that adequate remedies will be available in the event of an unauthorized use or disclosure of our proprietary information. If competitors independently develop or otherwise obtain access to our trade secrets or proprietary know-how, the appeal of our stores could be reduced and our business could be harmed.

Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.

We rely on our computer systems and network infrastructure across our operations, including point-of-sale processing at our stores. Our ability to effectively and efficiently manage our operations depends upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could materially adversely affect our business, financial condition and results of operations and subject us to litigation or actions by regulatory authorities. Remediation of such problems could also result in significant, unplanned expenditures.

An increasingly significant portion of our retail sales depends on the continuing operation of our information technology and communications systems, including but not limited to, our online ordering platform, point-of-sale system and our credit card processing systems. Our information technology, communication systems and electronic

data may be vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses, loss of data, unauthorized data breaches or other attempts to harm our systems. Additionally, we rely on data centers that are also subject to break-ins, sabotage and intentional acts of vandalism that could cause disruptions in our ability to serve our customers and protect customer data. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, intentional sabotage or other unanticipated problems could result in lengthy interruptions in our service. Any errors or vulnerabilities in our systems, or damage to or failure of our systems, could result in interruptions in our services and non-compliance with certain regulations, which could materially adversely affect our business, financial condition and results of operations.

We are subject to extensive government regulation and requirements issued by other groups and our failure to comply with existing or increased regulations could adversely affect our business and operating results.

We are subject to numerous federal, state, local and foreign laws and regulations, as well as, requirements issued by other groups, including those relating to:

the preparation, sale and labeling of food;

building and zoning requirements;

environmental laws;

compliance with the FLSA, which govern such matters as minimum wage, overtime and other working conditions, family leave mandates and a variety of other laws enacted by states that govern these and other employment matters;

the impact of immigration and other local and foreign laws and regulations on our business;

compliance with securities laws and NASDAQ listed company rules;

compliance with the Americans with Disabilities Act of 1990, as amended;

working and safety conditions;

menu labeling and other nutritional requirements;

sales taxes or other transaction taxes;

compliance with the Payment Card Industry Data Security Standards (PCI DSS) and similar requirements;

compliance with the PPACA, and subsequent amendments; and

compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules promulgated thereunder.

We may also become subject to legislation or regulation seeking to tax and/or regulate high-fat foods, foods with high sugar and salt content, or foods otherwise deemed to be “unhealthy.” If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions. In addition, our capital expenditures could increase due to remediation measures that may be required if we are found to be noncompliant with any of these laws or regulations.

We are also subject to a Federal Trade Commission rule and to various state and foreign laws that govern the offer and sale of franchises. Additionally, these laws regulate various aspects of the franchise relationship, including terminations and the refusal to renew franchises. The failure to comply with these laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales, fines or other penalties or require us to make offers of rescission or restitution, any of which could materially adversely affect our business, financial condition and results of operations.

Some of the jurisdictions where we have company-owned and franchise stores do not assess sales tax on our Take ‘N’ Bake pizzas because they are not ready to eat when purchased. Accordingly, we may benefit from a pricing

advantage over some pizza chain competitors in these jurisdictions. If these jurisdictions were to impose sales tax on our products, these stores may experience a decline in sales due to the loss of this pricing advantage. In addition, our stores may be subject to unanticipated sales tax assessments. These sales tax assessments could result in losses to our franchise owners or franchise stores going out of business, which could adversely affect our number of franchise stores and our results of operations. Changes in sales tax assessments of this type at the franchisee level could lead to undercapitalized franchisees going out of business and loss of royalties at the company level. Similarly, such tax assessments could impact the profitability of our company-owned stores. As a result, changes in sales tax assessments could have a material adverse effect on our business, financial condition and results of operations.

Additionally, the failure to obtain and maintain licenses, permits and approvals could adversely affect our business, financial condition and results of operations. Typically, licenses must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing stores and delay or result in our decision to cancel the opening of new stores, which would adversely affect our business, financial condition and results of operations.

Conflict or terrorism could negatively affect our business.

We cannot predict the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against any foreign state or group located in a foreign state or heightened security requirements on local, regional, national or international economies or consumer confidence. Such events could negatively affect our business, including by reducing customer traffic or the availability of commodities.

Our current insurance coverage may not be adequate, insurance premiums for such coverage may increase and we may not be able to obtain insurance at acceptable rates, or at all.

We have retention programs for workers’ compensation, general liability and owned and non-owned automobile liabilities. These insurance policies may not be adequate to protect us from liabilities that we incur in our business. In addition, in the future our insurance premiums may increase and we may not be able to obtain similar levels of insurance on reasonable terms, or at all. Any substantial inadequacy of, or inability to obtain insurance coverage could materially adversely affect our business, financial condition and results of operations.

Changes to accounting rules or regulations may adversely affect our results of operations.

Changes to existing accounting rules or regulations may impact our future results of operations or cause the perception that we are more highly leveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. For instance, accounting regulatory authorities have indicated that they may begin to require lessees to capitalize operating leases in their financial statements in the next few years. If adopted, such change would require us to record significant lease obligations on our consolidated balance sheet and make other changes to our financial statements. This and other future changes to accounting rules or regulations could materially adversely affect our business, financial condition or results of operations.

Risks Relating to Our Company and Our Ownership Structure

We will incur increased costs and obligations as a result of being a public company.

As a privately held company, we were not required to comply with certain corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company, we will incur significant legal, accounting and other expenses that we were not required to incur in the recent past, particularly after we are no longer an “emerging growth company” as defined under the JOBS Act. After this offering, we will be required to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Exchange Act. We will also be required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. We will also become subject to other reporting and corporate governance requirements, including the requirements of NASDAQ, and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. As a public company, we will, among other things:

prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable NASDAQ rules;

create or expand the roles and duties of our board of directors and committees of the board;

institute more comprehensive financial reporting and disclosure compliance functions;

supplement our internal accounting, auditing and reporting function, including hiring additional staff with expertise in accounting and financial reporting for a public company;

enhance and formalize closing procedures at the end of our accounting periods;

enhance our internal audit and tax functions;

enhance our investor relations function;

establish new internal policies, including those relating to disclosure controls and procedures; and

involve and retain to a greater degree outside counsel and accountants in the activities listed above.

These changes will require a significant commitment of additional resources and many of our competitors already comply with these obligations. We may not be successful in implementing these requirements and the significant commitment of resources required for implementing them could adversely affect our business, financial condition and results of operations. In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate NASDAQ listing standards. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

The changes necessitated by becoming a public company require a significant commitment of resources and management oversight that has increased and may continue to increase our costs and might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns.

For as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These exceptions provide for, but are not limited to, relief from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and an extended transition period for complying with new or revised accounting standards. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We may remain an “emerging growth company” for up to five years. See “Prospectus Summary—Implication of Being an “Emerging Growth Company”.” To the extent we do not use exemptions from various reporting requirements under the JOBS Act, we may be unable to realize our anticipated cost savings from those exemptions.

Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act of 2002. The failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and share price.

As a privately held company, we have not been required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404. We anticipate being required to meet these standards in the course of preparing our consolidated financial statements as of and for the fiscal year ended December 28, 2015, and our management will be required to report on the effectiveness of our internal controls over financial reporting for such year. We do not currently have comprehensive documentation of our internal controls, nor do we document or test our compliance with these controls on a periodic basis in accordance with Section 404. Furthermore, we have not tested our internal controls in accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time. If we fail to maintain an effective internal control environment or to comply with the numerous legal and regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financial statements. In the past we have restated our private company financial statements. Specifically, we were previously required to restate our private company financial statements for fiscal years 2012 and 2011, related to the

treatment of certain share-based compensation. If, as a public company, we are required to restate our financial statements, we may fail to meet our public reporting obligations and we may be the subject of negative publicity focusing on financial statement inaccuracies and resulting restatements. Additionally, once we are no longer an “emerging growth company,” our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting on an annual basis. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In preparing our consolidated financial statements for the nine months ended September 30, 2013 and fiscal years 2012 and 2011, a material weakness in our internal control over financial reporting, as defined in the standards established by the U.S. Public Accounting Oversight Board (“PCAOB”), was identified. The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

The material weakness identified resulted from ineffective controls over financial reporting, mainly due to a lack of segregation of financial and accounting duties related to our inability to adequately staff our financial reporting function with a sufficient number of staff with the appropriate experience. To remedy the material weakness, we implemented several measures to improve our internal control over financial reporting, such as increasing the headcount of qualified financial reporting personnel, including hiring an SEC reporting manager and a director of accounting to improve the capabilities of existing financial reporting personnel through training and education in the reporting requirements and deadlines set under GAAP, SEC rules and regulations and the Sarbanes-Oxley Act of 2002. We also engaged independent consultants to assist in establishing processes and oversight measures designed to comply with the requirements under GAAP, SEC rules and regulations and the Sarbanes-Oxley Act of 2002.

In connection with the preparation of our consolidated financial statements for fiscal year 2013, although we had added appropriate additional accounting expertise and resources and no longer identified a material weakness in our internal control over financial reporting, a significant deficiency in our internal control still existed because we were still in the process of building and integrating our new resources and developing a reporting process commensurate with public company reporting. The PCAOB defines a significant deficiency as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting. To remedy the significant deficiency, we continue to integrate our newer personnel and improve our accounting and reporting process. In addition, in January 2014, we hired a new Chief Financial Officer, and we continue to hire additional qualified personnel and improve our information technology controls and systems. We plan to complete the remediation efforts as soon as practicable.

In addition to the remediation efforts noted above, we are in the early stages of addressing our internal control procedures to satisfy the requirements of Section 404, which requires an annual management assessment of the effectiveness of our internal control over financial reporting. We may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable attestation in connection with the attestation provided by our independent registered public accounting firm. We will be unable to issue securities in the public markets through the use of a shelf registration statement if we are not in compliance with Section 404. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules. Any restatement of our financial statements due to a lack of adequate internal controls or otherwise could further result in a loss of public confidence in the reliability of our financial statements and sanctions imposed on us by the SEC. Furthermore, failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and share price due to a lack of investor confidence.

In addition, we will incur additional costs in order to improve our internal control over financial reporting and comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an “emerging growth company.”

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC as a public company, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to five years.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period and, as a result, we plan to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Lee Equity may acquire interests and positions that could present potential conflicts with our and our stockholders’ interests.

Lee Equity makes investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Lee Equity may also pursue, for its own accounts, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Our amended and restated certificate of incorporation will contain provisions renouncing any interest or expectancy held by our directors affiliated with Lee Equity in certain corporate opportunities. Accordingly, the interests of Lee Equity may supersede ours, causing it or its affiliates to compete against us or to pursue opportunities instead of us, for which we have no recourse. Such actions on the part of Lee Equity and inaction on our part could have a material adverse effect on our business, financial condition and results of operations.

Upon the completion of this offering, representatives of Lee Equity will occupy a majority of the seats on our board of directors. In addition, under the new stockholder’s agreement that we expect to enter into in connection with this offering, for so long as Lee Equity (or one or more of its affiliates, to the extent assigned thereto), individually or in the aggregate owns (i) 20% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate two director designees or (ii) 10% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director designee, in each case to serve on the board of directors at any meeting of stockholders at which directors are to be elected to the extent that Lee Equity does not have a director designee then serving on the board of directors. We will take all necessary actions, including, among other things, calling a special meeting of the stockholders, to ensure that Lee Equity has at least one or two designees, as the case may be. Accordingly, we expect that after the first anniversary of this offering, at least two of the Lee Equity representatives serving on our board will resign. Lee Equity could invest in entities that directly or indirectly compete with us. As a result of these relationships, when conflicts arise between the interests of Lee Equity and the interests of our stockholders, these directors may not be disinterested.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, we may elect to delay adoption of new or revised accounting pronouncements applicable to public

companies until such pronouncements are made applicable to private companies. To the extent we choose to do so, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our certificate of incorporation and bylaws, as amended and restated in connection with this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

authorize our board of directors to issue, without further action by the stockholders, up to shares of undesignated preferred stock;

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

specify that special meetings of our stockholders can be called only upon the request of a majority of our board of directors or, at the request of Lee Equity so long as Lee Equity (or its affiliates) owns at least 10% of the voting power of all outstanding shares of our common stock;

establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

prohibit cumulative voting in the election of directors; and

provide that our directors may be removed only for cause by a majority of the remaining members of our board of directors or the holders of a supermajority of our outstanding shares of capital stock.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management, and may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. In addition, because we are incorporated in Delaware, we have opted out of Section 203 of the Delaware General Corporation Law, but our amended and restated certificate of incorporation will provide that engaging in any of a broad range of business combinations with any “interested” stockholder (any stockholder with 15% or more of our capital stock) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited. Our amended and restated certificate of incorporation will contain provisions that have the same effect as Section 203 of the Delaware General Corporations Law, except that they will provide that Lee Equity, or any affiliate thereof or any person or entity which acquires from any of the foregoing stockholders beneficial ownership of 5% or more of then outstanding shares of our voting stock in a transaction or any person or entity which acquires from such transferee beneficial ownership of 5% or more of then outstanding shares of our voting stock other than through a registered public offering or through any broker’s transaction executed on any securities exchange or other over-the-counter market, shall not be deemed an “interested stockholder” for purposes of this provision of our amended and restated certificate of incorporation and therefore not subject to the restrictions set forth in this provision.

Lee Equity will continue to have significant influence over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control.

Upon completion of this offering, investment funds affiliated with Lee Equity will beneficially own % of our outstanding common stock ( % if the underwriters exercise in full the option to purchase additional shares from

the selling stockholders). Under the terms of our amended and restated certificate of incorporation and bylaws, Lee Equity will have consent rights with respect to certain significant matters so long as Lee Equity owns 25% or more of the outstanding shares of our common stock, including among others, certain change of control transactions, issuances of equity securities, the incurrence of significant indebtedness, declaration or payments of non-pro rata dividends, significant investments in, or acquisitions or dispositions of assets, adoption of any new equity-based incentive plan, any material increase in the salary of our Chief Executive Officer, certain amendments to our organizational documents, any material change to our business, or any change to the number of directors serving on our board. So long as Lee Equity owns 10% or more of our issued and outstanding common stock, Lee Equity will be granted access to our customary non-public information and members of our management team and shall have the ability to share our material non-public information with any potential purchaser of us that executes an acceptable confidentiality agreement with us which will include a prohibition on trading on material non-public information. Lee Equity will have the right to assign any of its governance and registration rights to its affiliates or to a third party in connection with the sale by Lee Equity of 10% or more of the issued and outstanding shares of our common stock. Under the terms of a new stockholder’s agreement, for so long as Lee Equity (or one or more of its affiliates, to the extent assigned thereto), individually or in the aggregate owns (i) 20% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate two director designees or (ii) 10% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director designee, in each case to serve on the board of directors at any meeting of stockholders at which directors are to be elected to the extent that Lee Equity does not have a director designee then serving on the board of directors. We will take all necessary actions, including, among other things, calling a special meeting of the stockholders, to ensure that Lee Equity has at least one or two designees, as the case may be. As such, Lee Equity will continue to have substantial influence over us. Such concentration of ownership may also have the effect of delaying or preventing a change in control, which may be to the benefit of this one stockholder but not in the interest of the investors.

Risks Related to this Offering

We expect that our stock price will fluctuate significantly, which could cause the value of your investment in our common stock to decline, and you may not be able to resell your shares at a price at or above the initial public offering price.

Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. The market volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock regardless of our results of operations. The trading price of our common stock is likely to be volatile and subject to significant price fluctuations in response to many factors, including:

market conditions in the broader stock market;

changing economic conditions;

actual or anticipated fluctuations in our quarterly or annual earnings or those of other companies in our industry;

legal or regulatory developments;

the public’s reaction to our press releases, public disclosures, our other public announcements and our filings with the SEC;

changes in accounting standards, policies, guidance, interpretations or principles;

additions or departures of our senior management personnel;

sales, or anticipated sales, of our common stock by our existing investors, directors and executive officers;

adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

actions by shareholders;

issuance of new or changed securities or industry analysts’ reports or recommendations;

litigation or governmental investigations;

acquisitions or strategic alliances by us or our competitors; and

short sales, hedging and other derivative transactions in our common stock.

Our quarterly results of operations may fluctuate significantly because of several factors, including:

the timing of new store openings and related expense;

store operating costs for our newly-opened stores, which are often materially greater during the first several months of operation than thereafter;

labor availability and costs for hourly and management personnel;

profitability of our stores, especially in new markets;

changes in interest rates;

increases and decreases in AWS and comparable store sales;

impairment of long-lived assets and any loss on store closures;

macroeconomic conditions, both nationally and locally;

negative publicity relating to the consumption of products we serve;

changes in consumer preferences and competitive conditions locally and nationally;

expansion to new markets;

increases in infrastructure costs;

fluctuations in commodity prices;

the seasonality of our business; and

our new store openings have historically been fourth quarter focused and we believe that new store openings will continue to be weighted towards the fourth quarter.

These and other factors may cause the market price and demand for shares of our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of our common stock and may otherwise negatively affect the liquidity of our common stock. As a result of these factors, our quarterly and annual results of operations and comparable store sales may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable store sales for any particular future period may decrease. In the future, our results of operations may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease. In the past, when the market price of a stock has been volatile, security holders have often instituted class action litigation against the company that issued the stock. If we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, which could materially adversely affect our business, financial condition and results of operations.

Future sales of our common stock in the public market could cause the market price of our common stock to decrease significantly.

Sales of substantial amounts of our common stock in the public market following this offering by our existing shareholders, upon the exercise of outstanding stock options or stock options granted in the future or by persons who acquire shares in this offering may cause the market price of our common stock to decrease significantly. The perception that such sales could occur could also depress the market price of our common stock. Any such sales could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate.

Upon the completion of this offering, we will have outstanding shares of common stock, of which:

shares are shares that we are selling in this offering and, unless purchased by affiliates, may be resold in the public market immediately after this offering; and

shares will be “restricted securities,” as defined under Rule 144 under the Securities Act, and eligible for sale in the public market subject to the requirements of Rule 144, of which shares are subject to lock-up agreements and will become available for resale in the public market beginning 180 days after the date of this prospectus and of which will become available for resale in the public market immediately following this offering.

In addition, we have reserved shares of common stock for issuance under our equity compensation plans. See “Executive and Director Compensation—2014 Equity Incentive Plan.” Upon consummation of this offering, we expect to have shares of common stock issuable upon exercise of outstanding options ( of which will be fully vested).

With limited exceptions as described under the caption “Underwriting,” the lock-up agreements with the underwriters of this offering prohibit a stockholder from selling, contracting to sell or otherwise disposing of any common stock or securities that are convertible or exchangeable for common stock or entering into any arrangement that transfers the economic consequences of ownership of our common stock for at least 180 days from the date of the prospectus filed in connection with our initial public offering, although the lead underwriters may, in their sole discretion and at any time without notice, release all or any portion of the securities subject to these lock-up agreements. Upon a request to release any shares subject to a lock-up, the lead underwriters would consider the particular circumstances surrounding the request including, but not limited to, the length of time before the lock-up expires, the number of shares requested to be released, reasons for the request, the possible impact on the market for our common stock and whether the holder of our shares requesting the release is an officer, director or other affiliate of ours. As a result of these lock-up agreements, notwithstanding earlier eligibility for sale under the provisions of Rule 144, none of these shares may be sold until at least 180 days after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting.”

We have granted registration rights to Lee Equity and certain of our other stockholders. Should these stockholders exercise their registration rights under our stockholder agreement, the shares registered would no longer be restricted securities and would be freely tradable in the open market. See “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—Existing Stockholders’ Agreement and Registration Rights Provisions.”

As restrictions on resale expire or as shares are registered, our share price could drop significantly if the holders of these restricted or newly registered shares sell them or are perceived by the market as intending to sell them. These sales might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and at a price that we deem appropriate.

In addition, immediately following this offering, we intend to file a registration statement registering under the Securities Act the shares of common stock reserved for issuance under our 2014 Plan. See the information under the heading “Shares Eligible for Future Sale” for a more detailed description of the shares that will be available for future sales upon completion of this offering.

We do not expect to pay any cash dividends on our common stock for the foreseeable future.

Because we do not expect to pay any cash dividends on our common stock for the foreseeable future, investors may be forced to sell their shares in order to realize a return on their investment, if any. We do not anticipate that we will pay any dividends to holders of our common stock for the foreseeable future. Any payment of cash dividends will be at the discretion of our board of directors and will depend on our financial condition, capital requirements, legal requirements, earnings and other factors. Our ability to pay dividends is restricted by the terms of new senior secured credit facilities and might be restricted by the terms of any indebtedness that we incur in the future. Consequently, you should not rely on dividends in order to receive a return on your investment. See “Dividend Policy.”

There is no existing market for our common stock and we do not know if one will develop to provide you with adequate liquidity.

Prior to this offering, there has not been a public market for our common stock. An active market for our common stock may not develop following the completion of this offering, or if it does develop, may not be maintained. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the shares of our common stock will be determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the initial public offering price.

If securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports about our business, our share price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our shares or our competitors’ stock, our share price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. As a result, the market price for our common stock may decline below the initial public offering price and you may not resell your shares of our common stock at or above the initial public offering price.

You will suffer immediate and substantial dilution.

The initial public offering price per share is substantially higher than the pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share that substantially exceeds the net tangible book value of our assets after subtracting the book value of our liabilities. Based on our pro forma net tangible book value as of December 30, 2013 and assuming an offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, you will incur immediate and substantial dilution in the amount of $ per share. See “Dilution.”

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The forward-looking statements contained in this prospectus are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of shares of common stock in this offering will be approximately $ million, after deducting estimated underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus. The underwriters may also purchase up to a maximum of additional shares of common stock from the selling stockholders named in this prospectus to cover over-allotments. If the underwriters exercise their right to purchase such additional shares of common stock from the selling stockholders, which include entities affiliated with members of our Board and certain of our executive officers, we will not receive any proceeds from such sale.

We intend to use net proceeds from this offering to repay $ million in aggregate principal amount of indebtedness under our new senior secured credit facilities, to pay a $1.5 million termination fee associated with our advisory services and monitoring agreement with Lee Equity and to use the remainder for general corporate purposes. Our new senior secured credit facilities bear interest at a variable interest rate of LIBOR plus 5.75%, as calculated pursuant to the agreement governing our new senior secured credit facilities, and mature on October 25, 2018. See “Description of Material Indebtedness—Credit Facility.” We entered into the new senior secured credit facilities in October 2013 and used the proceeds to repay our then existing credit facilities, to make a $31.5 million payment to holders of our Preferred Shares and to fund investments.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us in connection with this offering.

DIVIDEND POLICY

In October 2013, we entered into the new senior secured credit facilities, the proceeds, in part of which were used to make a $31.5 million payment to holders of our Preferred Shares. In addition, on June 12, 2012, we made a $36.1 million payment to holders of our Preferred Shares. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our History and Operations.” We have not declared or paid cash dividends on our common stock. We do not intend to pay cash dividends on our common stock in the foreseeable future. See “Risk Factors—Risks Related to this Offering Structure—We do not expect to pay any cash dividends on our common stock for the foreseeable future.” However, in the future, subject to the factors described below and our future liquidity and capitalization, we may change this policy and choose to pay dividends.

We are a holding company that does not conduct any business operations of our own. As a result our ability to pay cash dividends on our common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries. The ability of our subsidiaries to pay dividends is currently restricted by the terms of the new senior secured credit facilities and may be further restricted by any future indebtedness we or they incur. In addition, under Delaware law, our Board may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

Any future determination to pay dividends will be at the discretion of our Board and will take into account:

restrictions in our debt instruments, including restrictions in our new senior secured credit facilities on our ability to pay dividends on our equity interests or redeem, repurchase or retire our equity interests;

general economic business conditions;

our net income (loss), financial condition and results of operations;

our capital requirements;

our prospects;

the ability of our operating subsidiaries to pay dividends and make distributions to us;

legal restrictions; and

such other factors as our Board may deem relevant.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization, as of December 30, 2013:

on an actual basis;

on a pro forma basis to give effect to (i) the Reorganization Transactions, including the automatic conversion of our Preferred Shares to shares of our common stock and a 1 for stock split of our common stock prior to the consummation of this offering and (ii) the Share Repurchase; and

on a pro forma as adjusted basis to give effect to the aforementioned transactions and to give further effect to the sale of shares of our common stock in this offering at an assumed initial offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated expenses payable by us, the application of the net proceeds received by us from this offering, including the repayment of certain indebtedness and payment of fees associated with the termination of our advisory services and monitoring agreement with Lee Equity, as described under “Use of Proceeds”.

This table should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of Capital Stock” and our financial statements and notes thereto included elsewhere in this prospectus.


	AS OF DECEMBER 30, 2013
	ACTUAL			PRO FORMA	PRO FORMA AS ADJUSTED ⁽¹⁾
	(in thousands)
Cash and cash equivalents	$	3,705		$	$

Liabilities:
Total long-term debt, including current portion ⁽²⁾	$	170,000		$	$

Stockholders’ equity:
Papa Murphy’s Holdings Inc. shareholders’ equity
Common Stock, $0.01 par value; 3,000,000 shares authorized and 1,921,337 shares issued and outstanding on an actual basis; shares authorized and shares issued and outstanding on a pro forma basis; and shares authorized and shares issued and outstanding on a pro forma as adjusted basis	$	19
Series A, 6% cumulative redeemable, 20% participating preferred stock, $0.01 par value; 3,000,000 shares authorized and 2,853,809 issued and outstanding on an actual basis; no shares authorized on a pro forma and pro forma as adjusted basis		60,156
Series B, 6% cumulative redeemable, 20% participating preferred stock, $0.01 par value; 1,000,000 shares authorized and 26,551 shares issued and outstanding on an actual basis; no shares authorized on a pro forma and pro forma as adjusted basis		741
Preferred Stock, $0.01 par value, no shares authorized on an actual basis; no shares authorized and no shares issued and outstanding on a pro forma and pro forma as adjusted basis		—
Additional paid-in capital		1,579
Stock subscription receivable		(1,197	)
Accumulated deficit		(27,373	)
Accumulated other comprehensive income (loss)		—

Total Papa Murphy’s Holdings Inc. shareholders’ equity		33,925
Noncontrolling interests		222

Total equity		34,147		$	$

Total capitalization	$	207,852		$	$

⁽¹⁾

Assuming the number of shares sold by us in this offering remains the same, a $1.00 increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our total capitalization by $ million.

⁽²⁾

Does not include $10.0 million of availability under our revolving credit facility as of December 30, 2013.

DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after the Reorganization Transactions and this offering. Dilution results from the fact that the per share offering price of our common stock is in excess of the net tangible book value per share attributable to new investors.

Our pro forma net tangible book value as of December 30, 2013 was $ , or $ per share of common stock. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, and net tangible book value per share represents net tangible book value divided by the number of shares of common stock outstanding, in each case, after giving effect to the Reorganization Transactions and the Share Repurchase but not this offering.

After giving effect to (i) the sale of shares of common stock in this offering at the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and (ii) the application of the net proceeds from this offering, our pro forma as adjusted net tangible book value as of December 30, 2013 would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to our existing investors and an immediate dilution in pro forma net tangible book value of $ per share to new investors.

The following table illustrates this dilution on a per share of common stock basis:


Assumed initial public offering price per share of common stock				$
Pro forma net tangible book value per share as of December 30, 2013 before this offering
Increase in net tangible book value per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering

Dilution in net tangible book value per share to new investors				$

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $ million, the pro forma as adjusted net tangible book value per share after this offering by $ and the dilution per share to new investors by $ assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters were to fully exercise their option to purchase additional shares of our common stock from the selling stockholders, the pro forma as adjusted net tangible book value per share after this offering would be $ per share, and the dilution in pro forma in net tangible book value per share to new investors in this offering would be $ per share.

The following table summarizes, on a pro forma basis as of December 30, 2013 after giving effect to the Reorganization Transactions, the Share Repurchase and this offering, the total number of shares of common stock purchased from us, the total cash consideration paid to us, or to be paid, and the average price per share paid, or to be paid, by our existing investors and by new investors purchasing shares in this offering, at an assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:


	SHARES PURCHASED				TOTAL CONSIDERATION				AVERAGE PRICE PER SHARE
	NUMBER	PERCENT			AMOUNT	PERCENT			AVERAGE PRICE PER SHARE
Existing stockholders				%	$			%	$
New investors

Total			100	%	$		100	%	$

If the underwriters were to fully exercise their option to purchase additional shares of our common stock from the selling stockholders, the percentage of shares of our common stock held by existing investors would be %, and the percentage of shares of our common stock held by new investors would be %.

The above discussion and tables are based on the number of shares outstanding at December 30, 2013 on a pro forma basis and excludes shares of our common stock issued under our 2014 Plan or reserved for future awards under our equity incentive plans. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined statement of operations for the fiscal years ended December 30, 2013 is based on the historical audited consolidated financial statements of Papa Murphy’s Holdings, Inc. (the “Company”). The unaudited pro forma condensed combined statement of operations gives effect to transactions as if they had occurred as of January 1, 2013.

The unaudited pro forma condensed combined financial information gives pro forma effect to the following transactions:

The 2013 Store Acquisitions:

–

KK Great Pizza acquisition: Acquisition of four franchise stores in Minnesota and Wisconsin from a franchise owner completed on November 4, 2013;

–

TBD Business Group acquisition: Acquisition of four stores in Idaho from a franchise owner completed on December 16, 2013;

The Recapitalization: Repayment of the 2012 Credit Facilities in full and payment of $31.5 million to the holders of our Preferred Shares, using proceeds from our new senior secured credit facilities, entered into on October 25, 2013 and described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recapitalization,” “Description of Material Indebtedness” and in the accompanying notes to the unaudited pro forma condensed combined balance sheet.

As a result of the transactions described above, pro forma adjustments were made to our historical results of operations to reflect:

Changes in depreciation and amortization expense resulting from preliminary estimates of fair value adjustments to net tangible assets and amortizable intangible assets of the acquired businesses;

The changes to our debt and shareholders’ equity resulting from the transactions;

Transaction fees and debt issuance costs incurred as a result of the transactions described above;

The changes in interest expense resulting from the transactions described above; and

The effect of the above adjustments on income tax expense.

The 2013 Store Acquisitions were accounted for as business combinations using the acquisition method of accounting, which established a new basis of accounting for all assets acquired and liabilities assumed at fair value. The unaudited pro forma adjustments are based upon currently available information and certain assumptions that are factually supportable and that we believe are reasonable under the circumstances. For acquisitions that have been reflected in our audited financial statements and for which the measurement period has closed, the adjustments reflect our actual acquisition method accounting. The excess purchase consideration over the fair value of the net assets acquired is recorded as goodwill.

The unaudited pro forma condensed combined financial information is presented for informational purposes only and does not purport to present what our actual consolidated results of operations would have been had the transactions occurred on the dates indicated, nor are they necessarily indicative of future results of operations. Historical results are not necessarily indicative of results that may be expected for any future period. The unaudited pro forma condensed combined financial information should be read in conjunction with “Summary—Summary Historical Consolidated Financial and Other Data,” “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s audited consolidated financial statements and the related notes included elsewhere in this prospectus.

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

PAPA MURPHY’S HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED DECEMBER 30, 2013

(dollars in thousands, except share and per share data)


	HISTORICAL COMPANY ⁽¹⁾			HISTORICAL KK GREAT PIZZA ⁽²⁾		HISTORICAL TBD BUSINESS GROUP ⁽³⁾		ACQUISITION ACCOUNTING ADJUSTMENTS ⁽⁴⁾			RECAPITALIZATION ⁽⁵⁾			PRO FORMA
REVENUES
Franchise royalties	$	36,897		$	—	$	—	$	(336	) ^(a)	$	—		$	36,561
Franchise and development fees		4,330			—		—		—			—			4,330
Company-owned store sales		39,148			2,471		4,242		—			—			45,861
Lease income		120			—		—		—			—			120

Total revenues		80,495			2,471		4,242		(336	)		—			86,872
COSTS AND EXPENSES
Store operating costs (exclusive of depreciation and amortization shown separately below):
Cost of food and packaging		14,700			811		1,603		—			—			17,114
Compensation and benefits		10,687			582		837		—			—			12,106
Advertising		3,820			164		332		—			—			4,316
Occupancy		2,365			171		229		—			—			2,765
Other store operating costs		3,988			267		331		(336	) ^(a)		—			4,250
Selling, general, and administrative		24,180			160		106		—			—			24,446
Depreciation and amortization		6,973			32		115		666	^(b)		—			7,786
Loss on disposal or impairment of property and equipment		847			—		—		—			—			847

Total costs and expenses		67,560			2,187		3,553		330			—			73,630

Operating income		12,935			284		689		(666	)		—			13,242
Interest expense		10,523			—		14		601	^(c)		1,251	^(a)		12,389
Interest income		(94	)		—		—		—			—			(94	)
Loss on early retirement of debt		4,029			—		—		—			—			4,029
Other expense, net		44			—		—		—			—			44

Income (loss) before income taxes		(1,567	)		284		675		(1,267	)		(1,251	)		(3,126	)
Provision (benefit) for income taxes		1,024			—		—		(115	) ^(d)		(469	) ^(b)		440

Net income (loss)		(2,591	)		284		675		(1,152	)		(782	)		(3,566	)
Net loss attributable to noncontrolling interests		19			—		—		—			—			19

Net income (loss) attributable to Papa Murphy’s	$	(2,572	)	$	284	$	675	$	(1,152	)	$	(782	)	$	(3,547	)

Loss per share of common stock
Basic ⁽⁶⁾	$	(5.29	)											$	(5.86	)
Diluted ⁽⁶⁾	$	(5.29	)											$	(5.86	)
Weighted-average common stock outstanding
Basic ⁽⁶⁾		1,700,360													1,700,360
Diluted ⁽⁶⁾		1,700,360													1,700,360

See the accompanying notes to the unaudited pro forma condensed combined statement of operations.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(1) Historical Company

Represents audited consolidated statement of operations of the Company, which includes historical results of operations of KK Great Pizza and TBD Business Group from the 2013 Store Acquisitions.

(2) Historical KK Great Pizza

Represents historical statements of operations of KK Great Pizza for the period prior to the acquisition on November 4, 2013. This information should be read in conjunction with the historical financial statements of KK Great Pizza, included elsewhere in this prospectus. The KK Great Pizza acquisition was consummated on November 4, 2013 and results of operations subsequent to the acquisition are reflected in the Company’s historical statements of operations.

(3) Historical TBD Business Group

Represents historical carve-out statements of operations of TBD Business Group for the period prior to the acquisition on December 16, 2013. This information should be read in conjunction with the carve-out historical financial statements of TBD Business Group, included elsewhere in this prospectus. The TBD Business Group acquisition was consummated on December 16, 2013 and results of operations subsequent to the acquisition date are reflected in the Company’s historical statements of operations.

(4) Acquisition Accounting Adjustments

The following adjustments relate to the acquisition accounting effects of the 2013 Store Acquisitions:

(a)	KK Great Pizza and TBD Business Group were franchise owners of the Company prior to the acquisitions. The adjustment reflects the elimination of franchise royalty revenue of the Company and franchise royalty expense of KK Great Pizza and TBD Business Group as follows (in thousands):


	KK GREAT PIZZA			TBD BUSINESS GROUP			TOTAL
Franchise royalty revenue (Company)		$	124		$	212		$	336
Franchise royalty expense (Acquirees)		$	124		$	212		$	336

(b)	Reflects additional depreciation of property and equipment and amortization of definite-life intangibles (reacquired franchise rights) resulting from the preliminary acquisition accounting related to KK Great Pizza and TBD Business Group acquisitions as follows (in thousands):


	KK GREAT PIZZA		TBD BUSINESS GROUP		TOTAL
Depreciation	$	52	$	7	$	59
Amortization		216		391		607

Total	$	268	$	398	$	666

Depreciation and amortization are calculated based on the estimated fair values and useful lives of the respective assets acquired under the acquisition method of accounting as summarized below (in thousands):


	KK GREAT PIZZA		TBD BUSINESS GROUP		TOTAL		WEIGHTED AVERAGE USEFUL LIVES (YEARS)
Restaurant equipment and fixtures	$	163	$	230	$	393		3.0
Leasehold improvements		114		36		149		4.2
Reacquired franchise rights		547		3,625		4,173		7.2

(c)

Reflects additional interest expense related to notes issued in principal amount of $3.0 million bearing interest at 5.0%, as part of the purchase consideration of TBD Business Group and borrowings under our new senior secured credit facilities in principal amount of $6.4 million with an interest rate of 6.75% to fund the 2013 Store Acquisitions.

(d)

Reflects the estimated tax effects resulting from the pro forma adjustments related to the 2013 Store Acquisitions at the Company’s estimated statutory tax rate of 37.5%. Additionally, this adjustment reflects the pre-acquisition period tax effects of the historical results of operations of KK Great Pizza ($107,000) and TBD Business Group ($253,000) at the Company’s estimated statutory tax rate of 37.5%, as these businesses were non-taxable entities prior to their respective acquisitions by the Company.

(5) Recapitalization

The following adjustments relate to the Company’s Recapitalization transaction:

(a)

Reflects the interest expense under our new term loan facility at an interest rate of 6.75%, plus the fees on the undrawn amount under our new revolving credit facility, and the amortization of deferred financing costs, less historical interest expense in connection with fully repaid 2012 Credit Facilities. In addition, reflects annual administrative agent fees related to our new senior secured credit facilities. Interest expense does not include the amount relating to the portion of borrowings under our new term loan facility incurred to finance the 2013 Store Acquisitions, which is already reflected in the “Acquisition Accounting Adjustments” column.

We currently have a new term loan of $167.0 million outstanding and no borrowings outstanding under our revolving credit facility at the date of the consummation of the 2013 Store Acquisitions and the Recapitalization. Each 0.125% change in interest rates on our new term loan facility above our LIBOR floor would result in approximately $209,000 change in pro forma interest expense for the fiscal years ended December 30, 2013.

(b)	Reflects the estimated tax effects resulting from the pro forma adjustments related to the Recapitalization at the Company’s estimated statutory tax rate of 37.5%.

(6) Earnings Per Share

The unaudited pro forma condensed combined basic and diluted loss per share calculations are based on historical basic and diluted weighted-average shares of common stock. Pro forma basic and diluted loss per share was calculated by dividing pro forma net loss available to common stockholders by the historical basic and diluted weighted-average shares of common stock.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

We derived the selected consolidated statements of operations and cash flows data for fiscal years ended 2013, 2012 and 2011 and the selected consolidated balance sheet data as of December 30, 2013 and December 31, 2012 from our audited consolidated financial statements and related notes thereto included elsewhere in this prospectus. We derived the selected consolidated balance sheet data as of January 2, 2012 from our audited consolidated financial statements and related notes thereto not included in this prospectus. The selected consolidated statements of operations and cash flows data for the period from December 29, 2009 through May 4, 2010 and the period from March 29, 2010 through January 3, 2011 and the selected consolidated balance sheet data as of May 4, 2010 and January 3, 2011 have been derived from our unaudited consolidated financial information, which are not included in this prospectus. The selected consolidated statements of operations and cash flows data for the fiscal year ended December 28, 2009 and the selected consolidated balance sheet data as of December 28, 2009 have been derived from the Predecessor’s audited consolidated financial information, not included in this prospectus. We have prepared the unaudited consolidated financial information set forth below on the same basis as our audited consolidated financial statements and have included all adjustments, consisting of only normal recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for such periods. The results for any interim period are not necessarily indicative of the results that may be expected for a full year.

On May 4, 2010, affiliates of Lee Equity acquired a majority of the capital stock of PMI Holdings Inc., our predecessor. The periods on or prior to May 4, 2010 are referred to as “Predecessor.” Papa Murphy’s Holdings, Inc. was incorporated on March 29, 2010 by affiliates of Lee Equity in connection with the acquisition, and all periods including and after such date are referred to as “Successor.” From March 29, 2010 to May 4, 2010, the date of the acquisition, Papa Murphy’s Holdings, Inc. had no activities other than the incurrence of transaction costs related to the acquisition. The selected historical consolidated financial statements for all Successor periods may not be comparable to those of the Predecessor period.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and our financial statements and the related notes thereto included elsewhere in this prospectus.


	SUCCESSOR												PREDECESSOR
	FISCAL YEAR									MARCH 29, 2010 (DATE OF INCEPTION) THROUGH JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	2013			2012			2011			MARCH 29, 2010 (DATE OF INCEPTION) THROUGH JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	(dollars in thousands, except share and selected operating data, unless otherwise noted)
Consolidated statement of operations data:
Revenues
Franchise royalties	$	36,897		$	35,113		$	33,687		$	20,482		$	11,196		$	30,358
Franchise and development fees		4,330			2,826			2,398			2,029			625			2,433
Company-owned store sales		39,148			28,813			15,619			9,223			5,044			20,866
Lease income		120			164			218			152			128			436

Total revenues		80,495			66,916			51,922			31,886			16,993			54,093
Costs and expenses
Store operating costs:
Cost of food and packaging		14,700			10,741			6,088			3,476			1,844			7,455
Compensation and benefits		10,687			8,160			4,710			2,972			1,545			6,912
Advertising		3,820			2,711			1,514			922			499			2,165
Occupancy		2,365			1,980			1,102			863			368			2,425
Other store operating costs		3,988			2,961			1,722			1,033			573			1,542
Selling, general and administrative		24,180			21,225			20,833			13,929			10,002			19,000
Depreciation and amortization		6,973			6,187			5,798			3,590			1,485			4,878
Loss on disposal or impairment of property and equipment		847			193			263			119			132			948

Total costs and expenses		67,560			54,158			42,030			26,904			16,448			45,325

Operating income		12,935			12,758			9,892			4,982			545			8,768

Interest expense		10,523			10,462			10,410			7,372			806			1,115
Interest income		(94	)		(94	)		(183	)		(180	)		(79	)		(127	)
Loss (gain) on early retirement of debt		4,029			5,138			—			—			874			(95	)
Other expense, net		44			248			41			2			1			(26	)

Income (loss) before income taxes		(1,567	)		(2,996	)		(376	)		(2,212	)		(1,057	)		7,901
Provision (benefit) for income taxes		1,024			(882	)		230			(382	)		169			3,352

Net income (loss)		(2,591	)		(2,114	)		(606	)		(1,830	)		(1,226	)		4,549
Net loss attributable to noncontrolling interests		19			—			—			—			—			751

Net income (loss) attributable to Papa Murphy’s	$	(2,572	)	$	(2,114	)	$	(606	)	$	(1,830	)	$	(1,226	)	$	5,300


	SUCCESSOR												PREDECESSOR
	FISCAL YEAR									MARCH 29, 2010 (DATE OF INCEPTION) THROUGH JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	2013			2012			2011			MARCH 29, 2010 (DATE OF INCEPTION) THROUGH JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	(dollars in thousands, except share, per share and selected operating data, unless otherwise noted)
Loss per common share:
Basic	$	(5.29	)	$	(5.28	)	$	(4.52	)
Diluted		(5.29	)		(5.28	)		(4.52	)
Weighted average of common shares outstanding:		1,700,360			1,623,171			1,591,262
Basic		1,700,360			1,623,171			1,591,262
Diluted
Consolidated statement of cash flows:
Cash flows from operating activities	$	9,874		$	9,356		$	11,804		$	5,591		$	3,785		$	12,051
Cash flows from investing activities		(15,249	)		(5,904	)		(16,062	)		(2,029	)		16			(1,640	)
Cash flows from financing activities		6,613			(5,864	)		(2,563	)		(8,376	)		(4,554	)		(9,789	)
Other Financial Data:
Adjusted EBITDA ⁽¹⁾	$	24,421		$	22,126		$	19,740		$	12,836		$	6,690		$	16,550
Net working capital ⁽²⁾		(1,588	)		(5,003	)		(1,973	)		(541	)		(8,919	)		(8,119	)
Capital expenditures ⁽³⁾		3,037			1,343			2,193			2,396			274			1,587
Selected Operating Data:
Number of stores at end of period
Domestic franchise		1,327			1,270			1,232			1,208			1,149			1,136
Domestic company-owned		69			59			51			33			32			35
International		22			18			18			16			14			14

Total		1,418			1,347			1,301			1,257			1,195			1,185
Number of comparable stores at end of period ⁽⁴⁾
Domestic franchise		1,226			1,194			1,164			1,116			1,073			1,051
Domestic company-owned		68			57			50			33			32			35
International		17			15			16			14			11			9

Total		1,311			1,266			1,230			1,163			1,116			1,095
Domestic AWS per store (whole dollars) ⁽⁵⁾	$	11,099		$	10,923		$	10,640		$	9,912		$	10,811		$	10,615
System-wide comparable store sales growth ⁽⁶⁾		2.8	%		2.9	%		5.7	%		(3.3	)%		(2.4	)%		2.2	%
System-wide sales ⁽⁷⁾	$	785,630		$	739,091		$	701,770		$	422,979		$	230,277		$	630,449
System-wide sales growth ⁽⁸⁾		6.3	%		5.3	%		7.4	%		4.7	%		1.8	%		7.8	%


	SUCCESSOR								PREDECESSOR
	AS OF								AS OF
	DECEMBER 30, 2013		DECEMBER 31, 2012		JANUARY 2, 2012		JANUARY 3, 2011		MAY 4, 2010		DECEMBER 28, 2009
	(dollars in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	3,705	$	2,428	$	4,839	$	4,729	$	1,644	$	2,391
Total current assets		16,377		7,565		9,498		17,012		5,415		6,301
Total current liabilities		17,965		12,568		11,471		17,552		14,334		14,420
Total debt ⁽⁹⁾		170,000		125,280		90,226		92,598		30,700		35,083
Total assets		264,502		246,617		248,386		253,931		64,730		68,143
Total shareholders’ equity		33,925		63,930		100,208		103,338		16,618		17,816

⁽¹⁾

Adjusted EBITDA is calculated as net income (loss) before interest expense, income taxes, depreciation and amortization as adjusted for:

non-recurring or unusual cash fees, costs, charges, losses and expenses;

fees, costs and expenses related to acquisitions and debt refinancing costs;

pre-opening costs with respect to a new store;

management fees and expenses incurred under our advisory services and monitoring agreement with Lee Equity;

fees and expenses incurred in connection with the issuance of debt under the new senior secured credit facilities and related transactions; and

non-cash expenses resulting from purchase accounting adjustments made in accordance with GAAP with respect to acquisitions.

Adjusted EBITDA eliminates the effects of items that we do not consider indicative of our operating performance. Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income (loss), as determined by U.S. generally accepted accounting principles, or GAAP, and our calculation of Adjusted EBITDA may not be comparable to that reported by other companies.

Adjusted EBITDA is a non-GAAP financial measure. Management believes that such financial measure, when viewed with our results of operations in accordance with GAAP and our reconciliation of Adjusted EBITDA to net income (loss), provides additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. By providing this non-GAAP financial measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry.

Management uses Adjusted EBITDA and other similar measures:

as a measurement used in comparing our operating performance on a consistent basis;

to calculate incentive compensation for our employees;

for planning purposes, including the preparation of our internal annual operating budget;

to evaluate the performance and effectiveness of our operational strategies; and

to assess compliance with various metrics associated with our new senior secured credit facilities.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes.

The following table provides a reconciliation of our net income (loss) to Adjusted EBITDA for the periods presented:


	SUCCESSOR												PREDECESSOR
	FISCAL YEAR									MARCH 29, 2010 (DATE OF INCEPTION THROUGH) JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	2013			2012			2011			MARCH 29, 2010 (DATE OF INCEPTION THROUGH) JANUARY 3, 2011			DECEMBER 29, 2009 THROUGH MAY 4, 2010			FISCAL YEAR ENDED DECEMBER 28, 2009
	(dollars in thousands)
Net income (loss)	$	(2,591	)	$	(2,114	)	$	(606	)	$	(1,830	)	$	(1,226	)	$	4,549
Depreciation and amortization		6,973			6,187			5,798			3,590			1,485			4,878
Income tax provision (benefit)		1,024			(882	)		230			(382	)		169			3,352
Interest expense, net		10,429			10,368			10,227			7,192			727			988

EBITDA		15,835			13,559			15,649			8,570			1,155			13,767
(Gain) loss on settlement of liabilities ^(a)		3,943			5,138			(58	)		(33	)		864			(534	)
Loss on disposal or impairment of property and equipment ^(b)		847			193			263			119			132			948
Management transition and restructuring costs ^(c)		587			490			1,783			—			—			1,055
Expense not indicative of future operations ^(d)		1,293			967			—			—			—			343
Management fees and related expenses ^(e)		586			537			797			329			53			129
Transaction costs ^(f)		402			24			59			3,813			4,523			—
Loss from non-controlling interests ^(g)		—			—			—			—			—			409
New store pre-opening expenses ^(h)		19			52			12			—			—			45
Non-cash expenses and non-income based state taxes ⁽ⁱ⁾		909			1,166			1,235			38			(37	)		388

Adjusted EBITDA	$	24,421		$	22,126		$	19,740		$	12,836		$	6,690		$	16,550

^(a)

Represents (gains) losses resulting from refinancing of long-term debt and settlement of asset retirement obligations.

^(b)

Represents non-cash losses resulting from disposal or impairment of property and equipment, including divested company stores.

^(c)

^(d)

Represents (i) non-recurring losses on guaranteed lease payments for company stores acquired by franchise owners; (ii) non-recurring roll-out costs of new uniform program; (iii) a one-time valuation allowance of an international notes receivable resulting from the sale of company-owned stores; and (iv) non-recurring advisory expenses in connection with this offering.

^(e)

^(f)

Represents transaction costs relating to our acquisition by Lee Equity in 2010 and acquisitions and divestitures.

^(g)

Represents losses attributable to non-controlling interests.

^(h)

⁽ⁱ⁾

⁽²⁾

Represents current assets less current liabilities.

⁽³⁾

Represents long-lived asset capital expenditures related to the acquisition of property and equipment and excludes expenditures relating to acquisitions of businesses.

⁽⁴⁾

A comparable store is a store that has been open for at least 52 weeks from the comparable date, which is the Tuesday following the opening date.

⁽⁵⁾

⁽⁶⁾

System-wide comparable store sales growth represents year-over-year sales comparisons for comparable stores.

⁽⁷⁾

System-wide sales include net sales by all of our system-wide stores.

⁽⁸⁾

System-wide sales growth represents year-over-year sales comparisons for system-wide sales.

⁽⁹⁾

Represents total outstanding indebtedness, including current portion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in “Forward-Looking Statements,” “Risk Factors” and elsewhere in this prospectus.

To match our operating cycle, we use a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal years 2013, 2012 and 2011 were 52-week periods ending on December 30, 2013, December 31, 2012 and January 2, 2012, respectively.

Overview

Papa Murphy’s is a high-growth franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States. We were founded in 1981 and have grown our footprint to a total of 1,418 system-wide stores as of December 30, 2013, more than 20 times the stores of our nearest Take ‘N’ Bake pizza restaurant competitor. The Papa Murphy’s experience is different from traditional pizza restaurants. Our customers:

CREATE their fresh customized pizza with high-quality ingredients in our stores or online;

TAKE their fresh pizza home; and

BAKE their pizza fresh in their ovens, at their convenience, for a home-cooked meal served hot.

Our History and Operations

Our history dates back over 30 years and has its roots in Papa Aldo’s Pizza, founded in 1981 in Hillsboro, Oregon and Murphy’s Pizza, founded in 1984 in Petaluma, California. Murphy’s Pizza and Papa Aldo’s were merged into a single entity under the Papa Murphy’s brand in 1995. In 2007, the 1,000th Papa Murphy’s system-wide store opened.

In May 2010, affiliates of Lee Equity acquired all of the equity interests of our parent, PMI Holdings, Inc. Papa Murphy’s Holdings, Inc. was established as a holding company for PMI Holdings, Inc. and its subsidiaries. Under the leadership of our current Chief Executive Officer, we implemented several strategic initiatives, including restructuring our new store development, operations, marketing and finance teams. We rolled out our Focus 5 menu strategy that offers price points ranging the value spectrum in order to increase store traffic and sales through high-quality new product offerings and promotions such as our FAVES and Fresh Pan Pizza offerings, and we introduced online ordering in select markets. We are also in the early stages of testing a store remodel program providing for a more contemporary store format.

Following the Lee Equity acquisition, we also expanded and invested in our senior management team and refinanced our then existing credit facility. In June 2011, we hired Ken Calwell, an industry veteran with extensive experience in the limited service restaurants and pizza restaurants businesses, as our President. In December 2011, Mr. Calwell transitioned into the role of Chief Executive Officer with our prior Chief Executive Officer, John Barr, remaining as Chairman of the Company. In 2013, we began the process of transitioning our Chief Financial Officer and we hired our current Chief Financial Officer, Mark Hutchens, in January 2014.

As of December 30, 2013, we had 1,396 stores in the United States and believe there are significant domestic growth opportunities. We expect the majority of our expansion will result from new franchise store openings, and we also plan to strategically expand our company-owned store base in select markets. Our domestic and international franchise owners opened 98 stores in 2013. Recently, we have also expanded our international presence. We currently have a 10-year master franchise agreement in Canada, with 18 stores open as of December 30, 2013. In addition, in August 2012 we entered into a 20-year master franchise agreement with Saudi Arabia-based MAM FoodCo LLC to open up to 100 franchise stores in the Middle East, specifically in the United Arab Emirates, Oman, Kuwait, Kingdom of Saudi Arabia, Qatar and Bahrain, with four stores open as of December 30, 2013.

From time to time, we also pursue opportunistic acquisitions of stores from franchise owners. We evaluate these acquisition opportunities on a case-by-case basis, taking into account the economic strength of the stores and the potential to further develop the related market. In 2012, we acquired six stores from franchise owners, and in 2013, we acquired 19 stores from franchise owners. In the fourth quarter of 2013 we acquired franchise stores in Colorado, Minnesota and Idaho for an aggregate purchase price of $9.9 million, paid in cash or a combination of cash and promissory notes. The cash portion of the purchase price for each of these acquisitions was funded through available cash and advances on our new senior secured credit facilities (described below), and the acquisitions are accounted for using the acquisition method of accounting. From time to time, we also may sell company-owned stores to franchise owners.

As part of the financing for the Lee Equity acquisition, certain of our subsidiaries entered into a senior secured credit agreement providing for a $73.6 million term loan and a $7.0 million revolving credit agreement and issued an $18.4 million senior subordinated note (collectively, the “2010 Credit Facilities”), a portion of which was used to repay our then existing $30.7 million senior secured term loan. We refinanced the 2010 Credit Facilities in June 2012 with a new $88.0 million senior secured term loan, a $36.2 million senior subordinated term loan and a $10.0 million revolving credit facility (collectively, the “2012 Credit Facilities”). In addition to repaying the borrowings outstanding under the 2010 Credit Facilities, the proceeds of the 2012 Credit Facilities, along with proceeds from the issuance of additional shares of common and preferred stock and cash on hand, were used to pay accreted dividends to preferred stockholders and provide a partial return of initial investment to preferred stockholders (the “2012 Refinancing”).

In October 2013, we entered into a new $177.0 million senior secured credit facility consisting of a $167.0 million senior secured term loan and a $10.0 million revolving credit facility, which includes a $2.5 million letter of credit subfacility (collectively, the “new senior secured credit facilities”), the proceeds of which were used to repay our existing credit facilities, to make a $31.5 million payment to holders of our Preferred Shares and to fund investments. We refer to these transactions as the “Recapitalization.”

In March 2014, we repurchased an aggregate of 48,516 shares of common stock from certain of our executive officers, including an aggregate of 14,014 shares of common stock for which vesting terms were accelerated in connection with the repurchase. We repurchased the shares at a price of $26.80 per share, the then-current fair market value of our common stock, as determined by a third party valuation firm. See “—Critical Accounting Policies—Shared-based Compensation—Valuation of Common Stock and Preferred Shares.”

Recent Developments

Investment in Project Pie

In December 2013, Project Pie Holdings, LLC (“Project Pie Holdings”), a non-wholly owned subsidiary, purchased 387 Series A Convertible Preferred Units (the “Series A Units”) of Project Pie, a fast casual custom-pizza restaurant chain, for an aggregate purchase price of $2.0 million, paid in cash. In March 2014, we made an additional $500,000 investment in Project Pie for 97 preferred convertible units. Each such Series A Unit is convertible at our option into one common unit of Project Pie. On a fully converted basis, these investments represent 30.3% of all issued and outstanding Project Pie common units. Until December 2016, the board of managers of Project Pie has the right to request further capital funding from us in exchange for additional Series A Units up to an aggregate value of $2.5 million in increments of $500,000. After that, the board of managers of Project Pie may continue to request capital funding from us up to an aggregate value of $5.0 million in increments of $500,000, in exchange for which we may purchase additional Series A Units at our option. We also have the right to purchase common units

from other members following the completion of Project Pie’s fiscal year 2015 audited financial statements in an amount that would increase our ownership of all common units to 51.0% on a fully converted basis. Similarly, following the completion of Project Pie’s fiscal year 2017 audited financial statements, we have the right to purchase all of the common units from other members, subject to certain exceptions. We also have certain preemptive and registration rights with respect to Project Pie’s securities as well as consent and voting rights with respect to certain significant matters, including certain change of control transactions, issuances of new equity securities, certain matters related to operations and the incurrence of significant debt. In addition, we may designate two members of Project Pie’s board of managers, which initially are John Barr, our Chairman, and Yoo Jin Kim, one of our directors and a partner at Lee Equity. Mr. Barr serves as chairman of Project Pie and of the Project Pie board of managers and also owns approximately 11% of the equity interests of Project Pie Holdings, which he acquired at the same time as our investment in Project Pie. See “Certain Relationships and Related Person Transactions—Project Pie.”

Our Segments

We operate in three business segments: Domestic Franchise, Domestic Company Stores and International. Our Domestic Franchise segment consists of our domestic franchise stores, which represent the majority of our system-wide stores. Our Domestic Company Stores segment consists of our company-owned stores in the United States. Our International segment consists of our stores outside of the United States, all of which are franchise stores. As of December 30, 2013, we had 18 franchise stores in Canada and four franchise stores in the United Arab Emirates. The following table sets forth our revenues, operating income and depreciation and amortization for each of our segments for the periods presented:


	FISCAL YEAR
	2013			2012			2011
	(dollars in thousands)
Revenues
Domestic Franchise	$	40,450		$	37,998		$	36,115
Domestic Company Stores		39,148			28,813			15,619
International		897			105			188

Total	$	80,495		$	66,916		$	51,922

Operating Income
Domestic Franchise	$	20,540		$	17,503		$	15,899
Domestic Company Stores		(408	)		(344	)		(1,183	)
International		(24	)		(611	)		(179	)
Other ⁽¹⁾		(7,173	)		(3,790	)		(4,645	)

Total	$	12,935		$	12,758		$	9,892

Depreciation and Amortization
Domestic Franchise	$	4,753		$	4,745		$	5,165
Domestic Company Stores		2,193			1,408			601
International		27			34			32

Total	$	6,973		$	6,187		$	5,798

⁽¹⁾

Represents corporate costs and intersegment elimination

Key Operating Metrics

We evaluate the performance of our business using a variety of operating and performance metrics. Set forth below is a description of our key operating metrics.

Average Weekly Sales. AWS consists of the average weekly sales of franchise and company-owned stores over a specified period of time. AWS is calculated by dividing the total net sales of our stores for the relevant time period by the number of weeks the same stores were open in such time period. This measure allows management to assess changes in customer traffic and spending patterns at our system-wide stores. We evaluate AWS on domestic stores separately from international stores.

Comparable Store Sales Growth. Comparable store sales growth represents the change in year-over-year sales for comparable stores. A comparable store is a store that has been open for at least 52 full weeks from the comparable date (the Tuesday following the opening date). As of the end of fiscal years 2013, 2012 and 2011, there were 1,294, 1,251 and 1,214 domestic comparable stores, respectively. This measure highlights the performance of existing stores, while excluding the impact of newly opened or closed stores. Comparable store sales growth reflects changes in the number of transactions and in customer spend per transaction at existing stores. Customer spend per transaction is affected by changes in menu prices and the mix and number of items sold per customer.

System-Wide Sales . System-wide sales include net sales by all of our system-wide stores. This measure allows management to assess changes in our royalty revenues, our overall store performance, the health of our brand and our position relative to competitors.

Adjusted EBITDA . We define Adjusted EBITDA as net income (loss) before interest expense, provision for (benefit from) income taxes and depreciation and amortization, with further adjustments to reflect the additions and eliminations of certain income statement items including non-cash charges, income and expenses that we consider not indicative of ongoing operations and certain other adjustments. For a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, see “Summary—Summary Historical Consolidated Financial and Other Data.”

Store Openings, Closures, Acquisitions and Divestitures . Management reviews the number of new stores, the number of closed stores, and the number of acquisitions and divestitures of stores to assess growth in system-wide sales, royalty revenues and company-owned store sales.

The following table sets forth our AWS for domestic franchise and company-owned stores, our comparable store sales growth, our system-wide sales, Adjusted EBITDA and our number of stores for fiscal years 2013, 2012 and 2011.


	FISCAL YEAR
	2013			2012			2011
Domestic AWS	$	11,099		$	10,923		$	10,640
Comparable store sales growth		2.8	%		2.9	%		5.7	%
System-wide sales (dollars in thousands)	$	785,630		$	739,091		$	701,770
Adjusted EBITDA (dollars in thousands)	$	24,421		$	22,126		$	19,740
Number of system-wide stores at period end		1,418			1,347			1,301

Key Financial Definitions

Revenues. Substantially all of our revenues are derived from sales of pizza and other food and beverage products to the general public by company-owned stores, as well as the collection of franchise royalties and fees associated with franchise and development rights. We generated 45.8%, 52.5% and 64.9% of our revenues from franchise royalties and 48.6%, 43.1% and 30.1% of our revenues from company-owned store sales in fiscal years 2013, 2012 and 2011, respectively. The increase of sales at company-owned stores as a percentage of revenues reflects the impact of our opportunistic acquisitions of stores from franchise owners during these periods. System-wide store sales are the primary driver of our revenues. Typically, system-wide sales are impacted by a number of factors, including the success of our franchise and company-owned store operations, advertising and marketing campaigns and new

product launches as well as general customer demand. System-wide sales of our pizzas, food and beverages are generally lower in summer months, when family vacations and seasonal activities translate into reduced demand for Take ‘N’ Bake pizza and are higher in the fall, winter and spring corresponding to times when families tend to dine at home. The following is a brief description of our components of revenues.

Franchise Royalties . We earn franchise royalties in our Domestic Franchise and International segments based on a percentage of franchise store sales of pizza and other food and beverage products. The majority of our franchise agreements require our franchise owners to pay us a royalty of 5.0% of their sales net of discounts. We collect these royalties on a weekly basis.

Franchise and Development Fees . Franchise and development fees, which we earn from our Domestic Franchise and International business segments, consist of initial franchise fees and development fees related to new store openings, as well as fees to renew or extend franchise agreements and transfer fees. Initial franchise fees and development fees are recognized upon the earlier of the opening of a store, which is when we have performed all of our obligations related to such fees or openings, or the forfeiture of any deposits made in connection with the franchise agreement. Initial franchise fees are impacted by the number of new franchise store openings in a specified period. New franchise store openings generally are higher in the first and fourth fiscal quarters, when our system-wide sales are higher. Successive (renewal) fees and transfer fees are recognized when a replacement franchise agreement becomes effective, usually upon the expiration of an initial franchise agreement or a replacement franchise agreement, which generally have terms of 10 years and five years, respectively.

Company-Owned Store Sales . Our Domestic Company Store segment generates revenues through sales of pizza and other food and beverage items at our company-owned stores net of discounts.

Lease Income . We earn lease income in our Domestic Franchise segment from the sublease of real estate of closed company-owned stores. Lease income is recognized in the period earned, which coincides with the period the expense is due to the master leaseholder.

Store Operating Costs. Store operating costs relate to our Domestic Company Store segment and consist of cost of food and packaging, compensation and benefits, advertising, occupancy costs and other store operating costs. Set forth below is a brief description of each of these costs. We expect all of our store operating costs to increase as we open new company-owned stores and acquire franchise stores.

Cost of Food and Packaging . Cost of food and packaging include the direct costs of our food and beverage items sold in company-owned stores and the costs of packaging our menu items. Food and packaging costs can be expected to fluctuate with the increases or decreases in revenues of our Domestic Company Store segment. Fluctuations in our food and packaging costs are caused primarily by changes to our Domestic Company Store segment revenues and fluctuations in commodity costs.

Compensation and Benefits . Compensation and benefits expense consists primarily of management and hourly labor costs at our company-owned stores, which include regional supervisors and store manager salaries and bonuses, hourly wages, payroll taxes, workers’ compensation expense and employee benefits.

Advertising . Advertising costs of our company-owned stores consist of local marketing expenses and contributions to certain advertising cooperatives. Company-owned stores typically spend at least 5.0% of net sales on local marketing and other advertising through DMA cooperatives.

Occupancy . Occupancy costs include rent, common area maintenance costs, property insurance, property taxes and adjustments to straight-line rent.

Other Store Operating Expenses . Other store operating expenses include supplies, utilities, repairs and maintenance, meals and entertainment, travel costs, insurance, dues and subscriptions, recruitment advertisement, accretion of long-term liabilities and other company-owned store operating expenses.

Selling, General and Administrative. Selling, general and administrative costs consist of wages, benefits, franchise development expenses, other compensation, travel, marketing, accounting fees, legal fees, sponsor management fees

and other expenses related to the infrastructure required to support our franchise and company-owned stores. Selling, general and administrative costs also include net advertising expenses of an advertising fund we manage on behalf of all system-wide stores, stock based compensation expense, valuation effects of a liability relating to certain common stock and Preferred Shares subject to put options, transition and restructuring costs. We incurred costs relating to severance, retention, recruitment, legal, relocation and share-based compensation totaling approximately $490,000 and $1.8 million during 2012 and 2011, respectively. In fiscal year 2013, we incurred approximately $540,000 of severance and recruitment fees related to the transition of our Chief Financial Officer. We expect to incur additional expenses in connection with hiring our new Chief Financial Officer in 2014. We also expect to incur an additional expense related to the payment of a termination fee associated with our advisory services and monitoring agreement with Lee Equity in connection with this offering and which we expect to pay with a portion of the net proceeds from this offering. We expect our selling, general and administrative expense to increase as we incur additional legal, accounting, insurance and other expenses associated with being a public company.

Depreciation and Amortization. These non-cash charges relate to the depreciation of fixed assets, including leasehold improvements and equipment and the amortization of the reacquired franchise rights relating to our acquisition of certain franchise stores.

Loss on Disposal or Impairment of Property and Equipment. Losses on the disposal or impairment of property and equipment include the loss on the disposal of assets related to retirement and replacement of our property and equipment, which is recognized at the time the property is disposed or the time when we enter into a binding agreement to dispose of such property, and impairment charges, if any, related to our property and equipment, which are recognized at the time we measure such impairment.

Interest Expense. Interest expense consists primarily of interest on borrowings, and the amortization of costs incurred to obtain long-term financing. We expect interest expense to decrease upon the application of the proceeds of this offering to repay a portion of our new senior secured credit facilities.

Interest Income. Interest income consists of interest income on our cash and cash equivalent balances and notes receivable.

(Gain) Loss on Early Retirement of Debt. (Gain) loss on early retirement of debt includes non-recurring gains and losses relating to the repayment of debt in connection with the Recapitalization and the 2012 Refinancing.

Other Expense (Income). Other expense (income) includes foreign exchange rate gains or losses, Delaware franchise tax and losses from guarantees of lease payments.

Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes represents federal, state and local taxes based on income in multiple jurisdictions. Our provision (benefit) for income taxes was $1.0 million, $(882,000) and $230,000 in fiscal years 2013, 2012 and 2011, respectively. Our income taxes have varied from what would be expected by applying the prevailing statutory rates mainly due to the impact of a change in the blended state tax rate. We have net operating loss (“NOL”) carry forwards that will be available in 2014 to lower taxable income. We expect that a majority of our NOL carry forwards will be used by the end of 2014, after which we will be subject to statutory tax rates.

Segment Operating Income (Loss) . Operating income (loss) measured by segment reflects segment earnings before interest expense, interest income, income taxes, loss on early retirement of debt, management fees payable to Lee Equity and other corporate expenses.

Results of Operations

The following table sets forth our results of operations in dollars and as a percentage of total revenues for the fiscal years 2013, 2012 and 2011.


	FISCAL YEAR
	2013						2012						2011
	$			TOTAL % OF REVENUES			$			TOTAL % OF REVENUES			$			TOTAL % OF REVENUES
	(dollars in thousands)
Revenues
Franchise royalties	$	36,897			45.8	%	$	35,113			52.5	%	$	33,687			64.9	%
Franchise and development fees		4,330			5.4	%		2,826			4.2	%		2,398			4.6	%
Company-owned store sales		39,148			48.6	%		28,813			43.1	%		15,619			30.1	%
Lease income		120			0.2	%		164			0.2	%		218			0.4	%

Total revenues		80,495			100.0	%		66,916			100.0	%		51,922			100.0	%
Costs and Expenses
Store operating costs (exclusive of depreciation and amortization shown separately below):
Cost of food and packaging ⁽¹⁾		14,700			18.3	%		10,741			16.1	%		6,088			11.7	%
Compensation and benefits ⁽¹⁾		10,687			13.3	%		8,160			12.2	%		4,710			9.1	%
Advertising ⁽¹⁾		3,820			4.7	%		2,711			4.1	%		1,514			2.9	%
Occupancy ⁽¹⁾		2,365			2.9	%		1,980			3.0	%		1,102			2.1	%
Other restaurant operating costs ⁽¹⁾		3,988			5.0	%		2,961			4.3	%		1,722			3.3	%
Selling, general and administrative		24,180			30.0	%		21,225			31.7	%		20,833			40.1	%
Depreciation and amortization		6,973			8.7	%		6,187			9.2	%		5,798			11.2	%
Loss on disposal of property and equipment		847			1.0	%		193			0.3	%		263			0.5	%

Total costs and expenses		67,560			83.9	%		54,158			80.9	%		42,030			80.9	%

Operating Income		12,935			16.1	%		12,758			19.1	%		9,892			19.1	%

Interest expense		10,523			13.1	%		10,462			15.6	%		10,410			20.1	%
Interest income		(94	)		(0.1	)%		(94	)		(0.1	)%		(183	)		(0.4	)%
Loss on early retirement of debt		4,029			5.0	%		5,138			7.7	%		—			0.0	%
Other expense		44			0.0	%		248			0.4	%		41			0.1	%

Loss Before Provision (Benefit) For Income Taxes		(1,567	)		(1.9	)%		(2,996	)		(4.5	)%		(376	)		(0.7	)%
Provision (benefit) for income taxes		1,024			1.3	%		(882	)		(1.3	)%		230			0.4	%

Net Loss		(2,591	)		(3.2	)%		(2,114	)		(3.2	)%		(606	)		(1.2	)%
Net loss attributable to noncontrolling interests		19			0.0	%		—			0.0	%		—			0.0	%

Net loss attributable to Papa Murphy’s	$	(2,572	)		(3.2	)%	$	(2,114	)		(3.2	)%	$	(606	)		(1.2	)%

⁽¹⁾

Cost of food and packaging represented 37.5%, 37.3% and 39.0% of company-owned store sales for the fiscal years 2013, 2012 and 2011, respectively. Compensation and benefits represented 27.3%, 28.3%, and 30.2% of company-owned store sales for the fiscal years 2013, 2012 and 2011, respectively. Advertising represented 9.8%, 9.4% and 9.7% of company-owned store sales for the fiscal years 2013, 2012 and 2011, respectively. Occupancy represented 6.0%, 6.9% and 7.1% of company-owned store sales for the fiscal years 2013, 2012 and 2011, respectively. Other restaurant operating costs represented 10.2%, 10.3% and 11.0% of company-owned store sales for the fiscal years 2013, 2012 and 2011, respectively.

Fiscal Year 2013 Compared with Fiscal Year 2012

Revenues

Total Revenues. Total revenues increased by $13.6 million, or 20.3%, to $80.5 million in 2013 from $66.9 million in 2012.

Franchise Royalties. Franchise royalties increased by $1.8 million, or 5.1%, to $36.9 million in 2013 from $35.1 million in 2012 due to the increase in the number of domestic franchise stores from 1,270 in 2012 to 1,327 in 2013, and comparable store sales growth of 2.8% for domestic franchise stores, resulting primarily from a favorable impact of product mix, pricing and an increase in transactions.

Franchise and Development Fees. Franchise and development fees increased by $1.5 million, or 53.6%, to $4.3 million in 2013 from $2.8 million in 2012 due to recognition of franchise development fees related to our agreement to open franchise stores in the Middle East, fees earned from the addition of 21 new franchise stores during 2013 compared to 2012 and increased successive fees.

Company-Owned Store Sales. Company-owned store sales increased by $10.3 million, or 35.8%, to $39.1 million in 2013 from $28.8 million in 2012 due to the acquisition of 19 company-owned stores and comparable store sales growth of 4.2% for company-owned stores, resulting primarily from a favorable impact of product mix, pricing and an increase in transactions.

Lease Income. Lease income decreased by $44,000, or 26.8%, to $120,000 in 2013 from $164,000 in 2012 due to the expiration of certain subleases.

Costs and Expenses

Total Costs and Expenses. Total costs and expenses increased by $13.4 million, or 24.7%, to $67.6 million in 2013 from $54.2 million in 2012.

Store Operating Costs. Store operating costs increased by $9.0 million, or 33.8%, to $35.6 million in 2013 from $26.6 million in 2012 due to the acquisition of 19 company-owned stores. In addition, we had increased variable costs related to a 4.2% increase in comparable store sales because as comparable store sales increase, costs related to food and labor at those stores generally increase. As a percentage of company-owned store sales, total company-owned store expenses decreased to 91.0% in 2013, from 92.4% in 2012.

Cost of Food and Packaging . Cost of food and packaging increased by $4.0 million, or 37.4%, to $14.7 million in 2013 from $10.7 million in 2012 due to the acquisition of 19 company-owned stores and a 4.2% increase in comparable store sales, resulting in an increased demand for food and supplies at our company-owned stores.

Compensation and Benefits . Compensation and benefits increased by $2.5 million, or 30.5%, to $10.7 million in 2013 from $8.2 million in 2012 due to increased headcount resulting from the acquisition of 19 company-owned stores and a 4.2% increase in comparable store sales, which resulted in additional hourly labor costs to support increased sales in those stores.

Advertising . Advertising increased by $1.1 million, or 40.7%, to $3.8 million in 2013 from $2.7 million in 2012 due to increased marketing spending and advertising through DMA cooperatives.

Occupancy . Occupancy increased by $385,000, or 19.3%, to $2.4 million in 2013 from $2.0 million in 2012 due to occupancy costs associated with the 19 acquired company-owned stores.

Other Store Operating Costs . Other store operating costs increased by $1.0 million, or 33.3%, to $4.0 million in 2013 from $3.0 million in 2012 due to the acquisition of 19 company-owned stores and a 4.2% increase in comparable store sales.

Selling, General and Administrative. Selling, general and administrative expenses increased by $3.0 million, or 14.2%, to $24.2 million in 2013 from $21.2 million in 2012 primarily due to $1.2 million of increased consulting

expenses and increased marketing expenses, including costs of producing a new television commercial, and increased corporate staffing expenses, including severance costs. As a percentage of revenues, selling, general and administrative expense declined to 30.0% in 2013 from 31.7% in 2012.

Depreciation and Amortization. Depreciation and amortization increased by $786,000, or 12.7%, to $7.0 million in 2013 from $6.2 million in 2012 primarily due to an increase in the number of company-owned stores and increased acquisitions of property and equipment for business technology projects.

Loss on Disposal or Impairment of Property and Equipment. Loss on disposal and impairment of property and equipment increased by $654,000, or 338.9%, to $847,000 in 2013 from $193,000 in 2012 due primarily to asset impairment charges of $565,000 related to the classification of assets held for sale and performance at certain of our stores in the Domestic Company Store segment.

Interest Expense. Interest expense increased by $61,000, or 0.6%, to $10.5 million in 2013 from $10.5 million in 2012 due to an increase in our outstanding debt in October 2013 related to the Recapitalization, partially offset by a reduction in the interest rates resulting from a debt modification to our 2012 credit facilities in March 2013.

Interest Income. Interest income was flat at $94,000 in 2013 and 2012 primarily due to similar average cash and cash equivalent balances during fiscal year 2013.

Loss on Early Retirement of Debt. Loss on early retirement of debt decreased by $1.1 million, or 21.6%, to $4.0 million in 2013 from $5.1 million in 2012. The Recapitalization met the definition of a partial debt extinguishment for accounting purposes and resulted in a write-off of $2.9 million, $388,000 in additional expenses, and a prepayment penalty of $724,000. The 2012 Refinancing met the definition of a debt extinguishment for accounting purposes and resulted in a write-off of existing deferred financing costs of $3.3 million and a prepayment penalty of $1.8 million.

Other Expense. Other expense decreased by $204,000, or 82.3%, to $44,000 in 2013 from $248,000 in 2012 primarily due to reduced losses related to payments made under lease guarantee arrangements for company stores that were sold beyond the fair value of the guarantee at the date the store was sold.

Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes increased by $1.9 million, or 215.4%, to $1.0 million in 2013 from a benefit of $(882,000) in 2012 due primarily to the tax impact of extinguishing the put option, which increased tax expense by $995,000.

Segment Results

Domestic Franchise. Total revenues for the Domestic Franchise segment increased by $2.5 million, or 6.6%, to $40.5 million in 2013 from $38.0 million in 2012 due to the net addition of 57 domestic franchise stores and segment comparable store sales growth of 2.8%.

Operating income for the Domestic Franchise segment increased by $3.0 million, or 17.1%, to $20.5 million in 2013 from $17.5 million in 2012 due to a growth in revenue of $2.5 million and a reduction of expenditures paid to assist franchise owners with a roll-out of a new uniform program in 2012 and other assistance totaling $482,000.

Domestic Company Stores. Total revenues for the Domestic Company Stores segment increased by $10.3 million, or 35.8%, to $39.1 million in 2013 from $28.8 million in 2012 due to the acquisition of 19 company-owned stores and segment comparable store sales growth of 4.2%.

Operating loss for the Domestic Company Stores segment increased by $64,000, or 18.6%, to $408,000 in 2013 from $344,000 in 2012 due to higher operating margins and increased revenues from acquired company-owned stores, and increased depreciation and amortization of $785,000 and an increased loss on disposal of property and equipment of $656,000 related primarily to asset impairment charges.

International. Total revenues for the International segment increased by $792,000 to $897,000 in 2013 from $105,000 in 2012 due primarily to $750,000 in revenues from area development fees related to our expansion in the Middle East.

Operating loss for the International segment decreased by $587,000, to $24,000 in 2013 from $611,000 in 2012 due to increased revenues of $792,000 and increased franchising expenses of $205,000.

Fiscal Year 2012 Compared with Fiscal Year 2011

Revenues

Total Revenues. Total revenues increased by $15.0 million, or 28.9%, to $66.9 million in 2012 from $51.9 million in 2011. This increase was primarily due to increases in franchise royalties and company-owned store sales.

Franchise Royalties. Franchise royalties increased by $1.4 million, or 4.2%, to $35.1 million in 2012 from $33.7 million in 2011 due to an increase in comparable store sales for domestic franchise stores of 2.8%, resulting primarily from a favorable impact of product mix, pricing and an increase in transactions.

Franchise and Development Fees. Franchise and development fees increased by $428,000, or 17.8%, to $2.8 million in 2012 from $2.4 million in 2011 due to 77 new franchise store openings, additional fees related to forfeitures of franchise fees from the termination or expiration of franchise agreements and increased successive and transfer fees.

Company-Owned Store Sales. Company-owned store sales increased by $13.2 million, or 84.6%, to $28.8 million in 2012 from $15.6 million in 2011 due to an increase in comparable store sales for company-owned stores of 5.1%, resulting primarily from a favorable impact of product mix, pricing and an increase in transactions, and the acquisition of six company-owned stores and the opening of two company-owned stores during 2012 and the full-year impact of nineteen company-owned stores acquired in December 2011.

Lease Income. Lease income decreased by $54,000, or 24.8%, to $164,000 in 2012 from $218,000 in 2011 due to the expiration of certain subleases.

Costs and Expenses

Total Costs and Expenses. Total costs and expenses increased by $12.2 million, or 29.0%, to $54.2 million in 2012 from $42.0 million in 2011 primarily due to an $11.5 million increase in company-owned store expenses, a $392,000 increase in selling, general and administrative expenses, and a $389,000 increase in depreciation and amortization expense, partially offset by decreases in losses on the disposal of property and equipment.

Store Operating Costs. Store operating costs increased by $11.5 million, or 76.2%, to $26.6 million for the fiscal year 2012 from $15.1 million for fiscal year 2011, corresponding to our acquisition of six company-owned stores and the opening of two company-owned stores in 2012 and the full-period impact of the acquisition of 19 company-owned stores in December 2011, in conjunction with an increase in our variable costs related to food and labor associated with a 5.1% increase in comparable store sales. As a percentage of company-owned store sales, total company-owned store expenses decreased to 92.4% in 2012, from 96.8% in 2011 due primarily to improvements in store labor productivity, a slight decrease in cheese costs and the acquisition of higher volume stores into the Domestic Company Stores segment.

Cost of Food and Packaging . Cost of food and packaging increased by $4.6 million, or 75.4%, to $10.7 million for 2012 from $6.1 million for 2011 due to our acquisition of six company-owned stores and the opening of two company-owned stores in 2012 and the full-period impact of 19 company-owned stores acquired in December 2011, and increased variable costs associated with a 5.1% increase in comparable store sales, resulting in an increased demand for food and supplies at our company-owned stores.

Compensation and Benefits . Compensation and benefits increased by $3.5 million, or 74.5%, to $8.2 million in 2012 from $4.7 million for 2011 due increased headcount resulting from our acquisition of six company-owned stores and the opening of two company-owned stores in 2012 and the full-period impact of 19 company-owned stores acquired in December 2011, and increased variable costs associated with a 5.1% increase in comparable store sales, which resulted in additional hourly labor costs to support increased sales in those stores.

Advertising . Advertising increased by $1.2 million, or 80.0%, to $2.7 million in 2012 from $1.5 million for 2011 due to increased marketing spending and advertising through DMA cooperatives.

Occupancy . Occupancy increased by $878,000, or 79.8%, to $2.0 million in 2012 from $1.1 million for 2011 due to occupancy costs associated with the acquisition of six company-owned stores and the opening of two company-owned stores in 2012 and the full-period impact of 19 company-owned stores acquired in December 2011.

Other store operating costs . Other store operating costs increased by $1.3 million, or 76.5%, to $3.0 million in 2012 from $1.7 million in 2011 due to our acquisition of six company-owned stores and the opening of two company-owned stores in 2012 and the full-period impact of nineteen company-owned stores acquired in December 2011, and a 5.1% increase in comparable store sales.

Selling, General and Administrative. Selling, general and administrative expenses increased by $392,000, or 1.9%, to $21.2 million in 2012 from $20.8 million in 2011 primarily due to additional corporate staffing and recruitment costs to support future revenue growth.

Depreciation and Amortization. Depreciation and amortization increased by $389,000, or 6.7%, to $6.2 million in 2012 from $5.8 million in 2011 due to an increase in the number of company-owned stores.

Loss on Disposal or Impairment of Property and Equipment. Loss on disposal or impairment of property and equipment declined $70,000, or 26.6%, to $193,000 in 2012 from $263,000 in 2011 due to lower charges associated with the write-off of capitalized software costs.

Interest Expense. Interest expense did not materially change from 2011 to 2012. Although our total long-term debt increased to $125.3 million as of December 31, 2012 in connection with the 2012 Refinancing from $90.2 million as of January 2, 2012, we significantly reduced our interest rate to the greater of LIBOR or 1.3% plus an applicable margin of between 5.0% and 5.3% (as determined by a leverage ratio) from the greater of LIBOR or 2.0% plus an applicable margin of 8.0% on the first lien term loan component of the 2012 Credit Facilities to the greater of LIBOR or 1.3% plus 9.3% from a fixed 13.0% on the second lien term loan component of the 2012 Credit Facilities.

Interest Income. Interest income decreased in 2012 from 2011 primarily due to lower average cash and cash equivalent balances and lower average notes receivable balances year-over-year.

Loss on Early Retirement of Debt. Loss on early retirement of debt increased substantially in 2012 as a result of the 2012 Refinancing. The $5.1 million of loss on early retirement of debt consists of $3.3 million of unamortized deferred debt issuance costs, a prepayment penalty of $1.8 million and other de minimis costs.

Other Expense. Other expense increased $207,000 to $248,000 in 2012 from $41,000 in 2011 due primarily to losses related to payments made under lease guarantee arrangements for previously owned company stores.

Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes was $(882,000) in 2012 compared to $230,000 in 2011. The change from a tax provision to a tax benefit is primarily attributable to the change in pretax income.

Segment Results

Domestic Franchise . Total revenues for the Domestic Franchise segment increased by $1.9 million, or 5.3%, to $38.0 million in 2012 from $36.1 million in 2011 due to an increase in franchise royalties of $1.5 million, or 4.4%, and an increase in franchise and development fees of $455,000, or 19.3%. The increase in franchise royalties is primarily due to the opening of 77 new franchise stores in 2012 and a 2.8% increase in comparable store sales for domestic franchise stores. The increase in franchise and development fees is primarily due to the increase in successive fees of $264,000 and the opening of 10 more domestic franchise stores in 2012.

Operating income for the Domestic Franchise segment increased by $1.6 million or 10.1%, to $17.5 million in 2012 from $15.9 million in 2011 due primarily to the revenue growth of $1.9 million.

Domestic Company Stores . Total revenues for the Domestic Company Stores segment increased by $13.2 million, or 84.6%, to $28.8 million in 2012 from $15.6 million in 2011 due to a 5.1% increase in comparable store sales for company-owned stores, our acquisition of six company-owned stores and the opening of two company-owned stores in 2012 , and the full-period impact of nineteen stores acquired in December 2011.

Operating loss for the Domestic Company Store segment decreased by $839,000 to $344,000 in 2012 from $1.2 million in 2011 due to increased revenues and higher operating margins from acquired company-owned stores.

International . Total revenues for the International segment decreased by $83,000, or (44.1)%, to $105,000 in 2012 from $188,000 in 2011 due to lower royalties resulting from (11.6)% decline in comparable store sales for international franchise stores and fewer franchise fees.

Operating loss for the International segment increased by $432,000 to $611,000 in 2012 from $179,000 in 2011 due to higher operating expenses associated with new staff hired in 2012, lower revenues and $434,000 of additional bad debt expense in 2012.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operating activities and proceeds from the incurrence of debt, which together are sufficient to fund our operations, tax payments, interest expense, capital expenditures, fees and principal payments on our debt as well as support our growth strategy and additional expenses we expect to incur as a public company. As a public company, we may also raise additional capital through the sale of equity. As of December 30, 2013, we had negative net working capital of $1.6 million due to the low levels of accounts receivable and inventory required to operate our business. In September 2013, we entered into an agreement with our vendor of point-of-sale systems to acquire $4.5 million of software licenses which will be sold to franchise owners. Payments to our vendor will be made in five equal payments, with the final payment being due in August 2014. We record these software licenses as prepaid expenses and other current assets. As of December 30, 2013, we had not sold any of these licenses.

On October 25, 2013, we entered into our new senior secured credit facilities, consisting of a $167.0 million senior secured term loan and a $10.0 million revolving credit facility, which includes a $2.5 million letter of credit subfacility. The proceeds of the new senior secured credit facilities were used to repay the 2012 Credit Facilities, make a $31.5 million payment to holders of our Preferred Shares and to fund investments. As of December 30, 2013, the interest rate on our new senior secured credit facilities was 6.75%. As of December 31, 2012, our weighted average interest rate on our 2012 Credit Facilities was 7.66%.

As of December 30, 2013, we had cash and cash equivalents of $3.7 million and $10.0 million of available borrowings under a revolving credit facility, none of which was drawn. As of December 30, 2013, we had $170.0 million of outstanding indebtedness, and after giving effect to the application of net proceeds from this offering, which will be used primarily to repay indebtedness under our new senior secured credit facilities, we would have had $ of outstanding indebtedness. We believe that our cash flows from operations, available cash and cash equivalents and available borrowings under our revolving credit facility will be sufficient to meet our liquidity needs during the next 12 months. We anticipate that to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness, including use of our revolving credit facility, equity financings or a combination thereof. It is not guaranteed that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, it is not guaranteed that our business will generate sufficient cash flow from operations or that future borrowings will be available under our credit facilities or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions or acquire additional company-owned stores, we may incur additional debt or sell additional equity to finance such acquisitions.

Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the periods presented:


	FISCAL YEAR
	2013			2012			2011
	(dollars in thousands)
Cash flows from operating activities	$	9,874		$	9,356		$	11,804
Cash flows from investing activities		(15,249	)		(5,904	)		(16,062	)
Cash flows from financing activities		6,613			(5,864	)		(2,563	)
Effect of exchange rate fluctuations on cash		39			1			3

Total cash flows	$	1,277		$	(2,411	)	$	(6,818	)

Cash Flows from Operating Activities

Our cash flows from operating activities are driven by sales both at franchise stores and company-owned stores, as well as franchise and development fees. We collect franchise royalties from our franchise owners on a weekly basis. System-wide sales of our pizzas, food and beverages are generally lowest in summer months, when family vacations and seasonal activities translate into reduced demand for Take ‘N’ Bake pizza and are highest in the fall, winter and spring corresponding to times when families tend to dine at home. Other factors that may impact our cash flows from operating activities are the cost of ingredients and personnel for our company-owned stores, unearned franchise and development fees and corporate overhead costs.

Net cash provided by operating activities was $9.9 million in 2013 compared to $9.4 million in 2012. This $518,000 increase was due primarily to increased net loss of $458,000, offset by decreased non-cash expenses including loss on retirement of debt, of $24,000 and less effects of changes in operating assets and liabilities of $952,000.

Net cash provided by operating activities was $9.4 million in 2012 compared to $11.8 million in 2011. This $2.4 million decrease was the result of lower net income of $1.5 million and effects of changes in operating assets and liabilities of $6.7 million, offset by increased non-cash expenses, including loss on retirement of debt, of $5.8 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $15.2 million in 2013 compared to $5.9 million in 2012. The increased usage of cash for investing activities was primarily due to increased acquisitions of company-owned stores of $5.5 million, increased acquisition of property and equipment of $1.7 million related to increased software and information technology investments and company-owned store remodels in 2013 and our $2.0 million investment in Project Pie.

Net cash used in investing activities was $5.9 million in 2012 compared to $16.1 million in 2011. This $10.2 million decrease in cash used in investing activities was primarily due to the payment in 2011 of $7.3 million of acquisition-related payments relating to our acquisition by Lee Equity in 2010, lower investment in acquisitions of company-owned stores of $2.3 million and lower investment of property and equipment of $850,000.

Cash Flows from Financing Activities

Net cash provided by financing activities was $6.6 million in 2013 compared to net cash used of $5.9 million in 2012. During 2013, cash provided by financing activities primarily consisted of funds raised related to the entry into the new senior secured credit facilities in connection with the Recapitalization. During 2012 cash used in financing activities primarily consisted of payments related to the 2012 Refinancing.

Net cash used in financing activities was $5.9 million for 2012 compared to $2.6 million for 2011. During 2012, cash used in financing activities primarily consisted of payments related to the 2012 Refinancing. During 2011, cash used in financing activities primarily consisted of payments of long-term debt of $6.7 million and access to our revolving credit facility to provide net cash of $4.4 million.

New Senior Secured Credit Facilities

In October 2013, we entered into our new senior secured credit facilities, which consist of a fully drawn $167.0 million first lien term loan and a $10.0 million revolving credit facility, which includes a $2.5 million letter of credit subfacility. The proceeds of the new senior secured credit facilities were used for the Recapitalization.

All obligations under our new senior secured credit facilities are unconditionally guaranteed by Papa Murphy’s Intermediate, Inc., one of our subsidiaries, and certain of our existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under our new senior secured credit facilities, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of the guarantors, including:

a first-priority pledge of all of our equity interests directly held by Papa Murphy’s Intermediate, Inc. and a first-priority pledge of all of the capital stock directly held by us and our subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary will be limited to 65% of the voting capital stock and 100% of the non-voting stock of any first-tier foreign subsidiary); and

a first-priority security interest in substantially all of our, and the guarantors’ tangible and intangible assets, including certain deposit accounts.

Borrowings under the new senior secured credit facilities bear interest at a rate per annum equal to an applicable margin, plus, at our option, either (a) base rate determined by reference to the highest of (i) the prime commercial lending rate determined by the administrative agent to the be the “prime rate” as in effect on such day, (ii) the federal funds effective rate plus 0.50% per annum and (iii) a LIBOR rate (which shall be no less than 1.00% per annum) determined for an interest period of one month, plus 1.00% per annum or (b) a LIBOR rate (which shall be no less than 1.00% per annum) determined for the specified interest period. The applicable margin for borrowings under the new senior secured credit facilities is (a) initially, 4.75% for base rate borrowings and 5.75% for LIBOR borrowings when our leverage ratio is greater than 4.25 to 1.00 and (b) 3.50% for base rate borrowings and 4.50% for LIBOR borrowings when our leverage ratio is equal to or less than 4.25 to 1.00.

Additionally, the following fees are required to be paid pursuant to the terms of the new senior secured credit facilities: (a) a commitment fee is charged on the average daily unused portion of the revolving credit commitments of 0.50% per annum, (b) a letter of credit fee is charged on the aggregate face amount of outstanding letters of credit under the new senior secured credit facilities at a per annum rate equal to the interest rate margin for LIBOR loans under the new senior secured credit facilities, (c) a fronting fee is charged on the aggregate face amount of outstanding letters of credit in an amount equal to the issuer’s prevailing market rates at the time of issuance and (d) a customary annual administration fee to the administrative agent thereunder.

We are required to make scheduled quarterly payments under the new senior secured credit facilities equal to 0.25% of the original amount of term loans thereunder, with the balance due on October 25, 2018.

The new senior secured credit facilities require us to prepay, subject to certain exceptions, the loans with 100% of the net cash proceeds of any incurrence of debt other than debt permitted under the new senior secured credit facilities, 100% of the net cash proceeds of certain equity issuances, 100% of net cash proceeds above a threshold amount for certain asset sales and other recovery events (including loss, destruction and condemnation), subject to reinvestment rights and certain other exceptions, 50% (subject to step-downs to 25% and 0% based upon specified leverage ratio levels) of our annual excess cash flow, and any proceeds from an initial public offering, including the offering hereby, in an amount not less than an amount sufficient to cause our leverage ratio to be less than or equal to 4.25 to 1.00 on a pro forma basis (or, if less, the net issuance proceeds from such initial public offering).

We may voluntarily reduce the utilized portion of the commitment amount and prepay loans under the new senior secured credit facilities at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR borrowings and subject to certain notice requirements and minimum amounts. If we are to refinance or reprice the term loans under the new senior secured credit facilities within eighteen months of the closing date thereunder through the incurrence of long term secured loan financing (including by way of amendment to the new

senior secured credit facilities) that has an all in yield that is less than the all in yield applicable to the term loans immediately prior to such transaction, we will be required to pay a 1.00% prepayment premium on the term loans that are repaid or repriced.

Our new senior secured credit facilities require us to maintain certain financial ratios, including a leverage ratio (based upon the ratio of net funded indebtedness (subject to a cap on netted cash and cash equivalents) to our Credit Agreement EBITDA) and a minimum interest coverage ratio as well as cap on the overall amount of capital expenditures made during any fiscal year. Credit Agreement EBITDA is defined in our credit agreement generally as Adjusted EBITDA with further adjustments for certain restricted payments under our credit agreement, fees paid to our independent directors and reimbursement of expenses of our directors, and any shortfalls between our advertising fund expenditures and amounts we collect for our advertising fund. The financial ratios required under the new senior secured credit facilities become more restrictive over time. In the event that we fail to comply with the leverage ratio or the interest coverage ratio, we will have the option to include any cash equity contributions to us in the calculation of Credit Agreement EBITDA for the purpose of determining compliance with such covenants (a “Specified Equity Contribution”), subject to (i) there being no more than four Specified Equity Contributions since the closing date of the new senior secured credit facilities, (ii) the aggregate amount of the Specified Equity Contributions not exceeding $4.0 million and (iii) certain other conditions and limitations.

The new senior secured credit facilities contains a number of restrictive covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our subsidiaries to:

incur additional indebtedness or other contingent obligations;

pay dividends on our equity interests or redeem, repurchase or retire our equity interests;

make investments, acquisitions, loans and advances;

create negative pledges or restrictions on the payment of dividends or payment of other amounts owed to us from our subsidiaries;

engage in transactions with our affiliates;

sell, transfer or otherwise dispose of our assets, including capital stock of our subsidiaries;

materially alter the business we conduct;

modify organizational documents in a manner that is materially adverse to the lenders under the new senior secured credit facilities;

change our fiscal year;

consolidate, merge, liquidate or dissolve;

incur liens;

engage in sale-leaseback transactions; and

make payments in respect of subordinated debt.

Our new senior secured credit facilities also contains certain customary representations and warranties, affirmative covenants and reporting obligations. In addition, the lenders under the new senior secured credit facilities are permitted to accelerate the loans and terminate commitments thereunder or exercise other remedies upon the occurrence of certain events of default, subject to certain grace periods and exceptions, which include, among others, payment defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain material indebtedness, certain events of bankruptcy, material judgments, material defects with respect to lenders’ perfection on the collateral, invalidity of subordination provisions of the subordinated debt and changes of control, which is not expected to be triggered by this offering.

As of December 30, 2013, we were in compliance with all of our covenants and other obligations under the new senior secured credit facilities.

Stock Repurchase and Put Option Agreement

In December 2011, Mr. Calwell transitioned into the role of Chief Executive Officer with our prior Chief Executive Officer, John Barr, remaining as Chairman of the company. In connection with these transition activities, we repurchased certain of Mr. Barr’s restricted shares and granted him the right and option to have us repurchase all or any portion of his common stock and preferred shares. See “Executive and Director Compensation—Employment Agreements—John Barr—Stock Repurchase and Put Option Agreement.”

Contractual Obligations

As of December 30, 2013, our contractual obligations and other commitments were as follows:


	PAYMENTS DUE BY YEAR (IN THOUSANDS)
	TOTAL		LESS THAN 1 YEAR			1-3 YEARS		3-5 YEARS		MORE THAN 5 YEARS
Long-term debt obligations	$	224.6	$	13.2		$	26.1	$	185.3	$	—
Operating lease obligations		8.3		2.6			4.2		1.3		0.2
Commitment to purchase additional equity subscriptions		2.5		2.5	*		—		—		—

Total	$	235.4	$	18.3		$	30.3	$	186.6	$	0.2

Represents potential capital funding for Project Pie, in $500,000 increments, payable on demand, for growth capital during three years ending December 2016. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Investment in Project Pie.”

Off-Balance Sheet Arrangements

We have guaranteed certain operating lease payments for divested company store locations through the end of the initial lease period. The maximum aggregate potential liability associated with the guaranteed lease payments is $737,000.

Qualitative and Quantitative Disclosures about Market Risk

Commodity Price Risk

We are exposed to market risks from changes in commodity prices. During the normal course of the year, we enter into national pricing commitments for cheese and other food products that are affected by changes in commodity prices and, as a result, our franchise and company-owned stores are subject to volatility in food costs. We also maintain relationships with multiple suppliers for certain key products, such as cheese. We do not engage in speculative transactions nor do we hold or issue financial instruments for trading purposes. In instances when we use fixed pricing agreements with our suppliers, these agreements cover our physical commodity needs, are not net-settled and are accounted for as normal purchases.

Interest Rate Risk

We are subject to interest rate risk on our new senior secured credit facilities. Interest rates on our new senior secured credit facilities are based on LIBOR, and under certain circumstances we may be required by our lenders to enter into interest rate swap arrangements. A hypothetical 1.0% increase or decrease in the interest rate associated with our new senior secured credit facilities would have resulted in a $1.7 million impact to interest expense for the year ended December 30, 2013.

Foreign Currency Exchange Rate Risk

Our international franchise owners use the local currency as their functional currency. Royalty payments from our franchise owners in the Middle East are generally remitted to us in U.S. dollars, and royalty payments from our Canadian franchise owners are generally remitted to us in Canadian dollars. Because our international activities do not account for a significant portion of our revenues, we believe our exposure to foreign currency risk is minimal.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our judgments and estimates including those related to revenue recognition, impairment of goodwill and intangible assets, income taxes, advertising expense and share-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies we believe to be most critical to understanding our financial results and condition and that require complex and subjective management judgments and estimates are discussed below.

Revenue recognition . Revenues consist of sales from company-owned stores, franchise royalties, franchise and development fees and lease income. Sales from company-owned stores are recognized as revenue when the products are provided to customers. We report revenues net of sales taxes collected from customers and remitted to government taxing authorities. Royalty fees are based on a percentage of sales and are recorded as revenue as the fees are earned and become receivable from the franchise owner. Lease income is recognized in the period earned, which generally coincides with the period the expense is due to the master leaseholder, if a sublease.

Consideration for franchise and development fees that are received in advance of being earned are included as unearned franchise and development fees in the consolidated balance sheets. For fees paid on an installment basis that have otherwise been earned, recognition of revenue is deferred until collectability is certain.

Franchise fees are recognized as revenue when all material services or conditions relating to the sale have been substantially performed or satisfied by us, which is typically when a new franchise store begins operations, or on the commencement date of the successive franchise agreement. Development fees for the right to develop stores in specific geographic areas are recognized as revenue when all material services or conditions relating to the sale have been substantially performed, which is typically when the first franchise store begins operations in the development area. Development fees determined based on the number of stores to open in an area are deferred and recognized on a pro rata basis after individual franchise agreements are executed for the stores subject to the development agreements and the stores begin operations.

We commenced a system-wide gift card program in 2010 and recognize revenues from gift cards when the gift card is redeemed by a customer. When the likelihood of a gift card being redeemed by a customer is determined to be remote (“gift card breakage”), the value of the unredeemed gift card is recognized by us as revenue. We determine the gift card breakage rate based upon company-specific historical redemption patterns and have not recognized any breakage to date due to a lack of historical experience.

Accounts and notes receivable. Accounts receivable consist primarily of (a) amounts due from franchise owners for continuing fees that are collected weekly, (b) receivables for supply chain vendor rebates, (c) subleased retail rents and (d) other miscellaneous receivables. Accounts receivable are stated net of an allowance for doubtful accounts determined by management through an evaluation of specific accounts, considering historical losses and existing economic conditions where relevant. Notes receivable consist primarily of amounts due from the sales of company-owned stores or specific equipment in training stores. Management reviews the notes receivable on a periodic basis and evaluates the creditworthiness and financial condition of the counterparty to determine the appropriate allowance, if any.

Goodwill and other intangible assets . Goodwill arises from business combinations and represents the excess of the purchase consideration transferred over the fair value of the net assets acquired, including identifiable intangible assets and liabilities assumed. The majority of our goodwill was generated upon our acquisition of our Predecessor in May 2010, though we have also recognized goodwill upon the acquisition of stores from franchise owners. Goodwill is assigned to reporting units for purposes of impairment testing.

We consider our trade name and trademark intangible assets to be indefinite-lived intangible assets. These assets were initially recognized in May 2010 upon our acquisition of our Predecessor. Our intangible assets that are not indefinite-lived include franchise relationships and reacquired franchise rights.

Goodwill and intangible assets determined to have an indefinite life are not amortized, but are tested for impairment annually, or more often if an event occurs or circumstances change that indicate an impairment might exist. Management evaluates indefinite-lived assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives are amortized over the estimated useful lives on a straight-line basis and tested for impairment together with long-lived assets.

In performing our annual goodwill impairment test, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying amount. If we determine that it is more likely than not, we perform the two-step quantitative goodwill impairment test. Under the two-step quantitative goodwill impairment test, the fair value of the reporting unit is compared to its respective carrying amount, including goodwill. If the fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the fair value, further analysis is performed to determine the amount of the impairment. Both the qualitative and quantitative assessments are completed separately with respect to the goodwill of each of our reporting units. We review goodwill for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist. We can bypass the qualitative assessment and move directly to the quantitative assessment for any reporting unit in any period and can elect to resume performing the qualitative assessment in any subsequent period. Management has concluded that none of its reporting units with a material amount of goodwill are at risk for failing step one of the quantitative assessment.

In performing our annual impairment test for indefinite-lived intangible assets, we first assess qualitatively whether it is more likely than not that the indefinite-lived intangible asset is impaired, thus necessitating a quantitative impairment test. We do not calculate the fair value of an indefinite-lived asset and perform the quantitative test unless we determine that it is more likely than not that the asset is impaired. We review indefinite-lived intangible assets for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist. We can bypass the qualitative assessment and move directly to the quantitative assessment for any indefinite-lived intangible asset in any period and can elect to resume performing the qualitative assessment in any subsequent period.

Impairment of long-lived assets . Long-lived assets are evaluated for recoverability of the carrying amount whenever events and circumstances indicate the carrying amount of an asset may not be fully recoverable. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to, significant under-performance relative to expected and/or historical results (such as two years of comparable store sales decrease or two years of negative operating cash flows), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property at amounts below the carrying value.

Assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Typically, long-lived assets relating to company-owned stores are tested for impairment at an individual store level and long-lived assets relating to franchised operations are tested for impairment at each segment level. If the carrying amount of an asset group exceeds the estimated, undiscounted future cash flows expected to be generated by the asset, then an impairment charge is recognized to the extent the carrying amount exceeds the asset group’s fair value. In determining fair value, management considers current results, trends, future prospects and other economic factors.

Income taxes. We account for income taxes using the asset and liability approach. This requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and the tax basis of assets and liabilities at the applicable tax rates. A valuation allowance is recorded against deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

authorities based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As facts and circumstances change, management reassesses these probabilities and would record any changes in the financial statements as appropriate. As of December 30, 2013, December 31, 2012 and January 2, 2012, we recognized no uncertain tax positions or any accrued interest and penalties associated with uncertain tax positions.

Advertising and marketing costs . We expense media development costs when the advertisement is first aired. All other advertising costs, including contributions to other local and regional advertising programs are expensed when incurred. These costs are included in store operating costs or selling, general and administrative expenses based on the nature of the advertising and marketing costs incurred.

Franchise and company-owned stores in the United States contribute to an advertising fund that we manage on behalf of these stores. In addition, certain supply chain vendors contribute to the advertising fund. Under our franchise agreements and other agreements, the contributions received must be spent on marketing, creative efforts, media support, or other related purposes specified in the agreements and result in no profit recognized. The expenditures are primarily amounts paid to third parties, but may also include personnel expenses and allocated costs. In accordance with ASC Subtopic 952-605-25, contributions to the advertising fund are netted against the related expense. At each reporting date, to the extent that contributions exceed expenditures on a cumulative basis, the excess contributions to the advertising fund are accounted for as a deferred liability and are recorded in accrued expenses in the consolidated balance sheets. If expenditures exceed contributions on a cumulative basis, the excess is recorded as an expense within selling, general, and administrative expenses. Previously recognized expenses may be recovered if subsequent contributions exceed expenditures.

Share-based Compensation. Our accounting policy and estimate of fair values related to share-based compensation are as follows:

Share-based Compensation Expense . Under the Amended 2010 Management Incentive Plan, we sold restricted and unvested common stock to certain employees. Purchased restricted common stock vests with the achievement of a time vesting or a performance vesting condition. Compensation expense relating to the restricted common stock with time vesting conditions is recognized as the portion of the grant date fair value that exceeds the purchase price and is ultimately expected to vest. This expense is recognized over the requisite service period, typically the vesting period, utilizing the straight-line attribution method. No compensation expense was recognized relating to the restricted common stock with performance vesting conditions as it was not yet probable for us to meet the performance vesting conditions. In addition, we have sold unrestricted common stock and Preferred Shares to certain employees and recognized as compensation expense the portion of the fair value that exceeds the purchase price on the issue date. Total compensation costs recognized in connection with our restricted common stock, unrestricted common stock and Preferred Shares during 2013, 2012 and 2011 were $61,000, $91,000 and $65,000, respectively.

Valuation of Common Stock and Preferred Shares . We obtained a valuation of our common stock and Preferred Shares from a third party valuation firm. The valuation of our company’s common stock and Preferred Shares was based on the principles of option-pricing theory. This approach is based on modeling the value of the various components of an entity’s capital structure as a series of call options on the proceeds expected from the sale of the entity or the liquidation of its assets at some future date. Specifically, each of the common stock and Preferred Shares is modeled as a call option on the aggregate value of our company with an exercise price equal to the liquidation preferences of the more senior securities. In estimating the fair value of the aggregate value of our company, we considered both the income approach and the market approach.

The key inputs required calculating the value of the common stock and Preferred Shares using the option-pricing model included the risk free rate, the volatility of the underlying assets, and the estimated time until a liquidation event. We applied a marketability discount to the value of common stock and Preferred Shares based on facts and circumstances at each valuation date. On July 1, 2013, we began to apply a probability weighted expected return method, where equity values were calculated using an option pricing model under an IPO and non-IPO scenarios and each value was weighted based on estimated probability of occurrence. As of December 30, 2013, our most recent valuation date, 80% weight was applied to an IPO scenario and the fair value of shares of our common stock,

Series A Preferred Shares and Series B Preferred Shares was estimated to be $26.80 per share, $24.21 per share and $29.00 per share, respectively. For further detail, see Note 17, Share-based Compensation, in the notes to the consolidated financial statements included elsewhere in this prospectus.

Common stock and Preferred Shares Subject to Put Options . In July 2011, we entered into a stock repurchase and put option agreement with an executive officer, pursuant to which the executive officer has the right and option to have us repurchase 74,491 shares of unrestricted Series A Preferred Stock and 41,075 shares of unrestricted common stock, which the employee previously acquired at fair value, at a redemption value on December 31 of any given calendar year following December 31, 2011 (“Put Option”) after a certain condition is met. In December 2012, the Put Option became exercisable.

The redemption value is defined as the greatest of (i) the fair market value (which includes the amount of accrued dividends on the unrestricted Series A Preferred Stock) as of the repurchase date as determined by the Board, (ii) $2.8 million plus the accrued dividends on the unrestricted Series A Preferred Stock, or (iii) only in the event that the executive officer no longer serves on the Board, the value (which includes the amount of accrued dividends on the Series A Preferred Stock) determined in connection with the most recent valuation performed by us.

The Put Option was considered compensatory in nature as it was entered into in conjunction with an employment agreement modification. Because the Put Option was contained in the terms of the shares, it was determined to not be a freestanding instrument. The Put Option, with a minimum redemption value of $2.8 million plus accrued dividends on the Series A Preferred Stock, allowed the employee to avoid bearing the full risks and rewards that are normally associated with equity ownership. The combined shares and Put Option were evaluated in accordance with ASC Topic 718 and determined to be a liability-classified instrument on the date the Put Option was granted to the employee. Subsequent changes to the combined fair value of the shares and embedded Put Option were recorded as compensation expense. On December 30, 2013, the Put Option was terminated.

We recognized related stock-based compensation expenses of $785,000, $1.0 million and $1.1 million for fiscal years 2013, 2012 and 2011, respectively.

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, reduced disclosure obligations relating to the presentation of financial statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation. We have availed ourselves of the reduced reporting obligations and executive compensation disclosure in this prospectus, and expect to continue to avail ourselves of the reduced reporting obligations available to emerging growth companies in future filings.

In addition, an emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we plan to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02 , Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income , which requires an entity to present either on the face of the statement where net income is presented or in the notes to the financial

statements, significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items of net income. We adopted ASU2013-02 effective January 1, 2013. The adoption concerns presentation and disclosure only and did not have an impact on our consolidated financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists , which prescribes that an unrecognized tax benefit or a portion of an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar loss, or a tax credit carryforward, except in certain cases where the unrecognized tax benefit should be presented as a liability and should not be combined with deferred tax assets. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. This update should be applied prospectively to all unrecognized tax benefits that exist at the effective date, with retrospective application permitted. We do not believe that adoption of this update will have a material impact on the consolidated financial statements.

BUSINESS

Our Company

Create. Take. Bake.

CREATE their fresh customized pizza with high-quality ingredients in our stores or online;

TAKE their fresh pizza home; and

BAKE their pizza fresh in their ovens, at their convenience, for a home-cooked meal served hot.

We have been repeatedly rated the #1 pizza chain in the United States by multiple third-party consumer studies. In 2013, 2012 and 2011, we were rated the #1 pizza chain overall by Nation’s Restaurant New s and in 2012, 2011 and 2010, we were rated the #1 chain pizza chain by Zagat . Compared to broader restaurant chain competition, we were also recognized by Technomic in 2013 as the #1 chain overall among all restaurants and all food categories, by Nation’s Restaurant New s in 2013 and 2012 as one of the Top 5 Overall limited service restaurant chains across all food categories, and by Zagat in 2012 as one of the Top 5 Overall fast food chains across all food categories. For fiscal years 2013 and 2012 we had total revenues of $80.5 million and $66.9 million, respectively, net loss of $(2.6) million and $(2.1) million, respectively, and Adjusted EBITDA of $24.4 million and $22.1 million, respectively. For a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net loss, see “Summary—Summary Historical Consolidated Financial and other Data.”

We make our dough fresh in each store, starting with flour, water and yeast;

We grate our cheese daily from blocks of 100% whole-milk mozzarella cheese;

We slice fresh, never-frozen vegetables by hand;

We feature specialty, premium ingredients like artichoke hearts, sun-dried tomatoes, feta cheese and fresh spinach;

We use only high-quality meats with no added fillers; and

We use no trans-fats.

Additionally, our guidelines provide that all pizza dough must be used to make pizzas within 72 hours of preparation and we recommend our customers bake their pizza within 24 hours of preparation, resulting in a fresh pizza for our customers.

Total Stores at End of Period

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System-wide Sales

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Our Competitive Strengths

Fresh Made. Fresh Baked. Love at 425°.

We believe we benefit from the following competitive strengths:

High-Quality Pizza at an Attractive Value. We were founded on the following core values —Great Quality, Great Value, Great Customer Service—and we strive to deliver on these values every day. We believe the manner in which we deliver these values to our customers provide a strong foundation for growth.

Zagat National Restaurant Chain Survey

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#1 Rated Pizza Chain in 2012, 2011 and 2010

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Top 5 U.S. Fast Food Chain (all fast food categories, less than 5,000 locations) in 2012 (#2 Top Service and Top Food ), 2011 (#3 Top Service and Top Food ) and 2010 (#4 Overall )

Technomic 2013 Consumer Restaurant Brand Metrics Study

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#1 Chain Overall , among all restaurants and food categories surveyed

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#1 Pizza/Italian Chain

Nation’s Restaurant News Consumer Picks Survey

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#1 Pizza/Italian Chain in 2013, 2012 and 2011 (including the #1 ranking in 2013 and 2012 in 10 out of 11 categories such as Food Quality, Value, Service, Likely to Recommend and Likely to Return)

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Top Overall Limited Services Restaurant Chain in 2013 (#3), 2012 (#2) and 2011 (#1)

NPD CREST Customer Survey

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Empathica 2013 Quick Service Restaurant Benchmark Study

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Top Carryout Pizza Chain

Loyal Customer Base. We have developed a loyal and diverse customer base that values (i) our ability to create a fresh, customized pizza; (ii) our high-quality ingredients; (iii) our fast and friendly in-store service; (iv) our bake-at-home convenience and (v) our attractive price points. We believe our leading consumer ratings and success across a national footprint can be attributed to the broad appeal of our Take ‘N’ Bake concept, which resonates with both families and single adults and attracts both female and male customers across all ages, demographics and income levels. While we believe our concept has broad appeal, we actively target mothers and families looking to solve the “dinnertime dilemma” of providing a fresh, home-cooked meal for their family without investing significant time or money. We believe this core target customer is more loyal and seeks a higher-quality pizza. As shown in research conducted by Nation’s Restaurant News , our customers are significantly more likely to recommend Papa Murphy’s as well as more likely to return to Papa Murphy’s stores than our competitors.

2013 Likely To Recommend

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2013 Likely To Return

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We believe our Take ‘N’ Bake pizza business model encourages stronger emotional connections with our core target of moms and dads because we give them a fresh, high-quality solution that’s easy to create, affordable and makes their families happy. The active role of ordering and watching the pizza being built gives customers a feeling of ownership: instead of “a pizza,” it becomes “my pizza.”

financial investment by us, given that new store development and substantially all of our store advertising costs are funded by franchise owners. Consequently, our business model is designed to generate significant operating cash flows and an attractive return on assets. As a franchised model, we generate a significant portion of our revenues from ongoing royalties based on a percentage of net sales at franchise stores and fees paid to us by franchise owners opening new stores and renewing expiring franchise agreements, which collectively represented 51.2% of our total revenues for 2013. These royalties and fees provide us with consistent and diverse cash flow. Further, our franchise model minimizes our direct exposure to changes in commodity and other operating costs that may impact our company-owned stores, which represented 48.6% of our total revenues in 2013.

We strive to be the partner of choice for both individual family owner/operators and sophisticated franchise organizations because we understand that our franchise owners ultimately drive the success of our business., our concept provides franchise owners access to financing sources, including loans guaranteed by the SBA.

As of December 30, 2013, a majority of our franchise owners owned one store, and approximately 75% owned one or two stores. We believe many of these owners operate and manage their stores themselves. For fiscal year 2012, our domestic franchise stores that had been open for at least one full year generated AWS of approximately $11,100 and generated a store-level EBITDA margin in excess of 15% after royalties and advertising but before the impact of manager/owner salary. Additionally, our stores have a low breakeven AWS, which we estimate to be less than half the system average. Our operating model requires a low initial capital expenditure on average of approximately $200,000 per store. In the first full fiscal year after a store has been open, we believe that our franchise owners can earn, on average, a cash-on-cash return of approximately 20% after royalties and advertising but before the impact of manager/owner salary. We believe the combination of our efficient operating model, low initial cash investment and attractive store economics has resulted in our ability to generate consistent new store growth from both new and existing franchise owners, as evidenced by over 570 net new store openings since 2004.

Experienced Management Team. Our strategic vision and culture are driven by our executive management team under the leadership of Mr. Ken Calwell, our Chief Executive Officer, Mr. Mark Hutchens, our Chief Financial Officer and Mr. John Barr, our Chairman. Mr. Calwell is an industry veteran with more than 28 years of relevant restaurant and food experience, including roles as the Chief Marketing Officer and Chief Food Innovation Officer at Wendy’s International, Chief Marketing Officer and Executive Vice President of Research Development at Domino’s Pizza and Senior Director of Marketing at Pizza Hut. Mark Hutchens has nearly 25 years of progressive financial leadership experience, with an extensive history in the restaurant and retail sector, including roles as the Vice President, Chief Financial Officer – International at Bloomin’ Brands, Inc., Senior Vice President, Controller and Chief Accounting Officer at Office Depot, Inc. and Assistant Treasurer – Corporate Finance at YUM! Brands, Inc. Our executive management team has over 140 years of combined operational experience at restaurant chains, franchisors and large corporations including Domino’s Pizza, Donatos, McDonald’s, Pizza Hut, Potbelly Sandwich Works, Starbucks, Wendy’s, Penske and Quaker State. Our executive management team has a deep understanding of our concept, averaging approximately seven years with our Company. Mr. Calwell and Mr. Barr have built a team with significant talent in new product development, brand marketing, franchise development and operations, which we believe positions us well for continued long-term growth.

Our Growth Strategies

We believe our significant unit growth potential, attractive store economics and the simplicity of our store operations will continue to attract new franchise owners and encourage existing franchise owners to expand their current footprint. Our ability to execute against this component of our growth strategy is supported by changes made over the last two years in our new store development team, an increased development marketing budget and a redesigned store prototype. We believe these changes will enhance our ability to accelerate new store openings and further improve unit economics. We expect the majority of our expansion will result from new franchise store openings. Our franchise owners opened 98 stores in 2013. We expect our franchise owners to open at least 105 stores in 2014. We also plan to strategically expand our company-owned store base in select markets. Our new store strategy consists of the following:

Pursue Growth in New Markets. We have historically proven our ability to expand into new markets, as evidence by the success of our stores in numerous markets across the United States. As we expand our footprint into new markets, we will continue to leverage our brand awareness and well-developed store support infrastructure to enhance new store performance and increase store density in these markets. Additionally, we are in the early stages of international expansion, which we believe represents a long-term growth opportunity. We currently have a 10-year master franchise agreement in Canada, with 18 stores open as of December 30, 2013, as well as a recent 20-year master franchise agreement to open up to 100 franchise stores in the Middle East, with four stores open as of December 30, 2013.

New product development is another tool for attracting customers to our stores. The recent roll-out of our Focus 5 menu strategy is designed to broaden our customer appeal by offering a variety of fresh, high-quality products utilizing our high-quality ingredients. Our Focus 5 menu strategy offers price points ranging from our FAVES line, generally marketed for $5 per pizza, to our Stuffed line of pizzas, generally marketed for $15 per pizza. Our FAVES line of pizzas consists of three simple pizza classics at attractive price points. We began testing the FAVES line of pizzas in November 2012 and rolled out nationally in December 2013. We believe the introduction of this option has helped increase transactions and comparable store sales growth. Our Fresh Pan Pizza is a new product at a higher price point that features a fresh, thicker, buttery crust that attracts new customers who prefer a thicker pan-style crust. We began testing the Fresh Pan Pizza in October 2013 and rolled out nationally in February 2014. For a premium price, we also offer gourmet toppings not typically available at large pizza chains such as artichoke hearts, sun-dried tomatoes, feta cheese and fresh spinach. We believe this balanced approach to menu innovation attracts a broader base of customers, drives new customer trial and increases brand loyalty.

We believe that providing a fast and friendly in-store experience drives customer frequency. Our Take ‘N’ Bake concept allows our employees to focus on providing personal service to every customer rather than rushing customer interactions or prioritizing incoming phone delivery orders. We also recently introduced online ordering, which will provide an additional convenience to our customers. In tests in approximately 300 stores during the first nine months of 2013, our online channel resulted in increases in customer frequency and average transaction size. We are also in the early stages of testing a store remodel program, which we believe will enhance our customer experience and drive customer frequency.

Improve Profitability and Leverage Our Infrastructure. Through opening stores in existing and new markets and increasing system-wide comparable store sales, we believe we will increase our revenues and Adjusted EBITDA. With 1,396 stores across the United States and 548 domestic franchise owners as of December 30, 2013 we believe we have an established infrastructure to support future growth. We plan to continue to invest strategically in this infrastructure. Our teams located across the country provide support to our franchise owners and company-owned stores in operations, store technology, training, marketing, new store development and other areas. Therefore, as we continue to grow our store base and increase sales, we believe our general and administrative expenses will increase at a lower rate than our revenues, and we will be able to realize certain benefits from economies of scale.

Our Industry

Take ‘N’ Bake pizza is a fast-growing segment of the LSR pizza category. We are the market leader in the Take ‘N’ Bake segment with more than 20 times the number of stores of our next closest Take ‘N’ Bake competitor in the United States. In addition, we are the only national Take ‘N’ Bake LSR pizza chain.

With system-wide sales of $786 million in fiscal year 2013, we are the fifth largest pizza chain in the United States as measured by system-wide sales and total number of stores. Mintel estimates that the pizza restaurant market grew from $32 billion in 2007 to $38 billion in 2012 and will grow to $44 billion in 2017. We believe the pizza restaurant market is an attractive category due to its size and growth, as well as its fragmented competitive landscape. The top five pizza chains accounted for only 40.8% of category sales in 2012, which provides the potential to take share from smaller pizza chains and independent pizza operators.

Our Stores

Our stores are designed to highlight our high-quality pizza and to reinforce the key attributes of our brand. For example, each of our stores has a mixer used to create our fresh dough, and in our newest stores, the mixer is located in the front of the store to reinforce that our dough is made fresh in the store every day. Our stores are designed to maximize the customer’s interaction with our friendly team members. Additionally our side items are contained in a display case for the customers to see as they are waiting in the lobby.

We focus on showcasing our high-quality ingredients in a way that makes ordering simple and fast. Our store features a food-forward, easy-to-use make line that facilitates interactive ordering, where store crew members create pizzas in front of the customer. Our pizzas are made fresh to order, and our customers can follow their pizza as it is made right in front of them. Our high-quality ingredients are on display on our make lines so customers can see the quality of the sauce, cheese and our toppings. We then wrap our pizzas in clear cellophane instead of in a box, to let the quality show, and our store crew members hand over the pizza to the customer and explain home baking instructions. We believe the value of our pizzas is evident in its weight and the visibility of the ingredients.

Our Menu Offerings . We serve large, 14” pizzas that serve two to three people and family size, 16” pizzas that serve four to six people. Our menu offers customers a variety of original, thin crust and stuffed pizzas as well as the ability to create a customized pizza from a broad selection of crust, sauce and topping combinations. We offer the following options:

Signature pizzas: include classic combinations and some unique twists on the classics;

deLite pizzas: thin crust, gourmet combination offerings with 25% less fat, 35% fewer calories than our Signature pizzas;

Stuffed pizzas: two-layer, four-pound pizzas with meats and vegetables stuffed in two layers of dough;

“C.Y.O.,” or Create Your Own pizza: customer selection of original or thin crust, one of our sauces and any combination of our cheese, meat and vegetable toppings;

FAVES: consists of three simple pizza classics offered at attractive value price points at all of our stores; and

Fresh Pan Pizza: features a fresh, thicker, buttery crust offered at a higher price point.

Properties

Our stores are typically located in neighborhood shopping centers, and the average store size is approximately 1,400 square feet. As of December 30, 2013, we and our franchise owners operated 1,418 stores with 1,396 in 38 states, 18 stores in Canada and four stores in the Middle East. Our principal executive office is located at 8000 NE Parkway Drive, Suite 350, Vancouver, WA 98662. We lease the property for this principal executive office and our 69 company-owned stores. Our franchise stores are situated on real property owned by franchise owners or leased directly by franchise owners from third-party landlords.

The map and chart below show the locations of our franchise and company-owned stores in the United States as of December 30, 2013.

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	FRANCHISE STORES		COMPANY-OWNED STORES		TOTAL
Alabama		13		—		13
Alaska		11		—		11
Arizona		49		—		49
Arkansas		12		—		12
California		166		—		166
Colorado		48		24		72
Florida		20		—		20
Georgia		4		—		4
Idaho		23		8		31
Illinois		22		—		22
Indiana		44		—		44
Iowa		38		—		38
Kansas		39		—		39
Kentucky		19		—		19
Louisiana		13		—		13
Maryland		3		—		3
Michigan		8		7		15
Minnesota		78		13		91
Mississippi		1		—		1
Missouri		48		—		48
Montana		12		—		12
Nebraska		18		—		18
Nevada		24		—		24
New Mexico		12		6		18
North Carolina		15		—		15
North Dakota		11		—		11
Ohio		5		—		5
Oklahoma		23		—		23
Oregon		93		3		96
South Carolina		11		—		11
South Dakota		12		—		12
Texas		111		—		111
Tennessee		37		—		37
Utah		51		—		51
Virginia		2		—		2
Washington		137		5		142
Wisconsin		85		3		88
Wyoming		9		—		9

Total		1,327		69		1,396

Lease Arrangements. We lease the property for our company-owned stores. The typical store is located in a neighborhood-oriented shopping center. Lease terms for these stores are generally five years with one or more five-year renewal options, and generally require us to pay a proportionate share of real estate taxes, insurance, common area and other operating costs in addition to base or fixed rent.

New Domestic Development

Growth Opportunity

We believe there is significant growth opportunity in our existing markets. We intend to focus on further developing our core markets in the West and Midwest, while expanding our store density in existing but less penetrated

developing markets in the South and East. Historically, new stores tend to generate higher AWS as markets become more penetrated. As a result, we expect to focus the majority of our near-term new store development in existing markets.

The following table details our per-capita penetration levels in U.S. regions.


REGION	NUMBER OF STATES/DISTRICT OF COLUMBIA		POPULATION		STORES		STORES PER MILLION PEOPLE
Existing Markets: Core		20		98,663,241		1,026		10.2
Existing Markets: Developing		18		154,692,567		370		2.3
New Markets		13		60,558,232		0		N/A

Note: Core markets include Alaska, Arizona, California, Colorado, Iowa, Idaho, Kansas, Minnesota, Missouri, Montana, North Dakota, Nebraska, New Mexico, Nevada, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming. Store data as of December 30, 2013.

Source: U.S. Census Bureau, 2012 Population Estimate.

In 2011, we made significant upgrades to our new store development team and strategy in order to accelerate new store openings. We promoted a company veteran to Chief Development Officer, refocused development marketing resources toward target markets, and employed a two-pronged market approach which includes (i) backfilling existing markets to reach greater density and (ii) quickly ramping density in less penetrated markets outside of the core West and Midwest. Additionally, this new strategy is focused on recruiting and attracting new franchise owners while encouraging our existing owners to commit to building new stores. This new development strategy resulted in an increase in our franchise inquiry conversion rate, a decrease in cost per franchise sales for new stores and a record number of individual franchise sales in each of 2012 and 2013. Individual franchise sales accounted for 83.6% of our new franchise store openings in 2013, and franchise sales pursuant to Area Development Agreements described below in “—Franchise Overview—Franchise Agreements” accounted for the balance. The below chart shows our individual franchise sales since 2011.

Annual Individual Franchise Sales

LOGO

Franchise Owner Development and Economics

We believe we have an attractive owner operator franchise model that has resulted in our ability to produce a strong track record of opening stores with new and existing franchise owners. Since 2004, our store base has grown by over 570 units, and as of December 30, 2013 our brand operated in over 135 DMAs. In 2013, 47 of our new stores were opened by first time franchise owners and 28 were opened by existing franchise owners, approximately 67% of which operated three stores or less. We believe many of our first time franchise owners were initially introduced to our concept as customers and view Papa Murphy’s as an opportunity to own and operate their own business. We believe Papa Murphy’s is an attractive investment opportunity for franchise owners because of our award winning brand, simple operating model and low initial investment.

The capital expenditures required to open a Papa Murphy’s store are, on average, approximately $200,000. In the first full fiscal year after a store has been open, we believe that our franchise owners can earn, on average, a cash-on-cash return of approximately 20% after royalties and advertising but before the impact of manager/owner salary. We believe this represents an attractive opportunity for ownership in the franchised restaurant sector. Furthermore, our track record of consistent store openings and a low annual closure rate, averaging 2.3% since 2007, provides franchise owners access to financing sources including SBA-guaranteed loans, which reduces their initial cash costs of ownership and enhances their returns on invested capital. Our low closure rate is partially attributable to our low breakeven sales volume, which for domestic stores we estimate to be an AWS of approximately $5,300 after royalties and advertising but before the impact of manager/owner salary.

Since 2007, new domestic stores have achieved an AWS in excess of $8,000, on average, within their first fiscal year of operations. AWS in any given year can be impacted by a variety of factors, including the mix of new stores opening in core, developing, and new markets or in high-AWS and low-AWS markets. AWS is also impacted by the level of media efficiency, pricing structure, and the competitive activity in the markets where the new stores open, our overall marketing plans, and the timing of opening, which is impacted by the seasonal nature of our sales cycle. Store AWS tends to grow as a result of customer education on the Take ‘N’ Bake concept, brand awareness, and marketing and media efficiency from increased store density.

The table below illustrates the increase in AWS that we target as we increase density in markets:



MARKET	KANSAS CITY								DALLAS/FORT WORTH								PHOENIX								DENVER								AUSTIN
FISCAL YEAR	2010		2011		2012		2013		2010		2011		2012		2013		2010		2011		2012		2013		2010		2011		2012		2013		2010		2011		2012		2013
AWS(1)	$	8,971	$	10,231	$	11,527	$	11,546	$	7,546	$	8,057	$	8,304	$	8,419	$	7,234	$	8,075	$	8,749	$	8,870	$	9,712	$	10,013	$	10,919	$	11,064	$	8,410	$	8,877	$	9,513	$	9,610
# of units		26		28		31		37		27		33		39		45		21		26		30		39		41		42		46		51		12		15		15		18

(1)

Includes only franchise and company-owned stores open for at least one full fiscal year.

Company-Owned Stores

Our company-owned stores represent a combination of stores opened by us and acquired from franchise owners. As of December 30, 2013, we had 69 company-owned stores. Our company-owned stores provide a base where we can test new initiatives, train new employees and new franchise owners, and demonstrate leadership to the franchise community.

We have more than doubled our company-owned store count from December 2010 to December 2013, largely through the acquisition of franchise stores. We will continue to evaluate various franchise stores as potential acquisition opportunities that allow us to generate an attractive return on invested capital. We will also continue to build new stores in markets where we are already currently operating stores.

Franchise Overview

Our franchise owners operated a total of 1,349 Papa Murphy’s stores in 38 states, Canada and the Middle East as of December 30, 2013. We set forth rigorous qualification criteria and training programs that adhere to strict operating standards for franchise owners. We work hard to ensure that every Papa Murphy’s franchise location meets the same quality and customer service benchmarks in order to preserve the consistency and reliability of the Papa Murphy’s brand.

We are dedicated to providing the tools our franchise owners need to succeed before, during and after a store opening, including assistance with site selection and development, training, operations and marketing support. Through our franchise support and development infrastructure and our rigorous screening process, we have successfully built a base of 559 franchise owners as of December 30, 2013, with an average store ownership of approximately 2.4 stores per franchise owner. As of December 30, 2013, a majority of our franchise owners owned one store, and approximately 75% owned one or two stores. We believe this highly diversified franchise owner base demonstrates the viability of our store concept across numerous types of owners and operators, limits our risk and provides an attractive base of owners with capacity to grow with our brand. We believe the strong relationships we have with our franchise system provide a strong platform for growth.

Franchise Agreements. For each franchise store, we enter into a franchise agreement stipulating a standard set of terms and conditions. The initial term of a franchise agreement generally is 10 years with five-year renewal options. The standard initial franchise fee for our stores is $25,000. This initial fee is paid in full at the time the franchise agreement is signed. A franchise fee allows an owner to open a single store at a specific location. Franchise owners also may purchase successive franchise terms of five years at the expiration of the initial franchise agreement term, and each successive term thereafter, generally for $7,500 per successive term, which provides us with an ongoing income stream. Existing franchise owners purchasing a second or additional store franchise incur a reduced fee of $15,000 for each unit. If franchise owners enter into an Area Development Agreement (“ADA”) for multiple stores in a region on a set schedule, they are required to pay a development fee equal to an initial franchise fee for the first store of $25,000 plus $5,000 for each store remaining to be opened as outlined in their ADA. As additional stores open under the ADA, area developers are charged an incremental $10,000 per store.

Under the standard franchise agreements, franchise owners are also required to pay an ongoing royalty fee of 5.0% of weekly net sales in order to use our registered trademarks and to benefit from corporate franchise support. At present, franchise owners contribute 2.0% of weekly net sales to a national advertising and development fund.

From time to time, we may enter into amendments to our standard franchise agreements as part of various limited incentive programs targeted to improve store growth, accelerate development in certain markets or assist underperforming stores in certain markets, among others. These amendments may include lower royalty fees for a period of time. For example, we granted royalty discounts to certain franchise owners that have lower than a specified AWS in relation to their investments in remodeling their stores. We also expect to test a program in a select market or markets that would provide certain underperforming stores the ability to pay us lower royalty fees, with the difference to be reinvested in local marketing. In addition, we may enter into amendments as part of sales initiatives, such as our Military Franchise Incentive Program, which provides lower royalty fees over the first three years of a new store franchise agreement signed by a qualified member of the U.S. military in active duty or a U.S. veteran that has been honorably discharged from the military.

We hold the right to terminate our arrangement with a franchise owner for a number of factors, including insolvency or bankruptcy, failure to operate his or her store according to our standards, understatement of sales, failure to pay fees, or material misrepresentations on an application for a franchise.

Franchise Owner Support

From the time the initial franchise agreement is executed, we ensure that our franchise owners begin their Papa Murphy’s career in a manner that we believe will foster success. Although Papa Murphy’s franchise owners are responsible for site selection, we provide essential guidance and assistance through the site searching and acquisition process, as well as in the design and construction phases.

Site Selection. Franchise owners are responsible for finding their own site, with guidance and approval from us. Standard specifications involve such factors as: (i) general location/neighborhood; (ii) traffic patterns; (iii) parking; (iv) size; and (v) proximity to competing businesses. Once a franchise owner completes a Site Submission Package, which should occur at least 20 days prior to the execution of a lease, our real estate managers will assess the prospective site and, if deemed appropriate, provide written approval to proceed with commencing negotiations around a lease or purchase agreement relating to the site. Throughout this negotiation process, members of our real estate team support the franchise owner.

Design and Construction. Once a site is approved, our construction project managers provide the franchise owner with construction education and design plans to ensure that the franchised location fits our standards and specifications. Once a lease is signed, we also help our franchise owners in: (i) identifying and selecting qualified contractors; (ii) submitting plans for necessary permits; (iii) reviewing bids and (iv) helping to negotiate the prices throughout construction and design. During the actual construction phase, our construction project managers also help the franchise owner in conducting pre-construction meetings and providing final punch list instructions prior to opening the store.

Training. We have a mandatory five-phase training program for new franchise owners and their managers, crafted to provide the technical and managerial skills necessary to prepare them for success. The rigorous program, can take at

least five and a half weeks, and requires approximately 28 days or more of on-the-job training in an existing certified Papa Murphy’s store to be completed no less than four weeks prior to the franchise store’s opening. It covers a wide variety of topics, including: (i) pizza and product preparation, customer service and sales building; (ii) human resource management; (iii) payroll and (iv) cost management. We equip and support our franchise owners with the necessary tools to represent the brand and empower each franchise owner to run successful businesses that ultimately drive operating results. In addition to the initial franchise owner training, basic manager, advanced manager, shift supervisor and ServSafe (food safety) training programs are offered numerous times throughout the year at various field locations throughout the system.

System Standards and Operations Support. We have established stringent standards for franchise operations to protect and benefit the Papa Murphy’s brand and the franchise owners. These standards are clearly and thoroughly detailed for franchise owners through our detailed Operations Manual, which is given to franchise owners in training and amended periodically. Topics covered in our Operations Manual include, among other things: (i) maintenance of uniform standards of quality, taste and food appearance and (ii) maintenance of uniform quantities, volumes and types of food offered. Further, the Operations Manual contains lists of approved suppliers, recipes, menu requirements, accounting and bookkeeping methods, advertising requirements and public relations guidelines. We periodically provide refresher training programs, seminars and regional meetings which require the attendance and satisfactory completion by franchise owners and/or their managers. To further benefit the brand and ensure the success of the franchise owners, as of December 30, 2013, we had a field team of approximately 40 talented and seasoned operations professionals to support our franchise owners. This team leads the franchise owners through operational audits called QSCs (“Quality Service Cleanliness”). The operations team typically performs one QSC and one or two quick visits per store annually, as well as completed business reviews with each owner. We utilize a variety of tools, including QSCs, customer feedback scores, field visits, training classes, profit and loss statement reviews, evaluation of sales and transaction trends, costs of goods and labor, and speed of service, to identify and evaluate the strengths, weaknesses and development opportunities of franchise and company-owned stores. Our Market Leaders and Market Coaches accomplish this through regular visits with owners and weekly phone contact to discuss overall business trends and operations.

Point-of-Sale System and Online Ordering. The majority of our company-owned and franchise stores use a point-of-sale system supplied by a vendor selected by us (“PMI Enterprise Solution”). The PMI Enterprise Solution is specifically designed for the restaurant industry, and we and our franchise owners use this integrated restaurant-level technology solution for inventory and labor management and cash handling, allowing us and our franchise owners to better track point-of-sales data and the efficiency of stores. We began rolling out this PMI Enterprise Solution in our stores in 2009. As of December 30, 2013, 804 stores had installed the PMI Enterprise Solution, and we expect stores to continue converting to the new system. In our tests, existing stores that converted to the PMI Enterprise Solution experienced a 2.3% increase in comparable store sales growth versus a control group of existing stores that had not yet converted.

In 2013 we also began rolling out our new online ordering system to our franchise and company-owned stores in select markets. Stores that have implemented the new online ordering system have experienced an increase in transactions and average ticket value that has resulted in higher sales.

New Store Format. We recently developed an enhanced new store format for our system-wide stores with the help of a leading design firm. We leveraged our research about consumer preferences to design a contemporary store that highlights the high quality of our ingredients and clearly communicates the ability of our customers to customize their pizza. We have moved the mixer to the front of the store to highlight our fresh daily-made dough, and we have prominently presented the make line in the store to allow our customers to easily see the abundance of available high-quality ingredients and watch as their pizza is being made to their specifications. Additionally, the new “Murphy’s Market” displays our various additional items for sale and provides easy access for a customer to pick up items as they approach the register. Murphy’s Market also provides a platform for further expanding our offerings of sides and desserts in the future. We believe this unique new format will increase customer loyalty and drive repeat visits by reinforcing the strengths of the Papa Murphy’s brand.

The build-out cost of the new store format is in-line with the previous store format. The first store with the new store format opened in September 2013, and we expect to continue rolling out stores with the new format in the second

fiscal quarter of 2014. We expect to remodel approximately ten company-owned stores in 2014 at an aggregate cost of approximately $1.2 million, or approximately $70,000-$200,000 per store, depending on if the store is relocating in connection with a remodel. We expect some of these stores to convert to the new store format in the third quarter of 2014 as part of the remodeling. Our franchise stores will continue to be remodeled in accordance with the terms of their franchise agreements and may, at the option of the franchise owner, be converted to the new store format as part of the required remodeling. We believe the costs associated with converting franchise stores to the new store format, which will be the responsibility of the franchise owners, will be between approximately $30,000 to $70,000 per store. We expect that beginning in mid-2014, new franchise agreements will require stores to be in the new store format. In addition, franchise agreements that will be renewed will require stores to be remodeled in the new store format.

Franchise Advisory Board, Presidents Advisory Council and Franchise Convention. We formed a Franchise Advisory Board (“FAB”) in order to gather input and advice from our franchise owner community on key initiatives and business issues. The FAB is made up of franchise owners either elected by the Papa Murphy’s franchise owner community or appointed by us. In 2013, we formed a Presidents Advisory Council (“PAC”) composed of franchise owners elected as advertising cooperative presidents in many of our larger DMAs. We meet with the PAC on a regular basis to discuss and communicate key initiatives and business issues to our franchise community. In addition, we hold conventions or regional meetings periodically for the franchise owners that make up the Papa Murphy’s franchise system. These meetings are well attended by our franchise owners and typically include programs on sales and marketing techniques, performance specifications, advertising, training programs and committee elections. As a result of our extensive franchise owner support and training efforts, our franchise owners are among the most satisfied in the restaurant industry and experienced a lower failure rate than many of their peers when comparing the SBA failure rates for similar franchise companies for the years 2001 to 2011. From 2001 to 2011, which represents the most recent periods for which SBA loan data is available, our franchise owners with SBA-guaranteed loans had an annualized loan failure rate of 0.9%.

Additional Investment Opportunities

From time to time we may pursue opportunistic investments.

Project Pie. In December 2013, Project Pie Holdings, our non-wholly owned subsidiary, acquired a minority interest in Project Pie LLC (“Project Pie”) for $2.0 million. In March 2014, we made an additional $500,000 investment in Project Pie. Project Pie is a fast-casual pizza chain concept founded by James Markham in 2012. The concept offers pre-designed and custom-topping pizzas that are baked-to-order in less than five minutes. We believe this to be an opportunistic investment due to Project Pie’s competitive positioning in the fast-casual pizza industry. As of December 30, 2013 Project Pie had two stores located in San Diego and Las Vegas with additional stores scheduled to open in 2014. Project Pie will be supported by a team of advisors including John Barr, our Chairman, Kat Cole, President of Cinnabon Inc., and Alice Elliot, Chief Executive Officer of the Elliot Group.

Competition

The LSR pizza industry is highly competitive. We compete against national pizza chains such as Domino’s Pizza, Little Caesars, Papa Johns and Pizza Hut as well as local and regional pizza restaurants. We also compete against smaller Take ‘N’ Bake operators such as Figaro’s Pizza, Nick-N-Willy’s Pizza and HomeMade Pizza Company, which are smaller, more regional Take ‘N’ Bake operators. Finally, we compete against retail grocers with their offerings of: frozen pizza, such as DiGiorno, Tombstone, Red Baron, California Pizza Kitchen and Totino’s Party Pizza and refrigerated Take ‘N’ Bake pizza. We generally compete on the basis of product quality and variety, location, image, service and price. We also compete on a broader scale with other limited service restaurants. Unlike most traditional pizza chains and other limited service restaurants, we are able to accept Electronic Benefit Transfer (“EBT”) payments, commonly known as food stamps because our uncooked, Take ‘N’ Bake pizzas are classified as a grocery item, which is a requirement for accepting EBT payments.

Marketing

At the DMA level, which is the designated market area in which a franchise owner may open multiple Papa Murphy’s stores, each store in our system is required to spend, at a minimum, the greater of $2,000 or 5.0% of net sales each

month on local advertising. This generated approximately $40 million in 2013 in marketing spend across markets, which is an integral part of our brand-building effort. Our marketing messaging typically focuses on our fresh pizzas that are prepared in front of our customers using their favorite high-quality ingredients or our unique chef-designed combinations.

As of December 30, 2013 we employed a team of approximately 60 operations and marketing experts positioned across our geographic markets. This team works in conjunction with local franchise owners and a network of over a dozen local advertising agencies to create and execute broadcast and print marketing programs to support each DMA. We may also invest in additional marketing efforts at the store or DMA level to accelerate growth and development in certain markets, as we have done in Kansas City, Dallas/Fort Worth, Phoenix, Austin, Indianapolis, Nashville and many other markets, or assist underperforming stores and markets, as we have done in Charlotte and Des Moines, among others.

Target Audience. We target the dinner decision maker: parents, aged 25 to 54 with an annual household income greater than $70,000. We believe our menu options provide parents with food they are proud to serve because our pizzas are fresh and high-quality and food they enjoy serving because it is easy, convenient and because their families enjoy eating pizza. Moms in particular provide an active, social core target audience for our product, and we build brand awareness and loyalty by helping moms feed their family.

Menu Strategy. We routinely update our menu offerings and product promotional messaging to drive repeat business and bring new customers into each store. For example, we began testing the FAVES line of pizzas, which includes cheese, pepperoni and sausage pizzas, generally marketed for $5, in November 2012, and rolled out the FAVES line nationally in December 2013. In October 2013, we began testing Fresh Pan Pizza, with our customer’s choice of toppings on a thicker, fluffier, buttery-flavored crust, and rolled out Fresh Pan Pizza nationally in February 2014. Customer feedback on both of these products demonstrates that our menu strategy allows us to attract a broader base of customers, drive new customer trial and increase brand loyalty.

In addition, we periodically require our franchise owners to participate in national or regional promotions. Our holiday promotions include the heart-shaped pepperoni pizza, the HeartBaker, for Valentine’s Day and the Jack-o-Lantern pizza available for Halloween.

Media. We reach our target audience through traditional and non-traditional forms of media purchased at the DMA level, including broadcast television and radio, cable television, digital media such as web, email, text, social media and local store marketing. In markets with adequate store penetration and sales volume such that the stores contributing 5.0% of net sales into the local advertising group can purchase advertising to support their promotions without additional investment from us or the franchise owners, the majority of the local advertising budget funds the purchase of television and radio commercials in support of promotions. As a significant local spot media purchaser, we currently air television advertising in over 50% of our stores across the United States. Our social media presence includes an active Facebook page, Twitter account and Pinterest page as well as representation on other social media sites. We also use “mommy bloggers” for promotions in targeted regional areas. In markets without broadcast funds, our promotional messages are supported by aggressive regional and local print advertising, supplemented by local store marketing and digital marketing channels.

Advertising. Consistent with our strategy of keeping the menu fresh to drive repeat and new customer visits, our television, radio, digital and social media and in-store point-of-purchase materials are developed by an in-house creative studio and external agency team and distributed to local markets for their use. We believe this consistent approach to advertising is important to build brand awareness and loyalty in all markets.

Local Store Marketing. Our local store marketing program includes field marketing teams that train franchise owners on how to implement sales-building tools, like fundraisers, school lunch programs, local charity sponsorships and sports sponsorships, among other local store marketing promotions, throughout the community. Marketing materials that support these local promotions are developed by an in-house design team for brand consistency and are available to order via a website. We believe these connections allow us to show our appreciation to our communities and are important to sustaining long-term brand growth and developing relationships that lead to loyal customers.

Advertising and Development Fund . As part of their franchise agreements, franchise owners, as well as company-owned stores, contribute 2% of weekly net sales to a national advertising and development fund, which is invested in

the production of television, radio and print advertising, a national advertising agency, marketing research, marketing personnel and market-level support. A portion of the advertising and development fund is used for specific market and store-level investments targeted to increase sales units and transactions and to accelerate growth in these markets. In markets where electronic media is purchased, our franchise owners form owner associations and work with field marketing on buying airtime, contracting with local agencies and voting on strategic issues such as product and pricing, media scheduling and print timing.

Suppliers and Distribution

We enter into national supply or pricing agreements with certain key third-party suppliers, including: (i) Saputo Cheese, Inc. (“Saputo”), Davisco Foods International, Inc. (“Davisco”) and Atalanta Corporation (“Atalanta”) for cheese; (ii) Pizza Blends, Inc. (“Pizza Blends”) for flour and dough mix; (iii) Atalanta, Hormel Foods Corporation (“Hormel”), Capital Wholesale Meats (d/b/a Fontanini Meats) (“Fontanini”), Kraft Foodservice, Burke Corporation, John Soules Foods, Inc. and Tyson Foods, Inc. (“Tyson”) for meat; and (iv) Neil Jones Food Company (“Neil Jones”) for tomatoes and sauce. We negotiate pricing for our franchise and company-owned stores with national pricing agreements covering a term of three months to one year. We do not receive any profits for the sale of these supplies to franchise owners. Our top 10 food providers by dollar volume include Saputo and Davisco for cheese, Pizza Blends for flour and dough mix, Hormel and Fontanini for meat, Atalanta for various toppings, Tyson for chicken, Neil Jones for sauce and toppings, Pactiv Corporation for packaging and C.H. Robinson Worldwide, Inc. for produce.

We rely on Sysco Corporation (“Sysco”) as our primary distributor of cheese, refrigerated items, meat, canned and dry goods, paper and disposables and janitorial supplies. Pursuant to our Distribution Service Agreement with Sysco (the “DSA”), we have the right to designate the brands and products we want Sysco to supply, within a specified amount as described in the DSA. Sysco delivers these supplies to each store covered by the DSA approximately one to two times each week. Our distribution relationship with Sysco has been in place since 1998 and Sysco covers approximately 1,300 locations, as of December 30, 2013. The DSA terminated on August 30, 2007, but automatically renews until terminated by either party by written notice one year prior to the termination date as set forth in such notice. In 2010 we added a secondary distribution partner, Shamrock Foods, in Phoenix, Arizona. Shamrock Foods services 62 locations.

For our beverage products, we rely on Pepsi-Cola Advertising and Marketing, Inc. (“Pepsi”) as our exclusive provider of packaged beverage products. We have maintained a national distribution relationship with Pepsi since 2004.

Management Information/Technology Systems

The PMI Enterprise Solution point-of-sale system is specifically designed for the restaurant industry, and we use this integrated restaurant level technology solution for inventory and labor management and cash handling, allowing us to better track point-of-sales data and the efficiency of our stores. Through the PMI Enterprise Solution we are able to collect, store, utilize and disseminate data and information collected by each point-of-sale system to generate reports and records and examine or audit any store. We collect itemized reports of net sales from each store on a weekly basis. Franchise owners are required to report sales on a weekly basis and submit store-level profit and loss statements, including a year-to-date summary and a balance sheet on a monthly and annual basis. Stores that are not using the PMI Enterprise Solution yet are required to submit their net sales manually. We use these reports to analyze sales by location and generate preliminary profit and loss statements for each store.

Intellectual Property and Trademarks

We regard the Papa Murphy’s brand name and associated trademarks as valuable assets. We have a portfolio of 24 trademarks registered, and several pending trademark registrations with the United States Patent and Trademark Office. We have also secured trademark registrations for our brand name in Canada, Mexico, New Zealand and Australia, and have applied for trademark registrations in several Middle Eastern countries as well as for a community mark in the United Kingdom. All of the marks owned by us cover store-related services and/or food products.

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Seasonality

We experience some effects of seasonality. We typically follow family eating patterns at home, with our strongest sales levels occurring in the months of September through May, and our lowest sales levels occurring in the months of June, July and August. These months correspond with summer vacation in the United States, and we attribute our lower sales levels to our customers more frequently going on vacation, where they typically do not have an oven readily available, to bake our pizzas. Our sales levels typically increase in the fall, with the start of school and the desire of parents to provide home-cooked meals.

Employees

As of December 30, 2013, we employed 1,130 persons, of whom 183 were full-time corporate-based and regional personnel and the remainder were part-time or store-level employees. Much of the corporate support staff is highly experienced and many have a tenure of greater than five years. None of our employees are represented by a labor union or covered by a collective bargaining agreement, and we believe that we have good relations with our employees.

Our franchise owners are independent business owners, so they and their employees are not included in our employee count.

Government Regulation

Federal. We are subject to varied federal regulations affecting the operation of our business. We are subject to the U.S. Fair Labor Standards Act, the U.S. Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act and various other federal and state laws governing such matters as minimum wage requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements. A significant number of our food service personnel are paid at rates related to the applicable minimum wage, and past increases in the minimum wage have increased our labor costs, as would future increases. Further, we are continuing to assess the impact of recently-adopted federal health care legislation on our health care benefit costs. Many of our smaller franchise owners have few enough employees that they will qualify for exemption from the mandatory requirement to provide health insurance benefits. The imposition of any requirement that we or our franchise owners provide health insurance benefits to our or their employees that are more extensive than the health insurance benefits we currently provide to our employees or that franchise owners may or may not provide, or the imposition of additional employer paid employment taxes on income earned by our employees, could have an adverse effect on our results of operations and financial position. Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs for goods and services supplied to us.

We are also required to comply with the accessibility standards mandated by the U.S. Americans with Disabilities Act of 1990 and related federal and state statutes, which generally prohibits discrimination in accommodation or employment based on disability. We may in the future have to modify our stores to provide service to or make reasonable accommodations for disabled persons. While these expenses could be material, our current expectation is that any such actions will not require us to expend substantial funds.

The recent Patient Protection and Affordability Act of 2010 (the “PPACA”) federal legislation enacted in March 2010 requires chain restaurants with 20 or more locations in the United States to comply with federal nutritional disclosure requirements. Although the FDA published proposed regulations to implement the menu labeling provisions of the PPACA in April 2011, the agency has delayed the release of final regulations implementing these requirements. A number of states, counties and cities have also enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information available to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Although the federal legislation is intended to preempt conflicting state or local laws on nutrition labeling, until we are required to comply with the federal law we will be subject to a patchwork of state and local laws and regulations regarding nutritional content disclosure requirements. Many of these requirements are inconsistent or are interpreted differently from one jurisdiction to another. The effect of such labeling requirements on consumer choices, if any, is unclear at this time.

There is also a potential for increased regulation of food in the United States, such as the recent changes in the Hazard Analysis and Critical Control Points (“HACCP”) system requirements. HACCP refers to a management system

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in which food safety is addressed through the analysis and control of potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have adopted legislation or implemented regulations which require restaurants to develop and implement HACCP systems. Similarly, the U.S. Congress and U.S. Food and Drug Administration (the “FDA”) continue to expand the sectors of the food industry that must adopt and implement HACCP programs. The Food Safety Modernization Act (the “FSMA”) was signed into law in January 2011 and significantly expanded the FDA’s authority over food safety, granting the FDA authority to proactively ensure the safety of the entire food system, including through new and additional hazard analysis, food safety planning, increased inspections and permitting mandatory food recalls. Although restaurants are specifically exempted from some of these new requirements and not directly implicated by other requirements, we anticipate that some of the FSMA provisions and FDA’s implementation of the new requirements may impact our industry. We cannot assure you that we will not have to expend additional time and

resources to comply with new food safety requirements either required by the FSMA or future federal food safety regulation or legislation. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise harm our business.

State. We are subject to extensive and varied state and local government regulation, affecting the operation of our business, as are our franchise owners, including regulations relating to public and occupational health and safety, sanitation, fire prevention and franchise operation. Each franchise store is subject to licensing and regulation by a number of governmental authorities, which include zoning, health, safety, sanitation, nutritional information disclosure, environmental, building and fire agencies in the jurisdiction in which the franchise is located. We require our franchise owners to operate in accordance with standards and procedures designed to comply with applicable codes and regulations. However, our or our franchise owners’ inability to obtain or retain health department, or other licenses would adversely affect operations at the impacted store or stores. Although we have not experienced, and do not anticipate, any significant difficulties, delays or failures in obtaining required licenses, permits or approvals, any such problem could delay or prevent the opening of, or adversely impact the viability of, a particular store.

In addition, in order to develop and construct our stores, we need to comply with applicable zoning and land use regulations. Federal and state regulations have not had a material effect on our operations to date, but more stringent and varied requirements of local governmental bodies with respect to zoning and land use could delay or even prevent construction and increase development costs of new stores.

In addition, we are subject to the rules and regulations of the Federal Trade Commission and various state laws regulating the offer and sale of franchises. The Federal Trade Commission and various state laws require that we furnish a franchise disclosure document containing certain information to prospective franchise owners, and a number of states require registration of the franchise disclosure document at least annually with state authorities. We are operating under exemptions from registration in several states based on our qualifications for exemption as set forth in each such state’s laws. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states. We believe that our franchise disclosure document, and franchising procedures comply in all material respects with both the Federal Trade Commission guidelines and all applicable state laws regulating franchising in those states in which we have offered franchises.

International. Our franchise stores in Canada and the Middle East are subject to national and local laws and regulations. We believe that our international franchise stores and procedures comply in all material respects with the laws of the applicable foreign jurisdiction.

Environmental . Our operations, including the selection and development of company-owned and franchise stores and any construction or improvements we or our franchise owners make at those locations, are subject to a variety of federal, state and local laws and regulations concerning waste disposal, pollution, protection of the environment and the presence, discharge, storage, handling, release and disposal of or exposure to, hazardous or toxic substances (“environmental laws”). We provide training and require compliance with applicable laws by our employees and franchise owners in use of chemicals, which are primarily used in small quantities for cleaning in our stores. Storage, discharge and disposal of hazardous substances are not a significant part of our operations. Generally our stores are located in residential neighborhoods, but sometimes might be located in areas which were previously occupied by more environmentally significant operations. Environmental laws can provide for significant fines and penalties for

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non-compliance and liabilities for remediation and sometimes require owners or operators of contaminated property to remediate the property, regardless of fault. We are not aware of any environmental laws that will materially affect our results of operations, or result in material capital expenditures relating to our operations. However, we cannot predict what environmental laws will be enacted in the future, how existing or future environmental laws will be administered, interpreted or enforced, or the amount of future expenditures that we may need to comply with, or to satisfy claims relating to, environmental laws.

Legal Proceedings

From time to time we may be involved in claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these actions, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, liquidity or capital resources.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding our members of our Board and our executive officers as of the date set forth on the cover page of this prospectus.


NAME	AGE		POSITION
Ken Calwell		51	Chief Executive Officer, President and Director
Mark Hutchens		48	Chief Financial Officer
Kevin King		49	Chief Development Officer
Victoria Blackwell		46	Senior Vice President of Talent and Chief Legal Officer
Dan Harmon		48	Senior Vice President of Operations
Jayson Tipp		48	Senior Vice President of Marketing, Strategy & Technology
John Barr		66	Chairman of the Board and Company
Benjamin Hochberg		42	Director
Yoo Jin Kim		43	Director
Thomas H. Lee		70	Director
John Shafer		70	Director
Achi Yaffe		34	Director

Set forth below is a description of the business experience of the foregoing persons:

Ken Calwell has served as our President since June 2011 and as our Chief Executive Officer and a member of our Board since December 31, 2011. Mr. Calwell has extensive experience in the limited service restaurant industry. Mr. Calwell served as the Chief Marketing Officer and Chief Food Innovation Officer of Wendy’s International, Inc., a public company, from July 2008 to June 2011. Prior to that, Mr. Calwell served in various roles at Domino’s Pizza, Inc., a public company, including Chief Marketing Officer and Executive Vice President of Research and Development, from June 2001 to May 2008. Before joining Domino’s Pizza, Inc., Mr. Calwell served as the Vice President of New Product Development at Wendy’s International, Inc. from October 1998 to June 2001. Mr. Calwell also served as the Senior Director of Marketing at Frito Lay, Inc. (PepsiCo) from October 1996 to October 1998 and in roles of increasing responsibility at Pizza Hut starting as Associate Marketing Manager in September 1988 to Senior Director of Marketing in October 1996.

Mark Hutchens has served as our Chief Financial Officer since January 2014. Previously, Mr. Hutchens served as the Vice President, Chief Financial Officer – International, for Bloomin’ Brands, Inc., a public company, from October 2012 to January 2014, where his responsibilities included finance, business development and supply chain management activities for Outback Steakhouse International. Prior to that, Mr. Hutchens served in various roles of increasing responsibility at Office Depot, Inc., including Senior Vice President, Controller and Chief Accounting Officer from September 2008 to March 2012 and Senior Vice President Finance, International Division from November 2006 to September 2008. From 1996 to 2006, Mr. Hutchens worked with YUM! Brands, Inc., where his most recent title was Assistant Treasurer – Corporate Finance. From 1989 to 1996, Mr. Hutchens worked at Ford Motor Company.

Kevin King has been with Papa Murphy’s since June 2005 and has served as our Chief Development Officer since September 2011. Before being promoted to his current role, Mr. King served as Senior Vice President of Operations from June 2009 to September 2011 and as Senior Vice President of Development from June 2005 to June 2009. Prior to joining Papa Murphy’s, Mr. King was with JP Morgan Chase & Co. in Columbus, Ohio from September 2003 to June 2005. From August 1990 to August 2003, Mr. King worked with Donatos Pizzeria Corporation, where his most recent title was Vice President of Franchising.

Victoria Blackwell has been with Papa Murphy’s for almost 13 years and has served as our Senior Vice President of Talent and Chief Legal Officer since November 2012. Ms. Blackwell previously served as Senior Vice President and General Counsel from February 2007 to November 2012, Vice President Legal from March 2005 to February 2007 and Associate Attorney from July 2001 to March 2005.

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Dan Harmon has served as our Senior Vice President of Operations since August 2013. Mr. Harmon previously served as our Vice President, East Division from September 2012 to August 2013. Before joining Papa Murphy’s, Mr. Harmon held various roles at Potbelly Sandwich Works, LLC, including West Zone Director from September 2008 to September 2012 and Regional Director, Texas from October 2007 to September 2008. Prior to Potbelly Sandwich Works, LLC, Mr. Harmon held various roles at Blockbuster, Inc. including Regional Director of Operations for Western Canada, Director of Operations & Collections and District Manager and at McDonald’s Corporation as an Operations Manager.

Jayson Tipp has served as our Senior Vice President of Marketing, Strategy & Technology since November 2012. Mr. Tipp previously served as our Senior Vice President of Strategy from May 2012 to November 2012. Mr. Tipp joined Papa Murphy’s from Redbox Automated Retail, LLC, a division of Outerwall, Inc., a public company, where Mr. Tipp served as Vice President of CRM and Analytics from December 2010 to May 2012. Prior to Redbox Automated Retail, LLC, Mr. Tipp served as Vice President of Strategic Planning at Coinstar, Inc., also a division of Outerwall, Inc., from September 2009 to December 2010. From July 2007 to March 2009, Mr. Tipp served in various roles at Potbelly Sandwich Works, LLC including Senior Vice President of Development and Vice President of Finance.

John Barr has served as Chairman of our Board since October 2009 and as Chairman of the Company since December 2011. Mr. Barr previously served as our Chief Executive Officer from April 2005 to December 2011. Since December 2013, Mr. Barr has also served as Chairman of the Board of Managers and Chairman of Project Pie LLC. Prior to joining Papa Murphy’s, Mr. Barr served as President and Chief Executive Officer of Automotive Performance Industries from June 1999 to April 2004. Mr. Barr served as President, Chief Operating Officer and a Director of Quaker State Corporation from June 1995 to December 1999. Prior to joining the Quaker State Corporation, Mr. Barr spent 25 years with The Valvoline Company, a subsidiary of Ashland, Inc., where he was President and Chief Executive Officer from March 1987 to June 1995. In addition to working with above referenced companies, Mr. Barr has been a member of the Board of Directors of Penske Automotive Group, Inc., a publicly traded company, since December 2002 and a member of the Board of Directors of United Road Services Inc. since January 2013. Mr. Barr was previously a member of the Board of Directors of the following corporations: Performance Logistics Group, Inc. from March 2004 to January 2007; UST, Inc. from December 2003 to December 2008; Clean Harbors Environmental, Inc. from August 2003 to May 2009; James Hardie Industries NV from September 2003 to March 2008; and Home Base, Inc. from July 1997 to March 2002.

Benjamin Hochberg has served as a member of our Board since May 2010. Mr. Hochberg is a Partner at Lee Equity Partners, LLC. Prior to joining Lee Equity in May 2006, Mr. Hochberg was a Principal at Odyssey Investment Partners, LLC, a middle-market private equity investment firm. Prior to Odyssey, Mr. Hochberg worked at Bain Capital Partners, a global private equity investment firm, where he most recently held the position of Principal. Mr. Hochberg also serves on the board of directors of Paragon Industries, Inc., The Edelman Financial Group, Inc., Skopos Financial Group, LLC and Aimbridge Hospitality, LLC.

Yoo Jin Kim has served as a member of our Board since May 2010. Mr. Kim is a Partner at Lee Equity Partners, LLC. Prior to joining Lee Equity in 2005, Mr. Kim was with Bain Capital Partners, a global private equity investment firm, where he most recently held the position of Principal. Mr. Kim also serves on the board of directors of Paragon Industries, Inc., Cross MediaWorks, LLC, Eating Recovery Center LLC, Aimbridge Hospitality, LLC and Project Pie LLC.

Thomas H. Lee has served as a member of our Board since May 2010. Mr. Lee has served as President at Lee Equity Partners, LLC since its founding in 2006. He is also President of Thomas H. Lee Capital, LLC. Prior to forming Lee Equity, Mr. Lee served as Chairman and CEO of Thomas H. Lee Partners, L.P. and its predecessors, a global private equity investment firm, which he founded in 1974. Mr. Lee currently serves on the board of directors of Warner Music Group, The Edelman Financial Group, Inc. and Aimbridge Hospitality, LLC and has served as a director of numerous other public and private corporations. Mr. Lee is a Trustee of Lincoln Center for the Performing Arts, the Museum of Modern Art, Langone NYU Medical Center and the Whitney Museum of American Art, among other civic and charitable organizations. He also serves on the Executive Committee for Harvard University’s Committee on University Resources.

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John Shafer joined our Board in October 2006. Mr. Shafer was the Chief Executive Officer of Allied Domecq Retailing USA , in the former controlling shareholder of Dunkin’ Donuts, Baskin-Robbins and Togo’s Eateries, from 1999 until he retired in January 2003. Mr. Shafer also served on the Board of Directors of Mrs. Fields, Inc. from 2005 to 2008.

Achi Yaffe has served as a member of our Board since December 2011. Mr. Yaffe joined Lee Equity Partners, LLC in September 2010 and currently serves as a Principal. Prior to joining Lee Equity Partners, LLC, Mr. Yaffe worked at McKinsey & Company from October 2007 to September 2010, where he most recently held the position of Engagement Manager. Prior to joining McKinsey & Company, Mr. Yaffe was the Director of Global Financial Services Operations at eTelecare Global Solutions. Mr. Yaffe also serves on the board of directors of PDR Equity, LLC.

Board of Directors

Our business and affairs are managed under the direction of our Board. Our amended and restated certificate of incorporation will provide that our Board consist of between seven and nine directors. Contemporaneously with this offering, our Board will be composed of seven directors. Under the terms of a new stockholder’s agreement that we expect to enter into in connection with this offering, within one year of this offering the Board will increase its size to nine directors. Lee Equity will have the right to designate two directors to the Board as long as it owns 20% or more of the issued and outstanding shares of our common stock and the right to designate one director to the Board for as long as it owns 10% or more of our issued and outstanding common stock.

Our amended and restated certificate of incorporation will provide that our Board will be divided into three classes, with one class being elected at each annual meeting of stockholders. Each director will serve a three-year term, with termination staggered according to class. Class I will initially consist of two directors, Class II will initially consist of two directors, and Class III will initially consist of three directors. The Class I directors, whose terms will expire at the first annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Yoo Jin Kim and Benjamin Hochberg. The Class II directors, whose terms will expire at the second annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Thomas H. Lee and Achi Yaffe. The Class III directors, whose terms will expire at the third annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Ken Calwell, John Barr and John Shafer. See “Description of Capital Stock—Anti-takeover Provisions” and “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—New Stockholder’s Agreement.”

Our executive officers and key employees serve at the discretion of our Board.

Director Independence

Our Board has determined that John Shafer is an independent director under the rules of NASDAQ and Rule 10A-3(b)(1) under the Exchange Act. In accordance with NASDAQ phase-in rules for newly public companies, we have one director that is independent under NASDAQ rules and under Rule 10A-3(b)(1) at the time our shares are listed, and will have additional such directors within 90 days of such listing and a majority of such directors by the first anniversary of listing.

Board Committees

Upon the consummation of this offering, our Board will have three committees: the audit committee, the compensation committee and the nominating and corporate governance committee. Each committee will operate under a charter approved by our Board. Each committee will have the composition and responsibilities described below. Members serve on these committees until their resignations or until otherwise determined by our Board. The charter and composition of each committee will be effective upon the consummation of this offering. The charter of each committee will be available on our website.

Audit Committee

The primary purposes of our audit committee are to assist the Board’s oversight of:

the integrity of our financial statements;

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our internal financial reporting and compliance with our disclosure controls and procedures;

the qualifications, engagement, compensation, independence and performance of our independent registered public accounting firm;

our independent registered public accounting firm’s annual audit of our financial statements and any engagement to provide other services;

the performance of our internal audit function;

our legal and regulatory compliance; and

the application of our codes of business conduct and ethics as established by management and the Board.

Upon the consummation of this offering, and prior to the listing of our common stock, our audit committee will be composed of Ken Calwell, Yoo Jin Kim and John Shafer. Yoo Jin Kim will serve as chair of the audit committee. Yoo Jin Kim qualifies as an “audit committee financial expert” as such term has been defined by the Securities and Exchange Commission in Item 407(d)(5) of Regulation S-K. Our Board has affirmatively determined that John Shafer meets the definition of an “independent director” for the purposes of serving on the audit committee under applicable NASDAQ rules and Rule 10A-3 under the Exchange Act. We intend to comply with these independence requirements for all members of the audit committee within the time periods specified under such rules. The audit committee will be governed by a charter that complies with the rules of NASDAQ, as applicable.

Compensation Committee

The primary purposes of our compensation committee are to:

assist the Board in discharging its responsibilities regarding compensation of our executive officers;

review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer and evaluate our Chief Executive Officer’s performance in light of those goals and objectives;

review and determine the compensation of our Chief Executive Officer and other executive officers;

make recommendations to the Board with respect to our incentive and equity-based compensation plans;

provide oversight of our compensation policies, plans and benefit programs including reviewing and administering all compensation and employee benefit plans, policies and programs; and

produce, approve and recommend to the Board for approval reports on compensation matters required to be included in our annual proxy statement or annual report.

Upon the consummation of this offering, and prior to the listing of our common stock, our compensation committee will be composed of John Shafer, John Barr and Benjamin Hochberg. Benjamin Hochberg will serve as chair of the compensation committee. Our Board has affirmatively determined that John Shafer of our compensation committee meets the definition of an “independent director” for the purposes of serving on the compensation committee under applicable NASDAQ rules, is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, and we intend to comply with these independence requirements for all members of the compensation committee within the time periods specified under all such rules. The compensation committee will be governed by a charter that complies with the rules of NASDAQ, as applicable.

Nominating and Corporate Governance Committee

The primary purposes of our nominating and corporate governance committee are to:

recommend to the Board for approval the qualifications, qualities, skills and expertise required for board of directors membership;

identify potential members of the Board consistent with the criteria approved by our Board and select and recommend to the Board the director nominees for election at the next annual meeting of stockholders or to otherwise fill vacancies;

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evaluate and make recommendations regarding the structure, membership and governance of the committees of the Board;

develop and make recommendations to the Board with regard to our corporate governance policies and principles; and

oversee the annual review of the Board’s performance.

Upon the consummation of this offering, and prior to the listing of our common stock, we will establish a nominating and governance committee comprised of Yoo Jin Kim, John Shafer and John Barr. John Barr will serve as chair of the nominating and governance committee. Our Board has affirmatively determined that John Shafer meets the definition of an “independent director” for the purposes of serving on the nominating and governance committee under applicable NASDAQ rules, and we intend to comply with these independence requirements for all members of the nominating and governance committee within the time periods specified under such rules. The nominating and governance committee will be governed by a charter that complies with the rules of NASDAQ, as applicable.

Code of Business Conduct and Ethics Policy

We have adopted a written code of business ethics and conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following this offering, a current copy of the code will be posted on our website. Any amendments to our code of conduct, or any waivers of its requirements for which disclosure is required, will be disclosed on our website promptly following the date of such amendment.

Compensation Committee Interlocks and Insider Participation

Upon the completion of this offering, none of our executive officers will serve on the compensation committee or board of directors of any other company of which any members of our compensation committee or any of our directors is an executive officer.

Indemnification of Directors and Officers

Our amended and restated certificate of incorporation will provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL.

Our amended and restated certificate of incorporation will provide that our directors will not be liable for monetary damages for breach of fiduciary duty. Our amended and restated bylaws will provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL, subject to certain exceptions contained in our amended and restated bylaws

Prior to the completion of this offering, we will enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL, subject to certain exceptions contained in those agreements.

We have customary directors’ and officers’ indemnity insurance in place for our directors and executive officers.

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EXECUTIVE AND DIRECTOR COMPENSATION

The following contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs. See “Forward-Looking Statements.” Actual compensation programs that we adopt may differ from the programs summarized in this discussion.

Overview

For 2013, our named executive officers (“NEOs”) were:

Ken Calwell, our Chief Executive Officer, President and Director;

John Barr, our Chairman

Kevin King, our Chief Development Officer; and

Janet Pirus, our former Chief Financial Officer, Senior Vice President of Finance and Treasurer.

Summary Compensation Table

The following table sets forth certain information for the year ended December 30, 2013 concerning the total compensation awarded to, earned by or paid to our NEOs.


NAME AND PRINCIPAL POSITION	YEAR		SALARY ($)		BONUS ($)			ALL OTHER COMPENSATION ($) ⁽⁵⁾		TOTAL ($)
Ken Calwell		2013		500,000		76,268	⁽¹⁾		20,447		596,715
Chief Executive Officer, President and Director
John Barr		2013		250,000		418,423	⁽²⁾		15,998		684,421
Chairman
Kevin King		2013		238,703		24,274	⁽³⁾		20,305		283,282
Chief Development Officer
Janet Pirus		2013		294,168		24,231	⁽⁴⁾		374,866		693,265
Former Chief Financial Officer, Senior Vice President, Finance and Treasurer

⁽ ¹⁾

Represents an annual bonus paid pursuant to the terms of such employment agreement. See “—Employment Agreements—Ken Calwell.”

⁽²⁾

Includes an annual bonus in the amount of $25,423, and a special retention bonus in the amount of $393,000, both paid pursuant to the terms of Mr. Barr’s employment agreement. See “—Employment Agreements—John Barr.”

⁽³⁾

Represents an annual bonus paid pursuant to the terms of Mr. King’s employment agreement. See “—Employment Agreements—Kevin King.”

⁽⁴⁾

Represents a pro-rated portion of Ms. Pirus’ annual bonus paid pursuant to the terms of Ms. Pirus’ separation agreement. See “—Employment Agreements—Janet Pirus.”

⁽⁵⁾

All other compensation includes amounts in respect of 401(k) matching, life insurance premiums and medical benefits premiums to our named executive officers as set forth below. In addition, in 2013 we repurchased shares of Ms. Pirus’s vested restricted stock in connection with the termination of her employment, pursuant to which Ms. Pirus received an additional $358,457, representing the difference between the market price of the shares on the date she purchased them and our repurchase price. See “—Employment Agreements—Janet Pirus.”


	401(K) MATCHING ($)		LIFE INSURANCE PREMIUMS ($)		MEDICAL BENEFITS PREMIUMS ($)		REPURCHASE OF RESTRICTED STOCK ($)		TOTAL ALL OTHER COMPENSATION ($)
Ken Calwell		8,806		1,029		10,612		—		20,447
John Barr		7,370		811		7,817		—		15,998
Kevin King		8,664		1,029		10,612		—		20,305
Janet Pirus		7,649		943		7,817		358,457		374,866

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Outstanding Equity Awards Table

The following table sets forth certain information about outstanding equity awards held by our NEOs as of December 30, 2013.


	STOCK AWARDS
NAME	NUMBER OF SHARES OF STOCK THAT HAVE NOT VESTED (#) ⁽¹⁾		MARKET VALUE OF SHARES OF STOCK THAT HAVE NOT VESTED ($) ⁽²⁾		EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES THAT HAVE NOT VESTED (#) ⁽³⁾		EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES THAT HAVE NOT VESTED ($)
Ken Calwell		29,333		786,124		36,667		982,676
John Barr		—		—		6,435		172,458
Kevin King		9,333		250,124		10,000		268,400
Janet Pirus		—		—		—		—

⁽¹⁾

Represents shares of restricted stock that vest ratably on an annual basis over five years. As of December 30, 2013, 14,667 shares of Mr. Calwell’s restricted stock were scheduled to vest on June 6 on each of 2014 and 2015. As of December 30, 2013, 2,667 shares of Mr. King’s restricted stock were scheduled to vest on May 5 on each of 2014 and 2015, and 1,333 shares of Mr. King’s restricted stock were scheduled to vest on October 17 on each of 2014, 2015 and 2016.

⁽²⁾

Represents management’s determination of the fair market value at December 30, 2013 computed in accordance with ASC 718.

⁽³⁾

Represents shares of restricted stock that vest upon Lee Equity reaching certain returns on its initial investment in the company subject to the grantee’s continued employment by us. In connection with this offering, we intend to amend certain provisions of these restricted stock agreements. See “—Outstanding Incentive Awards and Anticipated Awards in Connection with this Offering.”

Employment Agreements

We have entered into employment agreements with each of Ken Calwell, our Chief Executive Officer, John Barr, our Chairman, Mark Hutchens, our Chief Financial Officer, Jayson Tipp, our Senior Vice President of Marketing, Strategy and Technology, Kevin King, our Chief Development Officer and Victoria Blackwell, our Senior Vice President of Talent and Chief Legal Officer. We also had an employment agreement with Janet Pirus, our former Chief Financial Officer, who resigned in November 2013.

Pursuant to the terms of their respective employment agreements, these executive officers receive a specified annual base salary, are eligible to receive an annual bonus and are entitled to participate in a benefits plan. Our Board approved these agreements.

Ken Calwell

Pursuant to the terms of his employment agreement, dated May 25, 2011, and as amended on March 21, 2014, Mr. Calwell, our Chief Executive Officer, is entitled to an annual base salary of $465,000, which is reviewed and may be increased by the Board on an annual basis, and is eligible for an annual bonus of up to 60% of his base salary. Mr. Calwell will receive an annual base salary of $500,000 for 2014. In 2013, Mr. Calwell’s annual bonus was based on certain financial and operating metrics, including, but not limited to, targets with respect to (i) EBITDA (ii) store openings, (iii) new store AWS and number of weeks and (iv) comparable store sales growth. Mr. Calwell, his spouse and eligible children are also eligible to participate in any benefit plans that are generally made available to our other senior executives. Mr. Calwell is also entitled to receive certain relocation and moving expenses pursuant to the terms of his employment agreement. He may terminate his employment agreement at any time on 60 days prior written notice to us for any reason or on 30 days prior written notice to us for good reason. We may terminate Mr. Calwell’s employment at any time without cause, immediately upon Mr. Calwell’s breach of the non-competition, non-solicitation, confidentiality or proprietary rights provisions in his employment agreement or upon 10 days prior written notice in the event of his permanent disability unless he is able to resume his normal and customary duties prior to the expiration of such notice period. If Mr. Calwell is terminated due to permanent disability or death, he or his legal representatives will be entitled to (i) an amount equal to his base salary payable through the date of termination, (ii) a pro rata portion of his annual bonus, if any, for the applicable period of the year for which he was employed, (iii) any unpaid annual bonus in respect of any prior calendar year, (iv) any then

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unreimbursed business expenses and (v) any accrued an unused vacation pay or other benefits he may be owed. If Mr. Calwell is terminated without cause or he terminates his employment for good reason, he is entitled to (i) payments commencing on the date of his termination and continuing for two years thereafter, of an amount equal to his base salary in effect on the date of his termination and an amount equal to his annual bonus for the prior calendar year, (ii) a lump sum amount equal to his annual bonus for the year in which he is terminated based on actual performance, pro-rated for the date of termination, (iii) at his election and expense, use of all health and medical insurance policies for 12 months following termination, (iv) the automatic vesting of his shares of time vesting restricted stock that would have vested within 18 months and (v) any unpaid annual bonus in respect of the prior calendar year, any unreimbursed business expenses and any accrued and unused vacation pay or other benefits owed. If Mr. Calwell is terminated for cause, terminates his employment without good reason or by nonrenewal of his agreement, he is only entitled to his base salary through his termination date and any accrued and unpaid vacation pay or other benefits owed. Mr. Calwell’s employment agreement contains non-competition and non-solicitation of customers and employees provisions for the period of his employment and for 2 years thereafter, as well as confidentiality and proprietary rights provisions. Mr. Calwell’s employment agreement, as amended, has a term of six years, expiring on June 6, 2017, and shall be automatically extended for an additional 12 months thereafter, unless written notice is given by Mr. Calwell or by us.

John Barr

Employment Agreement. Pursuant to the terms of his employment agreement, dated July 29, 2011, and as amended on December 30, 2013, Mr. Barr received a base salary of $250,000 in 2013 and shall receive a base salary of $200,000 for 2014, $150,000 for 2015 and $100,000 for 2016. Mr. Barr was entitled to receive and was paid a guaranteed retention bonus of $393,000 payable in 2013. Mr. Barr is also entitled to an annual $25,000 winter travel reimbursement. He and his spouse and eligible children may participate in any benefit plans generally made available to our other senior executives. Mr. Barr may terminate his employment agreement at any time, for any reason on 180 days prior written notice to us or for good reason on 90 days prior written notice to us. We may terminate Mr. Barr’s employment at any time without cause, immediately upon the breach of his non-competition, non-solicitation, confidentiality or proprietary rights provisions in the employment agreement or in the event of his permanent disability. If Mr. Barr is terminated due to permanent disability or death or without cause he or his legal representatives will be entitled to (i) an amount equal to his base salary payable through the date of termination and (ii) his base salary through the first anniversary of such date of termination payable in accordance with the Company’s payroll policies. If Mr. Barr is terminated without cause or he terminated his employment for good reason, he is entitled to (i) any accrued but unpaid base salary through the date of termination, and (ii) continuation of group health plan benefits for 24 months following termination. If Mr. Barr is terminated for cause or terminates his employment without good reason, he is only entitled to base salary through his termination date and any accrued and unpaid vacation pay or other benefits owed. Mr. Barr’s employment agreement contains non-competition and non-solicitation of customers and employees provisions for the period of his employment and for 2 years thereafter, as well as confidentiality and proprietary rights provisions. Mr. Barr’s employment agreement expires on December 31, 2016 and may be extended upon mutual agreement of Mr. Barr and us.

Stock Repurchase and Put Option Agreement. In July 2011, we entered into a Stock Repurchase and Put Option Agreement with John Barr, pursuant to which we repurchased 64,348 unvested timed vesting shares and 41,826 unvested performance vesting shares, for a total of 106,174 shares at a purchase price of $0.94 per share for an aggregate purchase price of $99,804. Pursuant to Mr. Barr’s employment agreement as amended on December 30, 2013, in consideration of certain of the changes made therein, the Stock Repurchase and Put Option Agreement was terminated.

Mark Hutchens

Pursuant to the terms of his employment agreement, dated March 21, 2014, Mr. Hutchens, our Chief Financial Officer, is entitled to an annual base salary of $350,000, which is reviewed and may be increased by the Board on an annual basis. Mr. Hutchens is eligible to receive an annual bonus of 40% of his base salary. Under the terms of his employment agreement, Mr. Hutchens received non-qualified stock options to purchase 32,500 shares of our common stock, one-third of which are subject to performance-vesting based on the company achieving certain performance thresholds and two-thirds of which are subject to time-vesting, vesting ratably over five years, provided that in connection with an initial public offering within the first year of the grant date, 20% of such options shall

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vest upon such initial public offering. Mr. Hutchens is also eligible to participate in any benefit plans that are generally made available to our other senior executives. He may terminate his employment agreement at any time upon 60 days prior written notice to us for any reason or on 30 days prior written notice to us for good reason. We may terminate Mr. Hutchens’ employment at any time without cause, immediately upon Mr. Hutchens’ breach of the non-competition, non-solicitation, confidentiality or proprietary rights provisions in his employment agreement or by written notice in the event of his permanent disability. If Mr. Hutchens is terminated due to permanent disability or death, he or his legal representatives will be entitled to (i) an amount equal to his base salary payable through the date of termination, (ii) a pro rata portion of his annual bonus, if any, for the applicable period of the year for which he was employed and (iii) any accrued and unpaid vacation pay or other benefits he may be owed. If Mr. Hutchens is terminated without cause or he terminated his employment for good reason, he is entitled to (i) any accrued but unpaid base salary through the date of termination, (ii) base salary through the one year anniversary of the termination date, (iii) a pro rata portion of his annual bonus for the applicable period of the calendar year for which he was employed, (iv) continuation of group health plan benefits for 12 months following termination and (v) any accrued and unpaid vacation pay or other benefits owed. If Mr. Hutchens is terminated for cause, terminates his employment without good reason or by nonrenewal of his agreement, he is only entitled to his base salary through the termination date and any accrued and unpaid vacation pay or other benefits owed. Mr. Hutchens’ employment agreement contains non-competition and non-solicitation of customers and employees provisions for the period of his employment and for one year thereafter, as well as confidentiality and proprietary rights provisions. Mr. Hutchens’ employment agreement is effective until May 5, 2015, and is automatically extended for an additional 12 months thereafter, unless written notice is given by Mr. Hutchens or by us.

Kevin King

Pursuant to the terms of his employment agreement, dated May 4, 1010, Mr. King, our Chief Development Officer, is entitled to an annual base salary of $205,000, which is reviewed and may be increased by the Board on an annual basis, and is eligible for an annual bonus of up to 40% of his salary. Mr. King is also eligible to participate in any benefit plans that are generally made available to our other senior executives. He may terminate his employment agreement at any time upon 180 days prior written notice to us for any reason or on 90 days prior written notice to us for good reason. We may terminate Mr. King’s employment at any time without cause, immediately upon Mr. King’s breach of the non-competition, non-solicitation, confidentiality or proprietary rights provisions in his employment agreement or by written notice in the event of his permanent disability. If Mr. King is terminated due to permanent disability or death, he or his legal representatives will be entitled to (i) an amount equal to his base salary payable through the date of termination, (ii) a pro rata portion of his annual bonus, if any, for the applicable period of the year for which he was employed and (iii) any accrued and unpaid vacation pay or other benefits he may be owed. If Mr. King is terminated without cause or he terminated his employment for good reason, he is entitled to (i) any accrued but unpaid base salary through the date of termination, (ii) base salary through the one year anniversary of the termination date, (iii) a pro rata portion of his annual bonus for the applicable period of the calendar year for which he was employed, (iv) continuation of group health plan benefits for 12 months following termination and (v) any accrued and unpaid vacation pay or other benefits owed. If Mr. King is terminated for cause, terminates his employment without good reason or by nonrenewal of his agreement, he is only entitled to his base salary through the termination date and any accrued and unpaid vacation pay or other benefits owed. Mr. King’s employment agreement contains non-competition and non-solicitation of customers and employees provisions for the period of his employment and for one year thereafter, as well as confidentiality and proprietary rights provisions. Mr. King’s employment agreement has an initial term of one year and is automatically extended for an additional 12 months thereafter, unless written notice is given by Mr. King or by us.

Janet Pirus

Pursuant to the terms of her employment agreement, effective May 4, 2010, Ms. Pirus, our former Chief Financial Officer, received an annual salary of $240,000 per year and was eligible to receive an annual bonus of up to 40% of her base salary. Ms. Pirus entered into a separation agreement with us on June 5, 2013. Ms. Pirus resigned from her position effective November 7, 2013. Pursuant to the terms of the separation agreement, Ms. Pirus is entitled to receive her base salary through December 31, 2014, a pro rata portion of her annual bonus to be reasonably determined by the Board, up to $50,000 related to the sale of her home if certain qualifications are met, up to $6,000 for certain outplacement services, career counseling, resume review and assistance on her behalf, any accrued and unpaid vacation pay or other benefits owed through December 31, 2014. Ms. Pirus remains subject to

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the non-competition, non-solicitation, confidentiality and proprietary rights provisions set forth in her employment agreement until November 7, 2014. We repurchased 11,667 shares of Ms. Pirus’s performance vesting restricted stock, which had not yet vested, at the per share purchase price of $0.4359 per share and 9,333 time vesting common stock, which had not yet vested, at the per share purchase price of $0.4359 per share. We also repurchased 14,000 shares of Ms. Pirus’s time vesting common stock, which had vested, at the per share purchase price of $26.04.

Potential Payments Upon Termination of Employment or Corporate Transactions/Change of Control

None of our NEOs is entitled to receive payments or other benefits upon termination of employment or a change in control, except as provided in the “Employment Agreements” section above.

Director Compensation

Our directors who are employed by us, our subsidiaries or Lee Equity or any of its affiliates do not receive any compensation and will not receive compensation following this offering, except as limited to expense reimbursement as described below. Directors nominated by Lee Equity pursuant to the Stockholders Agreement (as defined below) did not receive any compensation for their service as directors, except as limited to expense reimbursement.

For the year ended December 31, 2013, we paid $39,746 in total compensation to Mr. Shafer, for his service as our independent director, which consisted of a $20,000 base annual retainer and a total of $19,746 for in-person attendance at board meetings and Franchise Advisory Board meetings, as well as expense reimbursement for reasonable travel expenses incurred in attending Franchise Advisory Board meetings.

Following this offering, we expect to pay independent directors a base annual retainer of $30,000 in cash and $30,000 in restricted stock subject to a one-year vesting term for their services on the Board. In addition, we expect to reimburse all directors for reasonable expenses incurred in attending meetings of the Board or any of its committees.

2014 Equity Incentive Plan

We anticipate that at the time of, or shortly after, completion of this offering, we will make changes to certain of our compensation arrangements, including those covering our NEOs and members of our Board. We expect to adopt a 2014 Equity Incentive Plan (the “2014 Plan”). The following is a summary of certain features of the 2014 Plan.

Reservation of Shares

Subject to adjustments as described below, the maximum aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2014 Plan will be . Any shares of common stock delivered under the 2014 Plan will consist of authorized and unissued shares, or treasury shares.

In the event of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to common stock, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change or any other change affecting common stock, appropriate and equitable adjustments will be made to the number and kind of shares of common stock available for grant, as well as to other maximum limitations under the 2014 Plan, and the number and kind of shares of common stock or other terms of the awards that are affected by the event.

Share Counting

Awards that are required to be paid in cash pursuant to their terms will not reduce the share reserve. To the extent that an award granted under the 2014 Plan is canceled, expired, forfeited, surrendered, settled by delivery of fewer shares than the number underlying the award or otherwise terminated without delivery of the shares to the participant, the shares of common stock retained by or returned to the Company will become available for future awards under the 2014 Plan. In addition, shares that are withheld or separately surrendered in payment of the exercise or purchase price or taxes relating to such an award or are not issued or delivered as a result of the net settlement of an outstanding stock option or stock appreciation right will become available for future awards under the 2014 Plan. Awards assumed or substituted for in a merger, consolidation, acquisition of property or stock or reorganization will not reduce the share reserve.

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Administration

The 2014 Plan will be administered by the Compensation Committee. Subject to the limitations set forth in the 2014 Plan, the Compensation Committee has the authority to determine the persons to whom awards are to be granted, prescribe the restrictions, terms and conditions of all awards, interpret the 2014 Plan and adopt rules for the administration, interpretation and application of the 2014 Plan.

Eligibility

Awards under the 2014 Plan may be granted to any employees, directors, consultants or other personal service providers of the Company or its subsidiaries.

Stock Options

Stock options granted under the 2014 Plan may be issued as either incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, or as nonqualified stock options. The exercise price of an option will be not less than 100% of the fair market value of a share of common stock on the date of the grant of the option. The Compensation Committee will determine the vesting and/or exercisability requirements and the term of exercise of each option, including the effect of termination of service of a participant or a change in control. The vesting requirements may be based on the continued employment or service of the participant for a specified time period or on the attainment of specified business performance goals established by the Compensation Committee. The maximum term of an option will be 10 years from the date of grant.

To exercise an option, the participant must pay the exercise price, subject to specified conditions, (i) in cash, (ii) in shares of common stock, (iii) through an open-market broker-assisted transaction, (iv) by reducing the number of shares of common stock otherwise deliverable upon the exercise of the stock option, (v) by combination of any of the above methods or (vi) by such other method approved by the Compensation Committee and must pay any required tax withholding amounts. All options generally are nontransferable. Dividends may not be paid and dividend equivalent rights may not be granted with respect to the shares of stock subject to stock options.

Stock Appreciation Rights

A stock appreciation right may be granted either in tandem with an option or without a related option. A stock appreciation right entitles the participant, upon settlement or exercise, to receive a payment based on the excess of the fair market value of a share of common stock on the date of settlement or exercise over the base price of the right, multiplied by the number of shares of common stock as to which the right is being settled or exercised. Stock appreciation rights may be granted on a basis that allows for the exercise of the right by the participant or that provides for the automatic payment of the right upon a specified date or event. The base price of a stock appreciation right may not be less than the fair market value of a share of common stock on the date of grant. The Compensation Committee will determine the vesting requirements and the term of exercise of each stock appreciation right, including the effect of termination of service of a participant or a change in control. The vesting requirements may be based on the continued employment or service of the participant for a specified time period or on the attainment of specified business performance goals established by the Compensation Committee. The maximum term of a stock appreciation right will be 10 years from the date of grant. Stock appreciation rights may be payable in cash or in shares of common stock or in a combination of both. Dividends may not be paid and dividend equivalent rights may not be granted with respect to the shares of stock subject to Stock Appreciation Rights.

Restricted Stock Awards

A restricted stock award represents shares of common stock that are issued subject to restrictions on transfer and vesting requirements. The vesting requirements may be based on the continued service of the participant for a specified time period or on the attainment of specified performance goals established by the Compensation Committee, and vesting may be accelerated in certain circumstances, as determined by the Compensation Committee. Unless otherwise set forth in an award agreement, restricted stock award holders will have all of the rights of a stockholder of the Company, other than the right to receive dividends, during the restricted period. Any dividends with respect to a restricted stock award that is subject to performance-based vesting will be subject to the same restrictions on transfer and vesting requirements as the underlying restricted stock award.

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Restricted Stock Units

An award of restricted stock units, or “RSUs”, provides the participant the right to receive a payment based on the value of a share of common stock. RSUs may be subject to vesting requirements, restrictions and conditions to payment. RSUs may vest based solely on the continued service of the participant for a specified time period. In addition, RSUs may be denominated as performance share units, or “PSUs”, which will vest in whole or in part based on the attainment of specified performance goals established by the Compensation Committee. The vesting of RSUs may be accelerated in certain circumstances, as determined by the Compensation Committee. An RSU award will become payable to a participant at the time or times determined by the Compensation Committee and set forth in the award agreement, which may be upon or following the vesting of the award. Restricted stock unit awards are payable in cash or in shares of common stock or in a combination of both. RSUs may be granted together with a dividend equivalent right with respect to the shares of common stock subject to the award. Dividend equivalent rights will be subject to vesting conditions that apply to the underlying RSUs.

Stock Awards

A stock award represents shares of common stock that are issued free of restrictions on transfer and free of forfeiture conditions and to which the participant is entitled all incidents of ownership. A stock award may be granted for past services, in lieu of bonus or other cash compensation, directors’ fees or for any other valid purpose as determined by the Compensation Committee. The Compensation Committee will determine the terms and conditions of stock awards, and such stock awards may be made without vesting requirements. Upon the issuance of shares of common stock under a stock award, the participant will have all rights of a shareholder with respect to such shares of common stock, including the right to vote the shares and receive all dividends and other distributions on the shares.

Cash Performance Awards

A performance award is denominated in a cash amount (rather than in shares) and is payable based on the attainment of pre-established business and/or individual performance goals. The requirements for vesting may be also based upon the continued service of the participant during the performance period, and vesting may be accelerated in certain circumstances, as determined by the Compensation Committee. The maximum amount of cash compensation that may be paid to a participant during any one calendar year under all cash performance awards is $ .

Performance Criteria

For purposes of cash performance awards, as well as for any other awards under the 2014 Plan intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, the performance criteria will be one or any combination of the following, for the Company or any identified Subsidiary or business unit, as determined by the Compensation Committee at the time of the award: (i) total stockholder return; (ii) such total stockholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard & Poor’s 500 Stock Index; (iii) net income; (iv) pretax earnings; (v) adjusted earnings before interest expense, taxes, depreciation and amortization (“EBITDA”); (vi) pretax operating earnings after interest expense and before bonuses, service fees and extraordinary or special items; (vii) operating margin; (viii) earnings per share; (ix) return on equity; (x) return on capital; (xi) return on investment; (xii) operating earnings; (xiii) working capital; (xiv) ratio of debt to stockholders’ equity; (xv) revenue; (xvi) free cash flow (generally defined as adjusted EBITDA, less cash taxes, cash interest and net capital expenditures); and (xvii) any combination of or a specified increase in any of the foregoing. Each of the performance criteria will be applied and interpreted in accordance with an objective formula or standard established by the Compensation Committee at the time of grant of the award including, without limitation, GAAP. The performance criteria may be applied on an absolute basis or relative to an identified index, peer group, or one or more competitors or other companies (including particular business segments or divisions of such companies), or may be applied after adjustment for non-controllable industry performance (such as industry attendance), as specified by the Compensation Committee.

At the time that an award is granted, the Compensation Committee may provide that performance will be measured in such objective manner as it deems appropriate, including, without limitation, adjustments to reflect charges for restructurings, non-operating income, the impact of corporate transactions or discontinued operations, extraordinary and other unusual or non-recurring items and the cumulative effects of accounting or tax law changes.

Further, the Compensation Committee shall, to the extent provided in an award agreement, have the right, in its discretion, to reduce or eliminate the amount otherwise payable to any participant under an award and to establish

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rules or procedures that have the effect of limiting the amount payable to any participant to an amount that is less than the amount that is otherwise payable under an award. Following the conclusion of the performance period, the Compensation Committee shall certify in writing whether the applicable performance goals have been achieved.

Award Limitations

For purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code, the maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, performance-based restricted stock awards, performance-based RSUs and performance-based stock awards granted to any participant other than a non-employee director during any calendar year will be limited to shares of common stock for each such award type individually.

Further, the maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, restricted stock awards, RSUs and stock awards granted to any non-employee director during any calendar year will be limited to shares of common stock for all such award types in the aggregate.

Effect of Change in Control

Upon the occurrence of a change in control, unless otherwise specifically prohibited under applicable law, or unless otherwise provided in the applicable award agreement, the Compensation Committee is authorized to make adjustments in the terms and conditions of outstanding awards, including without limitation the following (or any combination thereof): (i) continuation or assumption of such outstanding awards by the Company (if it is the surviving company or corporation) or by the surviving company or corporation or its parent; (ii) substitution by the surviving company or corporation or its parent of awards with substantially the same terms as such outstanding awards (excluding the consideration payable upon settlement of the awards); (iii) accelerated exercisability, vesting and/or payment; and (iv) if all or substantially all of the Company’s outstanding shares of common stock transferred in exchange for cash consideration in connection with such change in control: (A) upon written notice, provide that any outstanding stock options and stock appreciation rights are exercisable during a reasonable period of time immediately prior to the scheduled consummation of the event or such other reasonable period as determined by the Compensation Committee (contingent upon the consummation of the event), and at the end of such period, such stock options and stock appreciation rights will terminate to the extent not so exercised within the relevant period; and (B) cancellation of all or any portion of outstanding awards for fair value, as determined in the sole discretion of the Compensation Committee.

Forfeiture

The Compensation Committee may specify in an award agreement that an award will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, including termination of service for “cause” (as defined in the 2014 Plan), violation of material Company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the participant, or other conduct by the participant that is detrimental to the business or reputation of the Company. Unless otherwise provided by the Compensation Committee and set forth in an award agreement, if (i) a participant’s service is terminated for “cause” or (ii) after termination of service for any other reason, the Compensation Committee determines in its discretion either that, (A) during the participant’s period of service, the participant engaged in an act which would have warranted termination from service for “cause” or (B) after termination, the participant engaged in conduct that violates any continuing obligation or duty of the participant in respect of the Company or any of its subsidiaries, such participant’s rights, payments and benefits with respect to such award may be subject to cancellation, forfeiture and/or recoupment.

Right of Recapture

If a participant receives compensation pursuant to an award based on financial statements that are subsequently required to be restated in a way that would decrease the value of such compensation, the participant will, upon the written request of the Company, forfeit and repay to the Company the difference between what the participant received and what the participant should have received based on the accounting restatement, in accordance with (i) the Company’s compensation recovery, “clawback” or similar policy, as may be in effect from time to time and (ii) any compensation recovery, “clawback” or similar policy made applicable by law including the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Tax Withholding

Participants in the 2014 Plan are responsible for the payment of any taxes or similar charges required by law to be paid or withheld from an award or an amount paid in satisfaction of an award.

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Deferrals of Payment

The Compensation Committee may in its discretion permit participants in the 2014 Plan to defer the receipt of payment of cash or delivery of shares of common stock that would otherwise be due by virtue of the exercise of a right or the satisfaction of vesting or other conditions with respect to an award; provided, however, that such discretion shall not apply in the case of a stock option or stock appreciation right.

Term, Amendment and Termination

The term of the 2014 Plan is 10 years from the date it was approved by the Board of Directors. The Board of Directors may amend, modify, suspend or terminate the 2014 Plan at any time. However, no termination or amendment of the 2014 Plan will materially adversely affect any award theretofore granted without the consent of the participant or the permitted transferee of the award. The Board of Directors may seek the approval of any amendment by the Company’s shareholders to the extent it deems necessary or advisable for purposes of compliance with Section 162(m) or Section 422 of the Internal Revenue Code, the listing requirements of NASDAQ, or for any other purpose.

Outstanding Incentive Awards and Anticipated Awards in Connection with this Offering

Certain of our employees and members of management historically have received management incentive awards consisting of restricted stock and/or options to purchase our common stock. These awards were typically subject to time-vesting or performance-vesting, which was based on Lee Equity reaching certain returns on its initial investment in the company. All vesting is subject to the grantee’s continued employment by us. In connection with this offering, we intend to enter into agreements with holders of performance-vesting restricted stock and performance-vesting stock options to amend the vesting provisions to be based on the volume-weighted average trading price of our common stock over a 90 calendar day period. We also intend to grant all holders of restricted stock subject to time-vesting an aggregate of stock options subject to time-vesting under the 2014 Plan, which will have the same vesting schedules as each such holder’s restricted stock, and we intend to grant all holders of restricted stock subject to performance vesting an aggregate of stock options subject to vesting based on the volume-weighted average trading price of our common stock over a 90 calendar day period under the 2014 Plan, in each case with an exercise price equal to the initial public offering price of our common stock. In addition, in connection with this offering we intend to grant certain members of management, including our executive officers and named executive officers, an aggregate of stock options subject to time-vesting under the 2014 Plan. These stock options will have a four-year vesting schedule and an exercise price equal to the initial public offering price of our common stock. We expect that Mr. Calwell and Mr. King, each named executive officers, will receive such options to purchase and shares of our common stock, respectively, as part of these anticipated grants.

Our Compensation Committee will determine, subject to employment agreements, any future equity awards that executive officers will be granted pursuant to the 2014 Plan.

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Relationship with Lee Equity

Several of our directors hold positions at Lee Equity, our private equity sponsors. Thomas H. Lee is President at Lee Equity, Benjamin Hochberg and Yoo Jin Kim are Partners at Lee Equity and Achi Yaffe is a Principal at Lee Equity. See “Management.”

Recapitalization

In October 2013, we entered into a new $177.0 million senior secured credit facility consisting of a $167.0 million senior secured term loan and a $10.0 million revolving credit facility, which includes a $2.5 million letter of credit subfacility. The proceeds of the new senior secured credit facilities were used to repay the outstanding borrowings under the 2012 Credit Facilities, to make a $31.5 million payment to holders of our Preferred Shares and to fund investments.

Reorganization

Prior to the completion of this offering, we intend to effect certain Reorganization Transactions consisting of (i) the automatic conversion of all of our outstanding Preferred Shares to shares of common stock, (ii) a 1 for stock split for our common stock and (iii) the amendment and restatement of our certificate of incorporation.

Agreements Related to the Acquisition by Lee Equity

Existing Stockholders’ Agreement and Registration Rights Provisions

In connection with the Lee Equity Acquisition, we entered into a stockholders’ agreement with an affiliate of Lee Equity and the additional stockholders named therein, which was amended and restated on June 11, 2012. Under the terms of the existing stockholders’ agreement, Lee Equity has the right to designate three directors to the Board. The stockholders agreement also provides that then current Chief Executive Officer will serve as a director and that an independent director approved by both Lee Equity and the then current Chief Executive Officer shall serve on the Board. The existing stockholders’ agreement will automatically terminate in connection with this offering, except for certain provisions which explicitly survive pursuant to the terms of our existing stockholders’ agreement, including the registration rights provisions. We intend to amend and restate our existing stockholders’ agreement to reflect these surviving provisions. The registration rights provisions provide for customary registration rights, including demand and short-form registration rights for Lee Equity and piggyback registration rights for such stockholders party to our existing stockholders’ agreement, in each case of the common stock they will receive as a result of the Reorganization Transactions. We shall not be obligated to effect more than 10 demand registrations, more than one demand registration during any four-month period or any demand registration unless the aggregate gross proceeds expected to be received from the sale of securities are at least $10 million in any offering.

Lee Equity may assign all or any portion of its rights under the registration rights provisions of the existing stockholders’ agreement to its affiliates or any third party in connection with a sale by Lee Equity of 10% or more of our outstanding common stock. The registration rights provisions of the existing stockholders’ agreement will impose significant restrictions on the ability of our members of management who are stockholders party thereto to transfer shares of our common stock. Generally, shares will be nontransferable for the two year period following the expiration of the lock-up period with respect to this offering and subject to any other lock-up period that may be in effect from time to time except transfers made pursuant to (i) certain piggyback rights, (ii) sales pursuant to an effective registration statement filed by us under the Securities Act at the request of Lee Equity, (iii) a transfer made simultaneous with or subsequent to a transfer of shares made by Lee Equity, and (iv) a transfer which would result in such management shareholder retaining the same (or greater) pro rata ownership of the voting power of the outstanding shares of our common stock as such management shareholder held prior to the transfer.

New Stockholder’s Agreement

In connection with this offering, we expect to enter into a new stockholder’s agreement with Lee Equity. The new stockholder’s agreement will set the number of directors our board of directors initially at seven, and Lee Equity (or one or more of its affiliates, to the extent assigned thereto), individually or in the aggregate, will be entitled to

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initially designate four directors to serve on the board of directors. Two of our initial directors will be members of management and the final initial director shall be independent. Within one year of the offering, the board of directors will increase its size to a total of nine directors, two of which will be designated by Lee Equity (or one or more of its affiliates, to the extent assigned thereto), two directors will be members of management and five directors shall be independent. So long as Lee Equity (or one or more of its affiliates, to the extent assigned thereto), individually or in the aggregate, owns (i) 20% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate two director designees or (ii) 10% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director designee, in each case to serve on the board of directors at any meeting of stockholders at which directors are to be elected to the extent that Lee Equity does not have a director designee then serving on the board of directors. Lee Equity’s director designees will initially be Benjamin Hochberg, Yoo Jin Kim, Thomas H. Lee and Achi Yaffe.

In furtherance of our amended and restated certificate of incorporation, the new stockholder’s agreement will provide that Lee Equity and its affiliates have no obligation to offer us an opportunity to participate in business opportunities presented to Lee Equity or its affiliates even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses), and that neither Lee Equity nor its affiliates will be liable to us or our stockholders for breach of any duty by reason of any such activities unless, in the case of any person who is a director or officer of our company, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as an officer or director of our company. Lee Equity, as part of a privately negotiated sale of 10% or more of its shares, may assign all or any portion of its rights under the stockholder’s agreement to any transferee. The new stockholder’s agreement will terminate upon the written request of Lee Equity or at such time as Lee Equity own less than 10% of our common stock.

For so long as Lee Equity owns 10% or more of the voting power of the outstanding shares of our common stock, Lee Equity will be granted access to some of our customary non-public information and members of our management team and shall have the ability to share such material non-public information with any potential purchaser of us that executes an acceptable confidentiality agreement with us, which will involve a prohibition on trading or material non-public information.

The new stockholder’s agreement will also provide that we will pay the costs and expenses included in connection with the preparation, negotiation, and execution of the new stockholder’s agreement and that Lee Equity will be reimbursed for its costs and expenses in connection with enforcing its rights and remedies under and pursuant to the new stockholder’s agreement.

The new stockholder’s agreement will also provide that, so long as Lee Equity owns 25% or more of the voting power of the outstanding shares of our common stock, the following actions by us will require the prior written approval of Lee Equity:

any issuance of our equity securities or any of our subsidiaries other than the granting of options or shares of common stock to members of our management or the issuance of shares of common stock in connection with the exercise of such options;

the declaration or payment of non-pro rata dividends or other non-pro rata distributions in respect of our capital stock or make any non-pro rata repurchase of our equity securities;

our incurrence of indebtedness for borrowed money (other than indebtedness incurred under the existing revolver or in connection with the refinancing of our existing indebtedness) in excess of 4.5 times leverage;

our entering into any change in control transaction;

the making by us of any investment in, or the acquisition or disposition of, any assets or entity (other than investments in wholly owned subsidiaries) in each case in excess of $25.0 million or the entry into any material joint ventures, partnerships or similar arrangements;

any adoption of a new equity-based incentive plan, any increase in the maximum number of shares of common stock available to participants in our existing equity-based incentive plans or material change to the vesting schedule or the termination of any of our existing equity-based incentive plans;

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any material increase in the salary of our Chief Executive Officer (other than for standard cost of living adjustments) and any material changes to the bonus structure applicable to our Chief Executive Officer as is in effect as of the date of the offering;

certain amendments to our organizational documents in a manner that would be adverse to Lee Equity;

any material change to our business of being the owner and/or franchisor of stores and restaurants that sell or serve pizza and other food items; and

any change to the number of directors serving on our board.

Lee Equity will have the right to assign any of its governance rights to its affiliates or to a third party in connection with the sale by Lee Equity of 10% or more of the issued and outstanding shares of our common stock.

Advisory Services and Monitoring Agreement

In May 2010 we entered into an advisory services and monitoring agreement with Lee Equity in connection with our acquisition by them, whereby we agreed to pay Lee Equity a fee for advisory and monitoring services. Monitoring and advisory services include, but are not limited to, financial, managerial and operation advice in connection with day-to-day operations, such as the development and implementation of strategies for improving our operating, marketing and financial performance, as well as such other services that we agree on (such as those relating to consulting services, human resources and executive recruitment services). Under the agreement we pay an annual fee of $500,000, payable in $125,000 installments quarterly, during the term of the agreement which is set to expire on December 31, 2020. Pursuant to this agreement, we also paid Lee Equity a transaction fee of $2.1 million on the closing date of the Lee Equity Acquisition, an additional transaction fee of $1.3 million in June 2012 for financial advice in connection with the 2012 Refinancing, and a transaction fee of $1.8 million in connection with the Recapitalization. We intend to terminate the advisory services and monitoring agreement upon consummation of this offering and pay Lee Equity a $1.5 million termination fee with the proceeds of this offering. See “Use of Proceeds.”

Employee Loans

On June 7, 2011 we made a loan to Ken Calwell, our current President and Chief Executive Officer, for approximately $548,000, bearing interest at an annual rate of 0.55% pursuant to a promissory note dated May 25, 2011, which was subsequently amended in June 2011 to pay for the purchase of our common stock by Mr. Calwell. In June 2012, this note was replaced with a promissory note for the same amount and interest rate and mature on the earlier of 30 days prior to the filing of an S-1 with the SEC or June 2014.

In 2012, we made an aggregate of approximately $208,000 of loans to Jayson Tipp, our Senior Vice President of Strategy, pursuant to three promissory notes. The notes for $40,000, $50,000, $86,000 and $32,000 bear interest at rates of 0.88%, 0.88%, 0.24% and 0.88%, respectively, and mature on the earlier of 30 days prior to the filing of an S-1 with the SEC or November 2017, September 2017, November 2015 and September 2017, respectively.

In 2013, we made a loan to Dan Harmon, our Senior Vice President of Operations, for approximately $196,000, pursuant to a promissory note. The note bears interest at an annual rate of 0.22% and matures on the earlier of 35 months from the date of the note or upon seven days written notice from the Company.

All of these loans were issued by Papa Murphy’s International LLC, our wholly owned subsidiary, and all were repaid on March 11, 2014.

Share Repurchases and Option Grants

On March 11, 2014, we repurchased 27,103 shares of common stock from Ken Calwell, our President and Chief Executive Officer, at a purchase price of $26.80 per share. We also granted Mr. Calwell fully vested options to purchase 27,103 shares of common stock at an exercise price of $26.80 per share.

On March 11, 2014, we repurchased 2,666 shares of common stock from Jayson Tipp, our Senior Vice President of Strategy, at a purchase price of $26.80 per share. We also accelerated the vesting term of 5,334 shares of Mr. Tipp’s common stock subject to time-vesting and 1,412 shares of common stock subject to performance-vesting

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and repurchased these shares at a purchase price of $26.80 per share. In addition, we granted Mr. Tipp fully vested options to purchase 2,666 shares of common stock, options subject to time-vesting to purchase 5,334 shares of common stock and options subject to performance-vesting to purchase 1,412 shares of common stock, in each case at an exercise price of $26.80 per share.

On March 11, 2014, we repurchased 667 shares of common stock from Dan Harmon, our Senior Vice President of Operations, at a purchase price of $26.80 per share. We also accelerated the vesting term of 6,667 shares of Mr. Harmon’s common stock subject to time-vesting and 601 shares of common stock subject to performance-vesting and repurchased these shares at a purchase price of $26.80 per share. In addition, we granted Mr. Harmon fully vested options to purchase 667 shares of common stock, options subject to time-vesting to purchase 6,667 shares of common stock and options subject to performance-vesting to purchase 601 shares of common stock, in each case at an exercise price of $26.80 per share.

All of the repurchased shares were issued and all of the options were granted under the Amended 2010 Management Incentive Plan. We repurchased the shares of common stock pursuant to the terms thereof at a price equal to the then-current fair market value of our common stock, as determined by a third party valuation firm. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies–Share-based Compensation—Valuation of Common Stock and Preferred Shares.”

Project Pie

Our Investment

In December 2013, Project Pie Holdings, a non-wholly owned subsidiary, purchased 387 Series A Units of Project Pie, a fast casual custom-pizza restaurant chain, for an aggregate purchase price of $2.0 million, payable in cash. In March 2014, we made an additional $500,000 investment in Project Pie for 97 preferred convertible units. Each such Series A Unit is convertible at our option into one common unit of Project Pie. On a fully converted basis, these investments represent 30.3% of all issued and outstanding Project Pie common units. Until December 2016, the board of managers of Project Pie has the right to request further capital funding from us in exchange for additional Series A Units up to an aggregate value of $2.5 million. After that, the board of managers of Project Pie may continue to request capital funding from us up to an aggregate value of $5.0 million, in exchange for which we may purchase additional Series A Units at our option. We also have the right to purchase common units from other members following the completion of Project Pie’s fiscal year 2015 audited financial statements in an amount that would increase our ownership of all common units to 51% on a fully converted basis. Similarly, following the completion of Project Pie’s fiscal year 2017 audited financial statements, we have the right to purchase all of the common units from other members, subject to certain exceptions. We also have certain preemptive and registration rights with respect to Project Pie’s securities as well as consent and voting rights with respect to certain significant matters, including certain change of control transactions, issuances of new equity securities, certain matters related to operations and the incurrence of significant debt. In addition, we may designate two members of Project Pie’s board of managers, which initially are John Barr, our Chairman, and Yoo Jin Kim, one of our directors and a partner at Lee Equity. Mr. Barr serves as chairman of Project Pie and of the Project Pie board of managers.

Relationship with Our Chairman

We own approximately 89% of the equity interests in Project Pie Holdings, and John Barr, our Chairman, owns the remaining 11%. In November 2013, Mr. Barr provided $550,000 in bond financing to Project Pie bearing interest at 6% (the “Bridge Note”). Project Pie used a portion of the proceeds of the Project Pie Holdings investment in Series A Units to repay the Bridge Note.

Mr. Barr is party to an employment agreement, effective as of January 1, 2014, with Project Pie pursuant to which he serves as Project Pie’s chairman in an executive capacity. The employment agreement has an initial term until December 31, 2016, and may be extended for an additional twelve-month period upon terms mutually agreeable between Mr. Barr and Project Pie. Under the terms of his employment agreement, Mr. Barr is entitled to a base salary of $100,000 for 2014, $150,000 for 2015 and $200,000 for 2016, and such base salary may be reviewed and increased annually at the discretion of the Project Pie board of managers based on Mr. Barr’s performance and the performance of Project Pie. Mr. Barr also will be eligible to participate in any benefits plans offered by Project Pie on the same basis as other senior executives of Project Pie. In addition, Mr. Barr may be entitled to certain payments if he is terminated by Project Pie without cause.

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Stock Repurchase and Put Option

In July 2011, we entered into a Stock Repurchase and Put Option Agreement with John Barr pursuant to which we repurchased shares of our common stock from Mr. Barr. This agreement was terminated on December 30, 2013. See “Executive and Director Compensation—Employment Agreements—John Barr—Stock Repurchase and Put Option Agreement.”

Dividends

On June 12, 2012, we made a $36.1 million payment to holders of our Series A Preferred Stock (including Series A Preferred Stock subject to put options). In connection with this offering, all of our Series A Preferred Stock and Series B Preferred Stock will be exchanged for shares of common stock. See “Summary—Reorganization Transactions.” In October 2013, we made a $31.5 million payment to holders of our Preferred Shares from the proceeds of the new senior secured credit facilities. See “Summary—Recapitalization.”

Board Compensation

Upon the consummation of this offering, directors who are our employees, employees of our subsidiaries or employees of Lee Equity will receive no compensation for their service as members of our Board. Our other directors will receive compensation for their service as members of our Board as described in “Executive and Director Compensation—Director Compensation.”

Employment Agreements

We have entered into an employment agreement with each of our NEOs as well as other executive officers. See “Executive and Director Compensation—Employment Agreements.”

Indemnification Agreements

We intend to enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL, subject to certain exceptions contained in those agreements.

Policies for Approval of Related Person Transactions

In connection with this offering, we will adopt a written policy relating to the approval of related person transactions. A “related person transaction” is a transaction or arrangement or series of transactions or arrangements in which we participate (whether or not we are a party) and a related person has a direct or indirect material interest in such transaction. Our audit committee will review and approve or ratify all relationships and related person transactions between us and (i) our directors, director nominees or executive officers, (ii) any 5% record or beneficial owner of our common stock or (iii) any immediate family member of any person specified in (i) and (ii) above. The audit committee will review all related person transactions and, where the audit committee determines that such transactions are in our best interests, approve such transactions in advance of such transaction being given effect.

As set forth in the related person transaction policy, in the course of its review and approval or ratification of a related party transaction, the audit committee will, in its judgment, consider in light of the relevant facts and circumstances whether the transaction is, or is not inconsistent with, our best interests, including consideration of various factors enumerated in the policy.

Any member of the audit committee who is a related person with respect to a transaction under review will not be permitted to participate in the discussions or approval or ratification of the transaction. However, such member of the audit committee will provide all material information concerning the transaction to the audit committee. Our policy also includes certain exceptions for transactions that need not be reported and provides the audit committee with the discretion to pre-approve certain transactions.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table shows information as of , 2014 regarding the beneficial ownership of our common stock (1) immediately following the Reorganization Transactions and the Share Repurchase but prior to this offering and (2) as adjusted to give effect to this offering by:

each person or group who is known by us to own beneficially more than 5% of our common stock;

each member of our Board and each of our named executive officers;

all members of our Board and our executive officers as a group; and

each selling stockholder.

For further information regarding material transactions between us and certain of our selling stockholders, see “Certain Relationships and Related Person Transactions.”

Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Percentage of beneficial ownership is based on shares of common stock outstanding as of , 2014 after giving effect to the Reorganization Transactions and the Share Repurchase and shares of common stock outstanding after giving effect to the Reorganization Transactions, the Share Repurchase and this offering, assuming no exercise of the underwriters’ option to purchase additional shares from the selling stockholders, or shares of common stock, assuming full exercise of the option to purchase additional shares from the selling stockholders. Shares of common stock subject to options currently exercisable or exercisable within 60 days of the date of this prospectus are deemed to be outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to all shares of capital stock held by them. Unless otherwise indicated, the address for each holder listed below is 8000 NE Parkway Drive, Suite 350, Vancouver, WA 98662.

SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
BEFORE THIS OFFERING

SHARES OFFERED

SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
AFTER THIS OFFERING
(ASSUMING NO EXERCISE OF
THE OPTION TO PURCHASE
ADDITIONAL SHARES)

SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
AFTER THIS OFFERING
ASSUMING FULL
EXERCISE
OF THE OPTION TO
PURCHASE ADDITIONAL
SHARES

NAME AND ADDRESS
OF BENEFICIAL OWNER

NUMBER
OF
SHARES

PERCENTAGE
OF
SHARES

NUMBER
OF
SHARES

PERCENTAGE
OF
SHARES

NUMBER
OF
SHARES

PERCENTAGE
OF
SHARES

NUMBER
OF
SHARES

PERCENTAGE
OF
SHARES

5% stockholders:

Lee Equity ⁽¹⁾

Thrivent White Rose Fund ⁽²⁾ .

AI PM Holdings LP ⁽³⁾

Named executive officers and directors:

Ken Calwell

Janet Pirus

John D. Barr

Kevin King

John D. Shafer, Jr.

Thomas H. Lee ⁽⁴⁾

Yoo Jin Kim ⁽⁵⁾

Benjamin Hochberg

Achi Yaffe

All directors and executive officers as a group (12 persons)

Other Selling Stockholders:

Gleacher Mezzanine Fund II, L.P. ⁽⁶⁾

ARCC PCP L.P. ⁽⁷⁾

North Point Investment Portfolio, LLC ⁽⁸⁾

Mark K. Gormley ⁽⁹⁾

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*	Represents beneficial ownership of less than 1% of our outstanding common stock.

⁽¹⁾

Represents shares held by LEP Papa Murphy’s Holdings, LLC, (“LEP Papa Murphy’s”) an affiliate of Lee Equity. Lee Equity Partners, LLC, a Delaware limited liability company (the “Investment Manager”), is the non-member manager of LEP Papa Murphy’s and serves as the investment manager of the members of LEP Papa Murphy’s (the “Lee Equity Funds”). Thomas H. Lee is the sole member of the Investment Manager. Thomas H. Lee is also a managing member of the general partner of each of the Lee Equity Funds (the “General Partner”), and any action, consent, approval, election, decision or determination of the managing members of the General Partner requires Mr. Lee’s consent. The principal business address of Lee Equity is 650 Madison Avenue, 21st Floor, New York, NY 10022.

⁽²⁾

Represents shares held by Thrivent White Rose Fund III Equity Direct, L.P. (“Thrivent White Rose Fund”). Thrivent White Rose GP III, LLC is the general partner of Thrivent White Rose Fund. Thrivent Financial for Lutherans, a Wisconsin fraternal benefit society that is owned by its members, is the managing member of, and controls, Thrivent White Rose GP III, LLC. Thrivent Financial for Lutherans is a not-for-profit, Fortune 500 financial services membership organization owned by approximately 2.5 million members and managed by a board of directors. Glen J. Vanic, Timothy P. Wegener, Geoffrey A. Huber and Jen W. Wilson, each of whom is a member of the general partner of Thrivent White Rose Fund, share voting and investment power over shares held by Thrivent White Rose Fund and may be deemed to have beneficial ownership of these shares. Each of Glen J. Vanic, Timothy P. Wegener, Geoffrey A. Huber and Jen W. Wilson disclaims beneficial ownership of the shares of common stock held by Thrivent White Rose Fund. The principal business address of Thrivent White Rose Fund is 625 Fourth Ave. S., Minneapolis, MN 55415-1665.

⁽³⁾

Represents beneficial ownership of common stock held directly by AI PM Holdings LP. Each of Access Industries, Inc. and Len Blavatnik may be deemed to beneficially own the shares of common stock held directly by AI PM Holdings LP. Access Industries, Inc. is the general partner of AI PM Holdings LP and, as a result, may be deemed to have voting and investment control over the shares of common stock owned directly by AI PM Holdings LP. Len Blavatnik controls Access Industries, Inc. and, as a result, may be deemed to share voting and investment power over the shares of common stock held by AI PM Holdings LP. Access Industries, Inc. and Mr. Blavatnik, and each of their affiliated entities and the officers, partners, members, and managers thereof, other than AI PM Holdings LP, disclaim beneficial ownership of the shares of common stock held by AI PM Holdings LP. The principal business address of AI PM Holdings LP is 730 Fifth Avenue, 20th Floor, New York, NY 10019.

⁽⁴⁾	Does not include shares held by LEP Papa Murphy’s.

⁽⁵⁾	Represents shares held by MLPF&S Custodian for the benefit of Yoo Jin Kim IRA. The principal business address of Yoo Jin Kim is c/o Lee Equity Partners 650 Madison Avenue, 21 ^st Floor, New York, NY 10022.

⁽⁶⁾

Represents shares held by Gleacher Mezzanine Fund II, L.P. (“Mezzanine Fund”). The Mezzanine Fund is a pooled investment vehicle managed by Arrowhead Mezzanine LLC, an investment adviser registered with the United States Securities and Exchange Commission (“Arrowhead”). A majority of Arrowhead’s Investment Committee with respect to the Mezzanine Fund, which is comprised of Mary P. Gay, Phillip Krall, Elliott Jones, Craig Pisani, Eric Gleacher and Jeffery Tepper are responsible for directing the votes of any shares in any company held by the Mezzanine Fund. The principal business address of Mezzanine Fund is 55 Railroad Avenue, Greenwich, CT 06830.

⁽⁷⁾

The reported shares are owned by ARCC PCP L.P., a wholly-owned subsidiary of Ares Capital Corporation (“ARCC”), a Maryland corporation, and whose stock is traded on The NASDAQ Global Select Market under the symbol “ARCC”. ARCC is externally managed by its investment advisor, Ares Capital Management LLC (“Ares Capital Management”). ARCC as so advised by Ares Capital Management has voting and dispositive power over the reported securities. The address for Ares Capital Management is 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

⁽⁸⁾

Represents shares held by North Point Investment Portfolio, LLC (“North Point”). David Jacquin exercises voting and investment power over shares held by North Point and may be deemed to have beneficial ownership of these shares. The principal business address of North Point is 580 California Street, Suite 2000, San Francisco, CA 94104.

⁽⁹⁾

Represents shares held in trust for the benefit of Mark K. Gormley. The principal business address of Mark K. Gormley is c/o Lee Equity Partners 650 Madison Avenue, 21st Floor, New York, NY 10022.

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DESCRIPTION OF MATERIAL INDEBTEDNESS

Credit Facility

In October 2013, we and certain of our subsidiaries entered into a senior secured credit facility (as amended through the date hereof, the “Credit Facility”), which includes (a) $167.0 million in senior secured term loans which were fully drawn on the closing date for the Credit Facility and (b) $10.0 million in the form of a revolving credit facility, which includes a $2.5 million letter of credit subfacility.

Interest Rates and Fees

Borrowings under the Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either (a) base rate determined by reference to the highest of (i) the prime commercial lending rate determined by the administrative agent to the be the “prime rate” as in effect on such day, (ii) the federal funds effective rate plus 0.50% per annum and (iii) a LIBOR rate (which shall be no less than 1.00% per annum) determined for an interest period of one month, plus 1.00% per annum or (b) a LIBOR rate (which shall be no less than 1.00% per annum) determined for the specified interest period. The applicable margin for borrowings under the Credit Facility is (a) initially, 4.75% for base rate borrowings and 5.75% for LIBOR borrowings when our leverage ratio is greater than 4.25 to 1.00 and (b) 3.50% for base rate borrowings and 4.50% for LIBOR borrowings when our leverage ratio is equal to or less than 4.25 to 1.00.

Additionally, the following fees are required to be paid pursuant to the terms of the Credit Facility: (a) a commitment fee is charged on the average daily unused portion of the revolving credit commitments of 0.50% per annum, (b) a letter of credit fee is charged on the aggregate face amount of outstanding letters of credit under the Credit Facility at a per annum rate equal to the interest rate margin for LIBOR loans under the Credit Facility, (c) a fronting fee is charged on the aggregate face amount of outstanding letters of credit in an amount equal to the issuer’s prevailing market rates at the time of issuance and (d) a customary annual administration fee to the administrative agent thereunder.

Mandatory Prepayments

The Credit Facility requires us to prepay, subject to certain exceptions, the loans with:

100% of the net cash proceeds of any incurrence of debt other than debt permitted under the Credit Facility.

100% of the net cash proceeds of certain equity issuances.

100% of net cash proceeds above a threshold amount for certain asset sales and other recovery events (including loss, destruction and condemnation), subject to reinvestment rights and certain other exceptions.

50% (subject to step-downs to 25% and 0% based upon specified leverage ratio levels) of our annual excess cash flow.

Any proceeds from an initial public offering in an amount not less than an amount sufficient to cause our leverage ratio to be less than or equal to 4.25 on a pro forma basis (or, if less, the net issuance proceeds from such initial public offering).

Voluntary Prepayments

We may voluntarily reduce the utilized portion of the commitment amount and prepay loans under the Credit Facility at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR borrowings and subject to certain notice requirements and minimum amounts. If we are to refinance or reprice the term loans under the Credit Facility within eighteen months of the closing date thereunder through the incurrence of long term secured loan financing (including by way of amendment to the Credit Facility) that has an all in yield that is less than the all in yield applicable to the term loans immediately prior to such transaction, we will be required to pay a 1.00% prepayment premium on the term loans that are repaid or repriced.

Amortization and Final Maturity

We are required to make scheduled quarterly payments under the Credit Facility equal to 0.25% of the original amount of term loans thereunder, with the balance due on October 25, 2018.

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Guarantees and Security

All obligations under the Credit Facility are unconditionally guaranteed by Papa Murphy’s Intermediate, Inc. (“Intermediate”) and certain of our existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under the Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of the guarantors, including:

a first-priority pledge of all of our equity interests directly held by Intermediate and a first-priority pledge of all of the capital stock directly held by us and our subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary will be limited to 65% of the voting capital stock and 100% of the non-voting stock of any first-tier foreign subsidiary); and

a first-priority security interest in substantially all of our, and the guarantors’ tangible and intangible assets, including certain deposit accounts.

Certain Covenants and Events of Default

The Credit Facility requires us to maintain certain financial ratios, including a leverage ratio (based upon the ratio of net funded indebtedness (subject to a cap on netted cash and cash equivalents) to Credit Agreement EBITDA) and a minimum interest coverage ratio as well as cap on the overall amount of capital expenditures made during any fiscal year. The financial ratios required under the Credit Facility become more restrictive over time. In the event that we fail to comply with the leverage ratio or the interest coverage ratio, we will have the option to include any cash equity contributions to us in the calculation of Credit Agreement EBITDA for the purpose of determining compliance with such covenants (a “Specified Equity Contribution”), subject to (i) there being no more than four Specified Equity Contributions since the closing date of the Credit Facility, (ii) the aggregate amount of the Specified Equity Contributions not exceeding $4.0 million and (iii) certain other conditions and limitations.

The Credit Facility contains a number of restrictive covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our subsidiaries to:

incur additional indebtedness or other contingent obligations;

pay dividends on our equity interests or redeem, repurchase or retire our equity interests;

make investments, acquisitions, loans and advances;

create negative pledges or restrictions on the payment of dividends or payment of other amounts owed to us from our subsidiaries;

engage in transactions with our affiliates;

sell, transfer or otherwise dispose of our assets, including capital stock of our subsidiaries;

materially alter the business we conduct;

modify organizational documents in a manner that is materially adverse to the lenders under the Credit Facility;

change our fiscal year;

consolidate, merge, liquidate or dissolve;

incur liens;

engage in sale-leaseback transactions; and

make payments in respect of subordinated debt.

The Credit Facility also contains certain customary representations and warranties, affirmative covenants and reporting obligations. In addition, the lenders under the Credit Facility are permitted to accelerate the loans and

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terminate commitments thereunder or exercise other remedies upon the occurrence of certain events of default, subject to certain grace periods and exceptions, which include, among others, payment defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain material indebtedness, certain events of bankruptcy, material judgments, material defects with respect to lenders’ perfection on the collateral, invalidity of subordination provisions of the subordinated debt and changes of control, which is not expected to be triggered by this offering.

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DESCRIPTION OF CAPITAL STOCK

The following discussion is a summary of (i) the material terms of our amended and restated certificate of incorporation and amended and restated bylaws as they will be in effect following the Reorganization Transactions and at the consummation of this offering and (ii) certain applicable provisions of Delaware law. We refer you to our amended and restated certificate of incorporation and amended and restated bylaws, copies of which are exhibits to the registration statement of which this prospectus is a part.

Authorized Capitalization

After the Reorganization Transactions, our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and shares of preferred stock, par value $0.01 per share.

Following the consummation of this offering, shares of common stock will be outstanding and no shares of preferred stock will be outstanding.

Common Stock

Holders of our common stock are entitled to the following rights:

Voting Rights

Directors will be elected by a plurality of the votes entitled to be cast except as set forth below with respect to directors to be elected by the holders of common stock. Our stockholders will not have cumulative voting rights. Except as otherwise provided in our amended and restated certificate of incorporation or as required by law, all matters to be voted on by our stockholders other than matters relating to the election and removal of directors must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter or by a written resolution of the stockholders representing the number of affirmative votes required for such matter at a meeting.

Preferred Stock

Our Board is authorized to provide for the issuance of preferred stock in one or more series and to fix the preferences, powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preference and to fix the number of shares to be included in any such series without any further vote or action by our stockholders. Any preferred stock so issued may rank senior to our common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. In addition, any such shares of preferred stock may have class or series voting rights. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock. Our Board has not authorized the issuance of any shares of preferred stock, and we have no agreements or current plans for the issuance of any shares of preferred stock.

Classified Board

Our amended and restated certificate of incorporation will provide that our Board will consist of between seven and nine directors, as long as any shares of common stock are outstanding and that our Board will be divided into three classes, with one class being elected at each annual meeting of stockholders. Each director will serve a three-year term, with termination staggered according to class. Class I will initially consist of two directors, Class II will initially consist of two directors, and Class III will initially consist of three directors. The Class I directors, whose terms will expire at the first annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Yoo Jin Kim and Benjamin Hochberg. The Class II directors, whose terms will expire at the second annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Thomas H. Lee and Achi Yaffe. The Class III directors, whose terms will expire at the third annual meeting of our stockholders following the filing of our amended and restated certificate of incorporation, will be Ken Calwell, John Barr and John Shafer. Under the new stockholder’s agreement that we expect to enter into in connection with this offering, for so long as Lee Equity (or one or more of its affiliates, to the extent assigned thereto), individually or in the aggregate owns (i) 20% or more of the voting power of the issued and outstanding

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shares of our common stock, Lee Equity will be entitled to designate two director designees or (ii) 10% or more of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director designee, in each case to serve on the board of directors at any meeting of stockholders at which directors are to be elected to the extent that Lee Equity does not have a director designee then serving on the

board of directors. We will take all necessary actions, including, among other things, calling a special meeting of the stockholders, to ensure that Lee Equity has at least one or two designees, as the case may be. Accordingly, we expect that after the first anniversary of this offering, at least two of the Lee Equity representatives serving on our board will resign. See “Description of Capital Stock—Anti-takeover Provisions” and “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—New Stockholder’s Agreement.”

Upon consummation of this offering, our Board will initially consist of seven directors.

Our amended and restated certificate will provide that directors may only be removed for cause by the affirmative vote of the remaining members of the Board or the holders of at least 66 2/3% of the voting power of all outstanding shares of common stock then entitled to vote on the election of directors. Directors appointed by Lee Equity may be removed from office with or without cause by the affirmative vote of Lee Equity without a meeting.

The classification of our Board could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals

Our amended and restated bylaws will provide that special meetings of the stockholders may be called only upon the request of a majority of our Board or, at the request of Lee Equity so long as Lee Equity (or its affiliates) owns at least 10% of the voting power of all outstanding shares of our common stock. Our amended and restated bylaws will prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control or management of our company.

Our amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our Board or a committee of the Board. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with the advance notice requirements of directors, which may be filled only by a vote of a majority of directors then in office, even though less than a quorum, and not by the stockholders. Our amended and restated bylaws will allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

No Stockholder Action by Written Consent

Our amended and restated certificate of incorporation will provide that, subject to the rights of any holders of preferred stock to act by written consent instead of a meeting, stockholder action may be taken only at an annual meeting or special meeting of stockholders and may not be taken by written consent instead of a meeting. Failure to satisfy any of the requirements for a stockholder meeting could delay, prevent or invalidate stockholder action.

Dividend Rights

Holders of common stock will share equally in any dividend declared by our Board, subject to the rights of the holders of any outstanding preferred stock.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.

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Other Rights

Our stockholders have no preemptive or other rights to subscribe for additional shares. All holders of our common stock are entitled to share equally on a share-for-share basis in any assets available for distribution to common stockholders upon our liquidation, dissolution or winding up. All outstanding shares are, and all shares offered by this prospectus will be, when sold, validly issued, fully paid and nonassessable.

Registration Rights

Our existing stockholders have certain registration rights with respect to our common stock pursuant to a stockholders’ agreement that will remain in effect following the offering. See “Certain Relationships and Related Person Transactions Agreements Related to the Acquisition by Lee Equity—Existing Stockholders’ Agreement and Registration Rights Provisions.”

Anti-Takeover Provisions

Our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that delay, defer or discourage transactions involving an actual or potential change in control of us or change in our management. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our Board the power to discourage transactions that some stockholders may favor, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Accordingly, these provisions could adversely affect the price of our common stock.

Amendment to Bylaws and Amended and Restated Certificate of Incorporation.

Any amendment to our amended and restated certificate of incorporation must first be approved by a majority of our Board of Directors and (i) if required by law, thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment or (ii) if related to provisions regarding the classification of the Board of Directors, the removal of directors, indemnification, corporate opportunities, business combinations, forum, severability, the provision opting-out of Section 203 of the DGCL, or the amendment of our bylaws or amended and restated certificate of incorporation, thereafter be approved by 66 2/3% of the outstanding shares entitled to vote on the amendment. Our amended and restated bylaws may be amended subject to any limitations set forth in the bylaws (x) by the affirmative vote of a majority of the directors then in office, without further stockholder action or (y) by the affirmative vote of at least 66 2/3% of the outstanding shares entitled to vote on the amendment without further action by our Board of Directors.

Section 203 of the DGCL

Upon the closing of this offering, our amended and restated certificate of incorporation will provide that the provisions of Section 203 of the Delaware General Corporation Law or DGCL, which relate to business combinations with interested stockholders, do not apply to us. Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder (a stockholder who owns more than 15% of our common stock) for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction that resulted in such stockholder becoming an interested stockholder. These provisions would apply even if the business combination could be considered beneficial by some shareholders. However, our amended and restated certificate of incorporation will contain provisions that have the same effect as Section 203 of the DGCL, except that they will provide that Lee Equity, or any affiliate thereof or any person or entity which acquires from any of the foregoing stockholders beneficial ownership of 5% or more of then outstanding shares of our voting stock in a transaction other than through a registered public offering or through any broker’s transaction executed on any securities exchange or other over-the-counter market shall not be deemed an “interested stockholder” for purposes of this provision of our amended and restated certificate of incorporation and therefore not subject to the restrictions set forth in this provision.

Exclusive Forum

Our amended and restated certificate of incorporation will provide that, subject to certain exceptions, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for certain stockholder litigation matters. However, it is possible that a court could rule that this provision is unenforceable or inapplicable.

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Corporate Opportunities

Our amended and restated certificate of incorporation and new stockholder’s agreement will provide that directors appointed by the funds managed or advised by Lee Equity Partners, LLC do not have any obligation to offer us an opportunity to participate in business opportunities presented to Lee Equity even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses), and that, to the extent permitted by law, the funds managed Lee Equity Partners, LLC will not be liable to us or our stockholders for breach of any duty by reason of any such activities.

Listing

We have applied to have our common stock listed on NASDAQ under the symbol “FRSH”.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our capital stock. Future sales of our common stock in the public market or the perception that sales may occur, could materially adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital in the future.

Sale of Restricted Securities

Upon consummation of this offering, we will have shares of our common stock outstanding. Of these shares, the shares sold in this offering (or shares, if the underwriters exercise their option to purchase additional shares from the selling stockholders in full) will be freely tradable without further restriction or registration under the Securities Act, except that any shares purchased by our affiliates may generally only be sold in compliance with Rule 144, which is described below. Of the remaining outstanding shares, shares will be deemed “restricted securities” under the Securities Act.

Lock-Up Arrangements and Registration Rights

In connection with this offering, we, each of our directors, executive officers and the selling stockholders, as well as certain other stockholders, representing shares of our common stock, will enter into lock-up agreements described under “Underwriting” that restrict the sale of our securities for up to 180 days after the date of this prospectus, subject to certain exceptions or an extension in certain circumstances.

In addition, following the expiration of the lock-up period, the holders of an aggregate of shares of our common stock will be subject to certain restrictions in transferring shares and will also have the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under federal securities laws. See “Certain Relationships and Related Person Transactions—Agreements Related to the Acquisition by Lee Equity—Existing Stockholders’ Agreement and Registration Rights Provisions.” If these stockholders exercise this right, our other existing stockholders may require us to register their registrable securities.

Following the lock-up periods described above, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

The shares of our common stock sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any shares of our common stock held by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits our common stock that has been acquired by a person who is an affiliate of ours, or has been an affiliate of ours within the past three months, to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:

one percent of the total number of shares of our common stock outstanding; or

the average weekly reported trading volume of our common stock for the four calendar weeks prior to the sale.

Such sales are also subject to specific manner of sale provisions, a six-month holding period requirement, notice requirements and the availability of current public information about us.

Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months beneficially owned shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock subject only to the availability of current public information regarding us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144.

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Additional Registration Statements

We intend to file a registration statement on Form S-8 under the Securities Act to register shares of our common stock to be issued or reserved for issuance under the 2014 Plan. Such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement, including shares of unrestricted common stock and shares of restricted common stock to be issued under our 2014 Plan to holders of phantom equity units, will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS

FOR NON-U.S. HOLDERS

The following is a discussion of the material U.S. federal income and estate tax consequences of the purchase, ownership and disposition of our common stock that may be relevant to you if you are a non-U.S. Holder (as defined below), and is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Department regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion is limited to non-U.S. Holders who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code. Moreover, this discussion does not address all of the tax consequences that may be relevant to you in light of your particular circumstances, nor does it discuss special tax provisions, which may apply to you if you are subject to special treatment under U.S. federal income tax laws, such as for certain financial institutions or financial services entities, insurance companies, tax-exempt entities, dealers in securities or currencies, traders in securities that elect to apply a mark-to-market method of tax accounting, entities that are treated as partnerships for U.S. federal income tax purposes (and investors in such entities), “controlled foreign corporations,” “passive foreign investment companies,” former U.S. citizens or long-term residents, persons deemed to sell common stock under the constructive sale provisions of the Code, and persons that hold common stock as part of a straddle, hedge, conversion transaction or other integrated investment. In addition, this discussion does not address the Medicare tax on certain investment income, any state, local or foreign tax laws or any U.S. federal tax law other than U.S. federal income and estate tax law (such as gift tax laws).

As used in this discussion, the term “non-U.S. Holder” means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:

an individual who is a citizen or resident of the United States,

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia,

an estate the income of which is subject to U.S. federal income taxation regardless of its source, or

a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined in the Code) have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable Treasury Department regulations to be treated as a domestic trust for U.S. federal income tax purposes.

If you are an individual, you may be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the United States (1) for at least 183 days during the calendar year, or (2) for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of (2), all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to U.S. federal income tax as if they were U.S. citizens.

If any entity or arrangement treated as a partnership for U.S. federal income tax purposes is a holder of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. A holder that is a partnership, and the partners in such partnership, should consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of our common stock.

EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION, IN LIGHT OF THE PROSPECTIVE PURCHASER’S PARTICULAR CIRCUMSTANCES.

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U.S. Trade or Business Income

For purposes of the discussion below, dividends and gains on the sale, exchange or other disposition of our common stock will be considered to be “U.S. trade or business income” if such income or gain is:

effectively connected with the non-U.S. Holder’s conduct of a U.S. trade or business, and

in the case a treaty applies, attributable to a permanent establishment (or, in the case of an individual, a fixed base) maintained by the non-U.S. Holder in the United States within the meaning of such treaty.

Generally, U.S. trade or business income is subject to U.S. federal income tax on a net income basis at regular graduated U.S. federal income tax rates. Any U.S. trade or business income received by a non-U.S. Holder that is a corporation also may, under specific circumstances, be subject to an additional “branch profits tax” at a 30% rate (or a lower rate that may be specified by an applicable tax treaty).

Distributions on Common Stock

We do not anticipate making any distributions on our common stock. See “Dividend Policy.” If distributions (other than certain stock distributions) are paid on shares of our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, such excess will constitute a return of capital that reduces, but not below zero, a non-U.S. Holder’s tax basis in our common stock. Any remainder will constitute gain from the sale or exchange of our common stock (as described in “—Disposition of Common Stock” below). If dividends are paid, as a non-U.S. Holder, you will be subject to withholding of U.S. federal income tax at a 30% rate, or a lower rate as may be specified by an applicable income tax treaty. To claim the benefit of a lower rate under an income tax treaty, you must properly file with the payor an Internal Revenue Service Form W-8BEN, or other applicable form, claiming an exemption from or reduction in withholding tax under the applicable tax treaty. Such form must be provided to us or our paying agent prior to the payment of dividends and must be updated periodically.

If dividends are considered U.S. trade or business income, those dividends will be subject to U.S. federal income tax on a net basis at applicable graduated individual or corporate rates and potential branch profits tax (as described in “—U.S. Trade or Business Income” above) but will not be subject to withholding tax, provided a properly executed Internal Revenue Service Form W-8ECI, or other applicable form, is filed with the payor.

You must comply with the certification procedures described above, or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures, directly or, under certain circumstances, through an intermediary, to obtain the benefits of a reduced withholding rate under an income tax treaty with respect to dividends paid with respect to our common stock. In addition, if you are required to provide an Internal Revenue Service Form W-8ECI or other applicable form, as discussed above, you must also provide your U.S. taxpayer identification number.

If you are eligible for a reduced rate of U.S. withholding tax with respect to a distribution on our common stock, you may obtain a refund from the Internal Revenue Service of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.

Disposition of Common Stock

As a non-U.S. Holder, you generally will not be subject to U.S. federal income or withholding tax on any gain recognized on a sale or other disposition of common stock unless:

the gain is U.S. trade or business income;

you are an individual who is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met; or

we are, or have been, a U.S. real property holding corporation (a “USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition of our common stock and the non-U.S. Holder’s holding period for our common stock.

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If you are a non-U.S. Holder with gain described in the first bullet above, you generally will be subject to tax as described in “—U.S. Trade or Business Income.” If you are a non-U.S. Holder described in the second bullet above, you generally will be subject to a flat tax at a 30% rate (or lower applicable treaty rate) on the gain, which may be offset by certain U.S. source losses.

Generally, a corporation is a USRPHC if the fair market value of its “United States real property interests” equals 50% or more of the sum of the fair market value of (a) its worldwide property interests and (b) its other assets used or held for use in a trade or business. We believe that we are not currently a USRPHC for U.S. federal income tax purposes. However, no assurance can be given that we will not become a USRPHC.

The tax relating to stock in a USRPHC does not apply to a non-U.S. Holder whose holdings, actual and constructive, amount to 5% or less of our common stock at all times during the applicable period, provided that our common stock is regularly traded on an established securities market. As of the date of this offering, our common stock is traded on an established securities market.

No assurance can be given that we will not be a USRPHC or that our common stock will be considered regularly traded on an established securities market when a non-U.S. Holder disposes of shares of our common stock. Non-U.S. Holders are urged to consult with their tax advisors to determine the application of these rules to their disposition of our common stock.

Federal Estate Tax

Individuals, or an entity the property of which is includable in an individual’s gross estate for U.S. federal estate tax purposes, should note that common stock held at the time of such individual’s death will be included in such individual’s gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding Tax

We must report annually to the Internal Revenue Service and to you the amount of dividends paid to you and the tax withheld with respect to those dividends, regardless of whether withholding was required. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty or other applicable agreements.

Backup withholding is generally imposed (currently at a 28% rate) on certain payments to persons that fail to furnish the necessary identifying information to the payor. You generally will be subject to backup withholding tax with respect to dividends paid on your common stock unless you certify to the payor your non-U.S. status. Dividends subject to withholding of U.S. federal income tax as described above in “ Dividends ” would not be subject to backup withholding.

The payment of proceeds of a sale of common stock effected by or through a United States office of a broker is subject to both backup withholding and information reporting unless you provide the payor with your name and address and you certify your non-U.S. status or you otherwise establish an exemption. In general, backup withholding and information reporting will not apply to the payment of the proceeds of a sale of common stock by or through a foreign office of a broker. If, however, such broker is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States or a foreign partnership that at any time during its tax year either is engaged in the conduct of a trade or business in the United States or has as partners one or more U.S. persons that, in the aggregate, hold more than 50% of the income or capital interest in the partnership, backup withholding will not apply but such payments will be subject to information reporting, unless such broker has documentary evidence in its records that you are a non-U.S. Holder and certain other conditions are met or you otherwise establish an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished in a timely manner to the Internal Revenue Service.

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Other Withholding Requirements

Non-U.S. Holders of our common stock may be subject to U.S. withholding tax at a rate of 30% under sections 1471 through 1474 of the Code (commonly referred to as “FATCA”). This withholding tax may apply if a non-U.S. Holder (or any foreign intermediary that receives a payment on a non-U.S. Holder’s behalf) does not comply with certain U.S. information reporting requirements. The payments potentially subject to this withholding tax include dividends on, and gross proceeds from the sale or other disposition of, our common stock. If FATCA is not complied with, the withholding tax described above will apply to dividends paid on or after July 1, 2014, and to gross proceeds from the sale or other disposition of our common stock on or after January 1, 2017. Certain non-U.S. governments have entered into agreements with the United States (and additional non-U.S. governments are expected to enter into such agreements) to implement FATCA in a manner that may be different than described above. Non-U.S. Holders should consult their tax advisors regarding the possible implications of FATCA on their investment in our common stock.

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UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement, dated , 2014, among us, the selling stockholders and Jefferies LLC, as the representative of the underwriters named below and as a joint bookrunning manager of this offering, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the respective number of shares of common stock shown opposite its name below:


UNDERWRITERS		NUMBER OF SHARES
Jefferies LLC
Robert W. Baird & Co. Incorporated
Wells Fargo Securities, LLC
William Blair & Company, L.L.C.
Raymond James & Associates, Inc.
Stephens Inc.

Total

The underwriting agreement provides that the obligations of the several underwriters are subject to certain conditions precedent such as the receipt by the underwriters of officers’ certificates and legal opinions and approval of certain legal matters by their counsel. The underwriting agreement provides that the underwriters will purchase all of the shares of common stock if any of them are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated. We and the selling stockholders have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.

The underwriters have advised us that, following the completion of this offering, they currently intend to make a market in the common stock as permitted by applicable laws and regulations. However, the underwriters are not obligated to do so, and the underwriters may discontinue any market-making activities at any time without notice in their sole discretion. Accordingly, no assurance can be given as to the liquidity of the trading market for the common stock, that you will be able to sell any of the common stock held by you at a particular time or that the prices that you receive when you sell will be favorable.

The underwriters are offering the shares of common stock subject to their acceptance of the shares of common stock from us and the selling stockholders and subject to prior sale. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. In addition, the underwriters have advised us that they do not intend to confirm sales to any account over which they exercise discretionary authority.

In connection with this offering and depending on the applicable facts and circumstances, a selling stockholder may be deemed to be an “underwriter” within the meaning of such term under the Securities Act. The selling stockholders purchased the shares being registered for resale in the ordinary course of business, and at the time of the purchase, the selling stockholders had no agreements or understandings, directly or indirectly, with any person to distribute the securities. Based upon such facts and circumstances, including when and how shares of the Company’s common stock were acquired, none of the selling stockholders believes that it should be considered an “underwriter” within the meaning of such term under the Securities Act.

Commission and Expenses

The underwriters have advised us that they propose to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers, which may include the underwriters, at that price less a concession not in excess of $ per share of common stock. The underwriters

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may allow, and certain dealers may reallow, a discount from the concession not in excess of $ per share of common stock to certain brokers and dealers. After the offering, the initial public offering price, concession and reallowance to dealers may be reduced by the representative. No such reduction will change the amount of proceeds to be received by us as set forth on the cover page of this prospectus.

The following table shows the public offering price, the underwriting discounts and commissions that we and the selling stockholders are to pay the underwriters and the proceeds, before expenses, to us and the selling stockholders in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares from the selling stockholders.

PER SHARE

TOTAL

WITHOUT
OPTION TO PURCHASE
ADDITIONAL SHARES

WITH
OPTION TO PURCHASE
ADDITIONAL SHARES

WITHOUT
OPTION TO PURCHASE
ADDITIONAL SHARES

WITH
OPTION TO PURCHASE
ADDITIONAL SHARES

Public offering price

Underwriting discounts and commissions paid by us

Proceeds to us, before expenses

Underwriting discounts and commissions paid by the selling stockholders

Proceeds to the selling stockholders, before expenses

We estimate expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $ . We estimate expenses payable by the selling stockholders in connection with this offering, if the underwriters exercise their option to purchase additional shares from the selling stockholders in full, other than the underwriting discounts and commissions referred to above, will be approximately $ . We have also agreed to reimburse the underwriters for certain of their expenses, in an amount of up to $30,000, incurred in connection with review by the Financial Industry Regulatory Authority, Inc. of the terms of this offering, as set forth in the underwriting agreement.

Determination of Offering Price

Prior to this offering, there has not been a public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiations between us and the representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.

We offer no assurances that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to the offering or that an active trading market for the common stock will develop and continue after the offering.

Listing

We have applied to have our common stock approved for listing on NASDAQ under the symbol “FRSH”.

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

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Option to Purchase Additional Shares

The selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of shares from the selling stockholders at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. If the underwriters exercise this option, each underwriter will be obligated, subject to specified conditions, to purchase a number of additional shares proportionate to that underwriter’s initial purchase commitment as indicated in the table above. This option may be exercised only if the underwriters sell more shares than the total number set forth on the cover page of this prospectus.

No Sales of Similar Securities

We, our officers, directors and holders of all or substantially all our outstanding capital stock and other securities have agreed, subject to specified exceptions, not to directly or indirectly:

sell, offer, contract or grant any option to sell (including any short sale), pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-l(h) under the Exchange Act, or

otherwise dispose of any shares of common stock, options or warrants to acquire shares of common stock or securities exchangeable or exercisable for or convertible into shares of common stock currently or hereafter owned either of record or beneficially, or

publicly announce an intention to do any of the foregoing for a period of 180 days after the date of this prospectus without the prior written consent of Jefferies LLC.

This restriction terminates after the close of trading of the common stock on and including the 180 ^th day after the date of this prospectus.

Jefferies LLC may, in its sole discretion and at any time or from time to time before the termination of the 180-day period, release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our stockholders who will execute a lock-up agreement, providing consent to the sale of shares prior to the expiration of the lock-up period.

Stabilization

The underwriters have advised us that they, pursuant to Regulation M under the Exchange Act, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either “covered” short sales or “naked” short sales.

“Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock from the selling stockholders or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares from the selling stockholders.

“Naked” short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering.

A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase

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of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member are purchased in a syndicate covering transaction and therefore have not been effectively placed by such syndicate member.

None of we, the selling stockholders or any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. The underwriters are not obligated to engage in these activities and, if commenced, any of the activities may be discontinued at any time.

The underwriters may also engage in passive market making transactions in our common stock on NASDAQ. in accordance with Rule 103 of Regulation M during a period before the commencement of offers or sales of shares of our common stock in this offering and extending through the completion of distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.

Electronic Distribution

A prospectus in electronic format may be made available by e-mail or on the web sites or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of common stock for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ web sites and any information contained in any other web site maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.

Directed Share Program

At our request, the underwriters have reserved for sale at the initial public offering price up to common shares for employees, directors and other persons associated with us who have expressed an interest in purchasing shares in the offering. The number of common shares available for sale to the general public in the offering will be reduced to the extent these persons purchase the directed shares in the program. Any directed shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares. Except for certain participants who have entered into lock-up agreements as contemplated above, each person buying shares through the directed share program has agreed that, for a period of 180 days from and including the date of this prospectus, he or she will not, without the prior written consent of Jefferies LLC, dispose of or hedge any common shares or any securities convertible into or exchangeable for common shares with respect to shares purchased in the program. For those participants who have entered into lock-up agreements as contemplated above, the lock-up agreements contemplated therein shall govern with respect to their purchases of common shares in the program. Jefferies LLC in its sole discretion may release any of the securities subject to these lock-up agreements at any time. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the directed shares.

Other Activities and Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses.

141

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. The underwriters and their respective affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the common stock offered hereby. Any such short positions could adversely affect future trading prices of the common stock offered hereby. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Rothschild Inc., or Rothschild, has acted as our financial advisor in connection with this offering. Rothschild is not acting as an underwriter in connection with this offering, and accordingly, Rothschild is neither purchasing shares of our common stock nor offering shares of our common stock to the public in connection with this offering. The maximum aggregate compensation that Rothschild is eligible to receive in connection with this offering, including reimbursement of out-of-pocket expenses, is $365,000.

Selling Restrictions

This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the shares of common stock or possession or distribution of this prospectus or any other offering or publicity material relating to the shares of common stock in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any shares of common stock or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of the shares of common stock by it will be made on the same terms.

European Economic Area

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), an offer to the public of any common shares which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any common shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

to any legal entity which is a “qualified investor” as defined in the Prospectus Directive;

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the underwriters or the underwriters nominated by us for any such offer; or

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of common shares shall require us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer common shares to the public” in relation to the common shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the common shares to be offered so as to enable an investor to decide to purchase or subscribe to the common shares, as the same may be varied in that Relevant Member State by any

142

measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated (each such person being referred to as a “relevant person”).

This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Hong Kong

No securities have been offered or sold, and no securities may be offered or sold, in Hong Kong, by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent; or to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (“SFO”) and any rules made under that Ordinance; or in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong (“CO”) or which do not constitute an offer or invitation to the public for the purpose of the CO or the SFO. No document, invitation or advertisement relating to the securities has been issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under that Ordinance.

This prospectus has not been registered with the Registrar of Companies in Hong Kong. Accordingly, this prospectus may not be issued, circulated or distributed in Hong Kong, and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers of the securities described in this prospectus and the relevant offering documents and that such person is not acquiring, and has not been offered any securities in circumstances that contravene any such restrictions.

Singapore

This prospectus has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in

143

Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

where no consideration is or will be given for the transfer;

where the transfer is by operation of law;

as specified in Section 276(7) of the SFA; or

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

Japan

The offering has not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948 of Japan, as amended), or FIEL, and the Initial Purchaser will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan.

Switzerland

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.

Australia

This prospectus is not a disclosure document for the purposes of Australia’s Corporations Act 2001 (Cth) of Australia, or Corporations Act, has not been lodged with the Australian Securities & Investments Commission and is only directed to the categories of exempt persons set out below. Accordingly, if you receive this prospectus in Australia:

You confirm and warrant that you are either:

a “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act;

a “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the Company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

a person associated with the Company under Section 708(12) of the Corporations Act; or

a “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act.

144

To the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this prospectus is void and incapable of acceptance.

You warrant and agree that you will not offer any of the securities issued to you pursuant to this prospectus for resale in Australia within 12 months of those securities being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

145

LEGAL MATTERS

Weil, Gotshal & Manges LLP, New York, New York, has passed upon the validity of the shares of common stock offered under this prospectus. Certain legal matters in connection with this offering will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.

EXPERTS

The consolidated financial statements of Papa Murphy’s Holdings, Inc. as of December 30, 2013 and December 31, 2012, and for each of the three years in the period ended December 30, 2013, included in this prospectus have been so included in reliance on the report of Moss Adams LLP, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.

The combined financial statements of TBD Business Group as of December 31, 2012 and January 2, 2012, and for the years then ended, included in this prospectus have been so included in reliance on the report of Moss Adams LLP, an independent public accounting firm, given on the authority of said firm as experts in accounting and auditing.

The financial statements of KK Great Pizza, LLC as of December 31, 2012, and for the year then ended, included in this prospectus have been so included in reliance on the report of Moss Adams LLP, an independent public accounting firm, given on the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and the shares of common stock offered hereby, you should refer to the registration statement and to the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. When we complete this offering, we will be required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings, including our registration statement and the exhibits and schedules thereto, may be inspected without charge at the public reference room maintained by the SEC located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of all or any portion of the registration statements and the filings may be obtained from such offices upon payment of prescribed fees. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330 or (202) 551-8090. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.

You may obtain a copy of any of our filings, at no cost, by writing or telephoning us at:

Papa Murphy’s Holdings, Inc.

8000 NE Parkway Drive, Suite 350

Vancouver, WA 98662

(360) 260-7272

Attn: Investor Relations

146

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	PAGE
Consolidated Financial Statements of Papa Murphy’s Holdings, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Operations and Comprehensive Loss for the Fiscal Years ended December 30, 2013, December 31, 2012 and January 2, 2012		F-3
Consolidated Balance Sheets as of December 30, 2013, and December 31, 2012		F-4
Consolidated Statements of Shareholder’s Equity for the Fiscal Years ended December 30, 2013, December 31, 2012 and January 2, 2012		F-5
Consolidated Statements of Cash Flows for the Fiscal Years ended December 30, 2013, December 31, 2012 and January 2, 2012		F-7
Notes to Consolidated Financial Statements		F-8

Combined Financial Statements of TBD Business Group ^(a)
Report of Independent Auditors		F-41
Combined Balance Sheets as of December 31, 2012 and January 2, 2012		F-42
Combined Statements of Income for the Fiscal Years Ended December 31, 2012 and January 2, 2012		F-43
Combined Statements of Business Equity for the Fiscal Years Ended December 31, 2012 and January 2, 2012		F-44
Combined Statements of Cash Flows for the Fiscal Years ended December 31, 2012 and January 2, 2012		F-45
Notes to Combined Financial Statements		F-46

Unaudited Interim Combined Balance Sheets as of September 30, 2013 and December 31, 2012		F-50
Unaudited Interim Combined Statements of Income for the 39 Weeks Ended September 30, 2013 and October 1, 2012		F-51
Unaudited Interim Combined Statements of Business Equity for the 39 Weeks Ended September 30, 2013		F-52
Unaudited Interim Combined Statements of Cash Flows for the 39 Weeks Ended September 30, 2013 and October 1, 2012		F-53
Notes to Unaudited Interim Combined Financial Statements		F-54

Financial Statements of KK Great Pizza, LLC ^(a)
Report of Independent Auditors		F-59
Balance Sheet as of December 31, 2012		F-60
Statement of Income for the Fiscal Year Ended December 31, 2012		F-61
Statement of Members’ Equity for the Fiscal Year Ended December 31, 2012		F-62
Statement of Cash Flows for the Fiscal Year Ended December 31, 2012		F-63
Notes to Financial Statements		F-64

Unaudited Interim Balance Sheet as of September 30, 2013 and December 31, 2012		F-67
Unaudited Interim Statement of Income for the Nine Months Ended September 30, 2013 and October 1, 2012		F-68
Unaudited Interim Statement of Member’s Equity for the Nine Months Ended September 30, 2013		F-69
Unaudited Interim Statement of Cash Flows for the Nine Months Ended September 30, 2013 and October 1, 2012		F-70
Notes to Unaudited Interim Financial Statements		F-71

^(a)	The financial statements of TBD Business Group and KK Great Pizza, LLC are required to be filed under Rule 3-05 of Regulation S-X as TBD Business Group and KK Great Pizza, LLC are material acquired entities.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Papa Murphy’s Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Papa Murphy’s Holdings, Inc. and subsidiaries (the “Company”) as of December 30, 2013 and December 31, 2012, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended December 30, 2013. Our audits of the consolidated financial statements included the accompanying financial statement schedules. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Papa Murphy’s Holdings, Inc. and subsidiaries as of December 30, 2013 and December 31, 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 30, 2013, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules, when read in conjunction with the related consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Moss Adams LLP

Portland, Oregon

February 27, 2014, except for Note 23, as to which the date is March 11, 2014

F-2

PAPA MURPHY’S HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

(In thousands of dollars, except per share data)


	FISCAL YEAR
	2013			2012			2011
REVENUES
Franchise royalties	$	36,897		$	35,113		$	33,687
Franchise and development fees		4,330			2,826			2,398
Company-owned store sales		39,148			28,813			15,619
Lease income		120			164			218

Total revenues		80,495			66,916			51,922


COSTS AND EXPENSES
Store operating costs (exclusive of depreciation and amortization shown separately below):
Cost of food and packaging		14,700			10,741			6,088
Compensation and benefits		10,687			8,160			4,710
Advertising		3,820			2,711			1,514
Occupancy		2,365			1,980			1,102
Other store operating costs		3,988			2,961			1,722
Selling, general, and administrative		24,180			21,225			20,833
Depreciation and amortization		6,973			6,187			5,798
Loss on disposal or impairment of property and equipment		847			193			263

Total costs and expenses		67,560			54,158			42,030

OPERATING INCOME		12,935			12,758			9,892
Interest expense		10,523			10,462			10,410
Interest income		(94	)		(94	)		(183	)
Loss on early retirement of debt		4,029			5,138			—
Other expense, net		44			248			41

LOSS BEFORE INCOME TAXES		(1,567	)		(2,996	)		(376	)
Provision (benefit) from income taxes		1,024			(882	)		230

NET LOSS		(2,591	)		(2,114	)		(606	)
Net loss attributable to noncontrolling interests		19			—			—

NET LOSS ATTRIBUTABLE TO PAPA MURPHY’S		(2,572	)		(2,114	)		(606	)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment (loss) gain		(2	)		4			(27	)

TOTAL COMPREHENSIVE LOSS	$	(2,574	)	$	(2,110	)	$	(633	)

Loss per share of common stock
Basic	$	(5.29	)	$	(5.28	)	$	(4.52	)
Diluted	$	(5.29	)	$	(5.28	)	$	(4.52	)
Weighted average common stock outstanding
Basic		1,700,360			1,623,171			1,591,262
Diluted		1,700,360			1,623,171			1,591,262

See accompanying notes.

F-3

PAPA MURPHY’S HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands of dollars, except par value and share data)


	DECEMBER 30, 2013			DECEMBER 31, 2012
Assets

CURRENT ASSETS
Cash and cash equivalents	$	3,705		$	2,428
Accounts receivable, net		2,430			1,947
Notes receivable (including related party notes of $39 and zero, respectively)		837			—
Inventories		495			335
Prepaid expenses and other current assets		7,054			1,953
Current deferred tax asset		1,856			902

Total current assets		16,377			7,565
Property and equipment, net		9,660			8,653
Notes receivable, net (including related party notes of $444 and $513, respectively)		444			1,007
Goodwill		96,089			89,332
Trade name and trademarks		87,002			87,002
Definite-life intangibles, net		48,744			48,383
Deferred finance charges, net		3,934			4,438
Other assets		2,252			237

Total assets	$	264,502		$	246,617

Liabilities and Equity

CURRENT LIABILITIES
Accounts payable	$	3,673		$	2,339
Accrued and other liabilities		9,741			6,761
Unearned franchise and development fees		2,881			2,588
Current portion of long-term debt		1,670			880

Total current liabilities		17,965			12,568
Long-term debt, net of current portion		168,330			124,400
Unearned franchise and development fees		1,113			1,405
Deferred tax liability		41,465			39,567
Preferred and common stock subject to put options (0 and 74,491 Series A preferred shares outstanding, respectively, and 0 and 41,075 common shares outstanding, respectively)		—			3,570
Other long-term liabilities		1,482			1,177

Total liabilities		230,355			182,687

Commitments and contingencies (Note 19)

EQUITY
Papa Murphy’s Holdings Inc. Shareholders’ Equity
Series A preferred stock ($0.01 par value; 3,000,000 shares authorized; 2,853,809 and 2,779,318 shares issued and outstanding, respectively (aggregate liquidation preference $61,476 and $86,014, respectively))		60,156			79,856
Series B preferred stock ($0.01 par value; 1,000,000 shares authorized, 26,551 and 26,551 shares issued and outstanding, respectively (aggregate liquidation preference $722 and $1,006, respectively))		741			1,003
Common stock ($0.01 par value; 3,000,000 shares authorized; 1,921,337 and 1,894,262 shares issued and outstanding, respectively)		19			19
Additional paid-in capital		1,579			420
Stock subscription receivable		(1,197	)		(888	)
Accumulated deficit		(27,373	)		(16,482	)
Accumulated other comprehensive income		—			2

Total Papa Murphy’s Holdings Inc. shareholders’ equity		33,925			63,930
Noncontrolling interests		222			—

Total equity		34,147			63,930

Total liabilities and equity	$	264,502		$	246,617

See accompanying notes.

F-4

PAPA MURPHY’S HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

(In thousands of dollars, except share data)


	CUMULATIVE SERIES A PREFERRED STOCK						CUMULATIVE SERIES B PREFERRED STOCK				COMMON STOCK						ADDITIONAL PAID-IN CAPITAL			STOCK SUBSCRIP- TION RECEIVABLE			ACCUMU- LATED DEFICIT			ACCUMU- LATED OTHER COMPREH- ENSIVE INCOME (LOSS)			TOTAL PAPA MURPHY’S HOLDINGS INC. SHARE- HOLDERS’ EQUITY			NON CONTROLLING INTERESTS		TOTAL EQUITY
	SHARES			AMOUNT			SHARES		AMOUNT		SHARES			AMOUNT			ADDITIONAL PAID-IN CAPITAL			STOCK SUBSCRIP- TION RECEIVABLE			ACCUMU- LATED DEFICIT									NON CONTROLLING INTERESTS		TOTAL EQUITY
BALANCE, January 3, 2011		2,843,787		$	104,317			—	$	—		1,898,360		$	19		$	808		$	—		$	(1,830	)	$	25		$	103,339		$	—	$	103,339
Common stock issuances		—			—			—		—		142,438			1			69			—			—			—			70			—		70
Common stock repurchases		—			—			—		—		(136,353	)		(1	)		(58	)		—			(55	)		—			(114	)		—		(114	)
Preferred stock issuances		18,959			695			—		—		—			—			—			—			—			—			695			—		695
Preferred stock redemptions		(7,580	)		(278	)		—		—		—			—			(17	)		—			—			—			(295	)		—		(295	)
Note receivable issued to fund the purchase of stock		—			—			—		—		—			—			—			(548	)		—			—			(548	)		—		(548	)
Stock based compensation expense		—			—			—		—		—			—			64			—			—			—			64			—		64
Issuance of liability classified put options on 74,491 shares of series A preferred stock and 41,075 shares of common stock		(74,491	)		(2,733	)		—		—		(41,075	)		—			363			—			—			—			(2,370	)		—		(2,370	)
Net loss		—			—			—		—		—			—			—			—			(606	)		—			(606	)		—		(606	)
Adjustment for foreign currency translation		—			—			—		—		—			—			—			—			—			(27	)		(27	)		—		(27	)

BALANCE, January 2, 2012		2,780,675			102,001			—		—		1,863,370			19			1,229			(548	)		(2,491	)		(2	)		100,208			—		100,208
Common stock issuances		—			—			—		—		74,640			1			400			—			—			—			401			—		401
Common stock repurchases		—			—			—		—		(43,748	)		(1	)		(22	)		—			(94	)		—			(117	)		—		(117	)
Preferred stock issuances		—			—			26,551		1,003		—			—			—			—			—			—			1,003			—		1,003
Preferred stock redemptions		(1,357	)		(39	)		—		—		—			—			(1	)		—			(4	)		—			(44	)		—		(44	)
Preferred stock dividends		—			—			—		—		—			—			(1,277	)		—			(11,779	)		—			(13,056	)		—		(13,056	)
Preferred stock return of invested capital		—			(22,106	)		—		—		—			—			—			—			—			—			(22,106	)		—		(22,106	)
Note receivable issued to fund the purchase of stock		—			—			—		—		—			—			—			(340	)		—			—			(340	)		—		(340	)
Stock based compensation expense		—			—			—		—		—			—			91			—			—			—			91			—		91
Net loss		—			—			—		—		—			—			—			—			(2,114	)		—			(2,114	)		—		(2,114	)
Adjustment for foreign currency translation		—			—			—		—		—			—			—			—			—			4			4			—		4

F-5


	CUMULATIVE SERIES A PREFERRED STOCK					CUMULATIVE SERIES B PREFERRED STOCK					COMMON STOCK					ADDITIONAL PAID-IN CAPITAL			STOCK SUBSCRIP- TION RECEIVABLE			ACCUMU- LATED DEFICIT			ACCUMU- LATED OTHER COMPREH- ENSIVE INCOME (LOSS)			TOTAL PAPA MURPHY’S HOLDINGS INC. SHARE- HOLDERS’ EQUITY			NON CONTROLLING INTERESTS			TOTAL EQUITY
	SHARES		AMOUNT			SHARES		AMOUNT			SHARES			AMOUNT		ADDITIONAL PAID-IN CAPITAL			STOCK SUBSCRIP- TION RECEIVABLE			ACCUMU- LATED DEFICIT									NON CONTROLLING INTERESTS			TOTAL EQUITY
BALANCE, December 31, 2012		2,779,318		79,856			26,551		1,003			1,894,262			19		420			(888	)		(16,482	)		2			63,930			—			63,930
Common stock issuances		—		—			—		—			25,000			—		366			—			—			—			366			—			366
Common stock repurchases		—		—			—		—			(39,000	)		—		(12	)		—			(388	)		—			(400	)		—			(400	)
Preferred stock dividends		—		—			—		—			—			—		(830	)		—			(7,931	)		—			(8,761	)		—			(8,761	)
Preferred stock return of invested capital		—		(21,667	)		—		(262	)		—			—		—			—			—			—			(21,929	)		—			(21,929	)
Note receivable issued to fund the purchase of stock		—		—			—		—			—			—		—			(309	)		—			—			(309	)		—			(309	)
Stock based compensation expense		—		—			—		—			—			—		61			—			—			—			61			—			61
Reclassification of liability classified put options on 74,491 shares of series A preferred stock and 41,075 shares of common stock		74,491		1,967			—		—			41,075			—		1,574			—			—			—			3,541			—			3,541
Initial origination of a noncontrolling interest		—		—			—		—			—			—		—			—			—			—			—			241			241
Net loss		—		—			—		—			—			—		—			—			(2,572	)		—			(2,572	)		(19	)		(2,591	)
Adjustment for foreign currency translation		—		—			—		—			—			—		—			—			—			(2	)		(2	)		—			(2	)

BALANCE, December 30, 2013		2,853,809	$	60,156			26,551	$	741			1,921,337		$	19	$	1,579		$	(1,197	)	$	(27,373	)	$	—		$	33,925		$	222		$	34,147

See accompanying notes.

F-6

PAPA MURPHY’S HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands of dollars)


	FISCAL YEAR
	2013			2012			2011
OPERATING ACTIVITIES
Net loss	$	(2,591	)	$	(2,114	)	$	(606	)
Net loss attributable to noncontrolling interests		19			—			—

Net loss attributable to Papa Murphy’s		(2,572	)		(2,114	)		(606	)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		6,973			6,187			5,798
Loss on disposal or impairment of property and equipment		847			193			263
Loss on early retirement of debt		4,029			5,138			—
Bad debt expense		427			458			26
Non-cash employee equity compensation		846			1,115			1,184
Amortization of deferred finance charges		790			797			830
Change in operating assets and liabilities
Trade and other receivables		(483	)		128			42
Inventories		(39	)		(215	)		50
Prepaid expenses and other current assets		(5,006	)		(961	)		363
Unearned franchise and development fees		1			1,545			(82	)
Accounts payable		1,021			(162	)		432
Accrued expenses		(781	)		88			2,423
Other assets and liabilities		2,877			(1,884	)		992
Deferred taxes		944			(957	)		89

Net cash from operating activities		9,874			9,356			11,804

INVESTING ACTIVITIES
Acquisition of property and equipment		(3,037	)		(1,343	)		(2,193	)
Acquisition of stores, less cash acquired		(10,272	)		(4,762	)		(7,057	)
Proceeds from sales of property and equipment		29			180			34
Issuance of notes receivable		—			(40	)		(89	)
Payments received on notes receivable		31			61			590
Investment in cost-method investee		(2,000	)		—			—
Payment of post-closing holdback		—			—			(7,347	)

Net cash from investing activities		(15,249	)		(5,904	)		(16,062	)

FINANCING ACTIVITIES
Proceeds from issuance of long-term debt		167,000			124,200			—
Payments on long-term debt		(121,280	)		(87,647	)		(6,722	)
Advances on revolver		1,700			6,500			6,000
Payments on revolver		(5,700	)		(8,000	)		(1,650	)
Issuance of preferred stock		—			955			82
Issuance of common stock		57			109			136
Repurchases of common stock		(400	)		(117	)		(114	)
Redemptions of preferred stock		—			(44	)		(295	)
Payment of preferred dividends		(8,761	)		(13,056	)		—
Return of invested capital		(21,929	)		(22,106	)		—
Debt issuance and modification costs, including prepayment penalties		(4,315	)		(6,658	)		—
Investment by noncontrolling interest holders		241			—			—

Net cash from financing activities		6,613			(5,864	)		(2,563	)

Effect of exchange rate fluctuations on cash		39			1			3

Net change in cash and cash equivalents		1,277			(2,411	)		(6,818	)
CASH AND CASH EQUIVALENTS, beginning of year		2,428			4,839			11,657

CASH AND CASH EQUIVALENTS, end of year	$	3,705		$	2,428		$	4,839

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest	$	9,769		$	9,702		$	9,699

Cash paid during the year for income taxes	$	117		$	63		$	173

NONCASH SUPPLEMENTAL DISCLOSURES OF INVESTING AND FINANCING ACTIVITIES
Issuance of note receivable for preferred and common stock	$	309		$	340		$	548

Issuance of note payable for acquisition of stores	$	3,000		$	—		$	—

Acquisition of property and equipment in accounts payable	$	309		$	—		$	—

See accompanying notes.

F-7

PAPA MURPHY’S HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1—Description of Business and Basis of Presentation

Description of business —Papa Murphy’s Holdings, Inc. (“Papa Murphy’s” or the “Company”), together with its subsidiaries, is a franchisor and operator of a Take ‘N’ Bake pizza chain. The Company franchises the right to operate Take ‘N’ Bake pizza franchises and operates Take ‘N’ Bake pizza stores owned by the Company. As of December 30, 2013, the Company had 1,418 stores comprised of 1,396 domestic stores (1,327 franchised stores and 69 company-owned stores) across 38 states, plus 22 franchised stores in Canada and the United Arab Emirates.

Substantially all revenues are derived from retail sales of pizza and other food and beverage products to the general public by company-owned stores and the collection of franchise royalties and fees associated with franchise and development rights.

Basis of presentation —These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), which are contained in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”).

The Company has revised the presentation of segment information for prior periods to conform to the current year presentation. During 2013, the Company changed the methodology for allocating certain costs between segments. Such reclassifications had no impact on reported net income or equity.

In 2010, affiliates of Lee Equity Partners, LLC. (“Sponsor”) acquired all of the equity interests of PMI Holdings, Inc. (“Lee Equity Acquisition”). Papa Murphy’s Holdings, Inc. was established as a holding company for PMI Holdings, Inc. and its subsidiaries. This transaction was considered a business combination and was accounted for using the acquisition method of accounting. Assets and liabilities of the Company were recorded at their fair value and the purchase consideration in excess of the fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill.

Note 2—Summary of Significant Accounting Policies

Principles of consolidation —The consolidated financial statements includes the accounts of Papa Murphy’s Holdings, Inc. and its subsidiaries. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from shareholders’ equity. All significant intercompany transactions and balances have been eliminated.

Throughout the consolidated financial statements and these Notes, “Papa Murphy’s” and “the Company” refer to Papa Murphy’s Holdings, Inc. and its consolidated subsidiaries.

Fiscal year —The Company uses a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal years 2013, 2012 and 2011 were 52-week years. References to 2013, 2012 and 2011 are references to fiscal years ended December 30, 2013, December 31, 2012 and January 2, 2012, respectively.

Use of estimates —Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for doubtful accounts and notes receivable, goodwill and intangible assets and related impairment analysis, fair value of stock based compensation, deferred tax asset valuation allowance, and valuation of put options. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results may differ from those estimates.

Cash and cash equivalents —The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions that periodically exceed federally insured limits. The Company also holds limited funds, to

F-8

the extent necessary, on deposit outside the United States. The Company makes such deposits with entities it believes are of high credit quality and has not incurred any losses related to these balances. Management believes its credit risk to be minimal.

Accounts receivable —Accounts receivable consist primarily of (a) amounts due from franchise owners for continuing fees that are collected weekly, (b) receivables for supply chain vendor rebates, (c) subleased retail rents, and (d) other miscellaneous receivables. Accounts receivable are stated net of an allowance for doubtful accounts determined by management through an evaluation of specific accounts, considering historical losses and existing economic conditions where relevant. As of December 30, 2013 and December 31, 2012, the Company recorded an allowance for doubtful accounts of $37,000 and $61,000, respectively.

Notes receivable —Notes receivable consist primarily of amounts due from the sales of company-owned stores or specific equipment in training stores. Management reviews the notes receivable on a periodic basis and evaluates the creditworthiness and financial condition of the counterparty to determine the appropriate allowance, if any. In certain cases, the Company will choose to modify the terms of a note to help a store owner achieve certain profitability targets or to accommodate a store owner while they obtain third-party financing. If the store owner does not repay the note, the Company has the contractual right to take back ownership of the store or equipment based on the underlying franchise agreement, which therefore minimizes the credit risk to the Company.

Stock subscription receivables —On occasion, the Company issues preferred and common stock to certain employees for stock subscription receivables, which are not collateralized by the stock. The Company had $1,197,000 and $888,000 in outstanding equity subscription receivables as of December 30, 2013 and December 31, 2012, respectively, which have been classified as a reduction of equity.

Inventories —Inventories consist principally of food products and packaging supplies for use in company-owned stores. Inventories are valued at the lower of cost, determined under the first-in, first-out method, or net realizable value.

Property and equipment —Property and equipment are recorded at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the useful lives of the assets or the related lease term, including renewal options to the extent renewals are reasonably assured, not to exceed 10 years.

The estimated useful lives for property and equipment are:


PROPERTY AND EQUIPMENT		ESTIMATED USEFUL LIFE
Leasehold improvements		Shorter of lease term or estimated useful life, not to exceed 10 years
Restaurant equipment and fixtures		5 to 7 years
Office furniture and equipment		3 to 7 years
Vehicles		5 years

Deferred financing costs —Costs incurred to obtain long-term financing are accounted for as a deferred charge and amortized to interest expense over the terms of the respective debt agreements using the effective interest method.

Stock issuance costs —Costs of obtaining new capital by issuing common or preferred stock that is classified as permanent equity are considered a reduction of the related proceeds, which reduces the carrying value of the related equity capital. Until the close of stock issuance, costs are recorded as other current assets in the Company’s consolidated balance sheets.

Goodwill and other intangible assets —Goodwill arises from business combinations and represents the excess of the purchase consideration transferred over the fair value of the net assets acquired, including identifiable intangible assets and liabilities assumed. The majority of the Company’s goodwill was generated upon the Lee Equity Acquisition in May 2010, though the Company has also recognized goodwill upon the acquisition of stores from franchise owners. Goodwill is assigned to reporting units for purposes of impairment testing.

F-9

The Company considers its trade name and trademark intangible assets to be indefinite-lived intangible assets. These assets were initially recognized in May 2010 upon the Lee Equity Acquisition. The Company’s intangible assets that are not indefinite-lived include franchise relationships and reacquired franchise rights.

Goodwill and intangible assets determined to have an indefinite life are not amortized, but are tested for impairment annually, or more often if an event occurs or circumstances change that indicate an impairment might exist. Management evaluates indefinite-lived assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and tested for impairment together with long-lived assets.

In performing its annual goodwill impairment test, the Company early adopted the provision of Accounting Standards Update (“ASU”) No. 2011-08 for the fiscal year ended January 2, 2012. ASU No. 2011-08 enables the Company to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not, it performs the two-step quantitative goodwill impairment test. Under the two-step quantitative goodwill impairment test, the fair value of the reporting unit is compared to its respective carrying amount, including goodwill. If the fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the fair value, further analysis is performed to determine the amount of the impairment. Both the qualitative and quantitative assessments are completed separately with respect to the goodwill of each of the Company’s reporting units. The Company reviews goodwill for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist. The Company can bypass the qualitative assessment and move directly to the quantitative assessment for any reporting unit in any period and can elect to resume performing the qualitative assessment in any subsequent period. Management has concluded that none of its reporting units with a material amount of goodwill are at risk for failing step one of the quantitative assessment.

Most of the Company’s goodwill is attributed to and tested for impairment at the Domestic Franchise segment, which is considered one reporting unit, as the segment does not have any components of a business for which discrete financial information is available and is regularly reviewed by segment management.

In performing its annual impairment test for indefinite-lived intangible assets, ASU No. 2012-02 allows the Company the option to first assess qualitatively whether it is more likely than not that the indefinite-lived intangible asset is impaired, thus necessitating a quantitative impairment test. The Company does not calculate the fair value of an indefinite-lived asset and perform the quantitative test unless it determines that it is more likely than not that the asset is impaired. The Company reviews indefinite-lived intangible assets for impairment annually, as of the first day of its fourth fiscal quarter, or more frequently if indicators of impairment exist. The Company can bypass the qualitative assessment and move directly to the quantitative assessment for any indefinite-lived intangible asset in any period and can elect to resume performing the qualitative assessment in any subsequent period.

Impairment of long-lived assets —Long-lived assets are evaluated for recoverability of the carrying amount whenever events and circumstances indicate the carrying amount of an asset may not be fully recoverable. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to, significant under-performance relative to expected and/or historical results (such as two years of comparable store sales decrease or two years of negative operating cash flows), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property at amounts below the carrying value.

F-10

Assets held for sale —Assets are classified as held for sale when management with the appropriate authority commits to a plan to sell the assets, the assets are available for immediate sale, the assets are actively marketed at a reasonable price, the sale is probable within a year, and certain other criteria are met. Assets designated as held for sale are held at the lower of the net book value or fair value less costs to sell and reported separately on the balance sheet. Depreciation is not charged against property and equipment classified as assets held for sale.

Asset retirement obligations (ARO) —AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply with certain lease agreements. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Fair value is estimated based on a number of assumptions requiring management’s judgment, including store closing costs, cost inflation rates, and discount rates in effect at the time the lease is signed. Over time, the obligation is accreted to its projected future value and, upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statement of operations and comprehensive loss. As of December 30, 2013 and December 31, 2012, the Company recorded an ARO liability of $977,000 and $785,000, respectively, as a component of other long-term liabilities.

Derivative instruments and hedging activity —Interest rate movements create a degree of risk to the Company’s operations by affecting the amount of its interest payments and the value of its floating rate debt. On occasion, the Company uses derivative instruments to manage its exposure to interest rate changes. By using these instruments, the Company can be exposed to credit risk of the counterparty. The Company minimizes the credit risk by entering into transactions with high credit quality counterparties. The Company has not applied hedge accounting to its derivative instruments. All derivative instruments are measured at fair value. The Company held interest rate cap derivatives that expired in June 2013. Gains or losses resulting from changes in the fair value of the interest rate cap derivatives were recognized in current earnings as a component of interest expense. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

Revenue recognition —Revenues consist of sales from company-owned stores, franchise royalties, franchise and development fees, and lease income. Sales from company-owned stores are recognized as revenue when the products are provided to customers. The Company reports revenues net of sales taxes collected from customers and remitted to government taxing authorities. Royalty fees are based on a percentage of sales and are recorded as revenues as the fees are earned and become receivable from the franchise owner. Lease income is recognized in the period earned, which generally coincides with the period the expense is due to the master leaseholder, if a sublease.

Franchise fees are recognized as revenue when all material services or conditions relating to the store have been substantially performed or satisfied by the Company, which is typically when a new franchised store begins operations or on the commencement date of the successive franchise agreement. Development fees for the right to develop stores in specific geographic areas are recognized as revenue when all material services or conditions relating to the sale have been substantially performed, which is typically when the first franchised store begins operations in the development area. Development fees determined based on the number of stores to open in an area are deferred and recognized on a pro rata basis after individual franchise agreements are executed for the stores subject to the development agreements and the stores begin operations.

The Company commenced a system-wide gift card program in 2010 and recognizes revenue from gift cards when the gift card is redeemed by a customer. When the likelihood of a gift card being redeemed by a customer is determined to be remote (“gift card breakage”), the value of the unredeemed gift card is recognized by the Company as revenue. The Company determines the gift card breakage rate based upon Company-specific historical redemption patterns and has not recognized any breakage to date due to a lack of historical experience.

F-11

Advertising and marketing costs —The Company expenses media development costs when the advertisement is first aired. All other advertising costs, including contributions to other local and regional advertising programs are expensed when incurred. These costs are included in store operating costs or selling, general, and administrative expenses based on the nature of the advertising and marketing costs incurred.

Advertising costs of the Company-owned stores totaled $3,820,000, $2,711,000 and $1,514,000 for 2013, 2012 and 2011, respectively.

Franchise and company-owned stores in the United States contribute to an advertising fund that the Company manages on behalf of these stores. In addition, certain supply chain vendors contribute to the advertising fund. Under our franchise agreements and other agreements, the contributions received must be spent on marketing, creative efforts, media support, or other related purposes specified in the agreements and result in no profit recognized. The expenditures are primarily amounts paid to third parties, but may also include personnel expenses and allocated costs. In accordance with ASC Subtopic 952-605-25, contributions to the advertising fund are netted against the related expense. Advertising expense, net of contributions, totaled $766,000 for 2013 and zero for both 2012 and 2011, respectively. At each reporting date, to the extent that contributions exceed expenditures on a cumulative basis, the excess contributions to the advertising fund are accounted for as a deferred liability and are recorded in accrued expenses in the consolidated balance sheets. If expenditures exceed contributions on a cumulative basis, the excess is recorded as an expense within selling, general and administrative expenses. Previously recognized expenses may be recovered if subsequent contributions exceed expenditures.

Store pre-opening costs —Pre-opening costs, including wages, benefits and travel for the training and opening teams, cost of food and packaging, and other store operating costs, are expensed as incurred prior to a store opening for business.

Rent expense —Rent expense for the Company’s leases, which generally have escalating rental payments over the term of the lease, is recorded on a straight-line basis over the lease term. The lease term includes renewal options that are reasonably expected of being exercised and begins when the Company has control and possession of the leased property, which is typically before rental payments are due under the lease. The difference between the rent expense and rent paid is recorded as deferred rent as a component of accrued expenses. Tenant allowances are recorded in deferred rent and amortized as reductions of rent expense over the lease term. Rent expense is included in store occupancy costs or selling, general, and administrative expenses, based on the nature of the leased facility.

The Company accrues a loss provision for the lease termination costs when it closes a store before the end of the lease. The provision is estimated based on the net present value of the contractual, minimum rent obligations reduced by sublease rental income that could be reasonably obtained from the property using a credit-adjusted, risk-free interest rate at the time of closure. Certain other related costs are also included in the loss reserve. Management reviews these estimates at least annually and adjusts the accrual as necessary. The initial charge and any subsequent adjustment to the accrual are included in store occupancy costs.

Lease guarantees —On occasion, the Company becomes a guarantor for certain operating leases when it sells a store. The guarantee obligation is initially measured as the fair value of the guarantee, which is recorded as a liability. The Company recognizes its release from risk as a guarantor when the related lease contract is expired or such guarantee obligation is settled. In addition, throughout the guarantee period, the Company records a reserve when any contingent loss becomes probable in connection with such lease guarantee. As of December 30, 2013 and December 31, 2012, the Company’s reserve in connection with lease guarantees was not material.

Other comprehensive (loss) income —The Company maintains a subsidiary in Canada, which uses the local currency as its functional currency. Assets and liabilities are translated at exchange rates in effect at each balance sheet date. Equity accounts are translated at their historical rates. Income and expense accounts are translated using monthly average exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income.

Income taxes —The Company accounts for income taxes using the asset and liability approach. This requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences

F-12

between the financial statement and the tax basis of assets and liabilities at the applicable tax rates. A valuation allowance is recorded against deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The impact of uncertain tax positions would be recorded in the consolidated financial statements only after determining a more likely than not probability that the uncertain tax positions would withstand an examination by tax authorities based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As facts and circumstances change, management reassesses these probabilities and would record any changes in the financial statements as appropriate.

As of December 30, 2013 and December 31, 2012, the Company recognized no uncertain tax positions or any accrued interest and penalties associated with uncertain tax positions.

Share-based compensation —Under the 2010 Amended Management Incentive Plan, the Company sold restricted and unvested common stock to certain employees. Purchased restricted stock vests with the achievement of a time vesting or a performance vesting condition. Compensation expense relating to the restricted common stock with time vesting conditions is recognized as the portion of the grant date fair value that exceeds the purchase price and is ultimately expected to vest. This expense is recognized over the requisite service period, typically the vesting period, utilizing the straight-line attribution method. No compensation expense was recognized relating to the restricted common stock with performance vesting conditions as it was not yet probable for the Company to meet the performance vesting conditions. In addition, the Company has sold unrestricted common and preferred stock to certain employees and recognized as compensation expense the portion of the fair value that exceeds the purchase price on the issue date.

Business Combinations —The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . Under ASC Topic 805, assets acquired and liabilities assumed are recorded based upon their respective fair values. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The Company uses management estimates based on historically similar transactions to assist in establishing the acquisition date fair values of assets acquired, liabilities assumed, and contingent consideration granted, if any. These estimates and valuations require the Company to make significant assumptions, including projections of future events and operating performance.

Recent Accounting Pronouncements —In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income , which requires an entity to present either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The Company adopted ASU No. 2013-02 effective January 1, 2013. The adoption concerns presentation and disclosure only and did not have an impact on the Company’s consolidated financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists , which prescribes that an unrecognized tax benefit or a portion of an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar loss, or a tax credit carryforward, except in certain cases where the unrecognized tax benefit should be presented as a liability and should not be combined with deferred tax assets. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. This update should be applied prospectively to all unrecognized tax benefits that exist at the effective date, with retrospective application permitted. The Company does not believe that adoption of this update will have a material impact on the consolidated financial statements.

Note 3—Acquisitions

Acquisitions in 2013 —On December 23, 2013, the Company, through its newly formed non-wholly owned subsidiary, Project Pie Holdings, LLC (“PPH”), made a $2 million investment in Project Pie, LLC (“Project Pie”) in

F-13

the form of series A convertible preferred units (the “Preferred Units”). On a fully converted basis, the Company’s investment represents 25.8% of all issued and outstanding common units as of the purchase date. Project Pie is a fast casual custom-pizza restaurant chain with two stores located in San Diego and Las Vegas as of December 30, 2013.

The Company has determined that its investment in Project Pie is not a variable interest entity and the Company does not have control. The Company does not account for its investment in Project Pie as an equity method investment as the Company’s investment is in preferred units which contain subordination characteristics substantially different from the common units and were determined to not be in-substance common stock. The Company’s investment is classified as a cost method investment in other assets.

On December 16, 2013, the Company acquired all of the assets of four stores in Idaho from TBD Business Group and incurred transaction costs of $103,000 associated with the acquisition which were recognized as other store operating costs in the consolidated statement of operations and comprehensive loss. The total purchase price of the acquired stores was $7,047,000, which included a post-close holdback of $34,000 which will be settled in 2014. The acquisition was funded through cash, advances on the Company’s senior secured revolving credit facility, and a note payable to the seller for $3 million (see Note 11—Financing Arrangements). The transaction was accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	3
Inventories		31
Prepaid expenses and other current assets		13
Property and equipment		266
Reacquired franchise rights		3,625
Asset retirement obligation		(26	)

Total identifiable net assets acquired		3,912
Goodwill		3,135

Total consideration	$	7,047

Reacquired franchise rights have weighted average useful lives of 7.9 years. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquired customer bases and to a lesser extent economics of scale expected from combining the operations of the acquired entities with that of the Company.

Unaudited pro forma information —The unaudited pro forma consolidated revenues and net loss of the Company as though the acquisition date had been as of the beginning of 2011 are as follows (in thousands):


	2013			2012			2011
Pro forma revenues	$	84,523		$	71,129		$	56,000

Pro forma net loss	$	(2,669	)	$	(2,133	)	$	(720	)

The pro forma information presented in this note includes adjustments for amortization of acquired intangible assets, depreciation of acquired property and equipment, interest expense on borrowings used to fund the consideration paid and income tax expense. The pro forma information is presented for informational purposes and may not be indicative of the results that would have been obtained had the acquisitions actually occurred at the beginning of 2011, nor is it intended to be indicative of future operating performance.

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Revenues earned from the acquired stores of $168,000 and a net loss of $3,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2013.

On November 4, 2013, the Company acquired all the assets of four stores, three in Minnesota and one in Wisconsin, from KK Great Pizza, LLC and incurred transaction costs of $56,000 associated with the acquisition which were recognized as other store operating costs in the consolidated statement of operations and comprehensive loss. The total purchase price of the acquired stores was $2,450,000, which included a post-close holdback of $106,000 which will be settled in 2014. The acquisition was funded through cash and advances on the Company’s senior secured revolving credit facility and was accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	3
Inventories		23
Prepaid expenses and other current assets		20
Property and equipment		276
Reacquired franchise rights		547
Asset retirement obligation		(23	)

Total identifiable net assets acquired		846
Goodwill		1,604

Total consideration	$	2,450

Reacquired franchise rights have weighted average useful lives of 2.5 years. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquired customer bases and to a lesser extent economics of scale expected from combining the operations of the acquired entities with that of the Company.


	2013			2012			2011
Pro forma revenues	$	82,843		$	69,697		$	54,633

Pro forma net loss	$	(2,626	)	$	(2,173	)	$	(666	)

Revenues earned from the acquired stores of $473,000 and a net loss of $21,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2013.

The Company also acquired all of the assets of eleven stores through five individually immaterial acquisitions during 2013: four stores in Washington, four in Minnesota, two in Colorado, and one in Oregon. The Washington stores were acquired on January 9, 2013, the Minnesota stores were acquired on June 4, 2013, the Colorado stores were acquired on July 9, 2013 and October 14, 2013, and the Oregon store was acquired on March 26, 2013. The Company incurred transaction costs of $22,000 associated with the acquisitions that were recognized as other store operating costs in the consolidated statement of operations and comprehensive loss. The total purchase price of the

F-15

acquired stores was $3,933,000 which included a post-close holdback of $6,000. The acquisitions were funded through cash and advances on the Company’s senior secured revolving credit facility and were accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	6
Inventories		67
Prepaid expenses and other current assets		44
Property and equipment		804
Reacquired franchise rights		759
Asset retirement obligation		(6	)

Total identifiable net assets acquired		1,674
Goodwill		2,259

Total consideration	$	3,933

Reacquired franchise rights have weighted average useful lives of 2.7 years. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquired customer bases and to a lesser extent economics of scale expected from combining the operations of the acquired entities with that of the Company.


	2013			2012			2011
Pro forma revenues	$	82,499		$	72,962		$	57,916

Pro forma net loss	$	(2,510	)	$	(2,170	)	$	(642	)

Revenues earned from the acquired stores of $4,671,000 and a net loss of $186,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2013.

Acquisitions in 2012— On December 18, 2012, the Company acquired four stores in Idaho and incurred transaction costs of $16,000 associated with the acquisition which were recognized as other store operating costs in the consolidated statement of operations and comprehensive loss. The total purchase price of the acquired stores was $4,295,000, which included a post-close holdback of $90,000 paid during the quarter ended April 1, 2013. The acquisition was funded through cash and advances on the Company’s senior secured revolving credit facility and was accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

F-16

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	2
Inventories		34
Prepaid expenses and other current assets		9
Property and equipment		270
Reacquired franchise rights		678

Total identifiable net assets acquired		993
Goodwill		3,302

Total consideration	$	4,295

The reacquired franchise rights have weighted average useful lives of 1.8 years. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquired customer bases and to a lesser extent economics of scale expected from combining the operations of the acquired entities with that of the Company.


	2012			2011
Pro forma revenues	$	70,610		$	55,691

Pro forma net loss	$	(2,115	)	$	(614	)

Revenues earned from the acquired stores of $154,000 and a net loss of $1,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2012.

The Company acquired two additional stores in Colorado during 2012 and incurred transaction costs of $7,000 associated with the acquisitions which were recognized as other store operating costs in the consolidated statement of operations and comprehensive loss. One store was acquired on February 28, 2012 while the other was acquired on August 14, 2012. The total purchase price of the acquired stores was $439,000. The acquisitions were funded through cash and accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	1
Inventories		10
Prepaid expenses and other current assets		6
Property and equipment		182
Reacquired franchise rights		62

Total identifiable net assets acquired		261
Goodwill		178

Total consideration	$	439

The reacquired franchise rights have weighted average useful lives of 3.8 years. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquired customer bases and to a lesser extent economics of scale expected from combining the operations of the acquired entities with that of the Company.

F-17


	2012			2011
Pro forma revenues	$	67,330		$	52,887

Pro forma net loss	$	(2,100	)	$	(619	)

Revenues earned from the acquired stores of $667,000 and a net loss of $26,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2012.

Acquisitions in 2011— On December 19, 2011, the Company acquired 19 franchise stores and incurred transaction costs of $59,000 which were recognized as other store operating costs in the statement of operations and comprehensive loss. The total purchase price of the acquired assets was $7,188,000, which included a post-close holdback of $120,000 paid during the quarter ended April 2, 2012. The acquisitions were funded through cash and advances on the Company’s senior secured revolving credit facility and were accounted for using the acquisition method of accounting whereby operating results subsequent to the acquisition date are included in the consolidated financial statements.

The fair value of the assets acquired are summarized below (in thousands):


Cash and cash equivalents	$	11
Inventories		99
Prepaid expenses and other current assets		180
Property and equipment		1,731
Reacquired franchise rights		1,264

Total identifiable net assets acquired		3,285
Goodwill		3,903

Total consideration	$	7,188


	2011
Pro forma revenues	$	61,884

Pro forma net loss	$	(741	)

Revenues earned from the acquired stores of $470,000 and a net loss of $33,000 from the applicable date of the acquisition are included in the Company’s consolidated statement of operations and comprehensive loss for 2011.

F-18

Note 4—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):


	2013		2012
Prepaid media development costs	$	16	$	897
Prepaid rents and insurance		458		556
Other prepaid expenses		1,900		406

Subtotal prepaid expenses		2,374		1,859
POS software licenses		4,548		—
Other current assets		132		94

Subtotal other current assets		4,680		94

Total prepaid expenses and other current assets	$	7,054	$	1,953

Prepaid media development costs represent costs incurred for advertisements that have not aired.

Note 5—Property and Equipment

Property and equipment is comprised of the following (in thousands):


	2013			2012
Leasehold improvements	$	3,317		$	3,483
Restaurant equipment and fixtures		4,970			4,155
Office furniture and equipment		6,645			5,596
Vehicles		92			92
Construction in progress		1,116			45

		16,140			13,371
Accumulated depreciation and amortization		(6,480	)		(4,718	)

Property and equipment, net	$	9,660		$	8,653

Depreciation expense for 2013, 2012 and 2011 was $2,405,000, $2,271,000 and $2,293,000, respectively. The Company recognized an impairment loss of $565,000 related to certain underperforming company-owned stores for 2013. No impairment loss was recognized for 2012 or 2011.

Note 6—Disposals

In September 2013, the Company decided to sell nine Company-owned stores located in Wichita, Kansas. On November 11, 2013, the Company completed the sale and refranchise of the nine company-owned stores for $765,000, and recognized a gain of $3,000. In connection with the sale, the acquirer paid $135,000 in franchise fees. The Company received $125,000 in cash and a one-year note receivable for $775,000 in connection with this transaction. This disposition did not meet the criteria for accounting as a discontinued operation.

Current assets and liabilities of these stores were not material. The following is a summary of the assets sold as of November 11, 2013 (in thousands).


Leasehold improvements	$	338
Restaurant equipment and fixtures		184

Property and equipment		522
Goodwill		240

Total Assets Held for Sale	$	762

F-19

Note 7—Goodwill

The following summarizes changes to the Company’s goodwill, by reportable segment (in thousands):


	DOMESTIC COMPANY STORES			DOMESTIC FRANCHISE		TOTAL
Balance at January 2, 2012	$	4,306		$	81,546	$	85,852
Acquisitions		3,480			—		3,480

Balance at December 31, 2012		7,786			81,546		89,332
Acquisitions		6,997			—		6,997
Disposition		(240	)		—		(240	)

Balance at December 30, 2013	$	14,543		$	81,546	$	96,089

There is no goodwill associated with the International Segment. The Company did not recognize any impairment of goodwill for 2013, 2012 or 2011.

Note 8—Intangible Assets

Intangible assets as of December 30, 2013 consisted of the following (in thousands):


	DECEMBER 30, 2013							WEIGHTED AVERAGE AMORTIZATION PERIOD
	GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION			NET


Intangible assets subject to amortization:
Franchise relationships	$	56,000	$	(12,788	)	$	43,212		16.0
Reacquired franchise rights		7,027		(1,495	)		5,532		5.4

Net intangible assets subject to amortization	$	63,027	$	(14,283	)	$	48,744		14.8

Intangible assets not subject to amortization
Trade name and trademarks						$	87,002

Intangible assets as of December 31, 2012 consisted of the following (in thousands):


	DECEMBER 31, 2012							WEIGHTED AVERAGE AMORTIZATION PERIOD
	GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION			NET


Intangible assets subject to amortization:
Franchise relationships	$	56,000	$	(9,292	)	$	46,708		16.0
Reacquired franchise rights		2,099		(424	)		1,675		3.1

Net intangible assets subject to amortization	$	58,099	$	(9,716	)	$	48,383		15.5

Intangible assets not subject to amortization
Trade name and trademarks						$	87,002

Reacquired franchise rights were recorded as part of the Company’s acquisitions of franchised stores as discussed in Note 3—Acquisitions. Amortization expense for 2013, 2012 and 2011 was $4,568,000, $3,916,000 and $3,506,000, respectively

F-20

The estimated future amortization expense of amortizable intangible assets as of December 30, 2013, is as follows (in thousands):


Fiscal years	2014	$	5,026
	2015		4,573
	2016		4,178
	2017		4,030
	2018		3,987
	Thereafter		26,950

		$	48,744

The trade name and trademarks are intangible assets determined to have indefinite lives and are not subject to amortization.

Note 9—Notes Receivable

Notes receivable consists of the following (in thousands):


	2013			2012
Note issued on sale of company-owned restaurants maturing in 2020, bearing interest at 9.0%. Monthly payments of principal and interest of $6 are due through July 2014. Monthly payment amounts increase annually pursuant to an agreed schedule until they reach a monthly maximum of $9 in August 2018. Collateralized by restaurant assets.	$	443		$	471
Uncollateralized note issued to an employee, maturing from 2013 to 2017, bearing interest between 0.88% and 6.0%.		40			42

Total related party notes receivable		483			513

Notes issued to finance franchise owners’ purchase of point of sale systems, three year term, maturing during 2014 and bearing interest at 10.5%. Monthly payments of principal and interest due through maturity. Collateralized by point of sales systems.		23			60
Note issued on the sale of company-owned restaurants maturing during 2015, denominated in Canadian dollars, bearing interest at 4%. Monthly payment terms of interest only through 2015. Collateralized by restaurant assets.		825			868
Note issued on the sale of company-owned restaurants maturing during 2014, bearing interest at 8%. Monthly payment terms of interest only through 2014. Collateralized by restaurant assets.		775			—

Total notes receivable		2,106			1,441
Less allowance for doubtful notes receivable		(825	)		(434	)

Notes receivable, net of allowance for doubtful notes receivable		1,281			1,007
Less current portion		837			—

Notes receivable, net of current position	$	444		$	1,007

F-21

Note 10—2013 and 2012 Recapitalization

On October 25, 2013, the Company refinanced its existing long-term debt, consisting of a senior secured term loan and a revolving credit facility (collectively, the “2012 Credit Facilities”) (as discussed in Note 11—Financing Arrangements). The Company used a portion of the proceeds from its new credit facility and cash on hand to pay accreted dividends and provide a partial return of initial investment to its preferred stockholders. The refinancing also lowered the Company’s cost of capital through lower interest rates on its debt. This transaction is referred to as the “2013 Recapitalization.”

The following is a summary of the sources and uses of the 2013 Recapitalization (in thousands):


New senior secured credit facility	$	167,000

Repayment of existing debt, accrued interest and fees	$	122,483
Existing debt prepayment penalty		724
Transaction costs incurred on new debt		3,389
Payment of accreted dividends on preferred stock subject to put options		813
Payment of preferred dividend and return of invested capital		30,691
Cash available for acquisitions		8,900

Total uses	$	167,000

On June 11, 2012, the Company refinanced its existing long-term debt, consisting of a senior secured term loan, a revolving credit facility and subordinated note (collectively, the “2010 Credit Facilities”) (as discussed in Note 11—Financing Arrangements and Note 16—Shareholders’ Equity) and issued 25,287 shares of Series B Preferred Shares (see Note 16—Shareholders’ Equity) and 13,943 shares of common stock to the lender of its new second lien credit facility in return for cash of $1,000,000. The Company used a portion of the proceeds from its new credit facilities along with the proceeds from an equity issuance and cash on hand to pay accreted dividends and provide a partial return of initial investment to its preferred stockholders. The refinancing also lowered the Company’s cost of capital through lower interest rates on its debt. These transactions are referred to as the “2012 Recapitalization.”

The following is a summary of the sources and uses of the 2012 Recapitalization (in thousands):


New first and second lien credit facilities	$	124,200
Issuance of new preferred and common stock		1,000
Cash on hand		1,493

Total sources	$	126,693

Repayment of existing debt, accrued interest and fees	$	83,992
Existing debt prepayment penalty		1,769
Transaction costs incurred on new debt		4,828
Payment of accreted dividends on preferred stock subject to put options		942
Payment of preferred dividend and return of invested capital		35,162

Total uses	$	126,693

F-22

Note 11—Financing Arrangements

Long-term debt is comprised of the following (in thousands):


	2013			2012
Senior secured credit facility
Term loan	$	167,000		$	—
Revolving line of credit		—			—
First lien credit facility
Term loan		—			85,080
Revolving line of credit		—			4,000
Second lien credit facility		—			36,200
Notes payable		3,000			—

Total long-term debt		170,000			125,280
Less current portion		(1,670	)		(880	)

Total long-term debt, net of current portion	$	168,330		$	124,400

Maturities on long-term debt consist of the following (in thousands):


		SENIOR SECURED TERM LOAN		NOTES PAYABLE		TOTAL
Fiscal Years	2014	$	1,253	$	—	$	1,253
	2015		1,670		—		1,670
	2016		1,670		—		1,670
	2017		1,670		—		1,670
	2018		160,737		3,000		163,737

		$	167,000	$	3,000	$	170,000

Senior secured credit facility —On October 25, 2013, as part of the 2013 Recapitalization (see Note 10—2013 and 2012 Recapitalization), PMI Holdings Inc. entered into a new $177.0 million senior secured credit facility consisting of a $167.0 million senior secured term loan and a $10 million revolving credit facility, which includes a $2.5 million letter of credit subfacility. Closing and structuring fees of $3.3 million were incurred as a result of this transaction including a payment of $1.8 million to the Sponsor in connection with the advisory services and monitoring agreement (see Note 21—Related Party Transactions), which will be amortized over the duration of the new loan. The new senior secured term loan has a maturity of five years.

Borrowings under the senior secured credit facility bear interest at either (i) LIBOR (subject to a 1.00% floor) plus an applicable margin of 4.50% to 5.75%, or (ii) at the highest of the following rates plus an applicable margin of 3.00% to 4.75%: (a) the Wall Street Journal prime rate; (b) the federal funds rate plus 0.50%; or (c) the one-month LIBOR (subject to a 1.00% floor) plus 1.00%. The applicable margin in each case is determined based on a defined leverage ratio. The revolving line of credit under the facility includes a commitment fee of 0.50% per year on any unused portion of the facility. As of December 30, 2013, the senior secured credit facility bore interest under the LIBOR rate option at 5.75%.

The senior secured credit facility is collateralized by a first lien on substantially all of PMI Holdings, Inc.’s and certain of its existing and future direct and indirect wholly-owned domestic subsidiaries’ assets and contained customary affirmative and negative covenants that restricted specific activities to within certain limits, including payment of dividends to its parent company, acquisitions, and disposition of assets, and it required PMI Holdings, Inc. to maintain certain restrictive financial ratios and balances.

F-23

With a maturity date of over one year from December 31, 2013, balances outstanding under the first lien credit facility are classified as non-current on the consolidated balance sheets, except for mandatory, minimum term amortization loan payments of $417,500 due on the first day of each fiscal quarter commencing on April 1, 2014.

Notes payable —On December 16, 2013, a wholly-owned subsidiary of the Company issued a note payable for $3 million in connection with the acquisition of four stores in Idaho (see Note 3—Acquisitions). The note bears interest at 5% and monthly payments of interest only are required until the note matures in December 2018. This note is subordinated to the senior secured credit facility.

2012 first lien credit facility —In October 2013, the borrowings under the senior secured credit facility refinanced the first lien credit facility entered into in June 2012, which included a revolving credit facility for $10.0 million and a term loan for $88.0 million under substantially similar terms, except that the interest rate was at LIBOR (subject to a 1.25% floor) plus an applicable margin of 5.00% to 5.25%, or at other bank developed rates at the Company’s option. Minimum term amortization loan payments of $220,000 were due at the end of each fiscal quarter. This agreement was amended in March 2013 to provide interest rates at LIBOR (subject to a 1.00% floor) plus an applicable margin of 4.50% to 4.75% or at other bank developed rates at the Company’s option.

The borrowings under the June 2012 first lien credit facility refinanced the existing credit agreement entered into on May 5, 2010, which included a revolving credit facility for $7.0 million and a term loan for $73.6 million under substantially similar terms, except that the interest rate was at LIBOR (subject to a 2.00% floor) plus an applicable margin of 8.00%, or at other bank developed rates at the Company’s option.

2012 Second lien credit facility —Concurrent with entering into the first lien credit facility in June 2012, PMI Holdings, Inc. entered into a second lien credit facility providing for term loans in the amount of $36.2 million with a maturity date of June 10, 2018. Borrowings under the second lien credit facility bore interest at either (i) LIBOR (subject to a 1.25% floor) plus 9.25%, or (ii) at the highest of the following rates plus 8.25%: (a) the Wall Street Journal prime rate; (b) the federal funds rate plus 0.50%; or (c) the one-month LIBOR (subject to a 1.25% floor) plus 1.00%. This facility was refinanced as part of the senior secured credit facility entered into in October 2013.

The 2012 second lien credit facility was collateralized by a second lien on substantially all of PMI Holdings, Inc.’s and certain of its existing and future direct and indirect wholly-owned domestic subsidiaries’ assets and contained customary affirmative and negative covenants that restricted specific activities, including payment of dividends to its parent company, to within certain limits and requires PMI Holdings, Inc. to maintain certain restrictive financial ratios and balances. Payments on the second lien credit facility were interest only through maturity.

The borrowings under the 2012 second lien credit facility refinanced the existing subordinated note entered into on May 5, 2010 in the amount of $18.4 million, under substantially similar terms, except the interest rate was a fixed 13.00%.

Deferred financing costs and prepayment penalties —In conjunction with the 2013 Recapitalization, the Company evaluated the refinancing of the 2012 Credit Facilities and determined that $33.6 million was modified and $87.0 million was extinguished. Accordingly, a prepayment penalty of $0.7 million and unamortized debt fees of $2.9 million associated with the 2012 Credit Facilities were written-off as a loss on early retirement of debt. The Company incurred $3.3 million in financing costs of which $0.4 million was expensed as incurred and $2.9 million was capitalized and is being amortized using an effective interest rate method.

In conjunction with the 2012 Recapitalization (see Note 10), the Company evaluated the refinancing of the 2010 Credit Facilities and determined that the borrowing was extinguished and not modified. Accordingly, a prepayment penalty of $1.8 million and unamortized debt fees of $3.3 million associated with the 2010 Credit Facilities were written-off as a loss on early retirement of debt. The Company incurred $4.9 million in financing costs which was capitalized and amortized using an effective interest rate method.

F-24

Deferred financing costs amortized to interest expense in the consolidated statements of operations and comprehensive loss were $791,000, $797,000 and $830,000 for 2013, 2012 and 2011, respectively. Amortization of these charges in the future is expected to be as follows (in thousands):


Fiscal Years	2014	$	822
	2015		817
	2016		813
	2017		825
	2018		657

		$	3,934

Note 12—Derivatives

As required by the Company’s 2010 Credit Facilities, which were refinanced as part of the 2012 Recapitalization, the Company entered into two interest rate cap agreements fixing a portion of the variable rate interest component of the Company’s senior secured credit agreement. The Company recognized zero, $6,000 and $117,000 of expense related to these derivative instruments as part of a fair value adjustment for 2013, 2012 and 2011, respectively. This expense has been recorded as a component of interest expense on the consolidated statement of operations and comprehensive loss. The interest rate cap agreements had a notional amount of $40.0 million and expired on June 30, 2013. As of December 31, 2012, the fair value of the interest rate caps was zero. There were no changes to these cap agreements in connection with the 2012 Recapitalization.

Note 13—Fair Value Measurement

The Company determines the fair value of assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. GAAP defines a fair value hierarchy that prioritizes the assumptions used to measure fair value. The three levels of the fair value hierarchy are defined as follows:


n Level 1	—	Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
n Level 2	—	Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
n Level 3	—	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):


	BALANCE SHEET LOCATION	CARRYING VALUE		FAIR VALUE MEASUREMENTS
	BALANCE SHEET LOCATION	CARRYING VALUE		LEVEL 1		LEVEL 2		LEVEL 3
Preferred and common stock subject to put options*
December 30, 2013	Preferred and common stock subject to put options	$	—	$	—	$	—	$	—
December 31, 2012	Preferred and common stock subject to put options		3,570		—		—		3,570

See Note 17—“Share-based Compensation”

There were no transfers among levels within the fair value hierarchy during 2013, 2012 and 2011.

The Company recorded its interest rate cap at fair value in prepaid and other current assets on a recurring basis. The fair value amount was not material.

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The fair value of the preferred and common stock subject to put options was determined by adding the fair value of put options to the fair value of common and preferred stock (see Note 17—Share-based Compensation for the valuation method used for common and preferred stock). The fair value of put options was determined using an option pricing method in a Monte Carlo simulation framework where total equity value at the hypothetical exit event among various equity classes of the Company was simulated and the payoff at the exercise of the put options was calculated based on the exercise price of the put options and the share values in each simulated scenario. The payoff of the put options in all scenarios was averaged and a present value calculated for each valuation date.

A reconciliation from the opening to the closing balances of preferred and common stock subject to put options is as follows (in thousands):


Reclassification from shareholders equity upon issuance of put option on July 29, 2011	$	2,370
Expenses recognized in selling, general and administrative expenses		1,119

Balance as of January 2, 2012		3,489
Expenses recognized in selling, general and administrative expenses		1,023
Payment		(942	)

Balance as of December 31, 2012		3,570
Expenses recognized in selling, general and administrative expenses		784
Dividend paid on preferred shares		(813	)
Reclassification to shareholders equity upon cancellation of put option on December 30, 2013		(3,541	)

Balance as of December 30, 2013	$	—

Financial instruments not included in the table above consist of cash and cash equivalents, trade receivables, other receivables, notes receivable, accounts payable and long-term debt. The fair value of cash and cash equivalents, trade receivables, other receivables and accounts payable approximates carrying value because of the short-term nature of the accounts. The fair value of notes receivable was $1,287,000, $1,004,000, and $1,375,000 as of December 30, 2013, December 31, 2012, and January 2, 2012, respectively, and was based on Level 3 inputs. The fair value of the notes receivable was estimated primarily using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread. The fair value of long-term debt, including the current portion thereof, was $168,882,000, $127,397,000, and $92,560,000 as of December 30, 2013, December 31, 2012, and January 2, 2012, respectively, and was based on Level 3 inputs. In 2013, the fair value of the new long-term debt was estimated using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread. In 2012 and 2011, the fair value of the long-term debt was estimated primarily using an interest rate lattice model.

Note 14—Accrued and Other Liabilities

Accrued and other liabilities are comprised of the following (in thousands):


	2013		2012
Accrued payable for POS software licenses	$	2,729	$	—
Accrued compensation and related costs		2,232		3,013
Gift cards and certificates payable		2,829		2,399
Deferred system development costs		—		611
Accrued interest and non-income taxes payable		384		326
Convention fund		576		57
Other		991		355

	$	9,741	$	6,761

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Note 15—Income Taxes

The components of the provision for (benefit from) income taxes are as follows (in thousands):


	2013		2012			2011
Current tax provision (benefit)
Federal	$	9	$	(7	)	$	30
State		71		82			111

		80		75			141
Deferred tax provision (benefit)
Federal		299		(883	)		(336	)
State		645		(74	)		425

		944		(957	)		89

Total provision (benefit) for income taxes	$	1,024	$	(882	)	$	230

The current and noncurrent components of the net deferred tax assets (liabilities) were as follows (in thousands):


	2013			2012
Net current deferred income tax asset
Assets
Unearned franchise and development fees	$	741		$	658
Allowance for uncollectable notes receivable		326			161
Advertising, convention, and development fund balance		216			33
Compensation accruals		159			330
Gift certificate accruals		445			245
Other		143			20

Total current deferred tax assets		2,030			1,447

Liabilities
Other		(174	)		(545	)

Net current deferred income tax asset	$	1,856		$	902


	2013			2012
Net noncurrent deferred income tax liability
Assets
Asset retirement obligation	$	174		$	146
Deferred rent		152			132
Net operating loss		1,889			2,508

Total noncurrent deferred tax assets		2,215			2,786
Liabilities
Fixed asset, goodwill, and intangible asset basis differences		(42,369	)		(43,055	)
Other		(1,311	)		702

Net noncurrent deferred income tax liability	$	(41,465	)	$	(39,567	)

As of December 30, 2013, the Company had federal and state net operating loss carry forwards of $5,057,000 and $4,017,000, respectively. As of December 31, 2012, the Company had federal and state net operating loss carry forwards of $6,743,000 and $5,084,000, respectively. The federal and state net operating loss carry forwards begin to expire in 2030 and 2015, respectively. The company has federal and state credit carryovers of $49,000 and $11,000 that are a combination of credits that have no expiration date and credits that expire between 2026 and 2027.

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At December 30, 2013, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate. The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. As of December 30, 2013, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by federal and major states’ taxing jurisdictions are those for the fiscal years ended December 30, 2013, December 31, 2012, January 2, 2012, and January 3, 2011.

Tax benefits for federal and state net operating loss carry forwards are recorded as an asset to the extent that management assesses the utilization of such assets to be “more likely than not”; otherwise, a valuation allowance is required to be recorded. The Company has looked to future reversals of existing taxable temporary differences in determining that its federal and state net operating loss carry forwards are more likely than not to be utilized prior to their expiration dates. Consequently, no valuation allowance has been recorded for the deferred tax assets. The Company will continue to evaluate the need for a valuation allowance in the future. Changes in estimated future taxable income and other underlying factors may lead to adjustments to the valuation allowance in the future. The valuation allowance relief recorded in fiscal year 2011 relates exclusively to certain state net operating losses that were not subject to IRC §382 limitations.

A reconciliation of income tax at the United States federal statutory tax rate (using a statutory tax rate of 34%) to income tax expense for 2013, 2012 and 2011 in dollars is as follows (in thousands):


	2013			2012			2011
Federal income tax provision based on statutory rate	$	(534	)	$	(1,019	)	$	(128	)
State and local income tax effect		65			5			62
Impact of change in blended state rate		408			—			292
Non-deductible expenses		90			197			50
Tax shortfall created by put option cancelation		995			—			—
Valuation allowance		—			—			(31	)
Tax credits and other		—			(65	)		(15	)

Provision (benefit) for income taxes	$	1,024		$	(882	)	$	230

Note 16—Shareholders’ Equity

Preferred stock —The Company’s preferred stock consists of Series A Preferred Shares (the “Series A Preferred Shares”) and Series B Preferred Shares (the “Series B Preferred Shares,” and together with the Series A Preferred Shares, the “Preferred Shares”). The Preferred Shares have a cumulative preferred dividend of 6.00% per year based on an original liquidation value of $36.68 per share. Upon liquidation of the Company, the holders of the Preferred Shares are entitled to receive the unpaid liquidation value plus accreted dividends before any distribution may be made to the holders of common stock. In addition, the Preferred Shares participate in 20% of all remaining earnings if distributed to common stockholders. The unpaid liquidation value of the Series A and Series B Preferred Shares was $21.14 and $26.80 per share, respectively, as of December 30, 2013. In October 2013, the Company paid $31.5 million to existing shareholders of preferred stock as part of the 2013 Recapitalization (see Note 10 – 2013 and 2012 Recapitalization.

The holders of preferred and common stock are entitled to one vote per share solely voting together as a single class and are not entitled to vote separately as a class on any matter.

Note 17—Share-based Compensation

Restricted common shares —In May 2010, the Company’s Board of Directors approved the 2010 Amended Management Incentive Plan (the “Plan”), which, as amended, reserves 405,108 common shares for equity incentive awards consisting of incentive stock options, non-qualified stock options, restricted stock awards, and unrestricted stock awards. Under the Plan, the Company did not grant any options or awards, but only sold restricted common stock to eligible employees. The Company has issued 333,108, 347,108, and 330,108 shares of restricted common stock under the Plan to eligible employees as of December 30, 2013, December 31, 2012, and January 2, 2012, respectively.

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The restricted common stock is subject to either time or performance vesting conditions. Time vesting shares generally vest 20% on each of the five anniversaries of the sale date. Performance vesting shares vest when the Sponsor achieves certain target returns upon a qualified liquidity event. To the extent fair value exceeds the sale price, the excess was recognized as compensation expense as a component of selling, general, and administrative expenses over the requisite service period on a straight line basis for time vesting shares. As it is not yet deemed probable to meet the performance condition, no compensation expense has been recognized related to the performance vesting shares.

For shares sold under the Plan, the Company has a right to repurchase shares from employees who purchased shares in case of certain termination event of employees who purchased shares, qualifying sale, or bankruptcy event of the Company. Vested shares as of the date of these events are repurchased at the value determined by the board of directors of the Company. Unvested shares as of the date of these events, including a grantee’s resignation, are repurchased at the original sale price.

The number and weighted-average sale date fair value for the time and performance vesting shares for key activities are as follows:


	NUMBER OF SHARES OF RESTRICTED COMMON STOCK						WEIGHTED AVERAGE SALE DATE FAIR VALUE
	TIME VESTING			PERFORMANCE VESTING			WEIGHTED AVERAGE SALE DATE FAIR VALUE
Unvested, December 31, 2012		148,103			109,266		$	3.25
Sold/Granted		16,667			8,333			19.61
Vested		(46,235	)		—			2.26
Forfeited/Repurchased		(10,934	)		(12,999	)		1.04

Unvested, December 30, 2013		107,601			104,600		$	5.64

(*) Weighted average sale date fair value in 2012 and 2011 was $10.81 and $1.43 per share, respectively and total fair value of shares vested during 2013, 2012 and 2011 was $105,000, $37,000, and $37,000, respectively.

As of December 30, 2013, the total unrecognized stock-based compensation expense relating to shares of unvested time and performance vesting common stock was $436,000 and the remaining weighted average contractual life of unvested time-vesting shares of common stock was 2.0 years.

Unrestricted Preferred Shares and Unrestricted common stock— In June 2011, the Company sold 18,959 shares of Series A Preferred Shares and 10,438 shares of unrestricted common stock to an officer of the Company for an aggregate purchase price of $700,000, of which $548,000 was paid in the form of a stock subscription receivable and was recorded as a reduction of equity. The fair value per share of these Series A Preferred Shares and unrestricted common stock on the date of issuance was $31.26 and $1.27, respectively.

In September 2012, the Company sold 1,264 shares of Series B Preferred Shares and 697 shares of unrestricted common stock to an employee of the Company for an aggregate purchase price of $50,000. The fair value per share of these shares of Series B Preferred Shares and unrestricted common stock on the date of issuance was $26.54 and $7.64, respectively.

Compensation cost and valuation— Total compensation costs recognized in connection with the above-mentioned restricted common stock, unrestricted common stock and Preferred Shares for 2013, 2012 and 2011 were $61,000, $91,000 and $64,000, respectively. Income tax benefits recognized for 2013, 2012 and 2011 were $23,000, $39,000 and $42,000, respectively.

The valuation of the Company’s common stock and Preferred Shares was based on the principles of option-pricing theory. This approach is based on modeling the value of the various components of an entity’s capital structure as a series of call options on the proceeds expected from the sale of the entity or the liquidation of its assets at some future date. Specifically, each of the preferred and common equity is modeled as a call option on the aggregate

F-29

value of the Company with an exercise price equal to the liquidation preferences of the more senior securities. In estimating the fair value of the aggregate value of the Company, the Company considered both the income approach and the market approach.

The key inputs required to calculate the value of the common stock using the option-pricing model included the risk free rate, the volatility of the underlying assets, and the estimated time until a liquidation event. The Company applied a marketability discount to the value of common stock based on facts and circumstances at each valuation date.

During the reported periods, the Company assumed the following:


	2013	2012	2011
Risk free rate	0.10~0.50%	0.29~0.57%	0.45~1.28%
Volatility of the underlying assets	35~45%	30~40%	30~35%
Estimated time until a liquidation event	^(A)	2.5~3.3 years	3.5~4.0 years
Marketability discount—common stock	^(A)	30~35%	35%
Marketability discount—preferred stock	^(A)	15~20%	20%

^(A)

On July 1, 2013, the Company began to apply a probability weighted expected return method, where equity values were calculated using an option pricing model under an IPO and non-IPO scenarios and each value was weighted based on estimated probability of occurrence. During the period, 0.25~2.5 years were used as estimated time until a liquidation event and 13~30% and 8~15% of marketability discount were used for common and preferred stock, respectively, depending on an IPO or non-IPO scenarios. As of December 30, 2013, 80% weight was applied to an IPO scenario.

Preferred and common stock subject to put options— In July 2011, the Company entered into a share repurchase and put option agreement with an executive officer, pursuant to which the executive officer has the right and option to have the Company repurchase 74,491 shares of unrestricted preferred stock and 41,075 shares of unrestricted common stock, which the employee previously acquired at fair value, at a redemption value on December 31 of any given calendar year following December 31, 2011 (“Put Option”) after a certain condition is met. In December 2012, the Put Option became exercisable.

The redemption value is defined as the greatest of (i) the fair market value (which includes the amount of accrued dividends on the shares of preferred stock) determined by the board of directors of the Company, (ii) $2,750,000 plus accrued dividends on the shares of preferred stock, or (iii) only in the event that the executive officer no longer serves on the board of directors of the company, the value (which includes the amount of accrued dividends on the shares of preferred stock) determined in connection with the most recent valuation performed for the Company.

The Put Option was considered compensatory in nature as it was entered into in conjunction with an employment agreement modification. Because the Put Option was contained in the terms of the shares, it was determined to not be a freestanding instrument. The Put Option, with a minimum redemption value of $2,750,000 plus accrued dividends on the shares of preferred stock, allows the employee to avoid bearing the full risks and rewards that are normally associated with equity ownership. The combined shares and Put Option were evaluated in accordance with ASC Topic 718 and determined to be a liability-classified instrument on the date the Put Option was granted to the employee. Subsequent changes to the combined fair value of the shares and embedded Put Option are recorded as compensation expense.

The shares and embedded Put Option were recorded at the combined fair value of zero, $3,570,000, and $3,489,000 as of December 30, 2013, December 31, 2012 and January 2, 2012, respectively, as preferred and common stock subject to put options on the consolidated balance sheets. The Company recognized related stock-based compensation expenses of $785,000, $1,023,000 and $1,119,000 for 2013, 2012 and 2011, respectively. The Company records these expenses in selling, general and administrative expenses on the consolidated statements of operations and comprehensive loss.

In December 2013, the share repurchase and put option agreement was cancelled. The cancellation resulted in the award being modified from a liability classified award to an equity classified award under ASC Topic 718. The fair value of the shares and embedded Put Option at the time of cancellation was $3,541,000. The fair value of the award at the time of modification was reclassified from a liability to preferred stock and additional paid-in capital based on relative value.

F-30

Note 18—Earnings per Share (EPS)

The number of shares and earnings per share data (“EPS”) for all periods presented are based on the historical weighted-average shares of common stock outstanding. EPS is computed using the two-class method. The two-class method determines EPS for common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings. The Company’s cumulative preferred stockholders are entitled to participate in 20% of all remaining earnings or dividends if distributed to common stockholders. As such, the Company has calculated EPS using the two-class method.

EPS is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period, which includes restricted common stock. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The following table sets forth the computations of basic and dilutive earnings per share (in thousands, except per share data):


	2013			2012			2011
Earnings:
Net loss	$	(2,591	)	$	(2,114	)	$	(606	)
Less: Net loss from noncontrolling interests		(19	)		—			—

Net loss attributable to Papa Murphy’s		(2,572	)		(2,114	)		(606	)
Less: cumulative Series A and B Preferred dividends not subject to Put Option		(6,419	)		(6,448	)		(6,582	)

Net loss available to common stockholders	$	(8,991	)	$	(8,562	)	$	(7,188	)

Shares:
Weighted average common shares outstanding		1,700			1,663			1,607
Dilutive effect of restricted equity awards*		—			—			—

Diluted weighted average number of shares outstanding		1,700			1,663			1,607

Loss per share:
Basic loss per share	$	(5.29	)	$	(5.28	)	$	(4.52	)

Diluted loss per share	$	(5.29	)	$	(5.28	)	$	(4.52	)

Unvested restricted stock was not included in the computation of diluted earnings per share for 2013, 2012 and 2011 since the effect would have been anti-dilutive.

Note 19—Commitments and Contingencies

Commitment to purchase additional equity subscriptions —In connection with the acquisition of Project Pie, LLC (see note 3—Acquisitions), the Company has committed to fund, upon demand, up to an additional $2.5 million prior to December 2016 in increments of $500,000 through the purchase of additional Series A Preferred Units. The number of units to be purchased will be determined based upon the then-current pre-money valuation in accordance with the Unit Purchase Agreement.

Operating lease commitments —The Company leases facilities and various office equipment under non-cancelable operating leases which expire through March 2019. Lease terms for its store units are generally for five years with renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs.

The Company has entered into various operating leases that it has subleased to franchise owners. These operating leases have minimum base rent terms and contingent rent terms if individual franchise store sales exceed certain levels.

F-31

As of December 30, 2013, future minimum payments under the non-cancelable operating leases, excluding contingent rent obligations, are as follows (in thousands):


		TOTAL LEASE MINIMUM PAYMENTS		SUBLEASE INCOME		NET LEASE MINIMUM PAYMENTS
Fiscal years	2014	$	2,573	$	88	$	2,485
	2015		2,286		50		2,236
	2016		1,940		2		1,938
	2017		869		—		869
	2018		445		—		445
	Thereafter		187		—		187

		$	8,300	$	140	$	8,160

Rent expense for 2013, 2012 and 2011 was $3.1 million, $2.5 million and $1.6 million, respectively.

Lease guarantees —The Company is the guarantor for operating leases of six franchise owner store locations, including four locations that the Company is subleasing, that have terms expiring on various dates from March 2014 to September 2018. The obligation from these leases will generally continue to decrease over time as the leases expire. As of December 30, 2013, the Company does not believe it is probable it would be required to perform under the outstanding guarantees. The applicable franchise owners continue to have primary liability for these operating leases.

As of December 30, 2013, future commitments under these leases are as follows (in thousands):


Fiscal Years	2014	$	286
	2015		227
	2016		129
	2017		82
	2018		13

		$	737

Legal proceedings —The Company is subject to routine legal proceedings, claims, and litigation in the ordinary course of its business. Defending lawsuits requires significant management attention and financial resources and the outcome of any litigation is inherently uncertain. The Company does not, however, currently expect that the costs to resolve these routine matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Note 20—Retirement Plans

The Company has a defined contribution benefit plan, qualified under Section 401(k) of the Internal Revenue Code, covering all eligible employees. Plan participants may receive up to a 3.00% matching contribution up to the limits established by the plan and by the Internal Revenue Service and are vested based on years of service. The Company contributed $257,000, $289,000 and $257,000 to the plan for 2013, 2012 and 2011, respectively.

Note 21—Related Party Transactions

Advisory services and monitoring agreement —The Company is currently a party to an advisory services and monitoring agreement with the Sponsor. In accordance with the terms of the agreement, the Company pays the related party for ongoing advisory and monitoring services such as management consulting, financial analysis, and other related services. As compensation, the Company has agreed to pay an annual fee of $500,000 in four equal quarterly installments plus direct expenses incurred which are included in selling, general and administrative

F-32

expenses. The agreement calls for no minimum level of services to be provided and fees paid to the related party can be deferred at the discretion of the related party or if required by the credit facility. In October 2013, the Company made a payment of $1.8 million to the Sponsor for financial advice in connection with the 2013 Recapitalization discussed in Note 10 of which $1.4 million is included in deferred finance charges and $356,000 was expensed. In June 2012, the Company made a payment of $1.3 million to the Sponsor for financial advice in connection with the 2012 Recapitalization discussed in Note 10 which was included in deferred finance charges. In the event of an initial public offering or a change of control, the Company will be required to pay the Sponsor an amount not to exceed $1,500,000 based on the discounted value of the remaining payments to be paid according to the terms of the agreement. The agreement expires on December 31, 2020, automatically terminates immediately prior to an initial public offering or a change of control unless the Company and the Sponsor determine otherwise, and may be canceled by the Sponsor at any time.

Employee loans related to share purchases (see Note 17—Share-based Compensation)—In connection with share-based compensation, the Company has made several loans to certain officers and employees of the Company. Loans made in connection with the issuance of the Company’s Preferred Shares or common stock have been recognized in stock subscription receivables as a reduction of equity.

In March 2013, the Company made a loan of $54,000 to an employee of the Company. In June 2013, the Company made a loan of $59,000 to an employee of the Company. Both loans were made in connection with the purchase of the Company’s common stock and bear interest at the rate of 0.22% and mature on the earlier of 30 days prior to the effective date of any Form S-1 filed by the Company or March or May 2016, respectively. In October 2013, the Company made a loan of $196,000 to an officer of the Company. The loan was made in connection with the purchase of the Company’s common stock, bears interest at the rate of 0.22% and matures on the earlier of 35 months from the date of the note or upon seven days written notice from the Company.

In December 2012, the Company made an aggregate of $257,000 of 90-day loans to an officer and two employees of the Company in connection with the purchase of the Company’s common stock. The notes plus accrued interest were subsequently replaced in March 2013 with notes totaling $258,000, maturing on the earlier of 30 days prior to the effective date of any Form S-1 filed by the Company or November 2015. The notes bear interest at the rate of 0.22%.

In September 2012, the Company made two loans to an employee of the Company in connection with the purchase of the Company’s preferred and common stock totaling $82,000 which bear interest at the rate of 0.88% and mature on September 13, 2017.

The Company made a loan to an officer on June 6, 2011, for $548,000 bearing interest at an annual rate of 0.55% pursuant to a promissory note dated May 25, 2011 that matures in May 2014, which was subsequently amended on June 1, 2011 in connection with the purchase of the Company’s preferred and common stock. In June 2012, this note was replaced with a promissory note for the same terms and amount.

As of December 30, 2013, December 31, 2012, the Company had stock subscription receivables of $1.2 million, and $888,000, respectively.

Notes receivable (see Note 9—Notes Receivable)—On August 18, 2009, the Company obtained a note receivable from a third party in connection with the sale and refranchising of Company-owned stores. Subsequently, in March 2011 a member of the third party became an employee of the Company. The Company’s related party notes receivable related to this transaction had an outstanding balance of $443,000 and $471,000 as of December 30, 2013 and December 31, 2012, respectively. Based on repayment terms modified in September 2013, the note matures in 2020 and bears interest at 9.0% annually.

In November 2012, a loan of $40,000 was made to an employee of the Company under a promissory note permitting the employee to borrow $40,000 per year up to a maximum of $120,000. The note matures on the earlier of September 13, 2017 or November 18, 2017, respectively, or 30 days prior to the effective date of any Form S-1 filed by the Company. The note bears interest at the rate of 0.88%. As of December 30, 2013 and December 31, 2012, $40,000 was drawn against the full $120,000 available commitment.

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Note 22—Segment Information

The Company has the following reportable segments: (i) Domestic Company Stores; (ii) Domestic Franchise; and (iii) International. The Domestic Company Stores segment includes operations with respect to company-owned stores in the United States and derives its revenues from retail sales of pizza and side items to the general public. The Domestic Franchise segment includes operations with respect to franchise stores in the United States and derives its revenues from franchise and development fees and the collection of franchise royalties from the Company’s franchise owners located in the United States. The International segment includes operations related to the Company’s operations outside the United States and derives its revenues from franchise and development fees and the collection of franchise royalties located outside the United States.

The Company’s reportable segments are organized based on how the Chief Operating Decision Maker (“CODM”) reviews their separate financial information to assess performance and to allocate resources. The accounting policies of the reportable segments are the same as those described in Note 2—Summary of Significant Accounting Policies. The Company evaluates the profitability of its segments based on operating income.

The following table summarizes information on profit or loss and assets for each of our reportable segments (in thousands):


	2013			2012			2011
Revenues
Domestic Franchise	$	40,450		$	37,998		$	36,115
Domestic Company Stores		39,148			28,813			15,619
International		897			105			188
Other		—			—			—

Total	$	80,495		$	66,916		$	51,922

Segment Operating Income (Loss)
Domestic Franchise	$	20,540		$	17,503		$	15,899
Domestic Company Stores		(408	)		(344	)		(1,183	)
International		(24	)		(611	)		(179	)
Other		(7,173	)		(3,790	)		(4,645	)

Total	$	12,935		$	12,758		$	9,892

Depreciation and amortization
Domestic Franchise	$	4,753		$	4,745		$	5,165
Domestic Company Stores		2,193			1,408			601
International		27			34			32
Other		—			—			—

Total	$	6,973		$	6,187		$	5,798

Interest expense
Domestic Franchise	$	—		$	—		$	1
Domestic Company Stores		1,555			792			38
International		—			—			—
Other		10,517			10,462			10,409

Total	$	12,072		$	11,254		$	10,448
Elimination of intersegment interest expense		(1,549	)		(792	)		(38	)

Total Consolidated	$	10,523		$	10,462		$	10,410

Interest income
Domestic Franchise	$	(9	)	$	(56	)	$	(69	)
Domestic Company Stores		(50	)		—			—
International		(35	)		(38	)		(114	)
Other		(1,549	)		(792	)		(38	)

Total	$	(1,643	)	$	(886	)	$	(221	)
Elimination of intersegment interest income		1,549			792			38

Total Consolidated	$	(94	)	$	(94	)	$	(183	)

F-34


	2013			2012			2011
Provision (benefit) for income taxes
Domestic Franchise	$			$	—		$	—
Domestic Company Stores		—			—			—
International		9			—			—
Other		1,015			(882	)		230

Total	$	1,024		$	(882	)	$	230

Total assets
Domestic Franchise	$	139,471		$	161,146
Domestic Company Stores		29,489			16,370
International		515			984
Other (*)		119,375			104,817

Total	$	288,850		$	283,317
Elimination of intersegment assets:
Intercompany note		(21,690	)		(11,500	)
Intercompany receivables		(2,658	)		(25,200	)

Total Consolidated	$	264,502		$	246,617

(*)

Other assets which are not allocated to the individual segments primarily include trade names & trademarks, unamortized deferred financing charges, and an intercompany note.

All long-lived assets are held within the United States. The following table summarizes revenues by geographic area (in thousands):


	2013		2012		2011
Revenues
United States	$	79,598	$	66,811	$	51,734
International		897		105		188

Total	$	80,495	$	66,916	$	51,922

Note 23—Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company’s financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued.

In March 2014, the Company entered into agreements with certain executive officers to repurchase an aggregate of 48,516 shares of common stock at a price of $26.80 per share, for a total purchase price of $1.3 million. Included among the repurchased shares were 14,014 shares of common stock for which vesting terms were accelerated in connection with the repurchase. The Company received a payment of $1.0 million from the same executive officers to repay their outstanding stock subscription receivables. Concurrent with the share repurchase, the Company entered into agreements with the same executive officers to issue 48,516 stock options to purchase shares at an exercise price of $26.80 per share, including 34,502 fully vested options and 14,014 options subject to time-based or performance-based vesting provisions. In connection with the acceleration of vesting and the issuance of the fully vested options, the Company will record stock-based compensation expense for the quarter ending March 31, 2014.

F-35

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Papa Murphy’s Holdings, Inc.

Parent Company Information

Condensed Statements of Operations and Comprehensive Loss

(In thousands of dollars)


	FISCAL YEAR
	2013			2012			2011
Equity in losses of subsidiaries	$	(1,159	)	$	(2,831	)	$	(341	)
Selling, general, and administrative expense		343			66			—

OPERATING LOSS		(1,502	)		(2,897	)		(341	)
Other expense		56			105			35

LOSS BEFORE INCOME TAXES		(1,558	)		(3,002	)		(376	)
Provision (benefit) for income taxes		1,014			(888	)		230

NET LOSS		(2,572	)		(2,114	)		(606	)
OTHER COMPREHENSIVE INCOME (LOSS)		(2	)		4			(27	)

TOTAL COMPREHENSIVE LOSS	$	(2,574	)	$	(2,110	)	$	(633	)

F-36

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Papa Murphy’s Holdings, Inc.

Parent Company Information

Condensed Balance Sheets

(In thousands of dollars, except par value and share data)


	DECEMBER 30, 2013			DECEMBER 31, 2012
ASSETS

CURRENT ASSETS
Prepaid expenses and other current assets	$	1,668		$	94
Due from consolidated affiliates		826			2,776
Current deferred tax asset		1,856			902

Total current assets		4,350			3,772
Investment in affiliates		71,034			103,305

Total assets	$	75,384		$	107,077

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Other current liabilities	$	14		$	10

Total current liabilities		14			10
Preferred and common stock subject to put options (0 and 74,491 Series A preferred shares outstanding, respectively, and 0 and 41,075 common shares outstanding, respectively)		—			3,570
Deferred tax liability		41,465			39,567

Total liabilities	$	41,479		$	43,147

Commitments and contingencies

SHAREHOLDERS’ EQUITY
Series A preferred stock ($0.01 par value; 3,000,000 shares authorized; 2,853,809 and 2,779,318 shares issued and outstanding, respectively (aggregate liquidation preference $61,476 and $86,014, respectively))		60,156			79,856
Series B preferred stock ($0.01 par value; 1,000,000 shares authorized, 26,551 and 26,551 shares issued and outstanding, respectively (aggregate liquidation preference $722 and $1,006, respectively))		741			1,003
Common stock ($0.01 par value; 3,000,000 shares authorized; 1,921,337 and 1,894,262 shares issued and outstanding, respectively)		19			19
Additional paid-in capital		1,579			420
Stock subscription receivable		(1,197	)		(888	)
Accumulated other comprehensive income		—			2
Accumulated deficit		(27,393	)		(16,482	)

Total shareholders’ equity		33,905			63,930

Total liabilities and shareholders’ equity	$	75,384		$	107,077

F-37

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Papa Murphy’s Holdings, Inc.

Parent Company Information

Condensed Statements of Cash Flows

(In thousands of dollars)


	FISCAL YEAR
	2013			2012			2011
NET CASH FLOWS FROM OPERATING ACTIVITIES	$	(56	)	$	(2,253	)	$	(30	)

INVESTING ACTIVITIES
Investment in subsidiary		(57	)		(1,064	)		(218	)
(Deemed) dividend from subsidiary		31,148			37,572			466

Net cash from investing activities		31,091			36,508			248

FINANCING ACTIVITIES
Issuance of preferred stock		—			955			82
Issuance of common stock		57			109			136
Redemptions of common stock		(400	)		(117	)		(114	)
Redemptions of preferred stock		—			(44	)		(295	)
Payment of preferred dividends		(8,761	)		(13,056	)		—
Return of invested capital		(21,929	)		(22,106	)		—

Net cash from financing activities		(31,033	)		(34,259	)		(191	)

Effect of exchange rate fluctuations on cash		(2	)		4			(27	)
Net increase (decrease) in cash		—			—			—
CASH AND CASH EQUIVALENTS, beginning of period		—			—			—

CASH AND CASH EQUIVALENTS, end of period	$	—		$	—		$	—

F-38

Papa Murphy Holdings, Inc.

Parent Company Information

Notes to Condensed Financial Information

Note 1—Basis of Presentation

Papa Murphy’s Holdings, Inc. (the Parent Company) is a holding company with no material operations of its own that conducts substantially all of its activities through its subsidiaries.

These condensed financial statements have been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s investments in subsidiaries are presented under the equity method of accounting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. As such, these parent-only statements should be read in conjunction with the notes to the consolidated financial statements Papa Murphy’s Holdings, Inc. and subsidiaries included elsewhere herein.

Note 2—Dividends

A cash dividend of $30.3 million, $35.2 million, and zero was declared and paid to the Series A Preferred holders of the Parent Company during 2013, 2012 and 2011, respectively. A cash dividend of $345,000, zero, and zero was declared and paid to the Series B Preferred holders of the Parent Company during 2013, 2012 and 2011, respectively. In order to fund the dividends, dividends were paid to the Parent Company from its subsidiaries. See Note 11—Financing Arrangements of the Company’s consolidated financial statements for a discussion of the dividend restriction under the debt covenants.

F-39

Schedule II—Valuation and Qualifying Accounts

Papa Murphy’s Holdings, Inc. and Subsidiaries


	BALANCE AT BEGINNING OF PERIOD		PROVISION (BENEFIT)		ADDITIONS (DEDUCTIONS)*			CURRENCY TRANSLATION ADJUSTMENTS			BALANCE AT END OF PERIOD
Fiscal year 2013
Allowance for trade and other receivables	$	61	$	—	$	(24	)	$	—		$	37
Allowance for notes receivable		434		427		—			(36	)		825

Total	$	495	$	427	$	(24	)	$	(36	)	$	862

Fiscal year 2012
Allowance for trade and other receivables	$	35	$	24	$	2		$	—		$	61
Allowance for notes receivable		326		434		(326	)		—			434

Total	$	361	$	458	$	(324	)	$	—		$	495

Fiscal year 2011
Allowance for trade and other receivables	$	38	$	26	$	(29	)	$	—		$	35
Allowance for notes receivable		326		—		—			—			326

Total	$	364	$	26	$	(29	)	$	—		$	361

represents write-offs and recoveries of bad debt

F-40

REPORT OF INDEPENDENT AUDITORS

To the Stockholders

TBD Business Group

Report on Financial Statements

We have audited the accompanying combined financial statements of TBD Business Group, which comprise the combined balance sheet as of December 31, 2012 and January 2, 2012, and the related combined statements of income, business equity, and cash flows for the fiscal years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of TBD Business Group as of December 31, 2012 and January 2, 2012, and the results of its operations and its cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Moss Adams LLP

Portland, Oregon

November 22, 2013

F-41

TBD BUSINESS GROUP

Combined Balance Sheets

As of December 31, 2012 and January 2, 2012


	DECEMBER 31, 2012		JANUARY 2, 2012
Assets
Current assets:
Cash	$	2,325	$	2,325
Inventories		29,830		34,176
Prepaid rent		8,224		11,328

Total current assets		40,379		47,829
Property and equipment, net		257,548		251,604
Intangible assets, net of accumulated amortization of $285,203 and $216,620		466,196		510,779

Total assets	$	764,123	$	810,212

Liabilities and Business Equity
Current liabilities:
Accounts payable	$	15,580	$	25,456
Accrued expenses		26,877		25,372
Current maturities of long-term debt		77,575		74,242

Total current liabilities		120,032		125,070
Asset retirement obligations		37,659		34,878
Deferred lease incentives		32,100		26,400
Long-term debt		172,847		250,422

Total liabilities		362,638		436,770
Business equity		401,485		373,442

Total liabilities and business equity	$	764,123	$	810,212

See accompanying notes

F-42

TBD BUSINESS GROUP

Combined Statements of Income

For the Fiscal Years Ended December 31, 2012 and January 2, 2012


	FISCAL YEAR ENDED DECEMBER 31, 2012		FISCAL YEAR ENDED JANUARY 2, 2012
Restaurant sales, net	$	4,434,688	$	4,292,904

Costs and expenses
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of food and packaging		1,664,754		1,681,556
Compensation and benefits		872,613		890,474
Franchise royalties		221,738		214,615
Advertising		324,029		290,668
Occupancy		217,260		209,374
Other restaurant operating expenses		125,787		145,960

Total restaurant operating costs		3,426,181		3,432,647
General and administrative costs		74,044		78,054
Depreciation and amortization		108,521		95,505

Total costs and expenses		3,608,746		3,606,206

Operating income		825,942		686,698
Interest expense		12,689		16,445

Net income	$	813,253	$	670,253

See accompanying notes

F-43

TBD BUSINESS GROUP

Combined Statements of Business Equity

For the Fiscal Years Ended December 31, 2012 and January 2, 2012


	FISCAL YEAR ENDED DECEMBER 31, 2012			FISCAL YEAR ENDED JANUARY 2, 2012
Business equity, beginning of year	$	373,442		$	313,894
Net income		813,253			670,253
Net transfers to TBD, Inc.		(785,210	)		(610,705	)

Business equity, end of year	$	401,485		$	373,442

See accompanying notes

F-44

TBD BUSINESS GROUP

Combined Statements of Cash Flows

For the Fiscal Years Ended December 31, 2012 and January 2, 2012


	FISCAL YEAR ENDED DECEMBER 31, 2012			FISCAL YEAR ENDED JANUARY 2, 2012
Cash flows from operating activities:
Net income	$	813,253		$	670,253
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		108,521			95,505
Accretion expense of asset retirement obligations		2,780			2,577
Changes in current assets and liabilities:
Inventories		4,346			(4,143	)
Prepaid rent		3,104			881
Accounts payable and accrued expenses		(2,671	)		44,962

Net cash from operating activities		929,333			810,035

Cash flows from investing activities:
Purchase of property and equipment		(45,881	)		(137,654	)
Franchise fee renewals		(24,000	)		—

Net cash from investing activities		(69,881	)		(137,654	)

Cash flows from financing activities:
Payments on long-term debt		(74,242	)		(61,676	)
Net transfers to TBD, Inc		(785,210	)		(610,705	)

Net cash from financing activities		(859,452	)		(672,381	)

Net change in cash		—			—
Cash, beginning of year		2,325			2,325

Cash, end of year	$	2,325		$	2,325

See accompanying notes

F-45

TBD BUSINESS GROUP

Notes to Combined Financial Statements

1. Background and Basis of Presentation

Background

TBD, Inc. (“Parent”), which is wholly owned by two stockholders, operates seven Papa Murphy’s Take ‘N’ Bake pizza stores under a franchise agreement with Papa Murphy’s International LLC. In September 2013, the Parent entered into a Letter of Intent to sell four of its seven pizza stores in Boise, Idaho, to Papa Murphy’s Company Stores, Inc., which owns Papa Murphy’s International LLC. TBD Business Group (“the Company”) is comprised of the four pizza stores to be sold.

Basis of Presentation

The combined financial statements of the Company have been derived from TBD, Inc.’s financial statements and accounting records using the historical results of operations, financial position and cash flows attributable to the four stores. The combined financial statements include allocations of certain corporate expenses incurred for support functions that are provided on a centralized basis within the Parent and not recorded at the store level, such as expenses related to finance, management, human resources, transportation and other administrative expenses. The costs of such services have been allocated to the Company primarily based on relative percentage of revenue. Management believes such allocations are reasonable. Nevertheless, the combined financial statements may not be indicative of the Company’s future performance and may not reflect what the combined results of operations, financial position and cash flows would have been had the Company operated as a stand-alone company during the periods presented. To the extent that an asset, liability, revenue or expense is directly associated with the Company, it is reflected in the accompanying combined financial statements.

Cash is managed centrally and working capital requirements are met from cash generated from each store. Accordingly, the cash and cash equivalents held by Parent at the corporate level were not attributed to the Company for any of the periods presented. The Company reflects transfers of cash to and from Parent’s main cash account as a component of Business Equity.

2. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the accompanying combined financial statements:

Principles of Combination

The combined financial statements include the assets, liabilities and operations of the Company’s business that will be sold to Papa Murphy’s Company Stores, Inc. as well as certain allocations discussed above. Any significant intercompany transactions and balances between and among the four stores have been eliminated in combination.

Fiscal year

To match its operating cycle, the Company uses a 52 or 53 week fiscal year, ending on the Monday nearest to December 31. Fiscal years 2012 and 2011 were 52 week years.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. Actual results may differ from those estimates.

Cash

Cash includes amounts used in the day to day operations of the business and deposits held on account with FDIC insured financial institutions.

Inventories

Inventories consist primarily of food and packaging supplies used in the restaurant and are stated at the lower of first-in, first-out (FIFO) cost or market.

F-46

Property and Equipment

Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the useful lives of the assets or the related lease term, including renewal options to the extent renewals are reasonably assured. Maintenance and repairs are charged to expense as incurred; expenditures for additions, improvements and replacements are capitalized. Upon disposal of property and equipment subject to depreciation, the accounts are relieved of the related costs and accumulated depreciation and resulting gains and losses are reflected in the statement of income.

The Company recognized no impairment of property and equipment assets for the fiscal years ended December 31, 2012 and January 2, 2012.

Intangible Assets

The Company’s intangible assets consist of franchise rights from Papa Murphy’s International LLC. Franchise rights and the renewal of franchise rights, are amortized on a straight-line basis over the related franchise agreement term, which ranges from 5 to 10 years.

The Company recognized no impairment of intangible assets for the fiscal years ended December 31, 2012 and January 2, 2012.

Amortization expense for the fiscal years ended December 31, 2012 and January 2, 2012 were $68,584 and $67,408, respectively. The estimated future amortization expense of amortizable intangible assets as of December 31, 2012 is as follows:


Fiscal years 2013	$	69,990
2014		69,990
2015		69,269
2016		68,990
2017		68,990
Thereafter		118,967

	$	466,196

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and intangible assets with finite useful lives, are evaluated for recoverability of the carrying amount whenever events and circumstances indicate the carrying amount of an asset may not be fully recoverable. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to, significant under-performance relative to expected and/or historical results (such as two years of comparable restaurant sales decrease or two years of negative operating cash flows), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property at amounts below the carrying value.

Assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets, which is typically an individual restaurant. If the carrying amount of an asset group exceeds the estimated, undiscounted future cash flows expected to be generated by the asset, then an impairment charge is recognized to the extent the carrying amount exceeds the asset’s fair value. In determining fair value, management considers current results, trends, future prospects, and other economic factors.

Revenue Recognition

Retail sales from restaurants are recognized as revenue when the product is purchased by the customer.

Income Taxes

F-47

and losses will be included in the stockholders’ personal income tax returns and will be taxed based upon personal income tax rates.

The Company applies applicable authoritative accounting guidance related to the accounting for uncertain tax positions. The impact of uncertain tax positions would be recorded in the Company’s combined financial statements only after determining a more likely than not probability that the uncertain tax positions would withstand challenge, if any, from taxing authorities. As of December 31, 2012 and 2011, the Company had no uncertain tax positions. Generally, the Company is subject to examination by income tax authorities for three years from the filing of a tax return.

Asset Retirement Obligations (ARO)

AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Fair value is estimated based on a number of assumptions requiring management’s judgment, including restaurant closing costs, cost inflation rates, and discount rates in effect at the time the lease is signed. Over time the obligation is accreted to its projected future value and upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the combined statement of income. The Company has recorded an ARO liability of $37,659 and $34,878 as of December 31, 2012 and January 2, 2012, respectively.

Advertising Costs

The Company expenses advertising costs when incurred. For the fiscal years ended December 31, 2012 and January 2, 2012 advertising costs were $324,029 and $290,668, respectively.

3. Property and Equipment

Property and equipment are comprised of the following:


	DECEMBER 31, 2012		JANUARY 2, 2012
Leasehold improvements	$	280,175	$	267,108
Restaurant equipment and fixtures		472,678		439,863

		752,853		706,971
Less accumulated depreciation		495,305		455,367

	$	257,548	$	251,604

Depreciation expense was $39,937 and $28,097 for the fiscal years ended December 31, 2012 and January 2, 2012, respectively.

4. Accrued Expenses

Accrued expenses are comprised of the following:


	DECEMBER 31, 2012		JANUARY 2, 2012
Sales taxes and other	$	20,577	$	22,072
Current portion of deferred lease incentive		6,300		3,300

	$	26,877	$	25,372

F-48

5. Long-Term Debt

The Parent’s long-term debt was incurred to purchase three stores in 2009, one of which is part of the Company. The Parent’s debt and related interest is allocated to the Company based on the relative purchase price of the Company’s one store compared to the Parent’s total purchase price of all three stores. The debt bears interest at 4.29% and matures in 2014. Assets of the Parent, including assets of the Company’s four stores, are pledged as collateral to the debt. Future maturities of principal allocated to the Company are 2013: $77,575; 2014: $172,847.

6. Commitments and Contingencies

As of December 31, 2012, the Company leased four store locations under operating leases that expire between 2014 and 2021. Future minimum payments under these non-cancelable leases are as follows:


2013	$	140,918
2014		102,967
2015		100,530
2016		104,700
2017		61,771
Thereafter		82,094

	$	592,980

Rent expense totaled $162,549 and $162,461 for the fiscal years ended December 31, 2012 and January 2, 2012, respectively.

7. Related Party Transactions

The Parent provides certain corporate support functions such as finance, management, human resources, transportation and other administrative expenses and related corporate overhead costs were allocated to the Company, primarily based on relative percentage of revenue. Such that operating and corporate overhead costs allocated to the Company were $141,698 and $139,426 for the fiscal years ended December 31, 2012 and January 2, 2012, respectively.

As the Parent manages cash centrally, the Company transfers cash generated from each store to the Parent on a periodic basis. Amount of net cash transferred to the Parent was $785,210 and $610,705 for the fiscal years ended December 31, 2012 and January 2, 2012, respectively.

8. Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. The Company recognizes in the combined financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the combined balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company’s combined financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before combined financial statements are issued.

The Company has evaluated subsequent events through November 22, 2013, which is the date the combined financial statements were available to be issued.

On November 4, 2013, the Parent entered into a Purchase and Sale Agreement to sell the Company, consisting of the four stores in Boise, Idaho, to Papa Murphy’s Company Stores, Inc., the parent entity of Papa Murphy’s International LLC, the Franchisor for $7,000,000 plus working capital. The Company expects to close on the sale in December 2013.

F-49

TBD BUSINESS GROUP

Combined Balance Sheets (Unaudited)

As of September 30, 2013 and December 31, 2012


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
ASSETS
Current assets:
Cash	$	2,325	$	2,325
Inventories		36,140		29,830
Prepaid rent		8,224		8,224

Total current assets		46,689		40,379
Property and equipment, net		243,905		257,548
Intangible assets, net of accumulated amortization of $337,685 and $285,203		413,715		466,196

TOTAL ASSETS	$	704,309	$	764,123

LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable	$	14,281	$	15,580
Accrued expenses		38,149		26,877
Current maturites of long-term debt		192,562		77,575

Total current liabilities		244,992		120,032

Asset retirement obligations		39,884		37,659
Deferred lease incentives		26,550		32,100
Long-term debt				172,847

Total liabilities		311,426		362,638
Business equity		392,883		401,485

TOTAL LIABILITIES AND BUSINESS EQUITY	$	704,309	$	764,123

See accompanying notes

F-50

TBD BUSINESS GROUP

Combined Statements of Income (Unaudited)

For the 39 weeks Ended September 30, 2013 and October 1, 2012


	39 WEEKS ENDED SEPTEMBER 30, 2013		39 WEEKS ENDED OCTOBER 1, 2012
Restaurant sales, net	$	3,263,287	$	3,261,200

Costs and expenses
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of food and packaging		1,237,208		1,200,598
Compensation and benefits		661,125		648,781
Franchise royalties		163,463		163,064
Advertising		253,381		231,793
Occupancy		169,769		168,229
Other restaurant operating expenses		98,748		93,746

Total restaurant operating costs		2,583,694		2,506,211
General and administrative costs		58,252		59,098
Depreciation and amortization		86,226		80,029

Total costs and expenses		2,728,172		2,645,338

Operating income		535,115		615,862
Interest expense		7,339		9,836

Net income	$	527,776	$	606,026

See accompanying notes

F-51

TBD BUSINESS GROUP

Combined Statements of Business Equity (Unaudited)

For the 39 weeks Ended September 30, 2013


Business equity, December 31, 2012	$	401,485
Net Income		527,776
Net transfers to TBD, Inc.		(536,378	)

Business equity, September 30, 2013	$	392,883

See accompanying notes

F-52

TBD BUSINESS GROUP

Combined Statements of Cash Flows (Unaudited)

For the 39 weeks Ended September 30, 2013 and October 1, 2012


	39 WEEKS ENDED SEPTEMBER 30, 2013			39 WEEKS ENDED OCTOBER 1, 2012
Cash flows from operating activities:
Net income	$	527,776		$	606,026
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		86,226			80,029
Accretion expense of asset retirement obligations		2,225			2,065
Changes in current assets and liabilities:
Inventories		(6,310	)		3,253
Prepaid rent		—			(289	)
Accounts payable and accrued expenses		4,423			25,956

Net cash from operating activities		614,340			717,040

Cash flows from investing activities:
Purchase of property and equipment		(20,102	)		(37,351	)

Net cash from investing activities		(20,102	)		(37,351	)

Cash flows from financing activities:
Payments on long-term debt		(57,860	)		(55,362	)
Net transfers to TBD, Inc		(536,378	)		(624,327	)

Net cash from financing activities		(594,238	)		(679,689	)

Net change in cash		—			—
Cash, beginning of period		2,325			2,325

Cash, end of period	$	2,325		$	2,325

See accompanying notes

F-53

TBD BUSINESS GROUP

Notes to Unaudited Combined Financial Statements

1. Background and Basis of Presentation

Background

Basis of Presentation

The combined unaudited financial statements of the Company have been derived from TBD, Inc.’s financial statements and accounting records using the historical results of operations, financial position and cash flows attributable to the four stores. The combined financial statements include allocations of certain corporate expenses incurred for support functions that are provided on a centralized basis within the Parent and not recorded at the store level, such as expenses related to finance, management, human resources, transportation and other administrative expenses. The costs of such services have been allocated to the Company primarily based on relative percentage of revenue. Management believes such allocations are reasonable. Nevertheless, the combined financial statements may not be indicative of the Company’s future performance and may not reflect what the combined results of operations, financial position and cash flows would have been had the Company operated as a stand-alone company during the periods presented. To the extent that an asset, liability, revenue or expense is directly associated with the Company, it is reflected in the accompanying combined financial statements.

The unaudited combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. They do not include all information and footnotes necessary for a fair presentation of the Company’s financial position and the results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the Company’s combined financial statements and related notes as of December 31, 2012 and January 2, 2012, and for the years then ended. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the period presented have been included in the interim period. Operating results for the interim periods ended September 30, 2013 and October 1, 2012, presented herein are not necessarily indicative of the results that may be expected for the year ending December 30, 2013.

2. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the accompanying combined financial statements:

Principles of Combination

Fiscal year

To match its operating cycle, the Company uses a 52 or 53 week fiscal year, ending on the Monday nearest to December 31. The period ended September 30, 2013 consisted of 39 weeks that began on January 1, 2013. The period ended October 2, 2012 consisted of 39 weeks that began on January 3, 2012.

F-54

Use of Estimates

Cash

Cash includes amounts used in the day to day operations of the business and deposits held on account with FDIC insured financial institutions.

Inventories

Inventories consist primarily of food and packaging supplies used in the restaurant and are stated at the lower of first-in, first-out (FIFO) cost or market.

Property and Equipment

The Company recognized no impairment of property and equipment assets for the 39 weeks ended September 30, 2013 and October 1, 2012.

Intangible Assets

The Company recognized no impairment of intangible assets for the 39 weeks ended September 30, 2013 and October 1, 2012.

Amortization expense for the 39 weeks ended September 30, 2013 and October 1, 2012 were $52,482 and $51,315, respectively. The estimated future amortization expense of amortizable intangible assets for the 12-month periods following September 30, 2013 is as follows:


2014		69,990
2015		69,269
2016		68,990
2017		68,990
2018		68,990
Thereafter		67,486

	$	413,715

Impairment of long-lived assets

F-55

Revenue Recognition

Retail sales from restaurants are recognized as revenue when the product is purchased by the customer.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code (IRC). Under these provisions, the Company generally will not pay federal corporate taxes on income. Instead, its earnings and losses will be included in the stockholders’ personal income tax returns and will be taxed based upon personal income tax rates.

The Company applies applicable authoritative accounting guidance related to the accounting for uncertain tax positions. The impact of uncertain tax positions would be recorded in the Company’s combined financial statements only after determining a more likely than not probability that the uncertain tax positions would withstand challenge, if any, from taxing authorities. As of September 30, 2013 and October 1, 2012, the Company had no uncertain tax positions. Generally, the Company is subject to examination by income tax authorities for three years from the filing of a tax return.

Asset Retirement Obligations (ARO)

AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Fair value is estimated based on a number of assumptions requiring management’s judgment, including restaurant closing costs, cost inflation rates, and discount rates in effect at the time the lease is signed. Over time the obligation is accreted to its projected future value and upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the combined statement of income. The Company has recorded an ARO liability of $39,884 and $37,659 as of September 30, 2013 and October 1, 2012, respectively.

Advertising costs

The Company expenses advertising costs when incurred. For September 30, 2013 and October 1, 2012, advertising costs were $253,381 and $231,793, respectively.

3. Property and Equipment

Property and equipment are comprised of the following:


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
Leasehold improvements	$	280,175	$	292,447
Restaurant equipment and fixtures		492,784		460,406

		772,959		752,853
Less accumulated depreciation		529,054		495,305

	$	243,905	$	257,548

Depreciation expense was $33,744 and $29,119 for the 39 weeks ended September 30, 2013 and October 1, 2012, respectively.

F-56

4. Accrued expenses

Accrued expenses are comprised of the following:


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
Sales taxes and other	$	31,849	$	20,577
Current portion of deferred lease incentive		6,300		6,300

	$	38,149	$	26,877

5. Long-term debt

6. Commitments and Contingencies

As of September 30, 2013, the Company leased four store locations under operating leases that expire between 2014 and 2021. Future minimum payments for the 12-month periods following September 30, 2013 under these non-cancelable leases are as follows:


2014		113,353
2015		100,089
2016		103,603
2017		81,514
2018		26,625
Thereafter		62,125

	$	487,309

Rent expense totaled $123,088 and $117,594 for the 39 weeks ended September 30, 2013 and October 1, 2012, respectively.

7. Related Party Transactions

The Parent provides certain corporate support functions such as finance, management, human resources, transportation and other administrative expenses and related corporate overhead costs were allocated to the Company, primarily based on relative percentage of revenue. Such that operating and corporate overhead costs allocated to the Company were $129,413 and $109,242 for the 39 weeks ended September 30, 2013 and October 1, 2012, respectively.

As the Parent manages cash centrally, the Company transfers cash generated from each store to the Parent on a periodic basis. Amount of net cash transferred to the Parent was $536,378 for the 39 weeks ended September 30, 2013.

F-57

8. Subsequent Event

The Company has evaluated subsequent events through November 22, 2013, which is the date the combined financial statements were available to be issued.

F-58

REPORT OF INDEPENDENT AUDITORS

To the Members

KK Great Pizza, LLC

Report on Financial Statements

We have audited the accompanying financial statements of KK Great Pizza, LLC, which comprise the balance sheet as of December 31, 2012, and the related statements of income, members’ equity, and cash flows for the fiscal year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Auditor’s Responsibility

We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KK Great Pizza, LLC as of December 31, 2012, and the results of its operations and its cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Moss Adams LLP

Portland, Oregon

October 29, 2013

F-59

KK GREAT PIZZA, LLC

Balance Sheet

As of December 31, 2012


Assets
Current assets:
Cash and cash equivalents	$	203,022
Inventories		18,917
Prepaid expenses and other current assets		35,259

Total current assets		257,198
Property and equipment, net		92,140
Intangible assets, net of accumulated amortization of $6,778		13,222

Total assets	$	362,560

Liabilities and Members’ Equity
Current liabilities:
Accounts payable	$	74,026
Accrued expenses		93,489

Total current liabilities		167,515
Asset retirement obligations		34,294

Total liabilities		201,809
Members’ equity		160,751

Total liabilities and members’ equity	$	362,560

See accompanying notes.

F-60

KK GREAT PIZZA, LLC

Statement of Income

For the Fiscal Year Ended December 31, 2012


Restaurant sales, net	$	2,926,917

Costs and expenses
Cost of food and packaging		1,006,752
Compensation and benefits		707,264
Franchise royalties		146,478
Advertising and related costs		225,024
Occupancy		227,788
Other operating expenses		107,874
General and administrative costs		150,856
Depreciation and amortization		30,187

Total costs and expenses		2,602,223

Net income	$	324,694

See accompanying notes.

F-61

KK GREAT PIZZA, LLC

Statement of Members’ Equity

For the Fiscal Year Ended December 31, 2012


Members’ equity, beginning of year	$	179,670
Net income		324,694
Distribution to members		(343,613	)

Members’ equity, end of year	$	160,751

See accompanying notes.

F-62

KK GREAT PIZZA, LLC

Statement of Cash Flows

For the Fiscal Year Ended December 31, 2012


Cash flows from operating activities
Net income	$	324,694
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		30,187
Accretion expense of asset retirement obligation		2,678
Changes in current assets and liabilities:
Inventories		4,452
Prepaid expenses and other current assets		(219	)
Accounts payable		(12,967	)
Accrued expenses		205

Net cash from operating activities		349,030

Cash flows from investing activities
Franchise fee renewal		(5,000	)

Net cash from investing activities		(5,000	)

Cash flows from financing activities:
Distributions to members		(343,613	)

Net cash from financing activities		(343,613	)

Net increase in cash		417
Cash, beginning of year		202,605

Cash, end of year	$	203,022

See accompanying notes.

F-63

KK GREAT PIZZA, LLC

Notes to Financial Statements

Note 1—Summary of Significant Accounting Policies

KK Great Pizza, LLC (“the Company”) was organized in Minnesota in September 2000 and operates four Papa Murphy’s Take and Bake Pizza stores in Minnesota and Wisconsin. The Company is wholly-owned by two Members. The Members each own 50% interest in the Company, respectively.

Fiscal Year —To match its operating cycle, the Company uses a 52 or 53 week fiscal year, ending on the Monday nearest to December 31. Fiscal year 2012 was a 52 week year.

Cash and Cash Equivalents —Cash equivalents include liquid investments with remaining maturities of three months or less when purchased.

Inventories —Inventories consist primarily of food and packaging supplies used in the restaurant and are stated at the lower of first-in, first-out (FIFO) cost or market.

Property and Equipment —Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the useful lives of the assets or the related lease term, including renewal options to the extent renewals are reasonably assured. Maintenance and repairs are charged to expense as incurred; expenditures for additions, improvements, and replacements are capitalized. Upon disposal of property and equipment subject to depreciation, the accounts are relieved of the related costs and accumulated depreciation and resulting gains and losses are reflected in the statement of income. The Company reviews the carrying value of property and equipment for impairment whenever events or changes in circumstances indicate the carrying amounts may not be recoverable.

The Company recognized no impairment of property and equipment assets for the fiscal year ended December 31, 2012.

Intangible Assets —The Company’s intangible assets consist of franchise rights from Papa Murphy’s International LLC. Franchise rights are amortized on a straight-line basis over the related franchise agreement term, which ranges from 5 to 10 years. The Company reviews the carrying value of intangible assets for impairment whenever events or changes in circumstances indicate the carrying amounts may not be recoverable.

The Company recognized no impairment of intangible assets for the fiscal year ended December 31, 2012.

Amortization expense for the year ended December 31, 2012 was $3,281. The estimated future amortization expense of amortizable intangible assets as of December 31, 2012 is as follows:


Fiscal years 2013	$	2,500
2014		2,500
2015		2,500
2016		2,500
2017		1,722
Thereafter		1,500

	$	13,222

The weighted average amortization period for the intangible assets is approximately 8.75 years.

Revenue Recognition —Retail sales from restaurants are recognized as revenues when the product is purchased by the customer.

F-64

Income Taxes —The Company is not a taxpaying entity for income tax purposes, and thus no income tax expense has been recorded in the financial statements. Income of the Company is taxed to the Members in their respective tax returns.

Distributions to Members —Guaranteed payments to Members that are intended as compensation for services rendered are accounted for as company expenses rather than as distributions.

The Company customarily makes payment on a quarterly basis to Members to pay their estimated personal federal and state income tax liabilities generated by the operations of the Company, which is accounted for as distributions to members.

Asset Retirement Obligations (ARO) —AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Fair value is estimated based on a number of assumptions requiring management’s judgment, including restaurant closing costs, cost inflation rates, and discount rates in effect at the time the lease is signed. Over time the obligation is accreted to its projected future value and upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statement of income. As of December 31, 2012, the Company has recorded an ARO liability of $34,294.

Advertising —Advertising costs are expensed as incurred. For 2012, advertising costs were $225,024.

Use of Estimates —The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. Actual results may differ from those estimates.

Note 2—Property and Equipment

Property and equipment are comprised of the following:


	2012
Leasehold improvements	$	251,980
Restaurant equipment and fixtures		300,488

		552,468
Less accumulated depreciation		460,328

Total	$	92,140

Depreciation expense was $26,906 for the fiscal year ended December 31, 2012.

Note 3—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following:


	2012
Prepaid rent	$	15,506
Prepaid franchise fee		15,000
Prepaid insurance		4,253
Utility deposit		500

Total	$	35,259

F-65

Note 4—Accrued Expenses

Accrued expenses are comprised of the following:


	2012
Accrued compensation and benefits	$	90,963
Sales taxes and other		2,526

Total	$	93,489

Note 5—Commitments and Contingencies

As of December 31, 2012, the Company leased four store locations under operating leases that expire between 2013 and 2019. Future minimum payments under these non-cancelable leases, including payments during the renewal term of the renewed lease, are as follows:


2013	$	124,075
2014		119,568
2015		120,519
2016		123,526
2017		96,516
Thereafter		287,698

Total	$	871,902

Rent expense totaled $127,909 for the fiscal year ended December 31, 2012.

Note 6—Employee Benefit Plans

The Company maintains a salary deferral plan under the provisions of Section 401(k) of the Internal Revenue Code, whereby participating employees may defer a portion of their gross wages. The Company provides a matching contribution under the plan. Company matching contributions for the fiscal year ending December 31, 2012 were approximately $8,000.

Note 7—Subsequent Events

The Company has evaluated subsequent events through October 29, 2013, which is the date the financial statements were available to be issued.

During June 2013, the Company elected to not open a store in the River Falls location. The Company elected to forfeit the franchise fee deposit of $15,000 in connection with this decision.

During August 2013, the Company agreed to sell substantially all of the assets of the Company to Papa Murphy’s Company Stores, Inc., the parent entity of Papa Murphy’s International LLC, the Franchisor. The Company expects to close on the sale on November 4, 2013.

F-66

KK GREAT PIZZA, LLC

Balance Sheet (Unaudited)

As of September 30, 2013 and December 31, 2012


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	69,097	$	203,022
Inventories		19,335		18,917
Prepaid expenses and other current assets		22,356		35,259

Total current assets		110,788		257,198
Property and equipment, net		87,391		92,140
Intangible assets, net of accumulated amortization of $8,653 and $6,778, respectively		11,347		13,222

Total Assets	$	209,526	$	362,560

LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	14,930	$	74,026
Accrued expenses		20,870		93,489

Total current liabilities		35,800		167,515

Asset retirement obligations		36,332		34,294

Total liabilities		72,132		201,809
Members’ Equity		137,394		160,751

Total liabilities and members’ equity	$	209,526	$	362,560

See accompanying notes.

F-67

KK GREAT PIZZA, LLC

Statement of Income (Unaudited)

For the Nine Months Ended September 30, 2013 and October 1, 2012


	NINE MONTHS ENDED
	SEPTEMBER 30, 2013		OCTOBER 1, 2012
Restaurant sales, net	$	2,140,716	$	2,114,585

Costs and expenses
Cost of food and packaging		705,063		717,989
Compensation and benefits		512,588		501,917
Franchise royalties		107,064		105,849
Advertising and related costs		145,490		162,070
Occupancy		149,592		172,715
Other operating expenses		131,066		79,796
General and administrative costs		159,854		92,211
Depreciation and amortization		24,052		22,854

Total costs and expenses		1,934,769		1,855,401

Net income	$	205,947	$	259,184

See accompanying notes.

F-68

KK GREAT PIZZA, LLC

Statement of Member’s Equity (Unaudited)

For the Nine Months Ended September 30, 2013


	NINE MONTHS ENDED SEPTEMBER 30, 2013
Members’ equity, beginning of period	$	160,751
Net Income		205,947
Distribution to members		(229,304	)

Members’ equity, end of period	$	137,394

See accompanying notes.

F-69

KK GREAT PIZZA, LLC

Statement of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2013 and October 1, 2012


	NINE MONTHS ENDED
	SEPTEMBER 30, 2013			OCTOBER 1, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	205,947		$	259,184
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		24,052			22,854
Changes in current assets and liabilities:
Inventories		(418	)		3,098
Prepaid expenses and other current assets		12,903			(1,119	)
Accounts payable and accrued expenses		(131,715	)		(113,532	)
Asset retirement obligation		—			1,898

Net cash from operating activities		110,769			172,383

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment	$	(15,390	)		—
Additions to intangible assests		—			(5,000	)

Net cash from investing activities		(15,390	)		(5,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to Members		(229,304	)		(277,753	)

Net cash from financing activities		(229,304	)		(277,753	)

NET INCREASE (DECREASE) IN CASH		(135,962	)		(110,370	)
CASH, beginning of period		203,022			202,605

CASH, end of period	$	69,097		$	92,235

See accompanying notes.

F-70

Note 1 — Summary of Significant Accounting Policies

The unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. They do not include all information and footnotes necessary for a fair presentation of the Company’s financial position and the results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes as of December 31, 2012 and January 2, 2012, and for the years then ended. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the period presented have been included in the interim period. Operating results for the interim periods ended September 30, 2013 and October 1, 2012, presented herein are not necessarily indicative of the results that may be expected for the year ending December 30, 2013.

Fiscal Year— To match its operating cycle, the Company uses a 52 or 53 week fiscal year, ending on the Monday nearest to December 31. Each of the nine months ended September 30, 2013 and October 1, 2012 consisted of a 39 weeks.

Cash and Cash Equivalents — Cash equivalents include liquid investments with remaining maturities of three months or less when purchased.

Inventories— Inventories consist primarily of food and packaging supplies used in the restaurant and are stated at the lower of first-in, first-out (FIFO) cost or market.

Property and Equipment— Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the useful lives of the assets or the related lease term, including renewal options to the extent renewals are reasonably assured. Maintenance and repairs are charged to expense as incurred; expenditures for additions, improvements and replacements are capitalized. Upon disposal of property and equipment subject to depreciation, the accounts are relieved of the related costs and accumulated depreciation and resulting gains and losses are reflected in the statement of income. The Company reviews the carrying value of property and equipment for impairment whenever events or changes in circumstances indicate the carrying amounts may not be recoverable.

The Company recognized no impairment of property and equipment assets for the nine months ended September 30, 2013 and October 1, 2012.

Intangible Assets— The Company’s intangible assets consist of franchise rights from Papa Murphy’s International LLC. Franchise rights are amortized on a straight-line basis over the related franchise agreement term, which ranges from 5 to 10 years. The Company reviews the carrying value of intangible assets for impairment whenever events or changes in circumstances indicate the carrying amounts may not be recoverable.

The Company recognized no impairment of intangible assets for the nine months ended September 30, 2013 and October 1, 2012.

F-71

Amortization expense for the nine months ended September 30, 2013 and October 1, 2012 was $1,875 and $2,654, respectively. The estimated future amortization expense of amortizable intangible assets for the 12-month periods following September 30, 2013 is as follows:


September 30,	2014	$	2,500
	2015		2,500
	2016		2,500
	2017		2,347
	2018		1,500

		$	11,347

The weighted average amortization period for the intangible assets is approximately 8.75 years.

Revenue Recognition —Retail sales from restaurants are recognized as revenues when the product is purchased by the customer.

Distributions to Members —Guaranteed payments to Members that are intended as compensation for services rendered are accounted for as company expenses rather than as distributions.

Asset Retirement Obligations (ARO) —AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. Fair value is estimated based on a number of assumptions requiring management’s judgment, including restaurant closing costs, cost inflation rates, and discount rates in effect at the time the lease is signed. Over time the obligation is accreted to its projected future value and upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statement of income. The Company has recorded an ARO liability of $34,294 and $33,661 as of September 30, 2013 and October 1, 2012, respectively.

Advertising —Advertising costs are expensed as incurred. For the nine months ended September 30, 2013 and October 1, 2012, advertising costs were $145,490 and $162,070, respectively.

Note 2—Property and Equipment

Property and equipment are comprised of the following:


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
Leasehold improvements	$	251,980	$	251,980
Restaurant equipment and fixtures		317,915		300,488

		569,895		552,468
Less accumulated depreciation		482,504		460,328

	$	87,391	$	92,140

F-72

Depreciation expense was $22,177 and $20,199 for the nine months ended September 30, 2013 and October 1, 2012, respectively.

Note 3—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following:


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
Prepaid insurance	$	—	$	4,253
Prepaid rent		15,025		15,506
Utility deposits		500		500
Prepaid franchise fee		—		15,000
Prepaid taxes		6,831		—

	$	22,356	$	35,259

During June 2013, the Company elected to not open a store in the River Falls location. The Company elected to forfeit the franchise fee deposit of $15,000 in connection with the decision.

Note 4—Accrued Expenses

Accrued expenses are comprised of the following:


	SEPTEMBER 30, 2013		DECEMBER 31, 2012
Accrued compensation and benefits	$	6,886	$	90,963
Sales taxes and other		13,984		2,526

	$	20,870	$	93,489

Note 5—Commitments and Contingencies

As of September 30, 2013, the Company leased four store locations under operating leases that expire between 2013 and 2019. Future minimum payments for the 12-month periods following September 30, 2013, under these non-cancelable leases, including payments during the renewal term of the renewed lease, are as follows:


2014		120,593
2015		120,281
2016		122,648
2017		104,053
2018		82,370
Thereafter		257,578

	$	807,523

Rent expense totaled $92,272 and $96,257 for the nine months ended September 30, 2013 and October 1, 2012, respectively.

Note 6—Employee Benefit Plans

The Company maintains a salary deferral plan under the provisions of Section 401(k) of the Internal Revenue Code, whereby participating employees may defer a portion of their gross wages. The Company provides a matching contribution under the plan. Company matching contributions for the nine months ending September 30, 2013 and October 1, 2012 were approximately $15,000 and $6,000, respectively.

F-73

Note 7—Subsequent Events

The Company has evaluated subsequent events through October 29, 2013, which is the date the financial statements were available to be issued.

On November 4, 2013, the Company sold substantially all of the assets of the Company, consisting of four stores in Minnesota and Wisconsin, to Papa Murphy’s Company Stores, Inc., the parent entity of Papa Murphy’s International LLC, the franchisor, for $2,400,000 plus working capital.

F-74

Shares

LOGO

Papa Murphy’s Holdings, Inc.

Common Stock

PRELIMINARY PROSPECTUS

Jefferies

Baird

Wells Fargo Securities

William Blair

Raymond James

Stephens Inc.

Until , 2014 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

, 2014

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. Other Expenses of Issuance and Distribution.

The expenses, other than underwriting commissions, expected to be incurred by us in connection with the issuance and distribution of the securities being registered under this Registration Statement are estimated to be as follows:


SEC Registration Fee	$	9,016
Financial Industry Regulatory Authority, Inc. Filing Fee		11,000
Exchange Listing Fee		*
Printing and Engraving		*
Legal Fees and Expenses		*
Accounting Fees and Expenses		*
Blue Sky Fees and Expenses		*
Transfer Agent and Registrar Fees		*
Miscellaneous		*

Total	$	*

*	To be completed by amendment.

ITEM 14. Indemnification of Directors and Officers.

The Registrant is governed by the Delaware General Corporation Law, or DGCL. Section 145 of the DGCL provides that a corporation may indemnify any person, including an officer or director, who was or is, or is threatened to be made, a party to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was or is an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer, director, employee or agent acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the corporation’s best interest and, for criminal proceedings, had no reasonable cause to believe that such person’s conduct was unlawful. A Delaware corporation may indemnify any person, including an officer or director, who was or is, or is threatened to be made, a party to any threatened, pending or contemplated action or suit by or in the right of such corporation, under the same conditions, except that such indemnification is limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person, and except that no indemnification is permitted without judicial approval if such person is adjudged to be liable to such corporation. Where an officer or director of a corporation is successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to above, or any claim, issue or matter therein, the corporation must indemnify that person against the expenses (including attorneys’ fees) which such officer or director actually and reasonably incurred in connection therewith.

The Registrant’s amended and restated bylaws and amended and restated certificate of incorporate will authorize the indemnification of its officers and directors, consistent with Section 145 of the DGCL. Reference is made to Section 102(b)(7) of the DGCL, which enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director’s fiduciary duty, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL, which provides for liability of directors for unlawful payments of dividends of unlawful stock purchase or redemptions or (iv) for any transaction from which a director derived an improper personal benefit.

II-1

As permitted by the DGCL, we will include in our amended and restated certificate of incorporation a provision to eliminate the personal liability of our directors for monetary damages for breach of their fiduciary duties as directors, subject to certain exceptions. In addition, our amended and restated certificate of incorporation and bylaws will provide that we are required to indemnify our officers and directors under certain circumstances, including those circumstances in which indemnification would otherwise be discretionary, and we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified.

The Registrant intends to enter into indemnification agreements with each of its directors and executive officers. These agreements, among other things, will require the Registrant to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts actually and reasonably incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of the Registrant, arising out of the person’s services as a director or executive officer.

The Registrant expects to maintain standard policies of insurance that provide coverage (i) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (ii) to the Registrant with respect to indemnification payments that it may make to such directors and officers.

The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification to the Registrant’s directors and officers by the underwriters against certain liabilities.

ITEM 15. Recent Sales of Unregistered Securities.

The following sets forth information regarding all unregistered securities sold by us in the last three years:

On October 25, 2010, we issued and sold 4,000 shares of common stock to an employee for $0.44 per share pursuant to the Amended 2010 Management Incentive Plan.

On March 8, 2011, we issued and sold 5,000 shares of common stock to an employee for $0.44 per share pursuant to the Amended 2010 Management Incentive Plan.

On March 25, 2011, we issued and sold 1,000 shares of common stock to an employee for $0.44 per share pursuant to the Amended 2010 Management Incentive Plan.

On June 6, 2011, we issued and sold 110,000 shares of common stock to an executive for $0.44 per share pursuant to the Amended 2010 Management Incentive Plan.

On June 6, 2011, we issued and sold 18,959 shares of Series A Preferred Stock for $36.68 per share and 10,438 shares of common stock for $0.44 per share to an executive pursuant to a subscription agreement, dated as of May 25, 2011.

On June 30, 2011, we issued and sold 5,000 shares of common stock to an employee for $0.98 per share pursuant to the Amended 2010 Management Incentive Plan.

On July 29, 2011, we issued new certificates for 38,608 previously held shares of common stock to an executive pursuant to a Stock Repurchase and Put Option Agreement.

On October 12, 2011, we issued and sold 1,000 shares of common stock to an employee for $0.94 per share pursuant to the Amended 2010 Management Incentive Plan.

On October 17, 2011, we issued and sold 10,000 shares of common stock to an executive for $0.94 per share pursuant to the Amended 2010 Management Incentive Plan.

On June 11, 2012, we issued and sold 13,943 shares of common stock for $3.22 per share and 25,287 shares of Series B Preferred Stock $37.77 per share to an institutional accredited investor pursuant to a subscription agreement.

II-2

On September 14, 2012, we issued and sold 10,000 shares of common stock to an executive for $3.22 per share pursuant to the Amended 2010 Management Incentive Plan.

On September 14, 2012, we issued and sold 1,264 shares of Series B Preferred Stock for $37.77 per share and 697 shares of common stock for $3.22 per share to an executive pursuant to a subscription agreement, dated as of September 14, 2012.

On September 21, 2012, we issued and sold 10,000 shares of common stock to an employee for $3.22 per share pursuant to the Amended 2010 Management Incentive Plan.

On December 19, 2012, we issued and sold 10,000 shares of common stock to an executive for $8.58 per share pursuant to the Amended 2010 Management Incentive Plan.

On December 24, 2012, we issued and sold 5,000 shares of common stock to an executive for $8.58 per share pursuant to the Amended 2010 Management Incentive Plan.

On December 24, 2012, we issued and sold 5,000 shares of common stock to an employee for $8.58 per share pursuant to the Amended 2010 Management Incentive Plan.

On December 28, 2012, we issued and sold 10,000 shares of common stock to an executive for $8.58 per share pursuant to the Amended 2010 Management Incentive Plan.

On December 31, 2012, we issued and sold 10,000 shares of common stock to an employee for $8.58 per share pursuant to the Amended 2010 Management Incentive Plan.

On March 27, 2013, we issued and sold 1,000 shares of common stock to an employee for $10.84 per share pursuant to the Amended 2010 Management Incentive Plan.

On March 29, 2013, we issued and sold 500 shares of common stock to an employee for $10.84 per share pursuant to the Amended 2010 Management Incentive Plan.

On April 1, 2013, we issued and sold 6,000 shares of common stock to two employees for $10.84 per share pursuant to the Amended 2010 Management Incentive Plan.

On June 12, 2013, we issued and sold 5,000 shares of common stock to an employee for $11.85 per share pursuant to the Amended 2010 Management Incentive Plan.

On July 1, 2013, we issued and sold 2,500 shares of common stock to an employee for $11.85 per share pursuant to the Amended 2010 Management Incentive Plan.

On October 9, 2013, we issued and sold 10,000 shares of common stock to an executive for $19.63 per share pursuant to the Amended 2010 Management Incentive Plan.

On March 11, 2014, we granted an executive fully vested options to purchase 27,103 shares of common stock with an exercise price of $26.80 per share.

On March 11, 2014, we granted an executive fully vested options to purchase 2,666 shares of common stock, options subject to time-vesting to purchase 5,334 shares of common stock and options subject to performance-vesting to purchase 1,412 shares of common stock, in each case with an exercise price of $26.80 per share.

On March 11, 2014, we granted an executive fully vested options to purchase 667 shares of common stock, options subject to time-vesting to purchase 6,667 shares of common stock and options subject to performance-vesting to purchase 601 shares of common stock, in each case with an exercise price of $26.80 per share.

On March 11, 2014, we granted an executive fully vested options to purchase 4,066 shares of common stock with an exercise price of $26.80 per share.

The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Rule 701 promulgated under Section 3(b) of the Securities Act as

II-3

transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with Papa Murphy’s, to information about Papa Murphy’s.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.

As described in the prospectus included in this Registration Statement, in connection with the offering all shares of Series A Preferred Shares and Series B Preferred Shares were exchanged for shares of common stock on a share-for-share basis.

II-4

ITEM 16. Exhibits and Financial Statement Schedules

(a)

Exhibits


EXHIBIT NUMBER		DESCRIPTION OF EXHIBITS

1.1		Form of Underwriting Agreement.

3.1		Amended and Restated Certificate of Incorporation of Papa Murphy’s Holdings, Inc.

3.2		Amended and Restated Bylaws of Papa Murphy’s Holdings, Inc.

4.1		Form of Common Stock Certificate.

4.2		Form of 2010 Amended and Restated Stockholders’ Agreement.

5.1		Opinion of Weil, Gotshal & Manges, LLP.

10.1*		Amended 2010 Management Incentive Plan.

10.2		Form of Stockholder’s Agreement.

10.3*†		Credit Agreement, dated as of October 25, 2013 among PMI Holdings, Inc., Golub Capital LLC and the other financial institutions party thereto.

10.4*		Security Agreement dated as of October 25, 2013 among PMI Holdings, Inc., Golub Capital LLC and the other financial institutions party thereto.

10.5		Form of 2014 Equity Incentive Plan.

10.6*		Form of Franchise Agreement.

10.7*		Form of Area Development Agreement.

10.8*		Form of Multiple Store Commitment Letter and Amendment to Franchise Agreement.

10.9*		Stock Repurchase and Put Option Agreement dated as of July 29, 2011 among Papa Murphy’s Holdings, Inc. and John Barr.

10.10*		Amended and Restated Executive Employment and Non-Competition Agreement dated as of July 24, 2011 among PMI Holdings, Inc. and John Barr.

10.11*		First Amendment to Amended and Restated Executive Employment and Non-Competition Agreement dated as of December 30, 2013 among PMI Holdings, Inc. and John Barr.

10.12*		Executive Employment and Non-Competition Agreement dated as of May 25, 2011 among PMI Holdings, Inc. and Ken C. Calwell.

10.13*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Kevin King.

10.14*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Victoria T. Blackwell.

10.15*		Executive Employment and Non-Competition Agreement dated as of January 7, 2013 among PMI Holdings, Inc. and Jayson Tipp.

10.16*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Janet Pirus.

10.17*		Resignation of Employment and Separation Agreement dated as of June 3, 2013.

10.18*		Executive Employment and Non-Competition Agreement dated as of March 21, 2014 among PMI Holdings, Inc. and Mark Hutchens.

10.19*		First Amendment to Executive Employment and Non-Competition Agreement dated as of March 21, 2014 among PMI Holdings, Inc. and Ken Calwell.

10.20		Form of Stock Option Agreement subject to time-vesting under the Amended 2010 Management Incentive Plan.

10.21		Form of Stock Option Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.

II-5


EXHIBIT NUMBER		DESCRIPTION OF EXHIBITS

10.22		Form of Restricted Stock Agreement subject to time-vesting under the Amended 2010 Management Incentive Plan.

10.23		Form of Restricted Stock Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.

10.24		Form of Amendment to the Restricted Stock Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.

10.25		Form of Stock Option Agreement subject to time-vesting under the Form of 2014 Equity Incentive Plan.

10.26		Form of Restricted Stock Agreement subject to time-vesting under the Form of 2014 Equity Incentive Plan.

21.1*		List of Subsidiaries of the Registrant.

23.1*		Consent of Moss Adams LLP, Independent Registered Public Accounting Firm for Papa Murphy’s Holdings, Inc. and its subsidiaries.

23.2*		Consent of Moss Adams LLP, Independent Auditor for TBD Business Group.

23.3*		Consent of Moss Adams LLP, Independent Auditor for KK Great Pizza, LLC.

23.4		Consent of Weil, Gotshal & Manges, LLP (included in the opinion filed as Exhibit 5.1 hereto).

24.1**		Power of Attorney (included on signature page).

*	Filed herewith

**	Previously filed

†	Confidential treatment requested as to certain portions, which portions have been provided separately to the Securities and Exchange Commission

(b)

Financial Statement Schedules.

Schedule I—Condensed Financial Information of Registrant—Papa Murphy’s Holdings, Inc. Parent Company Information

Schedule II—Valuation and Qualifying Accounts—Papa Murphy’s Holdings, Inc. and Subsidiaries.

ITEM 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

II-6

(2)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)

For the purpose of determining liability under the Securities Act to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4)

For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser.

(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, State of Washington, on April 4, 2014.


PAPA MURPHY’S HOLDINGS, INC.

By:		/s/ Ken Calwell
		Name: Ken Calwell
		Title: Chief Executive Officer and President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


SIGNATURE	TITLE	DATE

/s/ Ken Calwell Ken Calwell	President and Chief Executive Officer (Principal Executive Officer) and Director	April 4, 2014

/s/ Mark Hutchens Mark Hutchens	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	April 4, 2014

* John Barr	Chairman of the Board, Director	April 4, 2014

* Benjamin Hochberg	Director	April 4, 2014

* Yoo Jin Kim	Director	April 4, 2014

* Thomas Lee	Director	April 4, 2014

* John Shafer	Director	April 4, 2014

* Achi Yaffe	Director	April 4, 2014



*By:	/s/ Mark Hutchens
		Mark Hutchens
		Attorney-in-fact

EXHIBIT INDEX


EXHIBIT NUMBER		DESCRIPTION OF EXHIBITS

1.1		Form of Underwriting Agreement.

3.1		Amended and Restated Certificate of Incorporation of Papa Murphy’s Holdings, Inc.

3.2		Amended and Restated Bylaws of Papa Murphy’s Holdings, Inc.

4.1		Form of Common Stock Certificate.

4.2		Form of 2010 Amended and Restated Stockholders’ Agreement

5.1		Opinion of Weil, Gotshal & Manges, LLP.

10.1*		Amended 2010 Management Incentive Plan.

10.2		Form of Stockholder’s Agreement.

10.3*†		Credit Agreement, dated as of October 25, 2013 among PMI Holdings, Inc., Golub Capital LLC and the other financial institutions party thereto.

10.4*		Security Agreement dated as of October 25, 2013 among PMI Holdings, Inc., Golub Capital LLC and the other financial institutions party thereto.

10.5		Form of 2014 Equity Incentive Plan.

10.6*		Form of Franchise Agreement.

10.7*		Form of Area Development Agreement.

10.8*		Form of Multiple Store Commitment Letter and Amendment to Franchise Agreement.

10.9*		Stock Repurchase and Put Option Agreement dated as of July 29, 2011 among Papa Murphy’s Holdings, Inc. and John Barr.

10.10*		Amended and Restated Executive Employment and Non-Competition Agreement dated as of July 24, 2011 among PMI Holdings, Inc. and John Barr.

10.11*		First Amendment to Amended and Restated Executive Employment and Non-Competition Agreement dated as of December 30, 2013 among PMI Holdings, Inc. and John Barr.

10.12*		Executive Employment and Non-Competition Agreement dated as of May 25, 2011 among PMI Holdings, Inc. and Ken C. Calwell.

10.13*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Kevin King.

10.14*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Victoria T. Blackwell.

10.15*		Executive Employment and Non-Competition Agreement dated as of January 7, 2013 among PMI Holdings, Inc. and Jayson Tipp.

10.16*		Executive Employment and Non-Competition Agreement dated as of May 4, 2010 among PMI Holdings, Inc. and Janet Pirus.

10.17*		Resignation of Employment and Separation Agreement dated as of June 3, 2013.

10.18*		Executive Employment and Non-Competition Agreement dated as of March 21, 2014 among PMI Holdings, Inc. and Mark Hutchens.

10.19*		First Amendment to Executive Employment and Non-Competition Agreement dated as of March 21, 2014 among PMI Holdings, Inc. and Ken Calwell.

10.20		Form of Stock Option Agreement subject to time-vesting under the Amended 2010 Management Incentive Plan.

10.21		Form of Stock Option Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.

10.22		Form of Restricted Stock Agreement subject to time-vesting under the Amended 2010 Management Incentive Plan.

10.23		Form of Restricted Stock Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.


EXHIBIT NUMBER		DESCRIPTION OF EXHIBITS

10.24		Form of Amendment to the Restricted Stock Agreement subject to performance-vesting under the Amended 2010 Management Incentive Plan.

10.25		Form of Stock Option Agreement subject to time-vesting under the Form of 2014 Equity Incentive Plan.

10.26		Form of Restricted Stock Agreement subject to time-vesting under the Form of 2014 Equity Incentive Plan.

21.1*		List of Subsidiaries of the Registrant.

23.1*		Consent of Moss Adams LLP, Independent Registered Public Accounting Firm for Papa Murphy’s Holdings, Inc. and its subsidiaries.

23.2*		Consent of Moss Adams LLP, Independent Auditor for TBD Business Group.

23.3*		Consent of Moss Adams LLP, Independent Auditor for KK Great Pizza, LLC.

23.4		Consent of Weil, Gotshal & Manges, LLP (included in the opinion filed as Exhibit 5.1 hereto).

24.1**		Power of Attorney (included on signature page).

*	Filed herewith

**	Previously filed

†	Confidential treatment requested as to certain portions, which portions have been provided separately to the Securities and Exchange Commission

Exhibit 10.1

PAPA MURPHY’S HOLDINGS, INC.

Amended 2010 Management Incentive Plan

SECTION 1.

GENERAL PURPOSE OF THE PLAN; DEFINITIONS

The name of the plan is the Papa Murphy’s Holdings, Inc. Amended 2010 Management Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, directors, consultants and other key persons of Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company”) and its Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

The Plan is intended to be a “compensatory benefit plan” within the meaning of Rule 701 under the Act.

The following terms shall be defined as set forth below:

“ Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“ Award ” or “ Awards ,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, or any combination of the foregoing.

“ Board ” means the Board of Directors of the Company or its successor entity.

“ Cause ” shall mean, (x) with respect to any grantee with an employment agreement with the Company, “cause” as defined in such employment agreement or (y), with respect to any employee without such an employment agreement: the termination of the grantee’s employment with the Company and its Subsidiaries as a result of (i) the commission of any act by a grantee constituting financial dishonesty against the Company (which act would be chargeable as a crime under applicable law); (ii) a grantee’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment which, as determined in good faith by the Board, would: (A) materially adversely affect the business or the reputation of the Company with its current or prospective customers, suppliers, lenders and/or other third parties with whom it does or might do business; or (B) expose the Company to a risk of civil or criminal legal damages, liabilities or penalties; (iii) the repeated failure by a grantee to follow the directives of the Company’s chief executive officer or Board, (iv) any material misconduct, violation of the Company’s policies, or willful and deliberate non-performance of duty by the grantee in connection with the business affairs of the Company or (v) material breach by the grantee of any of the grantee’s obligations to the Company under this Plan, any restricted stock grant agreement, employment agreement or non-competition agreement.

“ Code ” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

“ Committee ” has the meaning specified in Section 2.

“ Effective Date ” means the date on which the Plan is approved by stockholders as set forth at the end of this Plan.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“ Fair Market Value ” in the absence of an established market for the Shares shall be the per Share Fair Market Value thereof, disregarding any discount for minority interest, as determined in good faith by the Board in accordance with applicable provisions of Section 409A of the Code. Notwithstanding the foregoing (i) if the Stock trades on a national securities exchange, the Fair Market Value on any given date is the closing sale price on such date; (ii) if the Stock does not trade on any national securities exchange but is admitted to trading on the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”), the Fair Market Value on any given date is the closing sale price as reported by NASDAQ on such date;’ or if no such closing sale price information is available, the average of the highest bid and lowest asked prices for the Stock reported on such date. For any date that is not a trading day, the Fair Market Value of the Stock for such date will be determined by using the closing sale price or the average of the highest bid and lowest asked prices, as appropriate, for the immediately preceding trading day. The Committee can substitute a particular time of day or other measure of closing sale price if appropriate because of changes in exchange or market procedures.

“ Good Reason ” means the occurrence of any of the following events: (i) a substantial adverse change in the nature or scope of the grantee’s responsibilities, authorities, powers, functions or duties; (ii) a reduction in the grantee’s annual base salary except for across-the-board salary reductions similarly affecting all or substantially all management employees; or (iii) the relocation of the offices at which the grantee is principally employed to a location more than 50 miles from such offices.

“ Incentive Stock Option ” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

“ Initial Public Offering ” means any underwritten initial public offering of securities of the Company, any corporate successor to the Company by way of conversion, PMI Holdings, Inc. or any of their respective Subsidiaries pursuant to an effective registration statement filed under the Act

“ Non-Qualified Stock Option ” means any Stock Option that is not an Incentive Stock Option.

“ Option ” or “ Stock Option ” means any option to purchase shares of Common Stock of the Company granted pursuant to Section 5.

“ Restricted Stock Award ” means Awards granted pursuant to Section 6.

“ Stock ” means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3 and, in the Committee’s sole discretion, Series A Participating Preferred Stock, par value $0.01 per share of the Company.

“ Subsidiary ” means any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company if each of the corporations or entities (other than the last corporation or entity in the unbroken chain) owns stock or other interests possessing 50 percent or more of the economic interest or 50 percent or more of the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

“ Unrestricted Stock Award ” means any Award granted pursuant to Section 7.

SECTION 2.

ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

(a) Administration of Plan . The Plan shall be administered by the Board, or at the discretion of the Board, by a committee of the Board, comprised, except as contemplated by Section 2(c), of not less than two Directors. All references herein to the Committee shall be deemed to refer to the group then responsible for administration of the Plan at the relevant time (i.e., either the Board of Directors or a committee or committees of the Board, as applicable).

(b) Powers of Committee . The Committee shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:

(i) to select the individuals to whom Awards may from time to time be granted;

(ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, or any combination of the foregoing, granted to anyone or more grantees;

(iii) to determine the number of shares of Stock to be covered by any Award;

(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the form of written instruments evidencing the Awards;

(v) to accelerate at any time the exercisability or vesting of all or any portion of any Award;

(vi) to impose any limitations on Awards granted under the Plan, including limitations on transfers, repurchase provisions and the like and to exercise repurchase rights or obligations;

(vii) subject to Section 409A of the Code and the provisions of Section 5(a)(ii), to extend at any time the period in which Stock Options may be exercised;

(viii) Subject to Section 409A of the Code, to determine at any time whether, to what extent, and under what circumstances distribution or the receipt of Stock and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the grantee and whether and to what extent the Company shall pay or credit amounts constituting interest (at rates determined by the Committee) or dividends or deemed dividends on such deferrals; and

(ix) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Committee shall be binding on all persons, including the Company and Plan grantees.

(c) Delegation of Authority to Grant Awards . The Committee, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Committee’s authority and duties with respect to the granting of Awards at Fair Market Value, and in the event of such delegation, such Chief Executive Officer shall be deemed a one-person Committee of the Board. Any such delegation by the Committee shall include a limitation as to the amount of Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price of any Option, the conversion ratio or price of other Awards and the vesting criteria. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee’s delegate or delegates that were consistent with the terms of the Plan.

(d) Indemnification . Neither the Board nor the Committee, nor any member of either or any delegatee thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegatee thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability insurance coverage which may be in effect from time to time.

SECTION 3.

STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

(a) Stock Issuable . The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 361,957 shares of Common Stock, subject to adjustment as provided in Section 3(b). The Committee, in its sole discretion, may make a number of shares of Common Stock available for granting Incentive Stock Options under the Plan, subject to Section 3(b) hereof and the provisions of Sections 422 and 424 of the Code and any successor

provisions. In the event that any outstanding Award expires, is forfeited, cancelled or is settled for cash, the shares subject to such Award, to the extent of any such forfeiture, cancellation, expiration, termination or settlement for cash, shall again be available for Awards under this Plan.

(b) Changes in Stock . Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger, consolidation or sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for a different number or kind of securities of the Company or any successor entity (or a parent or subsidiary thereof), the Committee shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price per share subject to each outstanding Restricted Stock Award, and (iv) the exercise price and/or exchange price for each share subject to any then outstanding Stock Options under the Plan. The adjustment by the Committee shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Committee in its discretion may make a cash payment in lieu of fractional shares.

The Committee may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Committee that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the grantee, if it would constitute a modification, extension or renewal of the Option within the meaning of Section 424(h) of the Code.

(c) Mergers and Other Sale Events . In the case of and subject to the consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation (other than in connection with an Initial Public Offering) in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, (iv) the sale of all or a majority of the outstanding capital stock of the Company to an unrelated person or entity or (v) any other transaction (other than an Initial Public Offering) in which, the owners of the Company’s outstanding voting power prior to such transaction do not own at least a majority of the outstanding voting power of the successor entity immediately upon completion of the transaction (in each case, regardless of the form thereof, a “Sale Event”), unless otherwise provided in the Award agreement, the Plan and all outstanding Options issued hereunder shall terminate upon the effective time of any such Sale Event, unless provision is made in connection with such

transaction in the sole discretion of the parties thereto for the assumption or continuation of Options theretofore granted (after taking into account any acceleration hereunder) by the successor entity, or the substitution of such Options with new Options of the successor entity or a parent or subsidiary thereof, with such adjustment as to the number and kind of shares and the per share exercise prices as such parties shall agree (after taking into account any acceleration If any, hereunder). In the event of such termination, each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Committee, to exercise all outstanding Options held by such grantee which are then exercisable or will become exercisable as of the effective time of the Sale Event; provided, however, that the exercise of Options not exercisable prior to the Sale Event shall be subject to the consummation of the Sale Event (The treatment of Restricted Stock Award in connection with any such transaction shall be as specified in the relevant Award agreement). Notwithstanding anything herein to the contrary, in the event that provision is made in connection with the Sale Event for the assumption or continuation of Awards, or the substitution of such Awards with new Awards of the successor entity or parent thereof, then, except as the Committee may otherwise determine with respect to particular Awards, any Award so assumed or continued or substituted therefor shall be deemed vested and exercisable in full upon the date on which the grantee’s employment or service relationship with the Company and its subsidiaries or successor entity, as the case may be, terminates if such termination occurs (i) within 18 months after such Sale Event and (ii) such termination is by the Company or its Subsidiaries or successor entity without Cause or by the grantee for “Good Reason”.

(d) Substitute Awards . The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 3(a).

SECTION 4.

ELIGIBILITY

Grantees in the Plan will be such full or part-time officers, employees, directors, consultants and other key persons (including prospective employees) of the Company and its Subsidiaries who are responsible for, or contribute to, the management, growth or profitability of the Company and its Subsidiaries as are selected from time to time by the Committee in its sole discretion.

SECTION 5.

STOCK OPTIONS

Any Stock Option granted under the Plan shall be pursuant to a Stock Option agreement which shall be in such form as the Committee may from time to time approve. Stock Option agreements need not be identical.

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the

Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

No Incentive Stock Option shall be granted under the Plan after the date which is ten years from the date the Plan is approved by the Board.

(a) Terms of Stock Options . Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable. If the Committee so determines, Stock Options may be granted in lieu of cash compensation at the grantee’s election, subject to such terms and conditions as the Committee may establish, as well as in addition to other compensation.

(i) Exercise Price . The exercise price per share for the Stock covered by a Stock Option shall be determined by the Committee at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date.

(ii) Option Term . The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the term of such Stock Option shall be no more than five years from the date of grant.

(iii) Exercisability; Rights of a Stockholder . Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Committee at or after the grant date. The Committee may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

(iv) Method of Exercise . Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the Award agreement or as otherwise provided by the Committee:

(A) In cash, by certified or bank check, or other instrument acceptable to the Committee in U.S. funds payable to the order of the Company in an amount equal to the purchase price of such Option Shares;

(B) By the optionee delivering to the Company a promissory note if the Board has expressly authorized the loan of, funds to the optionee for the purpose of enabling or assisting the optionee to effect the exercise of his or her Stock Option; provided that at least so much of the exercise price as represents the par value of the Stock shall be paid other than with a promissory note if required by state law;

(C) If permitted by the Committee, through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or have been beneficially owned by the optionee for at least six months and are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;

(D) If permitted by the Committee, by the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure.

Payment instruments will be received subject to collection. No certificates for shares of Stock so purchased will be issued to optionee until the Company has completed all steps required by law to be taken in connection with the issuance and sale of the shares, including without limitation (i) receipt of a representation from the optionee at the time of exercise of the Option that the optionee is purchasing the shares for the optionee’s own account and not with a view to any sale or distribution thereof, (ii) the legending of any certificate representing the shares to evidence the foregoing representations and restrictions, and (iii) obtaining from optionee payment or provision for all withholding taxes due as a result of the exercise of the Option. The delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his or her stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award agreement or applicable provisions of laws. In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.

(b) Annual Limit on Incentive Stock Options . To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. For purposes of the preceding sentence, Incentive Stock Options will be taken into account generally in the order in which they are granted. Each provision of the Plan and each Award Agreement ‘elating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of the Award Agreement thereof that cannot be so construed shall be disregarded. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.

(c) Non-transferability of Options . No Stock Option shall be transferable by the optionee other than by will or by the laws of descent and distribution and all Stock Options shall be exercisable, during the optionee’s lifetime, only by the optionee, or by the optionee’s legal representative or guardian in the event of the optionee’s incapacity. Notwithstanding the foregoing, the Committee, in its sole discretion, may provide in an Award agreement that the optionee may transfer, without consideration for the transfer, his or her Non-Qualified Stock Options to members of his or her immediate family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option.

SECTION 6.

RESTRICTED STOCK AWARDS

(a) Nature of Restricted Stock Awards . A Restricted Stock Award is an Award pursuant to which the Company may, in its sale discretion, grant or sell, at such purchase price as determined by the Committee, in its sole discretion, shares of Stock subject to such restrictions and conditions as the Committee may determine at the time of grant (“Restricted Stock”), which purchase price shall be payable in cash or other form of consideration acceptable to the Committee. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions of each such agreement shall be determined by the Committee, and such terms and conditions may differ among individual Awards and grantees.

(b) Rights as a Stockholder . Upon execution of a written instrument setting forth the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in the written instrument evidencing the Restricted Stock Award. Unless the Committee shall otherwise determine, certificates evidencing the Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in subsection (d) below of this Section, and the grantee shall be required, as a condition of the grant, to deliver to the Company a stock power endorsed in blank.

(c) Restrictions . Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award agreement. If a grantee’s employment (or other service relationship) with the Company and its Subsidiaries terminates under the conditions specified in the relevant instrument relating to the Award, or upon such other event or events as may be stated in the instrument evidencing the Award, the Company or its assigns shall have the right or shall agree, as may be specified in the relevant instrument, to repurchase some or all of the shares of Stock subject to the Award at such purchase price as is set forth in such instrument.

(d) Vesting of Restricted Stock . The Committee at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as may be specified in the instrument evidencing the Restricted Stock Award.

(e) Section 83(b) Election . If a Participant makes an election pursuant to Section 83(b) of the Code concerning Restricted Stock, the Participant shall be required to file promptly a copy of such election with the Company.

(f) Waiver, Deferral and Reinvestment of Dividends . The Restricted Stock Award agreement may require or permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted Stock.

SECTION 7.

UNRESTRICTED STOCK AWARDS

(a) Grant or Sale of Unrestricted Stock . The Committee may, in its sole discretion, grant (or sell at par value or such higher purchase price determined by the Committee) an Unrestricted Stock Award to any grantee, pursuant to which such grantee may receive shares of Stock free of any vesting restrictions (“Unrestricted Stock”) under the Plan, which purchase price shall be payable in cash or other form of consideration acceptable to the Committee. Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such individual.

(b) Elections to Receive Unrestricted Stock In Lieu of Compensation . Subject to Section 409A of the Code, upon the request of a grantee and with the consent of the Committee, each such grantee may, pursuant to an advance written election delivered to the Company no later than the date specified by the Committee, receive a portion of the cash compensation otherwise due to such grantee in the form of shares of Unrestricted Stock either currently or on a deferred basis.

(c) Restrictions on Transfers . The right to receive shares of Unrestricted Stock on a deferred basis may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution.

SECTION 8.

TAX WITHHOLDING

(a) Payment by Grantee . Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver stock certificates to any grantee is subject to and conditioned on tax obligations being satisfied by the grantee.

(b) Payment in Stock . Subject to approval by the Committee, a grantee may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a

number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock owned by the grantee with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.

SECTION 9.

TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall not be deemed a termination of employment:

(a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or

(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.

SECTION 10.

AMENDMENTS AND TERMINATION

The Board may, at any time, amend or discontinue the Plan and the Committee may, at any time, amend or cancel any outstanding Award (or provide substitute Awards at the same or reduced exercise or purchase price or with no exercise or purchase price in a manner not inconsistent with the terms of the Plan), but such price, if any, must satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent. If and to the extent determined by the Committee to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code, Plan amendments shall be subject to approval by the Company’s stockholders who are eligible to vote at a meeting of stockholders. Nothing in this Section 10 shall limit the Board’s or Committee’s authority to take any action permitted pursuant to Section 3(c).

SECTION 11.

STATUS OF PLAN

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.

SECTION 12.

GENERAL PROVISIONS

(a) No Distribution; Compliance with Legal Requirements . The Committee may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution

thereof. No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.

(b) Delivery of Stock Certificates . Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company.

(c) Other Compensation Arrangements; No Employment Rights . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.

(d) Trading Policy Restrictions . Option exercises and other Awards under the Plan shall be subject to such Company’s insider-trading-policy-related restrictions, terms and conditions as may be established by the Committee, or in accordance with policies set by the Committee, from time to time.

(e) Loans to Award Recipients . The Company shall have the authority to make loans to recipients of Awards hereunder (including to facilitate the purchase of shares) and shall further have the authority to issue shares for promissory notes hereunder.

(f) Designation of Beneficiary . Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.

SECTION 13.

COMPLIANCE WITH SECTION 409A OF THE CODE

(a) General . The Company intends that the Plan and all Awards be structured in compliance with, or to satisfy an exemption from, Section 409A of the Code and all regulations, guidance, compliance programs, and other interpretative authority thereunder (“Section 409A”), such that there are no adverse tax consequences, interest, or penalties under Section 409A as a result of the payments. Notwithstanding the Company’s intention, in the event any Award is subject to Section 409A, the Committee may, in its sole discretion and without a participant’s prior consent, amend the Plan and/or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as are necessary or appropriate to (a) exempt the Plan and/or any Award from the application of Section 409A, (b) preserve the intended tax treatment of any such Award, or (c) comply with the requirements of Section 409A, including without limitation any such regulations guidance, compliance programs, and other interpretative authority that may be issued after the date of the grant.

(b) Payments to Specified Employees . Notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) of nonqualified deferred compensation (within the meaning of Section 409A) that are otherwise required to be made under the Plan to a “specified employee” (as defined under Section 409A) as a result of his or her separation from service (other than a payment that is not subject to Section 409A) shall be delayed for the first six (6) months following such separation from service (or, if earlier, until the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award agreement) on the day that immediately follows the end of such six-month period or as soon as administratively practicable thereafter. Any remaining payments of nonqualified deferred compensation shall be paid without delay and at the time or times such payments are otherwise scheduled to be made.

(c) Separation from Service . A termination of service shall not be deemed to have occurred for purposes of any provision of the Plan or any Award agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of service, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A. For purposes of any such provision of the Plan or any Award agreement relating to any such payments or benefits, references to a “termination,” “termination of employment,” “termination of service,” or like terms shall mean “separation from service.”

SECTION 14.

EFFECTIVE DATE OF PLAN

This Plan shall become effective upon approval by the stockholders in accordance with applicable law. Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan by the Board.

SECTION 15.

GOVERNING LAW

This Plan and all Awards and actions taken thereunder shall be governed by Delaware law, applied without regard to conflict of law principles.


ADOPTED BY BOARD OF DIRECTORS:		[ ], 2010

APPROVED BY STOCKHOLDERS:		[ ], 2010

Exhibit 10.3

CONFIDENTIAL TREATMENT REQUESTED

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS

BEEN REQUESTED IS OMITTED AND NOTED WITH

“****”.

AN UNREDACTED VERSION OF THIS DOCUMENT

HAS ALSO BEEN PROVIDED TO THE

SECURITIES AND EXCHANGE COMMISSION.

$177,000,000 CREDIT FACILITY

CREDIT AGREEMENT

Dated as of October 25, 2013

by and among

PMI HOLDINGS, INC.,

as the Borrower,

THE OTHER PERSONS PARTY HERETO THAT ARE

DESIGNATED AS CREDIT PARTIES,

GOLUB CAPITAL LLC,

as Agent for all Lenders,

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

as Lenders,

and

GOLUB CAPITAL LLC,

as Sole Lead Arranger and Sole Bookrunner

TABLE OF CONTENTS


ARTICLE I THE CREDITS		2
1.1	Amounts and Terms of Commitments		2
1.2	Notes		6
1.3	Interest		6
1.4	Tax Treatment		7
1.5	Loan Accounts		7
1.6	Procedure for Revolving Credit Borrowing		8
1.7	Conversion and Continuation Elections		9
1.8	Optional Prepayments and Reductions in Revolving Loan Commitments		10
1.9	Mandatory Prepayments of Loans and Commitment Reductions		12
1.10	Fees		15
1.11	Payments by the Borrower		16
1.12	Payments by the Lenders to Agent; Settlement		18

ARTICLE II CONDITIONS PRECEDENT		21
2.1	Conditions of Initial Loans		21
2.2	Conditions to All Borrowings		22

ARTICLE III REPRESENTATIONS AND WARRANTIES			23
3.1	Corporate Existence and Power		23
3.2	Corporate Authorization; No Contravention		23
3.3	Governmental Authorization		23
3.4	Binding Effect		24
3.5	Litigation		24
3.6	No Default		24
3.7	ERISA Compliance		24
3.8	Use of Proceeds; Margin Regulations		25
3.9	Title to Properties		25
3.10	Taxes		25
3.11	Financial Condition		25
3.12	Environmental Matters		26
3.13	Regulated Entities		27
3.14	Solvency		27
3.15	Labor Relations		27
3.16	Intellectual Property		27
3.17	Brokers’ Fees; Transaction Fees		27
3.18	Insurance		27
3.19	Ventures, Subsidiaries and Affiliates; Outstanding Stock		28
3.20	Jurisdiction of Organization; Chief Executive Office		28
3.21	Reserved		28
3.22	Status of Holdings		28
3.23	Full Disclosure		28
3.24	Franchise Matters		29
3.25	Foreign Assets Control Regulations and Anti-Money Laundering		29
3.26	Patriot Act		29


ARTICLE IV AFFIRMATIVE COVENANTS		30
4.1	Financial Statements	30
4.2	Certificates; Other Information	31
4.3	Notices	32
4.4	Preservation of Corporate Existence, Etc.	34
4.5	Maintenance of Property	34
4.6	Insurance	34
4.7	Payment of Obligations	35
4.8	Compliance with Laws	36
4.9	Inspection of Property and Books and Records	36
4.10	Use of Proceeds	36
4.11	Cash Management Systems	37
4.12	Landlord Agreements	37
4.13	Further Assurances	37
4.14	Environmental Matters	38
4.15	Murphy’s Marketing	39

ARTICLE V NEGATIVE COVENANTS		39
5.1	Limitation on Liens	39
5.2	Disposition of Assets	41
5.3	Consolidations and Mergers	42
5.4	Loans and Investments	43
5.5	Limitation on Indebtedness	44
5.6	Transactions with Affiliates	46
5.7	Management Fees and Compensation	47
5.8	Use of Proceeds	48
5.9	Contingent Obligations	48
5.10	Compliance with ERISA	49
5.11	Restricted Payments	49
5.12	Change in Business	52
5.13	Change in Structure	52
5.14	Changes in Accounting, Name and Jurisdiction of Organization	52
5.15	Amendments to the Management Agreement and Subordinated Indebtedness	52
5.16	No Negative Pledges	53
5.17	OFAC; Patriot Act	53
5.18	Sale-Leasebacks	53

ARTICLE VI FINANCIAL COVENANTS		54
6.1	Capital Expenditures	54
6.2	Leverage Ratio	54
6.3	Interest Coverage Ratio	55
6.4	Equity Cure	56



ARTICLE VII EVENTS OF DEFAULT		57
7.1	Event of Default	57
7.2	Remedies	59
7.3	Rights Not Exclusive	60
7.4	Cash Collateral for Letters of Credit	60

ARTICLE VIII AGENT		61
8.1	Appointment and Duties	61
8.2	Binding Effect	62
8.3	Use of Discretion	62
8.4	Delegation of Rights and Duties	63
8.5	Reliance and Liability	63
8.6	Agent Individually	64
8.7	Lender Credit Decision	64
8.8	Expenses; Indemnities; Withholding	65
8.9	Resignation of Agent or L/C Issuer	66
8.10	Release of Collateral or Guarantors	66
8.11	Additional Secured Parties	67

ARTICLE IX MISCELLANEOUS		68
9.1	Amendments and Waivers	68
9.2	Notices	70
9.3	Electronic Transmissions	71
9.4	No Waiver; Cumulative Remedies	72
9.5	Costs and Expenses	72
9.6	Indemnity	73
9.7	Marshaling; Payments Set Aside	74
9.8	Successors and Assigns	74
9.9	Assignments and Participations; Binding Effect	74
9.10	Non-Public Information; Confidentiality	79
9.11	Set-off; Sharing of Payments	81
9.12	Counterparts; Facsimile Signature	82
9.13	Severability	82
9.14	Captions	82
9.15	Independence of Provisions	82
9.16	Interpretation	82
9.17	No Third Parties Benefited	82
9.18	Governing Law and Jurisdiction	83
9.19	Waiver of Jury Trial	83
9.20	Entire Agreement; Release; Survival	84
9.21	Patriot Act	84
9.22	Replacement of Lender	84
9.23	Joint and Several	85
9.24	Creditor-Debtor Relationship	85

iii


ARTICLE X TAXES, YIELD PROTECTION AND ILLEGALITY		85
10.1	Taxes	85
10.2	Illegality	88
10.3	Increased Costs and Reduction of Return	89
10.4	Funding Losses	90
10.5	Inability to Determine Rates	91
10.6	Reserves on LIBOR Rate Loans	91
10.7	Certificates of Lenders	92

ARTICLE XI DEFINITIONS		92
11.1	Defined Terms	92
11.2	Other Interpretive Provisions	118
11.3	Accounting Terms and Principles	119
11.4	Payments	119

SCHEDULES


Schedule 1.1(a)		Term Loan Commitments
Schedule 1.1(b)		Revolving Loan Commitments
Schedule 1.1(c)		Certain Permitted Acquisitions
Schedule 3.5		Litigation
Schedule 3.7		ERISA
Schedule 3.8		Margin Stock
Schedule 3.9		Real Estate
Schedule 3.12		Environmental
Schedule 3.15		Labor Relations
Schedule 3.17		Brokers’ and Transaction Fees
Schedule 3.19		Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.20		Jurisdiction of Organization; Chief Executive Office
Schedule 3.26		Franchise Matters
Schedule 5.1		Liens
Schedule 5.2		Permitted Store Dispositions
Schedule 5.4		Investments
Schedule 5.5		Indebtedness
Schedule 5.6		Transactions with Affiliates
Schedule 5.9		Contingent Obligations
Schedule 11.1		Fiscal Periods

EXHIBITS


Exhibit 1.6		Form of Notice of Conversion/Continuation
Exhibit 2.1		Closing Checklist
Exhibit 4.2(b)		Form of Compliance Certificate
Exhibit 9.9(g)(i)(B)		Form of Affiliated Lender Assignment and Assumption
Exhibit 11.1(a)		Form of Assignment
Exhibit 11.1(b)		Form of Notice of Borrowing
Exhibit 11.1(c)		Form of Revolving Note
Exhibit 11.1(d)		Form of Term Note

CREDIT AGREEMENT

This CREDIT AGREEMENT (including all exhibits and schedules hereto, as the same may be amended, modified and/or restated from time to time, this “Agreement”) is entered into as of October 25, 2013, by and among PMI Holdings, Inc., a Delaware corporation (the “Borrower”), the other Persons party hereto that are designated as a “Credit Party”, Golub Capital LLC, a Delaware limited liability company (in its individual capacity, “Golub”), as Agent for the several financial institutions from time to time party to this Agreement (collectively, the “Lenders” and individually each a “Lender”) and for itself as a Lender and such Lenders.

W I T N E S S E T H:

WHEREAS, the Borrower has requested, and the Lenders have agreed to make available to the Borrower, a revolving credit facility (including a letter of credit subfacility) and a term loan upon and subject to the terms and conditions set forth in this Agreement to provide for working capital, capital expenditures and other general corporate purposes of the Borrower and to (a) refinance Prior Indebtedness, (b) make the Closing Date Dividend, (c) fund directly or indirectly certain Acquisitions and/or Investments set forth on Schedule 1.1(c) and pay related fees and expenses and (d) fund certain fees and expenses associated with the funding of the Loans and the consummation of the Closing Date Dividend on the Closing Date (collectively, the “Transactions”);

WHEREAS, the Borrower desires to secure all of its Obligations under the Loan Documents by granting to Agent, for the benefit of the Secured Parties, a security interest in and lien upon substantially all of its Property;

WHEREAS, Papa Murphy’s Intermediate, Inc., a Delaware corporation that directly owns all of the Stock and Stock Equivalents of the Borrower (“Holdings”), is willing to guaranty all of the Obligations and to pledge to Agent, for the benefit of the Secured Parties, all of the Stock and Stock Equivalents of the Borrower and substantially all of its other Property to secure the Obligations;

WHEREAS, subject to the terms hereof, each Domestic Subsidiary (other than Disregarded Domestic Persons) of Holdings other than the Borrower is willing to guaranty all of the Obligations of the Borrower and to grant to Agent, for the benefit of the Secured Parties, a security interest in and lien upon substantially all of its Property;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

ARTICLE I

THE CREDITS

1.1 Amounts and Terms of Commitments .

(a) The Term Loans .

(i) Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Credit Parties contained herein, each Lender with a Term Loan Commitment severally and not jointly agrees to lend to the Borrower on the Closing Date, the amount set forth opposite such Lender’s name in Schedule 1.1(a) under the heading “Term Loan Commitment” (such amount being referred to herein as such Lender’s “Term Loan Commitment”). Amounts borrowed under this subsection 1.1(a)(i) are referred to as the “Term Loans.”

(ii) Amounts borrowed as the Term Loans which are repaid or prepaid may not be reborrowed.

(b) The Revolving Credit . Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Credit Parties contained herein, each Revolving Lender severally and not jointly agrees to make Loans to the Borrower (each such Loan, a “Revolving Loan”) from time to time on any Business Day during the period from the Closing Date through the Final Availability Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender’s name in Schedule 1.1(b) under the heading “Revolving Loan Commitments” (such amount as the same may be reduced or increased from time to time in accordance with this Agreement, being referred to herein as such Lender’s “Revolving Loan Commitment”); provided , however , that, after giving effect to any Borrowing of Revolving Loans, the aggregate principal amount of all outstanding Revolving Loans shall not exceed the Maximum Revolving Loan Balance. Subject to the other terms and conditions hereof, amounts borrowed under this subsection 1.1(b) may be repaid and reborrowed from time to time. The “Maximum Revolving Loan Balance” from time to time will be the Aggregate Revolving Loan Commitment then in effect, less the aggregate amount of Letter of Credit Obligations. If at any time the then outstanding principal balance of Revolving Loans exceeds the Maximum Revolving Loan Balance, then the Borrower shall immediately prepay outstanding Revolving Loans in an amount sufficient to eliminate such excess.

(c) Letters of Credit . (i) Conditions . On the terms and subject to the conditions contained herein, the Borrower may request that one or more L/C Issuers Issue, in accordance with such L/C Issuers’ usual and customary business practices, and for the account of the Credit Parties or any of their Subsidiaries (provided, the Borrower shall be co-applicant with respect to any Letter of Credit issued for the account of a Subsidiary that is not a Credit Party), Letters of Credit (denominated in Dollars) from time to time on any Business Day during the period from the Closing Date through the earlier of (x) the Final Availability Date and (y) five (5) days prior to the date specified in clause (a) of the definition of Revolving Termination Date; provided , however , that no L/C Issuer shall Issue any Letter of Credit upon the occurrence of any of the following or, if after giving effect to such Issuance:

(A) (i) Availability would be less than zero, (ii) the Letter of Credit Obligations for all Letters of Credit would exceed $2,500,000 (the “L/C Sublimit”) or (iii) the aggregate amount of the Letter of Credit is less than $200,000;

(B) the expiration date of such Letter of Credit (i) is not a Business Day, (ii) is more than one (1) year after the date of issuance thereof or (iii) is later than five (5) days prior to the date specified in clause (a) of the definition of Revolving Termination Date; provided, however, that any Letter of Credit with a term not exceeding one (1) year may provide for its renewal for additional periods not exceeding one (1) year as long as (x) each of the applicable Credit Party and such L/C Issuer have the option to prevent such renewal before the expiration of such term or any such period and (y) neither such L/C Issuer nor the Borrower shall permit any such renewal to extend such expiration date beyond the date set forth in clause (iii) above; or

(C) (i) any fee due in connection with, and on or prior to, such Issuance has not been paid, (ii) such Letter of Credit is requested to be Issued in a form that is not acceptable to such L/C Issuer or (iii) such L/C Issuer shall not have received, each in form and substance reasonably acceptable to it and duly executed by the Borrower, the documents that such L/C Issuer generally uses in the Ordinary Course of Business for the Issuance of letters of credit of the type of such Letter of Credit (collectively, the “L/C Reimbursement Agreement”).

For each Issuance, the applicable L/C Issuer may, but shall not be required to, determine that, or take notice whether, the conditions precedent set forth in Section 2.2 have been satisfied or waived in connection with the Issuance of any Letter of Credit; provided , however , that no Letters of Credit shall be Issued during the period starting on the first Business Day after the receipt by such L/C Issuer of notice from Agent or the Required Revolving Lenders that any condition precedent contained in Section 2.2 is not satisfied and ending on the date all such conditions are satisfied or duly waived.

Notwithstanding anything else to the contrary herein, if any Lender is a Non-Funding Lender or Impacted Lender, no L/C Issuer shall be obligated to Issue any Letter of Credit unless (w) the Non-Funding Lender or Impacted Lender has been replaced in accordance with Section 9.9 or 9.22, (x) the Letter of Credit Obligations of such Non-Funding Lender or Impacted Lender have been cash collateralized in an amount equal to 103% of the aggregate maximum undrawn amount of such Letter of Credit, (y) the Revolving Loan Commitments of the other Lenders have been increased by an amount sufficient to satisfy Agent that all future Letter of Credit Obligations will be covered by all Revolving Lenders that are not Non-Funding Lenders or Impacted Lenders, or (z) the Letter of Credit Obligations of such Non-Funding Lender or Impacted Lender have been reallocated to other Revolving Lenders in a manner consistent with subsection 1.11(e)(ii).

(ii) Notice of Issuance . The Borrower shall give the relevant L/C Issuer and Agent a notice of any requested Issuance of any Letter of Credit, which shall be effective only if received by such L/C Issuer and Agent not later than 12:00 p.m. (New York time) on the fifth Business Day prior to the date of such requested Issuance. Such notice shall be made in a writing or Electronic Transmission or in a writing in a form acceptable to such L/C Issuer (an “L/C Request”).

(iii) Reporting Obligations of L/C Issuers . Each L/C Issuer agrees to provide Agent, in form and substance satisfactory to Agent, each of the following on the following dates: (A) (i) on or prior to any Issuance of any Letter of Credit by such L/C Issuer, (ii) immediately after any drawing under any such Letter of Credit or (iii) immediately after any payment (or failure to pay when due) by the Borrower of any related L/C Reimbursement Obligation, notice thereof, which shall contain a reasonably detailed description of such Issuance, drawing or payment and Agent shall provide copies of such notices to each Revolving Lender reasonably promptly after receipt thereof; (B) upon the request of Agent (or any Revolving Lender through Agent), copies of any Letter of Credit Issued by such L/C Issuer and any related L/C Reimbursement Agreement and such other documents and information as may reasonably be requested by Agent; and (C) on the first Business Day of each calendar week, a schedule of the Letters of Credit Issued by such L/C Issuer, in form and substance reasonably satisfactory to Agent, setting forth the Letter of Credit Obligations for such Letters of Credit outstanding on the last Business Day of the previous calendar week.

(iv) Acquisition of Participations . Upon any Issuance of a Letter of Credit in accordance with the terms of this Agreement resulting in any increase in the Letter of Credit Obligations, each Revolving Lender shall be deemed to have acquired, without recourse or warranty, an undivided interest and participation in such Letter of Credit and the related Letter of Credit Obligations in an amount equal to its Commitment Percentage of such Letter of Credit Obligations.

(v) Reimbursement Obligations of the Borrower . The Borrower agrees to pay to the L/C Issuer of any Letter of Credit, or to Agent for the benefit of such L/C Issuer, each L/C Reimbursement Obligation owing with respect to such Letter of Credit no later than the first Business Day after the Borrower receives notice from such L/C Issuer that payment has been made under such Letter of Credit or that such L/C Reimbursement Obligation is otherwise due (the “L/C Reimbursement Date”) with interest thereon computed as set forth in clause (A) below. In the event that any L/C Reimbursement Obligation is not repaid by the Borrower as provided in this clause (v) (or any such payment by the Borrower is rescinded or set aside for any reason), such L/C Issuer shall promptly notify Agent of such failure (and, upon receipt of such notice, Agent shall notify each Revolving Lender) and, irrespective of whether such notice is given, such L/C Reimbursement Obligation shall be payable on demand by the Borrower with interest thereon computed (A) from the date on which such L/C Reimbursement Obligation arose to the L/C Reimbursement Date, at the interest rate applicable during such period to Revolving Loans that are Base Rate Loans and (B) thereafter until payment in full, at the interest rate specified in subsection 1.3(c) to past due Revolving Loans that are Base Rate Loans (regardless of whether or not an election is made under such subsection).

(vi) Reimbursement Obligations of the Revolving Lenders .

(1) Upon receipt of the notice described in clause (v) above from Agent, each Revolving Lender shall pay to Agent for the account of such L/C Issuer its Commitment Percentage of such Letter of Credit Obligations (as such amount may be increased pursuant to subsection 1.11(e)(ii)).

(2) By making any payment described in clause (1) above (other than during the continuation of an Event of Default under subsection 7.1(f) or 7.1(g)), such Lender shall be deemed to have made a Revolving Loan to the Borrower, which, upon receipt thereof by Agent for the benefit of such L/C Issuer, the Borrower shall be deemed to have used in whole to repay such L/C Reimbursement Obligation. Any such payment that is not deemed a Revolving Loan shall be deemed a funding by such Lender of its participation in the applicable Letter of Credit and the Letter of Credit Obligation in respect of the related L/C Reimbursement Obligations. Such participation shall not otherwise be required to be funded. Following receipt by any L/C Issuer of any payment from any Lender pursuant to this clause (vi) with respect to any portion of any L/C Reimbursement Obligation, such L/C Issuer shall promptly pay to Agent, for the benefit of such Lender, all amounts received by such L/C Issuer (or to the extent such amounts shall have been received by Agent for the benefit of such L/C Issuer, Agent shall promptly pay to such Lender all amounts received by Agent for the benefit of such L/C Issuer) with respect to such portion.

(vii) Obligations Absolute . The obligations of the Borrower and the Revolving Lenders pursuant to clauses (iv), (v) and (vi) above shall be absolute, unconditional and irrevocable and performed strictly in accordance with the terms of this Agreement irrespective of (A) (i) the invalidity or unenforceability of any term or provision in any Letter of Credit, any document transferring or purporting to transfer a Letter of Credit, any Loan Document (including the sufficiency of any such instrument), or any modification to any provision of any of the foregoing, (ii) any document presented under a Letter of Credit being forged, fraudulent, invalid, insufficient or inaccurate in any respect or failing to comply with the terms of such Letter of Credit or (iii) any loss or delay, including in the transmission of any document, (B) the existence of any setoff, claim, abatement, recoupment, defense or other right that any Person (including any Credit Party) may have against the beneficiary of any Letter of Credit or any other Person, whether in connection with any Loan Document or any other Contractual Obligation or transaction, or the existence of any other withholding, abatement or reduction, (C) in the case of the obligations of any Revolving Lender, (i) the failure of any condition precedent set forth in Section 2.2 to be satisfied (each of which conditions precedent the Revolving Lenders hereby irrevocably waive) or (ii) any adverse change in the condition (financial or otherwise) of any Credit Party and (D) any other act or omission to act or delay of any kind of Agent, any Lender or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this clause (vii), constitute a legal or equitable discharge of any obligation of the Borrower or any Revolving Lender hereunder.

1.2 Notes .

(a) The Term Loan made by each Lender with a Term Loan Commitment shall be evidenced by this Agreement and, if requested by such Lender, a Term Note payable to such Lender in an amount equal to the unpaid balance of the Term Loan held by such Lender.

(b) The Revolving Loans made by each Revolving Lender shall be evidenced by this Agreement and, if requested by such Lender, a Revolving Note payable to such Lender in an amount equal to such Lender’s Revolving Loan Commitment.

1.3 Interest .

(a) Subject to subsections 1.3(c) and 1.3(d), the Term Loans shall bear interest at a rate per annum equal to the LIBOR or the Base Rate plus the Applicable Margin then in effect. Each Revolving Loan shall bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to the LIBOR or the Base Rate, as the case may be, plus the Applicable Margin then in effect. Each determination of an interest rate by Agent shall be conclusive and binding on Borrower and the Lenders in the absence of manifest error. All computations of fees and interest (other than interest accruing on Base Rate Loans) payable under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. All computations of interest accruing on Base Rate Loans payable under this Agreement shall be made on the basis of a 365-day year (366 in the case of a leap year) and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to but excluding the last day thereof.

(b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any payment or prepayment of Loans in full, including the date of termination of the Revolving Loan Commitments.

(c) At the written election of Agent or the Required Lenders while any Event of Default exists (or automatically while any Event of Default under subsection 7.1(a), 7.1(f) or 7.1(g) exists), the Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the Loans from and after the date of occurrence of such Event of Default, at a rate per annum which is determined by adding two percent (2.0%) per annum to the Applicable Margin then in effect for such Loans (plus the LIBOR or Base Rate, as the case may be). All such interest shall be payable on demand of Agent or the Required Lenders.

(d) Anything herein to the contrary notwithstanding, the obligations of the Borrower hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the respective Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Lender, and in such event the Borrower shall pay such Lender interest at the highest rate permitted by applicable law (“Maximum Lawful Rate”); provided , however , that if at any time thereafter the rate of

interest payable hereunder is less than the Maximum Lawful Rate, the Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement.

1.4 Tax Treatment . Borrower and the Lenders agree (i) that the Loans are intended to be treated as debt for U.S. federal income tax purposes, (ii) that none of the Loans is intended to constitute debt that is governed by the rules set out in Treasury Regulations Section 1.1275-4, and (iii) not to file any tax return, report or declaration inconsistent with the foregoing, unless required by applicable law or Governmental Authority. The inclusion of this Section 1.4 is not an admission by any Lender that it is subject to U.S. taxation.

1.5 Loan Accounts .

(a) Agent, on behalf of the Lenders, shall record on its books and records the amount of each Loan made, the interest rate applicable, all payments of principal and interest thereon and the principal balance thereof from time to time outstanding. Agent shall deliver to the Borrower on a monthly basis a loan statement setting forth such record for the immediately preceding calendar month. Such record shall, absent manifest error, be conclusive evidence of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so, or any failure to deliver such loan statement shall not, however, limit or otherwise affect the obligation of the Borrower hereunder (and under any Note) to pay any amount owing with respect to the Loans or provide the basis for any claim against Agent.

(b) Agent, acting as a non-fiduciary agent of the Borrower solely for tax purposes and solely with respect to the actions described in this subsection 1.4(b), shall establish and maintain at its address referred to in Section 9.2 (or at such other address as Agent may notify the Borrower) (A) a record of ownership (the “Register”) in which Agent agrees to register by book entry the interests (including any rights to receive payment hereunder) of Agent, each Lender and each L/C Issuer in the Term Loans, Revolving Loans, L/C Reimbursement Obligations and Letter of Credit Obligations, each of their obligations under this Agreement to participate in each Loan, Letter of Credit, Letter of Credit Obligations and L/C Reimbursement Obligations, and any assignment of any such interest, obligation or right and (B) accounts in the Register in accordance with its usual practice in which it shall record (1) the names and addresses of the Lenders and the L/C Issuers (and each change thereto pursuant to Sections 9.9 and 9.22), (2) the Commitments of each Lender, (3) the amount of each Loan and each funding of any participation described in clause (A) above, and for LIBOR Rate Loans, the Interest Period applicable thereto, (4) the amount of any principal or interest due and payable or paid, (5) the amount of the L/C Reimbursement Obligations due and payable or paid in respect of Letters of Credit and (6) any other payment received by Agent from Borrower and its application to the Obligations.

(c) Notwithstanding anything to the contrary contained in this Agreement, the Loans (including any Notes evidencing such Loans and, in the case of Revolving Loans, the corresponding obligations to participate in Letter of Credit Obligations) and the L/C Reimbursement Obligations are registered obligations, the right, title and interest of the Lenders and the L/C Issuers and their assignees in and to such Loans or L/C Reimbursement Obligations, as the case may be, shall be transferable only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein. This Section 1.4 and Section 9.9 shall be construed so that the Loans and L/C Reimbursement Obligations are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code.

(d) The Credit Parties, Agent, the Lenders and the L/C Issuers shall treat each Person whose name is recorded in the Register as a Lender or L/C Issuer, as applicable, for all purposes of this Agreement. Information contained in the Register with respect to any Lender or any L/C Issuer shall be available for access by the Borrower, Agent, such Lender or such L/C Issuer during normal business hours and from time to time upon at least one (1) Business Day’s prior notice. No Lender or L/C Issuer shall, in such capacity, have access to or be otherwise permitted to review any information in the Register other than information with respect to such Lender or L/C Issuer unless otherwise agreed by Agent.

1.6 Procedure for Revolving Credit Borrowing .

(a) Each Borrowing of a Revolving Loan shall be made upon the Borrower’s irrevocable (subject to Section 10.5) written notice delivered to Agent substantially in the form of a Notice of Borrowing or in a writing in any other form acceptable to Agent, which notice must be received by Agent prior to 12:00 p.m. (New York time) (i) on the date which is one (1) Business Day prior to the requested Borrowing date of each Base Rate Loan (or the requested Borrowing Date in the case of Revolving Loan aggregating less than $1,000,000) and (ii) on the day which is three Business Days prior to the requested Borrowing date in the case of each LIBOR Rate Loan and shall specify:

(i) the amount of the Borrowing (which shall be in an aggregate minimum principal amount of $100,000);

(ii) the requested Borrowing date, which shall be a Business Day;

(iii) whether the Borrowing is to be comprised of LIBOR Rate Loans or Base Rate Loans; and

(iv) if the Borrowing is to be LIBOR Rate Loans, the Interest Period applicable to such Loans.

(b) Upon receipt of a Notice of Borrowing, Agent will promptly notify each Revolving Lender of such Notice of Borrowing and of the amount of such Lender’s Commitment Percentage of the Borrowing.

(c) Unless Agent is otherwise directed in writing by the Borrower, the proceeds of each requested Borrowing after the Closing Date will be made available to the Borrower by Agent by wire transfer of such amount to the Borrower pursuant to the wire transfer instructions specified by the Borrower.

1.7 Conversion and Continuation Elections .

(a) The Borrower shall have the option to (i) request that any Revolving Loan be made as a LIBOR Rate Loan, (ii) convert at any time all or any part of outstanding Revolving Loans or Term Loans from Base Rate Loans to LIBOR Rate Loans, (iii) convert any LIBOR Rate Loan to a Base Rate Loan, subject to Section 10.4 if such conversion is made prior to the expiration of the Interest Period applicable thereto, or (iv) continue all or any portion of any Revolving Loan or Term Loan as a LIBOR Rate Loan upon the expiration of the applicable Interest Period. Any Revolving Loan or group of Revolving Loans or Term Loan or group of Term Loans having the same proposed Interest Period to be made or continued as, or converted into, a LIBOR Rate Loan must be in a minimum amount of $100,000. Any such election must be made by the Borrower by 12:00 p.m. (New York time) on the third Business Day prior to (1) the date of any proposed Revolving Loan which is to bear interest at LIBOR, (2) the end of each Interest Period with respect to any LIBOR Rate Loans to be continued as such, or (3) the date on which the Borrower wishes to convert any Base Rate Loan to a LIBOR Rate Loan for an Interest Period designated by the Borrower. No LIBOR Rate Loan shall be comprised of both Revolving Loans (or any one or more portions thereof) and the Term Loan (or any one or more portions thereof). If no election is received with respect to a LIBOR Rate Loan by 12:00 p.m. (New York time) on the third Business Day prior to the end of the Interest Period with respect thereto, that LIBOR Rate Loan shall be converted to a Base Rate Loan at the end of its Interest Period. The Borrower must make such election by notice to Agent in writing, including by Electronic Transmission. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) substantially in the form of Exhibit 1.6 or in a writing in any other form acceptable to Agent. No Revolving Loan or Term Loan shall be made, converted into or continued as a LIBOR Rate Loan, if an Event of Default has occurred and is continuing and Agent or the Required Lenders have determined not to make or continue any Revolving Loan or Term Loan as a LIBOR Rate Loan as a result thereof.

(b) Upon receipt of a Notice of Conversion/Continuation, Agent will promptly notify each Lender thereof. In addition, Agent will, with reasonable promptness, notify the Borrower and the Lenders of each determination of LIBOR; provided that any failure to do so shall not relieve the Borrower of any liability hereunder or provide the basis for any claim against Agent. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans held by each Lender with respect to which the notice was given.

(c) Notwithstanding any other provision contained in this Agreement, after giving effect to any Borrowing, or to any continuation or conversion of any Loans, there shall not be more than nine (9) different Interest Periods in effect.

1.8 Optional Prepayments and Reductions in Revolving Loan Commitments .

(a) Optional Prepayments Generally . The Borrower may at any time upon at least two (2) Business Days’ (or such shorter period as is acceptable to Agent) prior written notice by the Borrower to Agent, prepay the Loans in whole or in part in an amount greater than or equal to $100,000 (other than Revolving Loans for which prior written notice is not required and for which no minimum shall apply), in each instance, subject to the Prepayment Premium if applicable and any other reimbursements as provided in Section 10.4. Optional partial prepayments of Term Loans shall be applied as specified by the Borrower in such notice of prepayment and, in the absence of such direction, in the manner set forth in subsection 1.9(g). Optional partial prepayments of Term Loans in amounts less than $100,000 shall not be permitted. The foregoing provisions of this subsection 1.8(a) shall not apply with respect to any Discounted Prepayment governed by subsection 1.8(d).

(b) Reductions in Revolving Loan Commitments . The Borrower may at any time upon at least two (2) Business Days’ (or such shorter period as is acceptable to Agent) prior written notice to Agent permanently reduce the Aggregate Revolving Loan Commitment; provided that such reductions shall be in an amount greater than or equal to $250,000 (unless the Aggregate Revolving Commitment is being reduced to zero and the amount of the Aggregate Revolving Commitment in effect immediately prior to such reduction is less than $250,000),. All reductions of the Aggregate Revolving Loan Commitment shall be allocated pro rata among all Lenders with a Revolving Loan Commitment. A permanent reduction of the Aggregate Revolving Loan Commitment shall require a corresponding pro rata reduction in the L/C Sublimit.

(c) Notices . Notice of prepayment or commitment reduction pursuant to clauses (a) and (b) above shall not thereafter be revocable by the Borrower and Agent will promptly notify each Lender thereof and of such Lender’s Commitment Percentage of such prepayment or reduction; provided , however, any notice of prepayment or reduction may be contingent on the occurrence of a refinancing or the consummation of a sale, transfer, lease or other disposition of assets and may be revoked or the termination date deferred if the refinancing or sale, transfer, lease or other disposition of assets does not occur. The payment amount specified in a notice of prepayment shall be due and payable on the date specified therein. Together with each prepayment under this Section 1.8, the Borrower shall pay any amounts required pursuant to Section 10.4.

(d) Discounted Prepayments .

(i) Generally . So long as (A) no Default or Event of Default has occurred and is continuing on both the date a Discounted Prepayment Notice (as defined below) is delivered to Agent and Lenders and the date a Discounted Prepayment (as defined below) is made (both before and after giving effect thereto), (B) no proceeds of Revolving Loans are used to make any such Discounted Prepayment, and (C) except as previously disclosed in writing to Agent, no Credit Party has any MNPI that both (1) has not been previously disclosed to Agent and the Lenders (other than because a Lender does not wish to receive MNPI with respect to any Credit Party or any of their respective securities), and (2) could reasonably be expected to have a material effect upon a

Lender’s decision to offer a Discounted Prepayment of the Term Loan, the Credit Parties (and their Subsidiaries) shall be permitted to make voluntary prepayments of the Term Loan from internally generated funds or the Net Issuance Proceeds from the issuance of Stock or Stock Equivalents (other than Specified Equity Contributions) or the incurrence of Indebtedness (other than the Obligations otherwise permitted hereunder) not more frequently than once during each Fiscal Quarter (each, a “Discounted Prepayment”) during the term of this Agreement pursuant to the provisions of this subsection 1.8(d). Notwithstanding anything to the contrary provided in this Agreement or any other Loan Document, the Borrower shall not be permitted to make any Discounted Prepayment if after giving effect thereto the Affiliated Lenders would hold a greater aggregate principal amount of Term Loan than is permitted by Section 9.9(g).

(ii) Procedures . In connection with any Discounted Prepayment, the applicable Credit Party (or Subsidiary thereof) will notify Agent and Lenders holding the Term Loan in writing (the “Discounted Prepayment Notice”) that it desires to prepay the Term Loan on a specified Business Day, in a maximum aggregate amount (which amount shall be not less than $1,000,000 and whole increments of $100,000 in excess thereof) (the “Discounted Prepayment Amount”) at a discount to par (which shall be expressed as a range of percentages of par of the principal amount of the Term Loan) specified by such Credit Party (or Subsidiary thereof) with respect to each Discounted Prepayment, the “Discount Price Range”); provided , that such notice shall be received by Agent and Lenders no earlier than fifteen (15) Business Days and no later than five Business Days prior to the proposed date of such Discounted Prepayment. In connection with a Discounted Prepayment, the applicable Credit Party (or Subsidiary thereof) will allow each Lender holding the Term Loan to specify to Borrower and, except to the extent necessary to determine the Applicable Discount Price in the following sentence, on a confidential basis, a discount to par (which shall be expressed as a price equal to a percentage of par of the principal amount of the Term Loan held by such Lender) (the “Acceptable Discount Price”) for a principal amount (subject to rounding requirements specified by Agent) of the Term Loan held by such Lender at which such Lender is willing to permit such voluntary prepayment. Based on the Acceptable Discount Prices and principal amounts of the Term Loan specified by Lenders, Agent, in consultation with the Borrower, will determine the applicable discount price (the “Applicable Discount Price”) for the applicable Discounted Prepayment, which will be the lower of (i) the lowest Acceptable Discount Price at which the applicable Credit Party (or Subsidiary thereof) can complete the Discounted Prepayment for the Discounted Prepayment Amount and (ii) if the Lenders’ response is such that the Discounted Prepayment could not be completed for the full Discounted Prepayment Amount, the highest Acceptable Discount Price specified by the Lenders that is within the Discount Price Range specified by the applicable Credit Party (or Subsidiary thereof).

(iii) Prepayments; Application . The applicable Credit Party (or Subsidiary thereof) shall prepay the Term Loan (or the respective portion thereof) offered by Lenders at the Acceptable Discount Prices specified by each such Lender that are equal to or less than the Applicable Discount Price (“Qualifying Term Loans”) at the Applicable Discount Price; provided , that if the aggregate proceeds required to prepay Qualifying Term Loans (disregarding any interest payable under this subsection 1.8(d))

would exceed the Discounted Prepayment Amount for such Discounted Prepayment, the applicable Credit Party (or Subsidiary thereof) shall prepay such Qualifying Term Loans at the Applicable Discount Price ratably based on the respective principal amounts of such Qualifying Term Loans (subject to rounding requirements specified by Agent). The portion of the Term Loan prepaid by the applicable Credit Party (or Subsidiary thereof) pursuant to this subsection 1.8(d) shall be accompanied by payment of accrued and unpaid interest on the par principal amount so prepaid to, but not including, the date of prepayment. The par principal amount of the Term Loan prepaid pursuant to this subsection 1.8(d) shall be applied to reduce the remaining installments of the respective Term Loan owing to the Lenders so prepaid in the manner set forth in subsection 1.9(g) with respect to mandatory prepayments (without affecting the amount of the installment payments owing to the Lenders not prepaid pursuant to this subsection 1.8(d)). The par principal amount of the Term Loan prepaid pursuant to this subsection 1.8(d) shall be deemed immediately cancelled upon payment of the applicable Discounted Prepayment.

(iv) Lender Consent . The Lenders hereby consent to the transactions described in this subsection 1.8(d) and waive the requirements of any provision of this Agreement or any other Loan Document that might otherwise result in a Default or Event of Default as a result of a Discounted Prepayment.

(v) Miscellaneous . Each Discounted Prepayment shall be consummated pursuant to procedures (including, without limitation, as to timing, rounding and minimum amounts, type and Interest Periods of accepted Term Loan, conditions for terminating a Discounted Prepayment or rescinding an acceptance of prepayment (if any), forms of other notices (including notices of offer and acceptance) by the Borrower and Lenders and determination of Applicable Discount Price) established by Agent acting in its reasonable discretion and with the consent of the Borrower. The making of a Discounted Prepayment shall be deemed to be a representation and warranty by the Borrower that all conditions precedent to such Discounted Prepayment set forth in this subsection 1.8(d) were satisfied in all respects.

1.9 Mandatory Prepayments of Loans and Commitment Reductions .

(a) Scheduled Term Loan Payments . The principal amount of the Term Loan shall be paid in installments on the dates and in the respective amounts shown below:


Date of Payment	Amount of Term Loan Payment
April 1, 2014	$	417,500
July 1, 2014	$	417,500
September 30, 2014	$	417,500
December 30, 2014	$	417,500

April 1, 2015	$	417,500
June 30, 2015	$	417,500
September 29, 2015	$	417,500
December 29, 2015	$	417,500


March 29, 2016	$	417,500
June 28, 2016	$	417,500
September 27, 2016	$	417,500
January 3, 2017	$	417,500

April 4, 2017	$	417,500
June 6, 2017	$	417,500
October 3, 2017	$	417,500
January 2, 2018	$	417,500

April 3, 2018	$	417,500
July 3, 2018	$	417,500
October 2, 2018	$	417,500
October 25, 2018	$	159,067,500

The final scheduled installment of the Term Loan shall, in any event, be in an amount equal to the entire remaining principal balance of the Term Loan.

(b) Revolving Loan . The Borrower shall repay to the Lenders in full on the date specified in clause (a) of the definition of “Revolving Termination Date” the aggregate principal amount of the Revolving Loans outstanding on the Revolving Termination Date.

(i) make a Disposition; or

(ii) suffer an Event of Loss;

and the aggregate amount of the Net Proceeds received by the Credit Parties and their Subsidiaries in connection with (x) such Disposition exceeds $250,000 or such Disposition and all other Dispositions occurring during the Fiscal Year exceeds $500,000 or (y) such Event of Loss exceeds $250,000 or such Event of Loss and all other Events of Loss occurring during the Fiscal Year exceeds $500,000, then (A) the Borrower shall promptly notify Agent of such Disposition or Event of Loss (including the amount of the estimated Net Proceeds to be received by a Credit Party and/or such Subsidiary in respect thereof) and (B) promptly upon receipt by a Credit Party and/or such Subsidiary of the Net Proceeds of such Disposition or Event of Loss, the Borrower shall deliver, or cause to be delivered an amount equal to, such excess Net Proceeds to Agent for distribution to the Lenders as a prepayment of the Loans, which prepayment shall be applied in accordance with subsection 1.9(g) hereof. Notwithstanding the foregoing and provided no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Credit Party or such Subsidiary reinvests an amount equal to the Net Proceeds of such Disposition or Event of Loss in assets (other than

Inventory) of a kind then used or usable in the business of a Credit Party or such Subsidiary, within two hundred seventy (270) days after the date of receipt of such Net Proceeds or enters into a binding commitment thereof within said two hundred seventy (270) day period and subsequently makes such reinvestment within three hundred sixty (360) days after the date of receipt of such Net Proceeds; provided, that the Borrower notifies Agent of such Credit Party’s or such Subsidiary’s intent to reinvest and of the completion of such reinvestment at the time such proceeds are received and when such reinvestment occurs, respectively. Pending such reinvestment, the Net Proceeds shall be deposited, and shall remain on deposit, in a deposit account in respect of which there exists a Control Agreement between Agent and the bank or other financial institution pursuant to which Agent has a perfected security interest.

(d) Issuance of Securities; Indebtedness . Without duplication of subsection 1.9(c), immediately upon the receipt by any Credit Party or any Subsidiary of any Credit Party of the Net Issuance Proceeds of (i) Specified Equity Contributions or (ii) the incurrence of Indebtedness (other than Net Issuance Proceeds from the incurrence of Indebtedness permitted hereunder), the Borrower shall deliver, or cause to be delivered, to Agent an amount equal to such Net Issuance Proceeds, in each case, for application to the Loans in accordance with subsection 1.9(g).

(e) Excess Cash Flow . Within five Business Days after the annual financial statements are required to be delivered pursuant to subsection 4.1(a) hereof, commencing with such annual financial statements for the Fiscal Year ending December 31, 2014, the Borrower shall deliver to Agent (and Agent shall make available to each Lender) a written calculation of Excess Cash Flow of the Credit Parties and their Subsidiaries for such Fiscal Year in the form of Exhibit 4.2(b) and certified as correct on behalf of the Credit Parties by a Responsible Officer of the Borrower and concurrently therewith shall deliver to Agent, for distribution to the Lenders, an amount equal to (i) (x) a percentage of such Excess Cash Flow equal to, if the Leverage Ratio (as calculated in the manner set forth on Exhibit 4.2(b)), as of the last day of such Fiscal Year is (1) greater than or equal to 4.00, fifty percent (50%), (2) less than 4.00 but equal to or greater than 2.75, twenty five percent (25%), and (3) less than 2.75, zero percent (0%), less (ii) voluntary prepayments of the Term Loan during such period other than Discounted Prepayments, in each case to the extent such prepayments are applied in the same manner mandatory prepayments under this subsection 1.9(e) are required to be applied in accordance with subsection 1.9(g) (or in the inverse order of maturity), less (iii) voluntary prepayments of Revolving Loans during such period accompanied by a permanent reduction of the Revolving Loan Commitment, to the extent not funded with the proceeds of other Indebtedness, in each case, for application to the Loans in accordance with the provisions of subsection 1.9(f) hereof. Excess Cash Flow shall be calculated in the manner set forth in the Compliance Certificate.

(f) IPO Proceeds . Without duplication of subsection 1.9(c), upon the consummation of an IPO, promptly upon receipt of the Net Issuance Proceeds of such IPO by Holdings or any direct or indirect parent of Holdings who is the IPO issuer, Borrower shall deliver to Agent an amount equal to the Net Issuance Proceeds of such IPO in an amount not less than an amount sufficient to cause the Leverage Ratio for the period of twelve (12) consecutive Fiscal Periods most recently ended for which financial statements have been delivered or are required to be delivered pursuant to Section 4.1, on a pro forma basis after giving effect to such prepayment, to be equal to or less than 4.25 (or, if less, the amount of such proceeds Net Issuance Proceeds), for application to the Loans in accordance with subsection 1.9(g).

(g) Application of Prepayments . Subject to subsection 1.10(c), any prepayments pursuant to (i) in cases of each of subsection 1.9(c), 1.9(d), or 1.9(e) shall be applied first to prepay the next six unpaid scheduled amortization payments on the Term Loan in direct order of maturity; second to prepay all remaining installments of the Term Loan pro rata against all such scheduled installments (including the final installment at maturity); and third to prepay outstanding Revolving Loans without permanent reduction of the Aggregate Revolving Loan Commitment and (ii) in the case of subsection 1.9(f), first to prepay outstanding Revolving Loans without permanent reduction of the Aggregate Revolving Loan Commitment; second to prepay the next six unpaid scheduled amortization payments on the Term Loan in direct order of maturity; and third to prepay all remaining installments of the Term Loan pro rata against all such scheduled installments (including the final installment at maturity). To the extent permitted by the foregoing sentences, amounts prepaid shall be applied first to any Base Rate Loans then outstanding and then to outstanding LIBOR Rate Loans with the shortest Interest Periods remaining. Together with each prepayment under this Section 1.9, the Borrower shall pay any amounts required pursuant to Section 10.4 hereof.

(h) No Implied Consent . Provisions contained in this Section 1.9 for application of proceeds of certain transactions shall not be deemed to constitute consent of the Lenders to transactions that are not otherwise permitted by the terms hereof or the other Loan Documents.

1.10 Fees .

(a) Fees . The Borrower shall pay to Agent, for Agent’s own account, fees in the amounts and at the times set forth in a letter agreement between the Borrower and Agent dated of even date herewith (as amended from time to time, the “Fee Letter”).

(b) Unused Commitment Fee . The Borrower shall pay to Agent a fee (the “ Unused Commitment Fee ”) for the account of each Revolving Lender in an amount equal to

(i) the average daily balance of the Revolving Loan Commitment of such Revolving Lender during the preceding Fiscal Quarter, less

(ii) the sum of (x) the average daily balance of all Revolving Loans held by such Revolving Lender plus (y) the average daily amount of Letter of Credit Obligations held by such Revolving Lender, in each case, during the preceding Fiscal Quarter,

(iii) multiplied by one half of one percent (0.50%) per annum.

The total Unused Commitment Fee paid by the Borrower will be equal to the sum of all of the Unused Commitment Fees due to the Lenders, subject to subsection 1.12(e)(vi). Such fee shall be payable quarterly in arrears on the first day of each Fiscal Quarter following the date hereof. The Unused Commitment Fee provided in this subsection 1.10(b) shall accrue at all times from and after the Closing Date.

(c) Letter of Credit Fee . The Borrower agrees to pay to Agent for the ratable benefit of the Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred hereunder, (i) without duplication of costs and expenses otherwise payable to Agent or Lenders hereunder or fees otherwise paid by the Borrower, all reasonable out-of-pocket costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each Fiscal Quarter during which any Letter of Credit Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to the product of the average daily undrawn face amount of all Letters of Credit Issued, guaranteed or supported by risk participation agreements multiplied by a per annum rate equal to the Applicable Margin with respect to Revolving Loans which are LIBOR Rate Loans; provided , however , at Required Revolving Lenders’ option, while an Event of Default exists (or automatically while an Event of Default under subsection 7.1(a), 7.1(f) or 7.1(g) exists), such rate shall be increased by two percent (2.00%) per annum. Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the first day of each Fiscal Quarter and on the date on which all L/C Reimbursement Obligations have been discharged. In addition, the Borrower shall pay to Agent, any L/C Issuer or any prospective L/C Issuer, as appropriate, on demand, such L/C Issuer’s or prospective L/C Issuer’s customary fees at then prevailing rates, without duplication of fees otherwise payable hereunder (including all per annum fees), charges and expenses of such L/C Issuer or prospective L/C Issuer in respect of the application for, and the Issuance, negotiation, acceptance, amendment, transfer and payment of, each Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is Issued.

1.11 Payments by the Borrower .

(a) All payments (including prepayments) to be made by each Credit Party on account of principal, interest, fees and other amounts required hereunder shall be made without set off, recoupment, counterclaim or deduction of any kind (except as otherwise expressly provided in Section 10.1), shall, except as otherwise expressly provided herein, be made to Agent (for the ratable account of the Persons entitled thereto) at the address for payment specified in the signature page hereof in relation to Agent (or such other address as Agent may from time to time specify in accordance with Section 9.2), including payments utilizing the ACH system, and shall be made in Dollars and by wire transfer or ACH transfer in immediately available funds (which shall be the exclusive means of payment hereunder), no later than 2:00 p.m. (New York time) on the date due. Any payment which is received by Agent later than 2:00 p.m. (New York time) may in Agent’s discretion be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. The Borrower and each other Credit Party hereby irrevocably waives the right to direct the application during the continuance of an Event of Default of any and all payments in respect of any Obligation and any proceeds of Collateral. The Borrower hereby authorizes Agent and each Lender to make a Revolving Loan (which shall be a Base Rate Loan) to pay (i) interest, principal, L/C Reimbursement Obligations, Agent’s fees, Unused Commitment Fees and Letter of Credit Fees, in each instance, on the date due, or (ii) after ten (10) days prior notice to the Borrower, other fees, costs or expenses payable by the Borrower or any of its Subsidiaries hereunder or under the other Loan Documents.

(b) Subject to the provisions set forth in the definition of “Interest Period” herein, if any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

(c) During the continuance of an Event of Default, Agent may, and shall upon the direction of Required Lenders, apply any and all payments received by Agent in respect of any Obligation (including all payments and prepayments) and all proceeds received by Agent as a result of the exercise of its remedies under the Collateral Documents after the occurrence and during the continuation of an Event of Default in accordance with clauses first through sixth below. Notwithstanding any provision herein to the contrary, all amounts collected or received by Agent, including proceeds of any Collateral and all payments made by the Credit Parties to Agent, after any or all of the Obligations have been accelerated (so long as such acceleration has not been rescinded), shall be applied as follows:

first , to payment of costs and expenses, including Attorney Costs, of Agent payable or reimbursable by the Credit Parties under the Loan Documents;

second , to payment of Attorney Costs of Lenders payable or reimbursable by the Borrower under this Agreement;

third , to payment of all accrued unpaid interest on the Obligations (other than Bank Product Obligations and Secured Rate Contracts) and fees owed to Agent, Lenders and L/C Issuers;

fourth , to payment of principal of the Obligations (other than Bank Product Obligations and Secured Rate Contracts) including, without limitation, L/C Reimbursement Obligations then due and payable, and cash collateralization of unmatured L/C Reimbursement Obligations to the extent not then due and payable;

fifth , to payment of any other amounts owing constituting Obligations (other than Bank Product Obligations and Secured Rate Contracts); and

sixth , to payment of any interest, principal or other amounts owing in respect of Bank Product Obligations and Secured Rate Contracts

seventh , any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto.

In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided , that until amounts in such category have been satisfied in full prior to the application to the next succeeding category and (ii) each of the Lenders or other Persons entitled to payment shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses third, fourth and fifth above. No Default or Event of Default shall be deemed to have occurred solely as a result of the application of payments pursuant to this Section 1.11(c).

1.12 Payments by the Lenders to Agent; Settlement .

(a) Agent may, on behalf of Lenders, disburse funds to the Borrower for Loans requested. Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Commitment Percentage of any Loan before Agent disburses same to the Borrower. If Agent elects to require that each Lender make funds available to Agent prior to disbursement by Agent to the Borrower, Agent shall advise each Lender by telephone or fax of the amount of such Lender’s Commitment Percentage of the Loan requested by the Borrower no later than the Business Day prior to the scheduled Borrowing date applicable thereto, and provided that Agent has complied with its obligations under subsection 1.5(b) hereof, each such Lender shall pay Agent such Lender’s Commitment Percentage of such requested Loan, in same day funds, by wire transfer to Agent’s account, as set forth on Agent’s signature page hereto, no later than 1:00 p.m. (New York time) on such scheduled Borrowing date. Nothing in this subsection 1.11(a) or elsewhere in this Agreement or the other Loan Documents, including the remaining provisions of Section 1.11, shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Agent, any Lender or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

(b) Agent shall advise each Lender by telephone or fax of the amount of such Lender’s Commitment Percentage of principal, interest and Fees paid for the benefit of Lenders with respect to each applicable Loan and, promptly following receipt of such payment, shall pay to each Lender such Lender’s Commitment Percentage (except as otherwise provided in subsection 1.11(e)(iv) and subsection 1.11(e)(vi)) thereof. Such payments shall be made by wire transfer to such Lender not later than 2:00 p.m. (New York time) on the next Business Day following such receipt.

(c) Availability of Lender’s Commitment Percentage . Agent may assume that each Revolving Lender will make its Commitment Percentage of each Revolving Loan available to Agent on each Borrowing date. If such Commitment Percentage is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without setoff, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Commitment Percentage forthwith upon Agent’s demand, Agent shall promptly notify the Borrower and the Borrower shall immediately repay such amount to Agent. Nothing in this subsection 1.12(c) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. Without limiting the provisions of subsection 1.12(b), to the extent that Agent advances funds to the Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such advance is made, Agent shall be entitled to retain for its account all interest accrued on such advance from the date such advance was made until reimbursed by the applicable Revolving Lender.

(d) Return of Payments .

(i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from the Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind.

(ii) If Agent determines at any time that any amount received by Agent under this Agreement or any other Loan Document must be returned to any Credit Party or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to the Borrower or such other Person, without setoff, counterclaim or deduction of any kind, and Agent will be entitled to set-off against future distributions to such Lender any such amounts (with interest) that are not repaid on demand.

(e) Non-Funding Lenders .

(i) Responsibility . The failure of any Non-Funding Lender to make any Revolving Loan, to fund any purchase of any participation to be made or funded by it, or to make any payment required by it hereunder on the date specified therefor shall not relieve any other Lender of its obligations to make such loan, fund the purchase of any such participation, or make any other payment required hereunder on such date, and neither Agent nor, other than as expressly set forth herein, any other Lender shall be responsible for the failure of any Non-Funding Lender to make a loan, fund the purchase of a participation or make any other payment required hereunder.

(ii) Reallocation . If any Revolving Lender is a Non-Funding Lender, all or a portion of such Non-Funding Lender’s Letter of Credit Obligations (unless such Lender is the L/C Issuer that issued such Letter of Credit) shall, at Agent’s election at any time or upon any L/C Issuer’s written request delivered to Agent (whether before or after the occurrence of any Default or Event of Default), be reallocated to and assumed by the Revolving Lenders that are not Non-Funding Lenders or Impacted Lenders in accordance with their Commitment Percentages of the Aggregate Revolving Loan Commitment (calculated as if all Non-Funding Lenders’ and Impacted Lenders’ Commitment Percentages were reduced to zero and each other Revolving Lender’s (other than any other Non-Funding Lender’s and any Impacted Lender’s) Commitment Percentage had been increased proportionately), provided, that no Revolving Lender shall be reallocated any such amounts or be required to fund any amounts that would cause the sum of its outstanding Revolving Loans, outstanding Letter of Credit Obligations, to exceed its Revolving Loan Commitment.

(iii) Voting Rights . Notwithstanding anything set forth herein to the contrary, including Section 9.1, a Non-Funding Lender (other than a Non-Funding Lender who only holds Term Loan) shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be, or have its Loans and Commitments, included in the determination of “Required Lenders”, “Required Revolving Lenders” or “Lenders directly affected” pursuant to Section 9.1) for any voting or consent rights under or with respect to any Loan Document, provided, that (A) the Commitment of a Non-Funding Lender may not be increased, extended or reinstated, (B) the principal of a Non-Funding Lender’s Loans may not be reduced or forgiven, and (C) the interest rate applicable to Obligations owing to a Non-Funding Lender may not be reduced by an amendment, waiver or consent under any Loan Documents, in each case, without the consent of such Non-Funding Lender. Moreover, for the purposes of determining Required Lenders and Required Revolving Lenders, the Loans, Letter of Credit Obligations, and Commitments held by Non-Funding Lenders shall be excluded from the total Loans and Commitments outstanding.

(iv) Borrower Payments to a Non-Funding Lender . Agent is hereby authorized to use all portions of any payments received by Agent for the benefit of any Non-Funding Lender pursuant to this Agreement to pay in full the Aggregate Excess Funding Amount to the appropriate Secured Parties. Agent is hereby authorized and is entitled to hold as cash collateral in a non-interest bearing account up to an amount equal to such Non-Funding Lender’s pro rata share, without giving effect to any reallocation pursuant to subsection 1.11(e)(ii), of all Letter of Credit Obligations until the Obligations are paid in full in cash, all Letter of Credit Obligations have been discharged or cash collateralized and all Commitments have been terminated. Upon any unfunded obligations owing by a Non-Funding Lender becoming due and payable, Agent is hereby authorized to use such cash collateral to make such payment on behalf of such Non-Funding Lender. With respect to any Non-Funding Lender’s failure to fund Revolving Loans or purchase participations in Letters of Credit or Letter of Credit Obligations, any amounts applied by Agent to satisfy such funding shortfalls shall be deemed to constitute a Revolving Loan or amount of the participation required to be funded and, if necessary to effectuate the foregoing, the other Revolving Lenders shall be deemed to have sold, and such Non-Funding Lender shall be deemed to have purchased, Revolving Loans or Letter of Credit participation interests from the other Revolving Lenders until such time as the aggregate amount of the Revolving Loans and participations in Letters of Credit and Letter of Credit Obligations are held by the Revolving Lenders in accordance with their Commitment Percentages of the Aggregate Revolving Loan Commitment. Any amounts owing by a Non-Funding Lender to Agent which are not paid when due shall accrue interest at the interest rate applicable during such period to Revolving Loans that are Base Rate Loans. In the event that Agent is holding cash collateral of a Non-Funding Lender that cures pursuant to clause (v) below or ceases to be a Non-Funding Lender pursuant to the definition of Non-Funding Lender, Agent shall return the unused portion of such cash collateral to such Lender. The “Aggregate Excess Funding Amount” of a Non-Funding Lender shall be the aggregate amount of (A) all unpaid obligations owing by such Lender to Agent, L/C Issuers, and other Lenders under the Loan Documents, including such Lender’s share of all Revolving Loans, Letter of Credit Obligations, plus, without duplication, (B) all amounts of Letter of Credit Obligations of such Non-Funding Lender reallocated to other Lenders pursuant to subsection 1.11(e)(ii).

(v) Cure . A Lender may cure its status as a Non-Funding Lender under clause (a) of the definition of Non-Funding Lender if such Lender fully pays to Agent, on behalf of the applicable Secured Parties, the Aggregate Excess Funding Amount, plus all interest due thereon. Any such cure shall not relieve any Lender from liability for breaching its contractual obligations hereunder.

(vi) Fees . A Lender that is a Non-Funding Lender pursuant to clause (a) of the definition of Non-Funding Lender shall not earn and shall not be entitled to receive, and the Borrower shall not be required to pay, such Lender’s portion of the Unused Commitment Fee during the time such Lender is a Non-Funding Lender pursuant to clause (a) thereof. In the event that any reallocation of Letter of Credit Obligations occurs pursuant to subsection 1.11(e)(ii), during the period of time that such reallocation remains in effect, the Letter of Credit Fee payable with respect to such reallocated portion shall be payable to (A) all Revolving Lenders based on their pro rata share of such reallocation or (B) to the L/C Issuer for any remaining portion not reallocated to any other Revolving Lenders.

(f) Procedures . Agent is hereby authorized by each Credit Party and each other Secured Party to establish procedures (and to amend such procedures from time to time) to facilitate administration and servicing of the Loans and other matters incidental thereto. Without limiting the generality of the foregoing, Agent is hereby authorized to establish procedures to make available or deliver, or to accept, notices, documents and similar items on, by posting to or submitting and/or completion, on E-Systems.

ARTICLE II

CONDITIONS PRECEDENT

2.1 Conditions of Initial Loans . The obligation of each Lender to make its initial Loans and of each L/C Issuer to Issue, or cause to be Issued, the initial Letters of Credit hereunder is subject to satisfaction of the following conditions:

(a) Loan Documents . Agent shall have received on or before the Closing Date all of the agreements, documents, instruments and other items set forth on the Closing Checklist, each in form and substance reasonably satisfactory to Agent and the Lenders;

(b) EBITDA and Leverage . The Borrower shall have delivered a certificate to Agent, in form reasonably satisfactory to Agent, demonstrating that: (i) EBITDA of the Borrower for the twelve (12) consecutive Fiscal Periods ended September 30, 2013 (with such adjustments thereto to be reasonably agreed upon among Agent, the Lenders party hereto and Borrower) shall be not less than $25,600,000; and (ii) the ratio of (x) total Funded Indebtedness of the Credit Parties as of the Closing Date after giving effect to the consummation of the Transactions, payment of all costs and expenses in connection therewith, funding of the initial Loans and Issuance of the initial Letters of Credit and net of cash funded to the balance sheet to consummate the Acquisitions and/or Investments set forth on Schedule 1.1(c) in an amount not to exceed $6,900,000, to (y) EBITDA of the Borrower for the twelve (12) consecutive Fiscal Periods ending September 30, 2013 (with such adjustments thereto to be reasonably agreed upon among Agent, the Lenders party hereto and Borrower) shall be not greater than 6.25; and

(c) Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs . (i) Agent shall have received fully executed pay-off letters reasonably satisfactory to Agent respecting the amounts necessary to repay in full all of the obligations of any Credit Party to Prior Lender and confirming that all Liens upon any of the Property of the Credit Parties or any of their Subsidiaries in favor of Prior Lender shall be terminated upon receipt of such payment; and (ii) all letters of credit issued or guaranteed by Prior Lender shall have been cash collateralized, or supported by a Letter of Credit Issued pursuant hereto, as mutually agreed upon by Agent, the Borrower and Prior Lender.

2.2 Conditions to All Borrowings . Except as otherwise expressly provided herein, no Lender or L/C Issuer shall be obligated to fund any Loan or incur any Letter of Credit Obligation, if, as of the date thereof:

(a) any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect in any material respect (without duplication of any materiality qualifier contained therein) as of such date, except to the extent that such representation or warranty expressly relates to an earlier date (in which event such representations and warranties were untrue or incorrect in any material respect (without duplication of any materiality qualifier contained therein) as of such earlier date), and Agent or the Required Revolving Lenders have determined not to make such Loan or incur such Letter of Credit Obligation as a result of the fact that such warranty or representation is untrue or incorrect;

(b) any Default or Event of Default has occurred and is continuing or would result after giving effect to any Loan (or the incurrence of any Letter of Credit Obligation), and Agent or the Required Revolving Lenders shall have determined not to make any Loan or incur any Letter of Credit Obligation as a result of that Default or Event of Default; and

(c) after giving effect to any Loan (or the incurrence of any Letter of Credit Obligations), the aggregate outstanding amount of the Revolving Loans would exceed the Maximum Revolving Loan Balance.

The request by the Borrower and acceptance by the Borrower of the proceeds of any Loan or the incurrence of any Letter of Credit Obligations shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by the Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by each Credit Party of the granting and continuance of Agent’s Liens, on behalf of itself and the Secured Parties, pursuant to the Collateral Documents.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Credit Parties, jointly and severally, represent and warrant to Agent and each Lender that the following are, and after giving effect to the Transactions will be, true and correct:

3.1 Corporate Existence and Power . Each Credit Party and each of its respective Subsidiaries:

(a) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, as applicable;

(b) has the power and authority and all governmental licenses, authorizations, Permits, consents and approvals to execute, deliver, and perform its obligations under, the Loan Documents to which it is a party;

(c) has the power and authority and all governmental licenses, authorizations, Permits, consents and approvals to own its assets and carry on its business;

(d) is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and licensed and in good standing, under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification or license; and

(e) is in compliance with all Requirements of Law;

except, in each case referred to in clause (c), clause (d) or clause (e), to the extent that the failure to do so would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

3.2 Corporate Authorization; No Contravention . The execution, delivery and performance by each of the Credit Parties of this Agreement and by each Credit Party and each of its respective Subsidiaries of any other Loan Document to which such Person is party, have been duly authorized by all necessary action, and do not and will not:

(a) contravene the terms of any of that Person’s Organization Documents;

(b) conflict with or result in any material breach or contravention of, or result in the creation of any Lien (other than Liens created under the Loan Documents) under, any document evidencing any material Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject; or

3.3 Governmental Authorization . No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Credit Party or any Subsidiary of any Credit Party of this Agreement, any other Loan Document except (a) for recordings and filings in connection with the Liens granted to Agent under the Collateral Documents, (b) those obtained or made on or prior to the Closing Date and (c) those which, if not obtained or made, would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

3.4 Binding Effect . This Agreement and each other Loan Document to which any Credit Party or any Subsidiary of any Credit Party is a party constitute the legal, valid and binding obligations of each such Person which is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

3.5 Litigation . Except as specifically disclosed in Schedule 3.5, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Responsible Officers of each Credit Party, threatened, at law, in equity, in arbitration or before any Governmental Authority, against any Credit Party, any Subsidiary of any Credit Party or any of their respective Properties which:

(a) purport to affect or pertain to this Agreement, any other Loan Document, or any of the transactions contemplated hereby or thereby; or

(b) would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.

No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement, any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. As of the Closing Date, except as set forth on Schedule 3.5 , no Credit Party or any Subsidiary of any Credit Party is the subject of an audit or, to each Credit Party’s knowledge, any review or investigation by any Governmental Authority (excluding the IRS and other taxing authorities) concerning the violation or possible violation of any Requirement of Law.

3.6 No Default . No Default or Event of Default exists or would result from the incurring of any Obligations by any Credit Party or the grant or perfection of Agent’s Liens on the Collateral or the consummation of the Transactions. No Credit Party and no Subsidiary of any Credit Party is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect.

3.7 ERISA Compliance . Schedule 3.7 sets forth, as of the Closing Date, a complete and correct list of, and that separately identifies, (a) all Title IV Plans and (b) all Multiemployer Plans. Except for those that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect, (x) each Benefit Plan is in compliance with applicable provisions of ERISA, the Code and other Requirements of Law, (y) there are no existing or pending (or to the knowledge of any Credit Party, threatened) claims (other than routine claims for benefits in the normal course), sanctions, actions, lawsuits or other proceedings or investigation involving any Benefit Plan to which any Credit Party incurs or otherwise has or could have an obligation or any Liability and (z) no ERISA Event is reasonably expected to occur. On the Closing Date, no ERISA Event has occurred in connection with which obligations and liabilities (contingent or otherwise) remain outstanding.

3.8 Use of Proceeds; Margin Regulations . The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Section 4.10, and are intended to be and shall be used in compliance with Section 5.8. No Credit Party and no Subsidiary of any Credit Party is engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. Proceeds of the Loans shall not be used for the purpose of purchasing or carrying Margin Stock. As of the Closing Date, except as set forth on Schedule 3.8 , no Credit Party and no Subsidiary of any Credit Party owns any Margin Stock.

3.9 Title to Properties . As of the Closing Date, the Real Estate listed in Schedule 3.9 constitutes all of the Real Estate of each Credit Party and each of their respective Subsidiaries. Each of the Credit Parties and each of their respective Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all Real Estate, and good and valid title to all owned personal property and valid leasehold interests in all leased personal property, in each instance, necessary or, except to the extent such failure would not reasonably be expected to have a Material Adverse Effect, used in the ordinary conduct of their respective businesses. None of the Property of any Credit Party or any Subsidiary of any Credit Party is subject to any Liens other than Permitted Liens. As of the Closing Date, Schedule 3.9 also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. All material Permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which it is currently occupied and used have been lawfully issued and are in full force and effect, except to the extent such failure would not reasonably be expected to have a Material Adverse Effect.

3.10 Taxes . All federal and material state, local and foreign income, material franchise and other material tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by any of the Credit Parties or any of their Subsidiaries have been filed with the appropriate Governmental Authorities, and all material taxes, assessments and other governmental charges and impositions reflected therein or otherwise due and payable have been paid prior to the date on which any Liability may be added thereto for non-payment thereof except for those contested in good faith by appropriate proceedings and for which adequate reserves are maintained on the books of the appropriate Person in accordance with GAAP.

3.11 Financial Condition .

(a) Each of (i) the audited consolidated balance sheet of Parent and its Subsidiaries dated December 31, 2012, and the related audited consolidated statements of income or operations and cash flows for the Fiscal Year ended on that date and (ii) the unaudited interim consolidated balance sheet of Parent and its Subsidiaries dated September 30, 2013 and the related unaudited consolidated statements of income and cash flows for the nine (9) Fiscal Periods then ended:

(x) were prepared in accordance with GAAP consistently applied throughout the respective periods covered thereby, except as otherwise expressly noted therein, subject to, in the case of the unaudited interim financial statements, normal year-end adjustments and the lack of footnote disclosures; and

(y) present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries as of the dates thereof and results of operations for the periods covered thereby.

(b) The pro forma unaudited consolidated balance sheet of Parent and its Subsidiaries dated September 30, 2013 delivered on the Closing Date was prepared by Holdings giving pro forma effect to the funding of the Loans and Transactions, was based on the unaudited consolidated balance sheet of Holdings and its Subsidiaries dated September 30, 2013, and was prepared in accordance with GAAP, with only such adjustments thereto as would be required in a manner consistent with GAAP.

(d) All financial performance projections delivered to Agent, including the financial performance projections delivered on or prior to the Closing Date, represent the Borrower’s best good faith estimate of future financial performance and are based on assumptions believed by the Borrower to be fair and reasonable in light of current market conditions, in each case, at the time of delivery of such projections, it being acknowledged and agreed by Agent and Lenders that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by such projections may differ from the projected results and such differences may be material.

3.12 Environmental Matters . Except as set forth in Schedule 3.12 and except where any failures to comply would not reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect, (a) the operations of each Credit Party and each Subsidiary of each Credit Party are and have been in compliance with all applicable Environmental Laws, including obtaining, maintaining and complying with all Permits required by any applicable Environmental Law, (b) no Credit Party and no Subsidiary of any Credit Party is party to, and no Credit Party and no Subsidiary of any Credit Party and no Real Estate currently (or to the knowledge of any Credit Party previously) owned, leased, subleased, operated or otherwise occupied by or for any such Person is subject to or the subject of, any Contractual Obligation or any pending (or, to the knowledge of any Credit Party, threatened) order, action, investigation, suit, proceeding, audit, claim, demand, dispute or notice of violation or of potential liability or similar notice relating in any manner to any Environmental Law, (c) no Lien in favor of any Governmental Authority securing, in whole or in part, Environmental Liabilities has attached to any property of any Credit Party or any Subsidiary of any Credit Party and, to the knowledge of any Credit Party, no facts, circumstances or conditions exist that could reasonably be expected to result in any such Lien attaching to any such property, (d) no Credit Party and no Subsidiary of any Credit Party has caused or suffered to occur a Release of Hazardous Materials at, to or from any Real Estate, (e) all Real Estate currently (or to the knowledge of any Credit Party previously) owned, leased, subleased, operated or otherwise occupied by or for any such Credit Party and each Subsidiary of each Credit Party is free of contamination by any Hazardous Materials and (f) no Credit Party and no Subsidiary of any Credit Party (i) is or has been engaged in, or has permitted any current or former tenant to engage in, operations in violation of any Environmental Law or (ii) knows of any facts, circumstances or conditions reasonably constituting notice of a violation of any Environmental Law, including receipt of any information request or notice of potential responsibility under the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601 et seq.) or similar Environmental Laws.

3.13 Regulated Entities . None of any Credit Party, any Person controlling any Credit Party, or any Subsidiary of any Credit Party, is (a) an “investment company” within the meaning of the Investment Company Act of 1940 or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute, rule or regulation limiting its ability to incur Indebtedness, pledge its assets or perform its Obligations under the Loan Documents.

3.14 Solvency . Both before and after giving effect to the Transactions, the Credit Parties are Solvent on a consolidated basis.

3.15 Labor Relations . There are no strikes, work stoppages, slowdowns or lockouts existing, pending (or, to the knowledge of any Credit Party, threatened) against or involving any Credit Party or any Subsidiary of any Credit Party, except for those that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.15 , as of the Closing Date, (a) there is no collective bargaining or similar agreement with any union, labor organization, works council or similar representative covering any employee of any Credit Party or any Subsidiary of any Credit Party in its capacity as such, (b) no petition for certification or election of any such representative is existing or pending with respect to any employee of any Credit Party or any Subsidiary of any Credit Party and (c) no such representative has sought certification or recognition with respect to any employee of any Credit Party or any Subsidiary of any Credit Party.

3.16 Intellectual Property . Each Credit Party and each Subsidiary of each Credit Party owns, or is licensed to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. To the knowledge of each Credit Party, (a) the conduct and operations of the businesses of each Credit Party and each Subsidiary of each Credit Party does not infringe, misappropriate, dilute, violate or otherwise impair any Intellectual Property owned by any other Person and (b) no other Person has contested any right, title or interest of any Credit Party or any Subsidiary of any Credit Party in, or relating to, any Intellectual Property, other than, in each case, as cannot reasonably be expected to affect the Loan Documents and the transactions contemplated therein and would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.17 Brokers’ Fees; Transaction Fees . Except as disclosed on Schedule 3.17 and except for fees payable to Agent and Lenders, none of the Credit Parties or any of their respective Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee in connection with the transactions contemplated hereby.

3.18 Insurance . Each of the Credit Parties and each of their respective Subsidiaries and their respective Properties are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrower, in such amounts, with such

deductibles and covering such risks as are customarily carried in all material respects by companies engaged in similar businesses and owning similar Properties in localities where such Person operates. A true and complete listing of such insurance as of the Closing Date, including issuers, coverages and deductibles, has been provided to the Administrative Agent.

3.19 Ventures, Subsidiaries and Affiliates; Outstanding Stock . Except as set forth in Schedule 3.19 , as of the Closing Date, no Credit Party and no Subsidiary of any Credit Party has any Subsidiaries or is engaged in any joint venture or partnership with any other Person. All issued and outstanding Stock and Stock Equivalents of each of the Credit Parties and each of their respective Subsidiaries are duly authorized and validly issued, fully paid, non-assessable, and free and clear of all Liens other than, with respect to the Stock and Stock Equivalents of the Borrower and Subsidiaries of the Borrower, those in favor of Agent, for the benefit of the Secured Parties. All such securities were issued in compliance with all applicable state and federal laws concerning the issuance of securities. As of the Closing Date, all of the issued and outstanding Stock of Parent, each Credit Party and each Subsidiary of each Credit Party and Parent is owned by each of the Persons and in the amounts set forth in Schedule 3.19 . Except as set forth in Schedule 3.19 , as of the Closing Date, there are no pre-emptive or other outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Credit Party may be required to issue, sell, repurchase or redeem any of its Stock or Stock Equivalents or any Stock or Stock Equivalents of its Subsidiaries. Set forth in Schedule 3.19 is a true and complete organizational chart of Parent and all of its Subsidiaries as of the Closing Date, which the Credit Parties shall update upon notice to Agent promptly following the completion of any Permitted Acquisition and promptly following the incorporation, organization or formation of any Subsidiary.

3.20 Jurisdiction of Organization; Chief Executive Office . Schedule 3.20 lists each Credit Party’s jurisdiction of organization, legal name, organizational identification number, if any, employer identification number and the location of such Credit Party’s chief executive office or sole place of business, in each case as of the Closing Date, and such Schedule 3.20 also lists all jurisdictions of organization and legal names of such Credit Party for the five years preceding the Closing Date.

3.21 Reserved .

3.22 Status of Holdings . Holdings has not engaged in any business activities and Holdings does not own any Property other than (i) ownership of the Stock and Stock Equivalents of the Borrower, (ii) activities and contractual rights incidental to maintenance of its corporate existence, (iii) performance of its obligations under the Loan Documents and the Management Agreement to which it is a party and (iv) other actions expressly permitted by the Loan Documents.

3.23 Full Disclosure . None of the written statements contained in each exhibit, report, statement or certificate furnished by or on behalf of any Credit Party or any of their Subsidiaries in connection with the Loan Documents (other than forward looking information and information of a general economic or industry specific nature), when taken as a whole, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not materially misleading as of the time when made or delivered.

3.24 Franchise Matters . Except as disclosed on Schedule 3.26 , (i) the Credit Parties have prepared and maintained each of their respective Disclosure Documents for the Papa Murphy’s ^® brand, in accordance with all applicable Requirements of Law, have filed Disclosure Documents, to the extent applicable and required, in all states and jurisdictions requiring registration and approval prior to any offers or sales of franchises in such states and has filed all material changes, amendments, renewals thereto on a timely and accurate basis as required by applicable Requirements of Law, and (ii) each Credit Party’s Disclosure Documents were prepared in all material respects in compliance with applicable Requirements of Law, and there were no material misrepresentations or material omissions of information in any Disclosure Document at the time any Credit Party was using such Disclosure Document; except, in each case, where failure to comply with the foregoing would not reasonably be expected to have a Material Adverse Effect. Each Franchise Agreement to which any Credit Party is a party complies in all material respects, and the offer and sale of such Franchise complied in all material respects at the time such offer and sale was and is made with, all applicable Franchise Laws, the non-compliance with which would not reasonably be expected to have a Material Adverse Effect.

3.25 Foreign Assets Control Regulations and Anti-Money Laundering . Each Credit Party and each Subsidiary of each Credit Party is and will remain in compliance in all material respects with all U.S. economic sanctions laws, executive orders and implementing regulations as promulgated by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. No Credit Party and no Subsidiary or Affiliate of a Credit Party (i) is a Person designated by the U.S. government on the list of the Specially Designated Nationals and Blocked Persons (the “SDN List”) with which a U.S. Person (as defined by OFAC) cannot deal with or otherwise engage in business transactions, (ii) is a Person who is otherwise the target of U.S. economic sanctions laws such that a U.S. Person cannot deal or otherwise engage in business transactions with such Person or (iii) is controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any person or entity on the SDN List or a foreign government that is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under U.S. law.

3.26 Patriot Act . The Credit Parties and each of their Subsidiaries are in compliance in all material respects with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (b) the Patriot Act and (c) other federal or state laws relating to “know your customer” and anti-money laundering rules and regulations. No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.

ARTICLE IV

AFFIRMATIVE COVENANTS

Each Credit Party covenants and agrees that, so long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted) shall remain unpaid or unsatisfied:

4.1 Financial Statements . Each Credit Party shall maintain, and shall cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit the preparation of financial statements in conformity with GAAP (provided that Fiscal Month and Fiscal Quarter financial statements shall not be required to have footnote disclosures and are subject to normal year-end adjustments). The Borrower shall deliver to Agent (and Agent shall make available to each Lender) by Electronic Transmission and in detail reasonably satisfactory to Agent:

(a) as soon as available, but not later than ninety (90) days after the end of each Fiscal Year, a copy of the audited consolidated balance sheets of Holdings and each of its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such Fiscal Year, and accompanied by the report of any “Big Four” or other nationally recognized independent public accounting firm reasonably acceptable to Agent which report shall (x) contain an unqualified opinion (provided that a qualification or exception may be included in any such audit report for any period ending within the twelve (12) consecutive Fiscal Periods preceding the stated maturity of the Loans to the extent such qualification is solely a result of the Loans being reported as short term indebtedness), stating that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years and (y) not include any explanatory paragraph expressing substantial doubt as to going concern status (except as expressly provided in clause (x) above);

(b)

(i) at any time prior to the consummation of an IPO, as soon as available, but not later than thirty (30) days after the end of each Fiscal Period of each Fiscal Year, a copy of the unaudited consolidated balance sheets of Holdings and each of its Subsidiaries, and the related consolidated statements of income, shareholders’ equity and cash flows as of the end of such Fiscal Period and for the portion of the Fiscal Year then ended, all certified on behalf of the Borrower by an appropriate Responsible Officer of the Borrower as fairly presenting, in all material respects, in accordance with GAAP, the financial position and the results of operations of Holdings and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures, and

(ii) at any time after the consummation of an IPO, as soon as available, but not later than forty-five (45) days after the end of each Fiscal Quarter, a copy of the unaudited consolidated balance sheets of Holdings and each of its Subsidiaries as at the

end of such Fiscal Quarter and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such Fiscal Quarter and for the period from the beginning of such Fiscal Year to such Fiscal Quarter, all certified on behalf of the Borrower by an appropriate Responsible Officer of the Borrower as fairly presenting, in all material respects, in accordance with GAAP, the financial position and the results of operations of Holdings and its Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures.

For purposes of clarification, provided they are accompanied by a reconciliation in detail reasonably satisfactory to Agent which differentiates the financial statements of Parent from the financial statements of Holdings and its Subsidiaries, the financial statements required to be delivered above may be delivered with respect to Parent and its Subsidiaries.

4.2 Certificates; Other Information . The Borrower shall furnish to Agent (and Agent shall make available to each Lender) by Electronic Transmission:

(a) together with each delivery of financial statements pursuant to (i) subsections 4.1(a) and, with respect to the Fiscal Period financial statements coinciding with the end of each Fiscal Quarter of each Fiscal Year, 4.1(b), (i) a management discussion and analysis report, in reasonable detail, describing the operations and financial condition of the Credit Parties and their Subsidiaries for the Fiscal Period and the portion of the Fiscal Year then ended (or for the Fiscal Year then ended in the case of annual financial statements), and (ii) reports setting forth (x) in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, the Fiscal Year to date, (y) with respect to statements of income only, the corresponding figures from the most recent budget for the current Fiscal Year delivered on or immediately prior to the Closing Date or pursuant to subsection 4.2(d), as applicable, and discussing the reasons for any significant variations, and (z) system-wide and region-level same store sales comparisons (for total stores); provided that, after the consummation of an IPO, the Borrower shall only be required to deliver such management discussion and analysis, comparative prior period figures and system-wide and region-level sales comparisons that are consistent with the financial disclosure requirements of a public reporting company;

(b) concurrently with the delivery of the financial statements referred to in subsections 4.1(a) and 4.1(b) above, a fully and properly completed certificate in the form of Exhibit 4.2(b) (a “Compliance Certificate”), certified on behalf of the Borrower by a Responsible Officer of the Borrower (with calculations of financial covenants appearing in Compliance Certificates delivered with the financial statements for the last Fiscal Period of each Fiscal Quarter only);

(c) promptly after the same are publicly filed, copies of all financial statements and regular, periodic or special reports which such Person may make to, or file with, the Securities and Exchange Commission or any successor or similar Governmental Authority;

(d) as soon as available and in any event not later than sixty (60) days following the beginning of each Fiscal Year of the Borrower, a budget for the Credit Parties (and their Subsidiaries’) consolidated financial performance for the forthcoming three Fiscal Years on a year by year basis, and (i) prior to the consummation of an IPO, for the forthcoming Fiscal Year on a Fiscal Period by Fiscal Period basis and (ii) after the consummation of an IPO, for the forthcoming Fiscal Year on a Fiscal Quarter by Fiscal Quarter basis, in each case consisting solely of consolidated income statements and capital expenditures;

(e) from time to time, if Agent reasonably determines that obtaining appraisals is necessary in order for Agent or any Lender to comply with applicable laws or regulations (including any appraisals required to comply with FIRREA), Agent may, or may require the Borrower to, in either case at the Borrower’s expense, obtain appraisals in form and substance and from appraisers reasonably satisfactory to Agent stating the fair market value or such other value as determined by Agent (for example, replacement cost for purposes of Flood Insurance) of any Real Estate of any Credit Party subject to a Mortgage; or of any Subsidiary of any Credit Party;

(f) together with each delivery of financial statements pursuant to Section 4.1(b), (which information may be included in the applicable Compliance Certificate) (A) a certificate of a Responsible Officer of the Borrower Representative setting forth in reasonable detail any Margin Stock owned by each Credit Party and each Subsidiary of each Credit Party as of the last day of such Fiscal Quarter and (B) a summary in reasonable detail of outstanding Investments permitted under Section 5.4(b)(iii); and

(g) promptly, such additional business, financial, corporate affairs, perfection certificates and other information as Agent may from time to time reasonably request.

4.3 Notices . The Borrower shall notify promptly Agent (and Agent shall notify each Lender) of each of the following (and in no event later than five (5) Business Days after a Responsible Officer becoming aware thereof):

(a) the occurrence or existence of any Default or Event of Default;

(b) any breach or non performance of, or any default under, any Contractual Obligation of any Credit Party or any Subsidiary of any Credit Party, or any violation of, or non-compliance with, any Requirement of Law, which would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, including a description of such breach, non-performance, default, violation or non-compliance and the steps, if any, such Person has taken, is taking or proposes to take in respect thereof;

(c) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between any Credit Party or any Subsidiary of any Credit Party and any Governmental Authority which would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect;

(d) the commencement of, or any material development in, any litigation or proceeding affecting any Credit Party or any Subsidiary of any Credit Party (i) in which the amount of damages claimed is $500,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought and which would reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any other Loan Document;

(e) (i) the receipt by any Credit Party of any notice of violation of or potential liability or similar notice under Environmental Law, (ii)(A) unpermitted Releases, (B) the existence of any condition that could reasonably be expected to result in violations of or Liabilities under, any Environmental Law or (C) the commencement of, or any material change to, any action, investigation, suit, proceeding, audit, claim, demand, dispute alleging a violation of or Liability under any Environmental Law which in the case of clauses (A), (B) and (C) above, in the aggregate for all such clauses, would reasonably be expected to result in a Material Adverse Effect, (iii) the receipt by any Credit Party of notification that any Real Property of any Credit Party is subject to any Lien in favor of any Governmental Authority securing, in whole or in part, Environmental Liabilities and (iv) any proposed acquisition or lease of Real Estate, if such acquisition or lease would have a reasonable likelihood of resulting in a Material Adverse Effect;

(f) any event that has had or is reasonably expected to have a Material Adverse Effect;

(g) (i) on or prior to any filing by any ERISA Affiliate of any notice of any reportable event under Section 4043 of ERISA or intent to terminate any Title IV Plan, a copy of such notice, (ii) promptly, and in any event within ten (10) Business Days, after any officer of any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a notice describing such waiver request and any action that any ERISA Affiliate proposes to take with respect thereto, together with a copy of any notice filed with the PBGC or the IRS pertaining thereto, and (iii) promptly, and in any event within ten (10) Business Days after any officer of any ERISA Affiliate knows or has reason to know that an ERISA Event will or has occurred which would reasonably be expected to result in a Material Adverse Effect, a notice describing such ERISA Event, and any action that any ERISA Affiliate proposes to take with respect thereto, together with a copy of any notices received from or filed with the PBGC, IRS, Multiemployer Plan or other Benefit Plan pertaining thereto; and

(h) (i) the creation, or filing with the IRS or any other Governmental Authority, of any Contractual Obligation or other document extending, or having the effect of extending, the period for assessment or collection of any income, franchise or other material taxes with respect to Holdings or any of its Subsidiaries, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) the creation of any Contractual Obligation of Holdings or any of its Subsidiaries, or the receipt of any request directed to Holdings or any of its Subsidiaries, to make any adjustment under Section 481(a) of the Code, by reason of a change in accounting method or otherwise, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Each notice pursuant to this Section shall be in electronic form accompanied by a statement by a Responsible Officer of the Borrower, setting forth details of the occurrence referred to therein, and stating what action the Borrower or other Person proposes to take with respect thereto and at what time. Each notice under subsection 4.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated.

4.4 Preservation of Corporate Existence, Etc . Each Credit Party shall, and shall cause each of its Subsidiaries to:

(a) preserve and maintain in full force and effect its organizational existence and good standing under the laws of its jurisdiction of incorporation, organization or formation, as applicable, except, with respect to the Borrower’s Subsidiaries, in connection with transactions permitted by Section 5.3;

(b) preserve and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary in the normal conduct of its business except in connection with transactions permitted by Section 5.3 and sales of assets permitted by Section 5.2 and except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect;

(c) preserve or renew all of its registered trademarks, trade names and service marks, the non-preservation of which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect; and

(d) conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect and shall comply in all material respects with the terms of its IP Licenses except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.5 Maintenance of Property . Each Credit Party shall maintain, and shall cause each of its Subsidiaries to maintain, and preserve all its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and shall make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.6 Insurance .

(a) Each Credit Party shall, and shall cause each of its Subsidiaries to, (i) maintain or cause to be maintained in full force and effect all policies of insurance of any kind with respect to the property and businesses of the Credit Parties and such Subsidiaries (including policies of life, fire, theft, product liability, public liability, Flood Insurance, property damage, other casualty, employee fidelity, workers’ compensation, business interruption and employee health and welfare insurance) with financially sound and reputable insurance companies or associations (in each case that are not Affiliates of the Borrower) of a nature and providing such coverage as is sufficient and as is customarily carried by businesses of the size and character of the business of the Credit Parties and (ii) cause all such insurance relating to any Collateral of any Credit Party to name Agent as loss payee and all liability insurance (other than directors and officers liability insurance) to name Agent as an additional insured. All policies of insurance on real and personal property of the Credit Parties will contain an endorsement, in form and substance acceptable to Agent, showing loss payable to

Agent (Form CP 1218 or equivalent) and extra expense and business interruption endorsements. The Credit Parties shall use commercially reasonable efforts to provide that each such endorsement, or an independent instrument furnished to Agent, will provide that the insurance companies will give Agent at least thirty (30) days’ prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of the Credit Parties or any other Person shall affect the right of Agent to recover under such policy or policies of insurance in case of loss or damage. Each Credit Party shall direct all present and future insurers under its “All Risk” policies of property insurance to pay all proceeds payable thereunder directly to Agent. If any insurance proceeds are paid by check, draft or other instrument payable to any Credit Party and Agent jointly, Agent may endorse such Credit Party’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash (or, at any time when no Event of Default shall have occurred and be continuing, Agent shall endorse such check, draft or other instrument to the applicable Credit Party upon request thereof by such Credit Party). The terms of this Section 4.6(a) shall not be deemed to limit the Borrower’s reinvestment rights pursuant to subsection 1.9(c) hereof, and, to the extent Agent receives proceeds paid in respect of claims under any Credit Party’s “All Risk” policies of property insurance at a time when no Event of Default shall have occurred and be continuing, Agent shall promptly remit such proceeds to the applicable Borrower upon the request of such Borrower to permit reinvestment of such proceeds to the extent permitted pursuant to subsection 1.9(c) hereof. Notwithstanding the requirement in subsection (i) above, Federal Flood Insurance shall not be required for (x) Real Estate not located in a Special Flood Hazard Area, or (y) Real Estate located in a Special Flood Hazard Area in a community that does not participate in the National Flood Insurance Program.

(b) Unless the Credit Parties provide Agent with evidence of the insurance coverage required by this Agreement (including, without limitation, Flood Insurance), Agent may purchase insurance (including, without limitation, Flood Insurance) at the Credit Parties’ expense to protect Agent’s and Lenders’ interests, including interests in the Credit Parties’ and their Subsidiaries’ properties. This insurance may, but need not, protect the Credit Parties’ and their Subsidiaries’ interests. The coverage that Agent purchases may not pay any claim that any Credit Party or any Subsidiary of any Credit Party makes or any claim that is made against such Credit Party or any Subsidiary in connection with said Property. The Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that there has been obtained insurance as required by this Agreement. If Agent purchases insurance, the Credit Parties will be responsible for the costs of that insurance, including interest and any other charges Agent may impose in connection with the placement of insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance shall be added to the Obligations. The costs of the insurance may be more than the cost of insurance the Borrower may be able to obtain on its own.

4.7 Payment of Obligations . Such Credit Party shall, and shall cause each of its Subsidiaries to, pay, discharge and perform as the same shall become due and payable or required to be performed:

(a) except for up to an aggregate of $500,000 of additional tax liabilities that are or may become secured by tax Liens from time to time after the Closing Date, all federal, state and material local and foreign tax liabilities, assessments and governmental charges or

levies upon it or its Property, unless the same are being contested in good faith by appropriate proceedings diligently prosecuted, for which the enforcement of any Lien shall not have been commenced and for which adequate reserves in accordance with GAAP are being maintained by such Person;

(b) all lawful claims (other than taxes) which, if unpaid, would by law become a Lien (other than a Permitted Lien) upon its Property unless the same are being contested in good faith by appropriate proceedings diligently prosecuted which stay the imposition or enforcement of any Lien and for which adequate reserves in accordance with GAAP are being maintained by such Person;

(c) the performance of all obligations under any Contractual Obligation to such Credit Party or any of its Subsidiaries is bound, or to which it or any of its Property is subject, except where the failure to perform would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect; and

(d) payments to the extent necessary to avoid the imposition of a Lien with respect to, or the involuntary termination of any underfunded Benefit Plan.

4.8 Compliance with Laws . Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with all Franchise Laws and all other Requirements of Law of any Governmental Authority having jurisdiction over it or its business, except where the failure to comply would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.9 Inspection of Property and Books and Records . Each Credit Party shall maintain and shall cause each of its Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of such Person. Each Credit Party shall, and shall cause each of its Subsidiaries to, with respect to each owned, leased, or controlled property, during normal business hours and upon reasonable advance notice (unless an Event of Default shall have occurred and be continuing, in which event no notice shall be required and Agent shall have access at any and all times during the continuance thereof): (a) provide access to such property to Agent and any of its Related Persons, as frequently as Agent determines to be appropriate; and (b) permit Agent and any of its Related Persons to conduct field examinations, audit, inspect, and make extracts and copies (or take originals if reasonably necessary) from all of such Credit Party’s books and records, and evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Agent considers advisable, in each instance, at the Credit Parties’ expense; provided the Credit Parties shall only be obligated to reimburse Agent for the reasonable expenses of one (1) such field examination, audit and inspection per calendar year or more frequently if an Event of Default has occurred and is continuing. Any Lender may accompany Agent or its Related Persons in connection with any inspection at such Lender’s expense.

4.10 Use of Proceeds . The Borrower shall use the proceeds of the Loans solely as follows: (a) first, to refinance on the Closing Date, Prior Indebtedness and then, (b) to make the Closing Date Dividend and pay costs and expenses in connection with this Agreement and the Transactions, and (c) for working capital, capital expenditures and other general corporate purposes of the Borrower and its Subsidiaries not in contravention of any Requirement of Law and not in violation of this Agreement.

4.11 Cash Management Systems . Each Credit Party shall enter into, and cause each depository, securities intermediary or commodities intermediary to enter into, Control Agreements with respect to each deposit, securities, commodity or similar account maintained by such Person (other than (i) any payroll accounts so long as such payroll account is a zero balance account, (ii) any withholding tax, trust or fiduciary accounts, (iii) any foreign accounts, (iv) any segregated deposit account which is established and maintained by any Credit Party solely to fund employee benefit plans as required by applicable Requirements of Law and (v) other accounts with an aggregate balance, at any time for all such accounts, not to exceed $500,000 plus an amount equal to (x) $5,000 multiplied by (y) as of any date of determination, the number of Papa Murphy’s locations then owned and operated by the Credit Parties and their Subsidiaries in excess of the number of such locations owned and operated as of the Closing Date) within sixty (60) days (or such later date as shall have been agreed to in writing by Agent) of the Closing Date, in the case of such accounts as of the Closing Date, and within sixty (60) days (or such later date as shall have been agreed to in writing by Agent) of the opening of such accounts, in the case of any new accounts; provided, that Agent shall not be entitled to exercise sole control or send any “blockage” or equivalent notice under any such Control Agreement unless an Event of Default under Section 7.1(a), (c) (solely with respect to a breach of Article VI), (d) (solely with respect to a breach of Sections 4.1 or 4.2(b)), (f) or (g) shall have occurred and be continuing or the Loans shall have been accelerated and/or the Commitments shall have been terminated pursuant to Section 7.2.

4.12 Landlord Agreements . Each Credit Party shall use commercially reasonable efforts to obtain a landlord agreement from the lessor of each leased property with respect to each location constituting the chief executive office of a Credit Party, which agreement shall be reasonably satisfactory in form and substance to Agent, within 60 days (or such later date as shall have been agreed to in writing by Agent) of the Closing Date, in the case of locations as of the Closing Date, and within 60 days (or such later date as shall have been agreed to in writing by Agent) of the entering into such lease, in the case of any new locations.

4.13 Further Assurances .

(a) Promptly upon request by Agent, the Credit Parties shall (and, subject to the limitations hereinafter set forth, shall cause each of their Subsidiaries to) take such additional actions and execute such documents as Agent may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Collateral Documents any of the Properties, rights or interests covered by any of the Collateral Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document. Without limiting the generality of the foregoing and except as otherwise approved in writing by Required Lenders, the Credit Parties shall cause each of their Domestic Subsidiaries (other than Disregarded

Domestic Persons and Domestic Subsidiaries owned indirectly through a Foreign Subsidiary) to guaranty the Obligations and to cause each such Domestic Subsidiary to grant to Agent, for the benefit of the Secured Parties, a security interest in, subject to the limitations set forth herein and in the Loan Documents, all of such Subsidiary’s Property to secure such guaranty. Furthermore and except as otherwise approved in writing by Required Lenders, each Credit Party shall, and shall cause each of its Domestic Subsidiaries (other than Disregarded Domestic Persons and Domestic Subsidiaries owned indirectly through a Foreign Subsidiary) to, pledge all of the Stock and Stock Equivalents of each of its Domestic Subsidiaries (other than Disregarded Domestic Persons and Domestic Subsidiaries owned indirectly through a Foreign Subsidiary) and sixty five percent (65%) of the outstanding voting Stock and Stock Equivalents and one hundred percent (100%) of the outstanding non-voting Stock and Stock Equivalents of each of its First Tier Foreign Subsidiaries, in each instance, to Agent, for the benefit of the Secured Parties, to secure the Obligations. In connection with each pledge of Stock and Stock Equivalents, the Credit Parties shall deliver, or cause to be delivered, to Agent, irrevocable proxies and stock powers and/or assignments, as applicable, duly executed in blank. In the event any Credit Party or any Domestic Subsidiary (other than Disregarded Domestic Persons and Domestic Subsidiaries owned indirectly through a Foreign Subsidiary) acquires any Real Estate with a fair market value in excess of $500,000, within thirty (30) days after such acquisition (or such later date as shall have been agreed to in writing by Agent), such Person shall execute and/or deliver, or cause to be executed and/or delivered, to Agent, (w) an appraisal complying with FIRREA, (x) a fully executed Mortgage, in form and substance reasonably satisfactory to Agent together with an A.L.T.A. lender’s title insurance policy issued by a title insurer reasonably satisfactory to Agent, in form and substance and in an amount reasonably satisfactory to Agent insuring that the Mortgage is a valid and enforceable first priority Lien on the respective property, free and clear of all defects, encumbrances and Liens (other than Permitted Liens), (y) then current A.L.T.A. surveys, certified to Agent by a licensed surveyor sufficient to allow the issuer of the lender’s title insurance policy to issue such policy without a survey exception and (z) an environmental site assessment prepared by a qualified firm reasonably acceptable to Agent, in form and substance satisfactory to Agent. In addition to the obligations set forth in subsection 4.6(a), within sixty (60) days (or such later date as shall have been agreed to in writing by Agent) after written notice from Agent to the Credit Parties that any Real Estate is located in a Special Flood Hazard Area, the Credit Parties shall satisfy the Federal Flood Insurance requirements of subsection 4.6(a).

4.14 Environmental Matters . Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with, and maintain its Real Estate, whether owned, leased, subleased or otherwise operated or occupied, in compliance with, all applicable Environmental Laws (including by implementing any Remedial Action necessary to achieve such compliance) or that is required by orders and directives of any Governmental Authority except where the failure to comply would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. Without limiting the foregoing, if an Event of Default is continuing or if Agent at any time has a reasonable basis to believe that there exist material violations of Environmental Laws by any Credit Party or any Subsidiary of any Credit Party, which would reasonably be expected to result in any Credit Party incurring material Environmental Liabilities or that there exist any material Environmental Liabilities of any Credit Party, then each Credit Party shall, promptly upon receipt of request from Agent, cause the performance of, and allow Agent and its Related Persons reasonable access to such Real Estate for the purpose of

conducting, such environmental audits and assessments, including where reasonable based on perceived violations or conditions giving rise to such Environmental Liability subsurface sampling of soil and groundwater at such Real Estate, and cause the preparation of such reports, in each case as Agent may from time to time reasonably request. Such audits, assessments and reports, to the extent not conducted by Agent or any of its Related Persons, shall be conducted and prepared by qualified environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent).

4.15 Murphy’s Marketing .

(a) Commencing with the Fiscal Period ending December 28, 2015, each Credit Party shall cause Murphy’s Marketing Services Inc., in each consecutive twelve (12) Fiscal Period, to have at least one Fiscal Period during which it maintains a positive fund balance (based on a trailing 30-day average).

(b) The Credit Parties shall cause Murphy’s Marketing Services, Inc. to maintain a deficit of no greater than $2,000,000 at any time outstanding.

ARTICLE V

NEGATIVE COVENANTS

5.1 Limitation on Liens . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following (“Permitted Liens”):

(a) any Lien existing on the Property of a Credit Party or a Subsidiary of a Credit Party on the Closing Date and set forth in Schedule 5.1 securing Indebtedness outstanding on such date and permitted by subsection 5.5(c), including replacement Liens on the Property currently subject to such Liens securing Indebtedness permitted by subsection 5.5(c);

(b) any Lien created under any Loan Document;

(c) Liens for taxes, fees, assessments or other governmental charges (i) which are not past due or remain payable without penalty, or (ii) the non-payment of which is permitted by Section 4.7;

(d) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising in the Ordinary Course of Business which are not delinquent for more than ninety (90) days or remain payable without penalty or which are being contested in good faith and by appropriate proceedings diligently prosecuted, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto and for which adequate reserves in accordance with GAAP are being maintained;

(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other social security legislation or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contract, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or to secure liability to insurance carriers;

(f) Liens consisting of judgment or judicial attachment liens (other than for payment of taxes, assessments or other governmental charges), provided that the enforcement of such Liens is effectively stayed and all such Liens secure claims in the aggregate at any time outstanding for the Credit Parties and their Subsidiaries not exceeding $1,000,000;

(g) easements, rights of way, zoning and other restrictions, minor defects or other irregularities in title, and other similar encumbrances which do not in any case materially detract from the value of the Property subject thereto or interfere in any material respect with the ordinary conduct of the businesses of any Credit Party or any Subsidiary of any Credit Party;

(h) Liens on any Property acquired or held by any Credit Party or any Subsidiary of any Credit Party securing Indebtedness incurred or assumed for the purpose of financing (or refinancing) all or any part of the cost of acquiring such Property and permitted under subsection 5.5(d); provided that (i) any such Lien attaches to such Property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the Property so acquired in such transaction and the proceeds thereof, and (iii) the principal amount of the debt secured thereby does not exceed one hundred percent (100%) of the cost of such Property;

(i) Liens securing Capital Lease Obligations permitted under subsection 5.5(d);

(j) any interest or title of a lessor or sublessor under any lease permitted by this Agreement;

(k) Liens arising from precautionary uniform commercial code financing statements filed under any lease permitted by this Agreement;

(l) non-exclusive licenses and sublicenses granted by a Credit Party or any Subsidiary of a Credit Party and leases and subleases (by a Credit Party or any Subsidiary of a Credit Party as lessor or sublessor) to third parties in the Ordinary Course of Business not interfering in any material respect with the business of the Credit Parties or any of their Subsidiaries;

(m) Liens in favor of collecting banks arising under Section 4-210 of the Uniform Commercial Code or, with respect to collecting banks located in the State of New York, under Section 4-208 of the Uniform Commercial Code;

(n) Liens (including the right of set-off) in favor of a bank or other depository institution arising as a matter of law encumbering deposits;

(o) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Borrower or any Subsidiary of the Borrower in the Ordinary Course of Business;

(p) Liens securing Indebtedness incurred by Foreign Subsidiaries of the Borrower in an aggregate amount not to exceed $2,000,000 at any time outstanding; provided, that (i) such Liens do not extend to, or encumber property which constitutes Collateral and (ii) such Liens extend only to the property (or equity interests not pledged or required to be pledged to Agent in accordance with the Loan Documents) of the Foreign Subsidiary incurring such Indebtedness;

(q) Liens in favor of customs and revenue authorities arising as a matter of law which secure payment of customs duties in connection with the importation of goods in the Ordinary Course of Business;

(r) Liens arising by operation of law or contract on insurance policies and proceeds thereof in favor of insurers (or other Persons financing the payment of insurance premiums) securing Indebtedness of the type described in and permitted under Section 5.5(o) hereof financing the premiums payable in respect of insurance policies issued by such insurers;

(s) Liens encumbering the assets of a Target to the extent securing Indebtedness permitted pursuant to subsection 5.5(l), solely to the extent such Liens encumber no assets other than the assets of the Target encumbered by such Liens immediately prior to the Acquisition of such Target; and

(t) other Liens securing obligations (other than Indebtedness for borrowed money, except to the extent any such Liens securing Indebtedness for borrowed money consist solely of cash collateral and/or Liens on the assets of Foreign Subsidiaries) otherwise permitted hereunder not exceeding $1,000,000 in the aggregate.

5.2 Disposition of Assets . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any Property (including the Stock of any Subsidiary of any Credit Party, whether in a public or private offering or otherwise, and accounts and notes receivable, with or without recourse), except:

(a) dispositions of Inventory, or worn out or surplus equipment, all in the Ordinary Course of Business;

(b) dispositions not otherwise permitted hereunder which are made for fair market value and the mandatory prepayment in the amount of the Net Proceeds of such disposition is made if and to the extent required by Section 1.9; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) not less than 80% of the aggregate sales price from such disposition shall be paid in cash and (iii) the aggregate fair market value of all assets so sold by the Credit Parties and their Subsidiaries, together, shall not exceed in any Fiscal Year $750,000 (other than in the case of Project Pie or any sales of stores related to Project Pie);

(d) transactions permitted under Sections 5.1, 5.3, 5.4 and 5.11;

(e) dispositions, discounts or forgiveness of past due Accounts in connection with the collection or compromise thereof in the Ordinary Course of Business;

(f) dispositions of certain stores set forth on Schedule 5.2, and additional stores that each individually have EBITDA for the four fiscal quarter period prior to the proposed disposition of less than $0 provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition and (ii) a mandatory prepayment is made with the Net Proceeds of such disposition if and to the extent required by Section 1.9);

(g) dispositions, abandonment or termination of Intellectual Property in the Ordinary Course of Business; and

(h) dispositions by (i) any Credit Party to any other Credit Party (other than Holdings) and (ii) any non-Credit Party to any Credit Party (at not more than the then current fair market value of the subject Property) or any other non-Credit Party.

5.3 Consolidations and Mergers . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except Permitted Acquisitions and except pursuant to transactions expressly permitted by Sections 5.2 or 5.4, and except that, upon not less than five Business Days prior written notice to Agent (or such lesser period of notice as Agent, in its sole discretion, may from time to time agree in writing), (a) any Subsidiary of the Borrower may merge with, or dissolve or liquidate into, the Borrower or a Wholly-Owned Subsidiary of the Borrower which is a Domestic Subsidiary, provided that the Borrower or such Wholly-Owned Subsidiary which is a Domestic Subsidiary shall be the continuing or surviving entity and all actions reasonably required by Agent, including actions required to maintain perfected Liens on the Stock of the surviving entity and other Collateral in favor of Agent, shall have been completed, (b) any Foreign Subsidiary may merge with or dissolve or liquidate into another Foreign Subsidiary provided if a First Tier Foreign Subsidiary is a constituent entity in such merger, dissolution or liquidation, such First Tier Foreign Subsidiary shall be the continuing or surviving entity or all actions reasonably required by Agent, including actions required to maintain perfected Liens on the Stock of the surviving entity in favor of Agent, shall have been completed and (c) any Permitted Concept may be merged with and into any Credit Party so long as the Credit Party shall be the continuing or surviving entity and all actions reasonably required by Agent, including actions required to maintain perfected Liens on the Stock of the surviving entity and other Collateral in favor of Agent, shall have been completed.

5.4 Loans and Investments . No Credit Party shall and no Credit Party shall suffer or permit any of its Subsidiaries to (i) purchase or acquire any Stock or Stock Equivalents, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary, or (ii) make any Acquisitions, or any other acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation or other combination or (iii) make or purchase any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including the Borrower, any Affiliate of the Borrower or any Subsidiary of the Borrower (the items described in clauses (i), (ii) and (iii) are referred to as “Investments”), except for:

(a) Investments in cash and Cash Equivalents;

(b) Investments by (i) any Credit Party (other than Holdings) in any other Credit Party (other than Holdings), (ii) Holdings in any other Credit Party, (iii) the Borrower or any Domestic Subsidiary of the Borrower in Foreign Subsidiaries of the Borrower; provided, that the aggregate amount of such Investments under this clause (iii) shall not exceed the Available Amount at any time outstanding, (iv) a Foreign Subsidiary of the Borrower in another Foreign Subsidiary of the Borrower, and (v) any Credit Party in a Foreign Subsidiary the proceeds of which are concurrently used by such Foreign Subsidiary in connection with a Permitted Acquisition of the type and in the amount described in clause (g)(x) of the definition of “Permitted Acquisition”; provided, if the Investments described in foregoing clauses (i), (ii), (iii) and (v) are evidenced by notes, such notes shall be pledged to Agent, for the benefit of the Secured Parties;

(c) loans and advances to employees not to exceed $3,000,000 in the aggregate at any time outstanding, less the amount of any loans and advances to employees outstanding pursuant to Section 5.4(f);

(d) Investments received as the non-cash portion of consideration received in connection with transactions permitted pursuant to subsection 5.2(b);

(e) Investments acquired in connection with the settlement of delinquent Accounts in the Ordinary Course of Business or in connection with the bankruptcy or reorganization of suppliers or customers;

(f) Investments existing (or committed to be made pursuant to a binding commitment) on the Closing Date and set forth on Schedule 5.4;

(g) Investments comprised of Contingent Obligations permitted by Section 5.9;

(h) Permitted Acquisitions;

(i) the maintenance of deposit accounts and securities accounts in the Ordinary Course of Business so long as the applicable provisions of Section 4.11, to the extent applicable, have been complied with respect to such deposit accounts and securities accounts;

(j) Investments constituting (i) accounts receivable arising, (ii) trade debt granted or (iii) deposits made in connection with the purchase price of goods or services, in each case, in the Ordinary Course of Business;

(k) Investments by way of contributions to capital or purchases of Stock by any Credit Party in any of its Subsidiaries that are Credit Parties;

(l) Investments in an amount at any time outstanding not greater than the Available Amount (x) in joint ventures, (y) consisting of loans or other financing to Franchisees, or (z) in any subsidiary franchise financing vehicle;

(m) (i) Initial Investments in Project Pie in an amount not to exceed $4,500,000 and (ii) additional Investments in Project Pie in an amount not to exceed $5,000,000 in the aggregate so long as, in the case of this clause (ii) no Default or Event of Default has occurred and is continuing or would result therefrom;

(n) Investments (i) relating to notes payable in connection with the disposition of the stores in Wichita, Kansas specified on Schedule 5.2 and (ii) consisting of notes payable in connection with the disposition of stores specified in Section 5.2(f) in an amount not to exceed $1,000,000 in the aggregate; and

(o) other Investments not to exceed an amount in the aggregate at any time outstanding equal to $3,000,000 less the amount of any Indebtedness outstanding pursuant to Section 5.5(p).

5.5 Limitation on Indebtedness . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

(a) the Obligations;

(b) Indebtedness consisting of Contingent Obligations described in clause (i) of the definition thereof and permitted pursuant to Section 5.9;

(d) Indebtedness not to exceed $3,000,000 in the aggregate at any time outstanding, consisting of Capital Lease Obligations or secured by Liens permitted by subsection 5.1(h) and Permitted Refinancings thereof;

(e) unsecured intercompany Indebtedness permitted pursuant to subsections 5.4(b) or 5.4(m);

(f) Reserved;

(g) Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not to exceed $2,000,000 at any time outstanding;

(h) Indebtedness in respect of overdraft protections and otherwise in connection with deposit accounts to the extent incurred in the Ordinary Course of Business, and Indebtedness in respect to netting services to the extent incurred in the Ordinary Course of Business and amounts are available to be netted; provided, that such Indebtedness and obligations shall not remain outstanding for not more than ten (10) Business Days;

(i) to the extent constituting Indebtedness, indemnification, adjustment or purchase price or similar obligations of a Credit Party (or any Subsidiary thereof) arising from agreements providing for the sale or other disposition of any assets of a Credit Party (or any Subsidiary thereof) in an amount not to exceed $3,000,000 in the aggregate at any time outstanding;

(j) Indebtedness representing deferred compensation to employees of the Borrower or any of its Subsidiaries incurred in the Ordinary Course of Business in an aggregate amount not to exceed $500,000 at any time outstanding;

(k) to the extent constituting Indebtedness, obligations in respect of Rate Contracts permitted under Section 5.9 hereof;

(l) (i) Indebtedness of a Target existing at the time the Target becomes a Subsidiary of the Borrower (or is merged into or consolidated with a Credit Party other than Holdings) pursuant to a Permitted Acquisition or Indebtedness assumed by the Borrower or its Subsidiaries in respect of assets acquired by such Person pursuant to a Permitted Acquisition, but only to the extent that such Indebtedness (A) was not incurred in connection with, as a result of, or in contemplation of, such Permitted Acquisition, (B) is secured, if at all, solely by assets of the Target so acquired and not by any assets of any Credit Party and (C) is not guaranteed by any Credit Party, and (ii) to the extent constituting Indebtedness, indemnification, adjustment or purchase price or similar obligations of a Credit Party (or any Subsidiary thereof) in connection with Permitted Acquisitions or other Investments permitted hereunder; provided, that the aggregate outstanding amount of any Indebtedness incurred pursuant to this clause (l) may not exceed $3,000,000 less the combined amounts utilized under clauses (m) and (n) of this Section 5.5;

(m) unsecured Indebtedness owing to current and former employees, officers, or directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the repurchase of Stock that has been issued to such Persons, so long as the aggregate principal amount of all such Indebtedness does not exceed an aggregate principal amount at any time outstanding equal to $3,000,000 less the combined amounts utilized under clauses (l) and (n) of this Section 5.5;

(n) unsecured Indebtedness owing to sellers of assets or Stock to any of the Credit Parties and their Subsidiaries that is incurred in connection with the consummation of one or more Permitted Acquisitions or other Investments permitted hereunder, so long as the aggregate principal amount of all such Indebtedness does not exceed an aggregate principal

amount at any time outstanding equal to (x) $3,000,000 in connection with the Miller Acquisition (the “ Miller Note ”), (y) $1,000,000 in connection with the Battleground Acquisition and (z) $3,000,000 in respect of all other Permitted Acquisitions or other Investments permitted hereunder, less the combined amounts utilized under clauses (l) and (m) of this Section 5.5, provided that, for purposes of clause (z), (1) no payments (whether mandatory or optional) of principal are paid or payable in cash prior to the later of the maturity date of the Term Loans or the Revolving Termination Date, (2) any interest payments payable in cash shall not exceed 10% per annum, (3) the maturity date of such Indebtedness shall be no earlier than six (6) months after the later of the maturity date of the Term Loans or the Revolving Termination Date and (4) such Indebtedness shall constitute Subordinated Indebtedness;

(o) Indebtedness incurred in order to finance the payment of insurance premiums in the Ordinary Course of Business; and

(p) other Indebtedness (provided, that any Indebtedness for borrowed money incurred in reliance on this clause (p) shall be unsecured, except to the extent any such Indebtedness for borrowed money is secured solely by cash collateral and/or Liens on the assets of Foreign Subsidiaries) not exceeding in the aggregate principal amount at any time outstanding $3,000,000 less the amount of any outstanding Investment made under Section 5.4(n).

5.6 Transactions with Affiliates . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, enter into any transaction with any Affiliate of the Borrower or of any such Subsidiary, except:

(a) as expressly permitted by this Agreement;

(b) transactions of the type described on Schedule 5.6;

(c) transactions between or among (i) Credit Parties (other than Holdings), (ii) First Tier Foreign Subsidiaries, (iii) non-First Tier Foreign Subsidiaries or (iv) Immaterial Subsidiaries; provided, transactions pursuant to clauses (ii) through (iv) shall not permit the disposition or investment of any cash or other assets from a Credit Party to any such Subsidiary unless such disposition or investment is otherwise permitted by the terms of this Agreement; or

(d) in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of such Credit Party or such Subsidiary upon fair and reasonable terms no less favorable to such Credit Party or such Subsidiary than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of the Borrower or such Subsidiary; provided, further, that in no event shall a Credit Party or any Subsidiary of a Credit Party perform or provide any management, consulting, administrative or similar services to or for any Person other than another Credit Party, a Subsidiary of a Credit Party or a customer who is not an Affiliate in the Ordinary Course of Business, other than those relating to Project Pie in the Ordinary Course of Business.

5.7 Management Fees and Compensation . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, pay any management, consulting or similar fees to any Affiliate of any Credit Party or to any officer, director or employee of any Credit Party or any Affiliate of any Credit Party except:

(a) payment of (i) reasonable compensation to officers and employees of the Credit Parties and their Subsidiaries (or any direct or indirect parent thereof) for actual services rendered to the Credit Parties and their Subsidiaries (or, to the extent such compensation is paid with respect to actual services rendered by such Person to or with respect to the Credit Parties and their Subsidiaries, any direct or indirect parent thereof) in the Ordinary Course of Business, (ii) reasonable benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements to officers, directors, managers and employees of the Credit Parties and their Subsidiaries (or, to the extent such benefits or arrangements are paid in consideration for actual services rendered by such Person to or with respect to the Credit Parties and their Subsidiaries, any direct or indirect parent thereof) in the Ordinary Course of Business and (iii) bonuses, separation and severance amounts to officers and employees of the Credit Parties and their Subsidiaries (or, to the extent such amounts are paid with respect to actual services rendered by such Person to or with respect to the Credit Parties and their Subsidiaries, any direct or indirect parent thereof) in the Ordinary Course of Business;

(b) payment of reasonable directors’ or managers’ fees and reimbursement of actual out-of-pocket costs and expenses incurred in connection with attending board of director or manager meetings in the Ordinary Course of Business; and

(c) payment of (x) management fees to Sponsor or its Affiliates pursuant to the Management Agreement not to exceed $500,000 per annum, either not less frequently than in equal quarterly installments when paid in advance or otherwise paid in arrears; provided, however, that the fees described in this clause (x) shall not be paid during any period while an Event of Default arising under Sections 7.1(a), (f) or (g) has occurred and is continuing or would arise as a result of such payment; provided, further any fees not paid due to the existence of such an Event of Default shall be deferred and may be paid when no such Event of Default exists or would arise as a result of such payment, (y) transaction fees to Sponsor or its Affiliates pursuant to Section 2(c) or Section 2(d) of the Management Agreement with respect to either the refinancing of all or substantially all of the Indebtedness under the Loan Documents or a Disposition of all or substantially all of the Property or Stock or Stock Equivalents of Holdings or any of its Subsidiaries, not to exceed one percent (1.00%) of such refinancing Indebtedness or purchase price (as applicable), and (z) transaction fees in an aggregate amount not to exceed $1,500,000 to Sponsor or its Affiliates pursuant to Section 2(d) of the Management Agreement with respect to the consummation of an IPO; provided, however, that the fees described in clauses (y) and (z) shall not be paid during any period while an Event of Default has occurred and is continuing or would arise as a result of such payment; provided, further any fees not paid due to the existence of such an Event of Default shall be deferred and may be paid when no such Event of Default exists or would arise as a result of such payment;

(d) making of Restricted Payments to Holdings, Parent or any direct or indirect parent thereof to the extent expressly permitted under Section 5.11(f), (g), (h) and (i) of this Agreement;

(e) reimbursement of reasonable out-of-pocket costs and expenses to Sponsor required to be paid pursuant to the Management Agreement; and

(f) payments of fees and expenses to Sponsor or its Affiliates on the Closing Date in connection with this Agreement and the Transactions as set forth on the funds flow memorandum delivered by the Borrower to Agent prior to the Closing Date

5.8 Use of Proceeds . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, use any portion of the Loan proceeds, directly or indirectly, to purchase or carry Margin Stock or repay or otherwise refinance Indebtedness of any Credit Party or others incurred to purchase or carry Margin Stock.

5.9 Contingent Obligations . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Contingent Obligations in respect of Indebtedness except in respect of the Obligations and except:

(a) endorsements for collection or deposit in the Ordinary Course of Business;

(b) Rate Contracts entered into in the Ordinary Course of Business for bona fide hedging purposes and not for speculation and Bank Product Obligations entered into in the Ordinary Course of Business;

(c) Contingent Obligations of the Credit Parties and their Subsidiaries existing (or committed to be made pursuant to a binding commitment) as of the Closing Date and listed in Schedule 5.9, including extension and renewals thereof which do not increase the amount of such Contingent Obligations or impose materially more restrictive or adverse terms on the Credit Parties or their Subsidiaries as compared to the terms of the Contingent Obligation being renewed or extended;

(d) Contingent Obligations arising under indemnity agreements to title insurers to cause such title insurers to issue to Agent title insurance policies;

(e) Contingent Obligations arising with respect to customary indemnification obligations in favor of (i) sellers in connection with Acquisitions permitted hereunder and (ii) purchasers in connection with dispositions permitted under subsection 5.2 (b);

(f) Contingent Obligations arising under letters of credit issued for the account of the Borrower or any of its Subsidiaries otherwise permitted hereunder;

(g) Contingent Obligations arising under guarantees made in the Ordinary Course of Business of obligations of any Credit Party (other than Holdings), which obligations are otherwise permitted hereunder; provided that if such obligation is subordinated to the Obligations, such guarantee shall be subordinated to the same extent;

(h) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeals bonds, leases, performance bonds and other similar obligations;

(i) Contingent Obligations arising under the Loan Documents;

(j) Contingent Obligations of (i) a Credit Party with respect to the obligations of another Credit Party (other than Holdings) otherwise permitted hereunder, (ii) a First Tier Foreign Subsidiary with respect to the obligations of another First Tier Foreign Subsidiary otherwise permitted hereunder, (iii) a non-First Tier Foreign Subsidiary with respect to the obligations of another non-First Tier Foreign Subsidiary or a First Tier Foreign Subsidiary otherwise permitted hereunder, (iv) an Immaterial Subsidiary with respect to the obligations of another Immaterial Subsidiary otherwise permitted hereunder, (v) a Foreign Subsidiary with respect to the obligations of a Credit Party and (vi) a Credit Party with respect to the obligations of a Foreign Subsidiary otherwise permitted hereunder; provided, that the aggregate amount of such Contingent Obligations under this clause (vi) shall not exceed the Available Amount at any time outstanding;

(k) Contingent Obligations arising under guarantees of the real estate leases relating to Project Pie in an amount not to exceed $3,500,000 in the aggregate at any time outstanding; and

(l) other Contingent Obligations not exceeding $2,000,000 in the aggregate at any time outstanding.

5.10 Compliance with ERISA . No ERISA Affiliate shall cause or suffer to exist (a) any event that could result in the imposition of a Lien on any asset of a Credit Party or a Subsidiary of a Credit Party with respect to any Title IV Plan or Multiemployer Plan or (b) any other ERISA Event, that would, in the aggregate, have a Material Adverse Effect.

5.11 Restricted Payments . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any Stock or Stock Equivalent, (ii) purchase, redeem or otherwise acquire for value any Stock or Stock Equivalent now or hereafter outstanding or (iii) make any payment or prepayment of principal of, premium, if any, interest, fees, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, Subordinated Indebtedness (the items described in clauses (i), (ii) and (iii) above are referred to as “Restricted Payments”); except that any Subsidiary of the Borrower may declare and pay dividends to the Borrower or ratably to its direct equity holders and except that:

(a) Holdings may declare and make dividend payments or other distributions payable solely in its Stock or Stock Equivalents;

(b) the Borrower may declare and make dividend payments or other distributions to Holdings, Parent or any direct or indirect parent thereof which are used to redeem from officers, directors, managers and employees Stock and Stock Equivalents provided, that all of the following conditions are satisfied:

(i) no Event of Default has occurred and is continuing or would arise as a result of such Restricted Payment;

(ii) the aggregate Restricted Payments under this clause (b) permitted during the term of this Agreement shall not exceed $5,000,000; provided, the foregoing limits shall not apply to the extent of any redemption or repurchase funded with the proceeds of any “key-man” life insurance policies of any Credit Party; and

(iii) after giving effect to such Restricted Payment, Availability plus (x) unrestricted cash and Cash Equivalents of Holdings and its Subsidiaries and (y) cash and Cash Equivalents of Holdings and its Subsidiaries held in deposit accounts or securities accounts subject to a Control Agreement in favor of Agent for the benefit of Agent and the Lenders is not less than $2,500,000;

(d) the Credit Parties and their Subsidiaries may make any payments of the type described in clause (iii) of the definition of “Restricted Payments” in respect of any Subordinated Indebtedness to the extent permitted by the subordination provisions applicable thereto;

(e) Borrower may make distributions (“Tax Distributions”) to Holdings (and Holdings may make distributions to any direct or indirect parent of Holdings that is the common parent of its consolidated, combined or unitary tax group that includes Holdings and Borrower) to permit Holdings (or such parent) to pay any taxes that are due and payable by Holdings (or such parent) that are attributable to the conduct, business or activities of Borrower or any of its Subsidiaries; provided, however, that such dividends are made no more than three (3) Business Days before such tax payments are made to the applicable Governmental Authority and neither Borrower nor Holdings shall be permitted to make Tax Distributions in excess of the amount that would be payable by Holdings if Holdings and its Subsidiaries were to file as a consolidated, combined or unitary group of which Holdings was the common parent;

(f) (i) to the extent actually used by Holdings, Parent or any direct or indirect parent thereof to pay such taxes, costs and expenses, payments by the Borrower to or on behalf of Holdings, Parent or any direct or indirect parent thereof in an amount sufficient to pay franchise taxes and other fees required to maintain the legal existence of Holdings, Parent or any direct or indirect parent thereof, (ii) payments by the Borrower to or on behalf of Holdings, Parent or any direct or indirect parent thereof in an amount sufficient to pay out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead in the Ordinary Course of Business of Holdings, Parent or any direct or indirect parent thereof, in the case of this clause (ii) in an aggregate amount not to exceed $500,000 in any Fiscal Year, (iii) after the consummation of an IPO, payments by the Borrower to or on behalf of Holdings, Parent or any direct or indirect party thereof to pay costs and expenses associated with the compliance by Parent or any direct or indirect parent of Parent with the requirements or regulations of a public company, including, without limitation, Sarbanes-Oxley, and (iv) payments by the Borrower to or on behalf of Holdings, Parent or any direct or indirect parent thereof in an amount sufficient to pay indemnification and reimbursement obligations to their directors, managers and officers to extent providing services to or on behalf of the Credit Parties and compensation to their directors and managers to extent providing services to or on behalf of the Credit Parties, in each case under this clause (iv), in the Ordinary Course of Business that are otherwise permitted to be paid hereunder; provided, however, that no such amounts otherwise permitted

to be paid by the Borrower to or on behalf of Parent under this subsection 5.11(f) shall be permitted in the event that Parent shall have conducted any business activities or acquired any Property after the Closing Date, except for amounts attributable to or on behalf of Holdings, the Borrower and its Subsidiaries, activities related to an IPO and activities incidental to its status as a holding company;

(g) Borrower may make distributions to Holdings, and Holdings may make distributions to any direct or indirect parent of Holdings to pay for costs and expenses related to an IPO (whether or not such IPO was in fact consummated); provided all of the following conditions are satisfied;

(i) no Event of Default has occurred and is continuing or would arise as a result of such Restricted Payment;

(ii) the aggregate Restricted Payments under this clause (g) shall not exceed $5,000,000 during the term of this Agreement; and

(h) the Borrower may declare and make dividend payments or other distributions to Holdings, and Holdings may declare and make dividend payments or other distributions to Parent, provided all of the following conditions are satisfied;

(i) no Event of Default has occurred and is continuing or would arise as a result of such Restricted Payment;

(ii) the aggregate Restricted Payments made under this clause (h) shall not exceed $500,000 per annum or $2,000,000 during the term of this Agreement; and

(i) Holdings and the Borrower may make the Closing Date Dividend on the Closing Date in accordance with the flow of funds memorandum delivered to Agent on the Closing Date; and

(j) Holdings and the Borrower may make any Restricted Payments to the extent used to make any payment permitted by Sections 5.7(a), (b), (c) and (e).

5.12 Change in Business . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, engage in (x) any line of business substantially different from those lines of business carried on by it on the Closing Date, or (y) the sale of Franchises (including development agreements) or the operation of restaurant locations for any restaurant concept other than the Papa Murphy’s Permitted Concept and, to the extent acquired pursuant to a Permitted Acquisition and the gross revenues therefrom do not exceed ten percent (10%) of the gross revenues of the system-wide sales of Holdings and its Subsidiaries at the time of the acquisition, an Additional Permitted Concept. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, if the Leverage Ratio is equal to or greater than 5.75 (at the time of such new store opening or acquisition and as evidenced by a certificate in form reasonably satisfactory to Agent), allow the aggregate number of Papa Murphy’s locations owned and operated by the Credit Parties and their Subsidiaries to exceed fifteen percent (15%) of the total Papa Murphy’s locations (in each case by location number; provided, however, that no Default or Event of Default shall be deemed to have occurred solely as a result of a change in the Leverage Ratio or franchise store closures which were not contemplated at the time of such store opening or acquisition). Holdings shall not engage in any business activities or own any Property other than (i) ownership of the Stock and Stock Equivalents of the Borrower, (ii) activities and contractual rights incidental to maintenance of its corporate existence, (iii) performance of its obligations under the Loan Documents and Management Agreement to which it is a party, and (iv) other actions expressly permitted by the Loan Documents.

5.13 Change in Structure . Except as expressly permitted under Section 5.3, no Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, amend any of its Organization Documents in any respect materially adverse to Agent or Lenders.

5.14 Changes in Accounting, Name and Jurisdiction of Organization . No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, (i) make any significant change in accounting treatment or reporting practices, except as required by GAAP, (ii) change the Fiscal Year or method for determining Fiscal Periods or Fiscal Quarters of any Credit Party or of any consolidated Subsidiary of any Credit Party, (iii) change its name as it appears in official filings in its jurisdiction of organization or (iv) change its jurisdiction of organization, in the case of (x) clause (i), without the prior written consent of Agent, and (y) clauses (iii) and (iv), without at least five days prior written notice to Agent (or such lesser period of notice as Agent, in its sole discretion, from time to time may agree in writing) and satisfaction of all conditions set forth herein and in the Collateral Documents to maintain perfection of the security interests granted therein.

5.15 Amendments to the Management Agreement and Subordinated Indebtedness .

(a) No Credit Party shall and no Credit Party shall permit any of its Subsidiaries, to (i) amend, supplement, waive or otherwise modify any provision of the Management Agreement in a manner materially adverse to Agent or Lenders or which would reasonably be expected to have a Material Adverse Effect, or (ii) take or fail to take any action under the Management Agreement that would reasonably be expected to have a Material Adverse Effect.

(b) No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries directly or indirectly to, change or amend the terms of any Subordinated Indebtedness if the effect of such change or amendment is to: (A) increase the interest rate on such Indebtedness; (B) shorten the dates upon which payments of principal or interest are due on such Indebtedness; (C) add or change in a manner adverse to the Credit Parties any event of default or add or make more restrictive any covenant with respect to such Indebtedness; (D) change in a manner adverse to the Credit Parties the prepayment provisions of such Indebtedness; (E) change the subordination provisions thereof (or the subordination terms of any guaranty thereof; or (F) change or amend any other term if such change or amendment would materially increase the obligations of the Credit Parties or confer additional material rights on the holder of such Indebtedness in a manner adverse to the Credit Parties, Agent or Lenders.

5.16 No Negative Pledges . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual restriction or encumbrance of any kind on the ability of any Credit Party or Subsidiary to pay dividends or make any other distribution on any of such Credit Party’s or Subsidiary’s Stock or Stock Equivalents or to pay fees, including management fees, or make other payments and distributions to the Borrower, any Subsidiary of the Borrower or, other than the Loan Documents, to Holdings. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, enter into, assume or become subject to any Contractual Obligation prohibiting or otherwise restricting the existence of any Lien upon any of its assets in favor of Agent, whether now owned or hereafter acquired except in connection with any document or instrument governing Liens permitted pursuant to subsections 5.1(h) and 5.1(i) provided that any such restriction contained therein relates only to the asset or assets subject to such permitted Liens.

5.17 OFAC; Patriot Act . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to fail to comply with the laws, regulations and executive orders referred to in Section 3.27 and Section 3.28.

5.18 Sale-Leasebacks . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, engage in a sale leaseback, synthetic lease or similar transaction involving any of its assets.

ARTICLE VI

FINANCIAL COVENANTS

6.1 Capital Expenditures . The Credit Parties and their Subsidiaries shall not make Capital Expenditures for any Fiscal Year (or shorter period) set forth below in excess of the amount set forth in the table below (the “Capital Expenditure Limitation”) with respect to such Fiscal Year (or shorter period):


Fiscal Year Ending	Capital Expenditure Limitation
December 30, 2013	$	5,883,000
December 29, 2014	$	4,559,000
December 28, 2015	$	4,742,000
January 2, 2017	$	4,976,000
January 1, 2018	$	5,086,000

provided , however , in the event the Credit Parties and their Subsidiaries do not expend the entire Capital Expenditure Limitation in any Fiscal Year, the Credit Parties and their Subsidiaries may carry forward to the immediately succeeding Fiscal Year 75% of the unutilized portion. All Capital Expenditures shall first be applied to reduce the applicable Capital Expenditure Limitation and then to reduce the carry-forward from the previous Fiscal Year, if any. “Capital Expenditures” shall be calculated in the manner set forth in Exhibit 4.2(b) .

6.2 Leverage Ratio . The Credit Parties shall not permit the Leverage Ratio for the period of twelve (12) consecutive Fiscal Periods ending as of any date set forth below to be greater than the maximum ratio set forth in the table below opposite such date:


Date	Maximum Leverage Ratio
December 30, 2013		8.68

March 31, 2014		8.68
June 30, 2014		8.65
September 29, 2014		8.62
December 29, 2014		8.16

March 30, 2015		8.00
June 29, 2015		7.88
September 28, 2015		7.78
December 28, 2015		7.42


March 28, 2016			7.19
June 27, 2016			7.00
September 26, 2016			6.82
January 2, 2017			6.40

April 3, 2017			6.24
July 3, 2017			6.10
October 2, 2017			5.96
January 1, 2018			5.57

April 2, 2018			5.40
July 2, 2018			5.25
October 1, 2018			5.13

“Leverage Ratio” shall be calculated in the manner set forth in Exhibit 4.2(b) .

6.3 Interest Coverage Ratio . The Credit Parties shall not permit the Interest Coverage Ratio for the period of twelve (12) consecutive Fiscal Periods ending on any date set forth below to be less than the minimum ratio set forth in the table below opposite such date:


Date	Minimum Interest Coverage Ratio
December 30, 2013		1.41

March 31, 2014		1.41
June 30, 2014		1.47
September 29, 2014		1.49
December 29, 2014		1.51

March 30, 2015		1.52
June 29, 2015		1.57
September 28, 2015		1.60
December 28, 2015		1.65

March 28, 2016		1.70
June 27, 2016		1.76
September 26, 2016		1.81
January 2, 2017		1.86

April 3, 2017		1.87
July 3, 2017		1.89
October 2, 2017		1.92
January 1, 2018		2.03

April 2, 2018		2.15
July 2, 2018		2.28
October 1, 2018		2.42

“Interest Coverage Ratio” shall be calculated in the manner set forth in Exhibit 4.2(b) .

6.4 Equity Cure . In the event the Credit Parties fail to comply with the financial covenants set forth in Sections 6.2 or 6.3 as of the last day of any Fiscal Quarter, any cash equity contribution to the Borrower (funded with proceeds of common equity, Qualified Preferred Equity or other equity having terms reasonably acceptable to Agent made or issued by Holdings) during or after the last day of such Fiscal Quarter and on or prior to the day that is ten (10) Business Days after the day on which financial statements are required to be delivered for that Fiscal Quarter will, at the irrevocable election of the Borrower (which, in the case of contributions made during the applicable Fiscal Quarter, shall be made prior to the end of such Fiscal Quarter), be included in the calculation of EBITDA solely for the purposes of determining compliance with such covenants at the end of such Fiscal Quarter and any subsequent period that includes such Fiscal Quarter (any such equity contribution so included in the calculation of EBITDA, a “Specified Equity Contribution”); provided that (a) in each consecutive four Fiscal Quarter period there will be at least two Fiscal Quarters in which no Specified Equity Contribution is made (or, with respect to Specified Equity Contributions made thereafter, deemed made), (b) the amount of any Specified Equity Contribution will be no greater than the amount required to cause the Credit Parties to be in compliance with such covenants, (c) all Specified Equity Contributions will be disregarded for purposes of the calculation of EBITDA for all other purposes, including calculating basket levels, pricing and other items governed by reference to EBITDA, (d) there shall be no more than four Specified Equity Contributions made in the aggregate after the Closing Date, (e) one hundred percent (100%) of the proceeds received by the Borrower from all Specified Equity Contributions shall be promptly used by the Borrower to prepay the Term Loan pro rata to all Term Lenders, (f) any Loans prepaid with the proceeds of Specified Equity Contributions shall be deemed outstanding for purposes of determining compliance with Sections 6.2 and 6.3 for the current Fiscal Quarter and the next three (3) Fiscal Quarters thereafter and (g) the aggregate amount of all Specified Equity Contributions shall not exceed $4,000,000. If with respect to any Fiscal Quarter the Borrower has notified Agent that a Specified Equity Contribution will be made as permitted pursuant to this Section 6.4 to cure a breach under Section 6.2 or Section 6.3 as at the end of such Fiscal Quarter, neither Agent nor any Lender shall have any right to declare all or any portion of any one or more of the Commitments of any Lender to make Loans or of the L/C Issuer to Issue Letters of Credit to be suspended or terminated, declare all or any portion of the unpaid principal amount of any outstanding Loans, interest accrued and unpaid thereon, and all amounts owing or payable hereunder or under any other Loan Document to be due and payable and/or exercise any other rights and remedies available under the Loan Documents or applicable law (including, without limitation, any right to foreclose on or take possession of Collateral) solely on the basis of an Event of Default having occurred and being continuing under Section 7.1 due to failure by the Credit Parties to comply with any financial covenant set forth in Article VI unless and until the time for making such Specified Equity Contribution for such Fiscal Quarter has passed and the breach of Section 6.2 or Section 6.3 as at the end of such Fiscal Quarter has not been cured as provided in this Section.

ARTICLE VII

EVENTS OF DEFAULT

7.1 Event of Default . Any of the following shall constitute an “Event of Default”:

(a) Non-Payment . Any Credit Party fails (i) to pay when and as required to be paid herein, any amount of principal of any Loan, including after maturity of the Loans, or to pay any L/C Reimbursement Obligation or (ii) to pay within three (3) Business Days after the same shall become due, interest on any Loan, any fee or any other amount payable hereunder or pursuant to any other Loan Document; or

(b) Representation or Warranty . Any representation, warranty or certification by or on behalf of any Credit Party or any of its Subsidiaries made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by any such Person, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any other Loan Document, shall prove to have been incorrect in any material respect (without duplication of other materiality qualifiers contained therein) on or as of the date made or deemed made; or

(c) Specific Defaults . Any Credit Party fails to perform or observe any term, covenant or agreement contained in any of:

(i) subsections 4.3(a) or Sections 4.10 or Articles V or VI hereof;

(ii) Section 4.6 (with regard to a failure by the Credit Parties to maintain the insurance coverage described therein), Section 4.9 (with regard to a failure by the Credit Parties to provide the access, field examination, audit or inspection rights described therein) and, solely with respect to this clause (ii), such failure shall not have been cured within five (5) Business Days; or

(iii) subsections 4.1(a), 4.1(b), 4.2(a) or 4.2(b) and, solely with respect to this clause (iii), such failure shall not have been cured within twenty (20) days; or

(d) Other Defaults . Any Credit Party fails to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of thirty (30) days from the date upon which written notice thereof is given to the Borrower by Agent or the Required Lenders; or

(e) Cross-Default . Any Credit Party or any Subsidiary of any Credit Party (i) fails to make any payment in respect of any Indebtedness (other than the Obligations) or Contingent Obligation in respect of Indebtedness (other than (x) Contingent Obligations in respect of the Obligations, (y) Contingent Obligations owing by one Credit Party with respect to the obligations of another Credit Party permitted hereunder or (z) earnouts permitted

hereunder) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $2,500,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness (other than the Obligations) or any such Contingent Obligation (other than (x) Contingent Obligations in respect of the Obligations, (y) Contingent Obligations owing by one Credit Party with respect to the obligations of another Credit Party permitted hereunder or (z) earnouts permitted hereunder), if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity (without regard to any subordination terms with respect thereto), or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or

(f) Voluntary Proceedings . Any Credit Party or any Subsidiary of any Credit Party (other than an Immaterial Subsidiary): (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) commences any Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize any of the foregoing; or

(g) Involuntary Proceedings . (i) Any involuntary Insolvency Proceeding is commenced or filed against any Credit Party or any Subsidiary of any Credit Party (other than an Immaterial Subsidiary), or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of any such Person’s Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within sixty (60) days after commencement, filing or levy; (ii) any Credit Party or any Subsidiary of any Credit Party (other than an Immaterial Subsidiary) admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) any Credit Party or any Subsidiary of any Credit Party (other than an Immaterial Subsidiary) acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business; or

(h) Monetary Judgments . One or more judgments, non-interlocutory orders, decrees or arbitration awards shall be entered against any one or more of the Credit Parties or any of their respective Subsidiaries (other than an Immaterial Subsidiary with respect to which no other Credit Party or Subsidiary is or may be liable) involving in the aggregate a liability of $2,500,000 or more (excluding amounts covered by insurance to the extent the relevant independent third-party insurer has not denied coverage therefor), and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of thirty (30) consecutive days after the entry thereof; or

(i) Non-Monetary Judgments . One or more non-monetary judgments, orders or decrees shall be rendered against any one or more of the Credit Parties or any of their respective Subsidiaries which has or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, and there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(j) Collateral . Any material provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against any Credit Party or any Subsidiary of any Credit Party party thereto or any Credit Party or any Subsidiary of any Credit Party shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason (other than the failure of Agent to take an action within its control) cease to be a perfected and first priority security interest subject only to Permitted Liens; or

(k) Ownership . (i) Prior to the consummation of an IPO, the Permitted Holders collectively at any time cease to own beneficially, directly or indirectly, voting Stock of Holdings representing a majority of the ordinary voting power for the election of directors (or equivalent governing body) of Holdings; (ii) after the consummation of an IPO, (A) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act of 1934), excluding the Permitted Holders, shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than the greater of (x) thirty five percent (35%) of the then outstanding voting stock of Holdings, and (y) the percentage of the then outstanding voting stock of Holdings collectively owned, directly or indirectly, beneficially by the Permitted Holders, or (B) during any period of twelve (12) consecutive months, the board of directors or other governing body of Holdings shall not consist of a majority of the Continuing Directors; or (iii) Holdings ceases to own one hundred percent (100%) of the issued and outstanding Stock and Stock Equivalents of the Borrower free and clear of all Liens, rights, options, warrants or other similar agreements or understandings, other than Liens in favor of Agent, for the benefit of the Secured Parties; or

(l) Invalidity of Subordination Provisions . The subordination provisions of any agreement or instrument governing any Subordinated Indebtedness shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations, for any reason shall not have the priority contemplated by this Agreement or such subordination provisions.

7.2 Remedies . Upon the occurrence and during the continuance of any Event of Default:

(a) Agent may, and shall at the written request of the Required Lenders, declare all or any portion of any one or more of the Commitments of each Lender to make Loans or of the L/C Issuer to issue Letters of Credit to be suspended or terminated, whereupon such Commitments shall forthwith be suspended or terminated;

(b) Agent shall at the written request of the Required Lenders declare all or any portion of the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, in which case, the Revolving Loan Commitment of each Lender shall immediately terminate without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Credit Party; and/or

(c) Agent shall at the written request of the Required Lenders exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law;

provided , however , that upon the occurrence of any event specified in subsections 7.1(f) or 7.1(g) above (in the case of clause (i) of subsection 7.1(g) upon the expiration of the sixty (60) day period mentioned therein), the obligation of each Lender to make Loans and the obligation of the L/C Issuers to issue Letters of Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of Agent, any Lender or the L/C Issuer.

7.3 Rights Not Exclusive . The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

7.4 Cash Collateral for Letters of Credit . If an Event of Default has occurred and is continuing, this Agreement (or the Revolving Loan Commitment) shall be terminated for any reason or if otherwise required by the terms hereof, Agent may, and upon request of Required Revolving Lenders, shall, demand (which demand shall be deemed to have been delivered automatically upon any acceleration of the Loans and other obligations hereunder pursuant to Section 7.2), and the Borrower shall thereupon deliver to Agent, to be held for the benefit of the L/C Issuer, Agent and the Lenders entitled thereto, an amount of cash equal to one hundred five percent (105%) of the amount of Letter of Credit Obligations as additional collateral security for Obligations in respect of any outstanding Letter of Credit. Agent may at any time apply any or all of such cash and cash collateral to the payment of any or all of the Credit Parties’ Obligations in respect of any Letters of Credit. Pending such application, Agent may (but shall not be obligated to) invest the same in an interest bearing account in Agent’s name, for the benefit of the L/C Issuer, Agent and the Lenders entitled thereto, under which deposits are available for immediate withdrawal, at such bank or financial institution as the L/C Issuer and Agent may, in their discretion, select.

ARTICLE VIII

AGENT

8.1 Appointment and Duties .

(a) Appointment of Agent . Each Lender and each L/C Issuer hereby appoints Golub (together with any successor Agent pursuant to Section 8.9) as Agent hereunder and authorizes Agent to (i) execute and deliver the Loan Documents and accept delivery thereof on its behalf from any Credit Party, (ii) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to Agent under such Loan Documents and (iii) exercise such powers as are reasonably incidental thereto.

(b) Duties as Collateral and Disbursing Agent . Without limiting the generality of clause (a) above, Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders and L/C Issuers), and is hereby authorized, to (i) act as the disbursing and collecting agent for the Lenders and the L/C Issuers with respect to all payments and collections arising in connection with the Loan Documents (including in any proceeding described in subsection 7.1(f) or (g) or any other bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with any Loan Document to any Secured Party is hereby authorized to make such payment to Agent, (ii) file and prove claims and file other documents necessary or desirable to allow the claims of the Secured Parties with respect to any Obligation in any proceeding described in subsection 7.1(f) or (g) or any other bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Person), (iii) act as collateral agent for each Secured Party for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any Loan Document, exercise all remedies given to Agent and the other Secured Parties with respect to the Credit Parties and/or the Collateral, whether under the Loan Documents, applicable Requirements of Law or otherwise and (vii) execute any amendment, consent or waiver under the Loan Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided, however, that Agent hereby appoints, authorizes and directs each Lender and L/C Issuer to act as collateral sub-agent for Agent, the Lenders and the L/C Issuers for purposes of the perfection of all Liens with respect to the Collateral, including any deposit account maintained by a Credit Party with, and cash and Cash Equivalents held by, such Lender or L/C Issuer, and may further authorize and direct the Lenders and the L/C Issuers to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to Agent, and each Lender and L/C Issuer hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.

(c) Limited Duties . Under the Loan Documents, Agent (i) is acting solely on behalf of the Secured Parties (except to the limited extent provided in subsection 1.4(b) with respect to the Register), with duties that are entirely administrative in nature, notwithstanding the use of the defined term “Agent”, the terms “agent”, “Agent” and “collateral agent” and

similar terms in any Loan Document to refer to Agent, which terms are used for title purposes only, (ii) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender, L/C Issuer or any other Person and (iii) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Loan Document, and each Secured Party, by accepting the benefits of the Loan Documents, hereby waives and agrees not to assert any claim against Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (i) through (iii) above.

8.2 Binding Effect . Each Secured Party, by accepting the benefits of the Loan Documents, agrees that (i) any action taken by Agent, the Required Lenders or the Required Revolving Lenders (or, if expressly required hereby, a greater proportion of the Lenders) in accordance with the provisions of the Loan Documents, (ii) any action taken by Agent in reliance upon the instructions of Required Lenders or the Required Revolving Lenders (or, where so required, such greater proportion) in accordance with provisions of the Loan Documents and (iii) the exercise by Agent or the Required Lenders or the Required Revolving Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein for such parties, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Secured Parties.

8.3 Use of Discretion .

(a) No Action without Instructions . Agent shall not be required to exercise any discretion or take, or omit to take, any action, including with respect to enforcement or collection, except any action it is required to take or omit to take (i) under any Loan Document or (ii) pursuant to instructions from the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders).

(b) Right Not to Follow Certain Instructions . Notwithstanding clause (a) above, Agent shall not be required to take, or omit to take, any action (i) unless, upon demand, Agent receives an indemnification satisfactory to it from the Lenders (or, to the extent applicable and acceptable to Agent, any other Person) against all Liabilities that, by reason of such action or omission, may be imposed on, incurred by or asserted against Agent or any Related Person thereof or (ii) that is, in the opinion of Agent or its counsel, contrary to any Loan Document or applicable Requirement of Law.

(c) Exclusive Right to Enforce Rights and Remedies . Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan Documents for the benefit of all the Lenders and the L/C Issuer; provided that the foregoing shall not prohibit (i) Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (ii) the L/C Issuer from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer) hereunder and under the other Loan Documents, (iii) any Lender from exercising setoff rights in accordance with Section 9.11, (iv)

any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any bankruptcy or other debtor relief law, (v) any party to a Secured Rate Contract from exercising any of its rights thereunder which are independent of its rights under the Loan Documents or (vi) any party to a Bank Product Agreement from exercising any of its rights thereunder which are independent of its rights under the Loan Documents; and provided further that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (A) the Required Lenders shall have the rights otherwise ascribed to Agent pursuant to Section 7.2 and (B) in addition to the matters set forth in clauses (ii), (iii) and (iv) of the preceding proviso and subject to Section 9.11, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

8.4 Delegation of Rights and Duties . Agent may, upon any term or condition it specifies, delegate or exercise any of its rights, powers and remedies under, and delegate or perform any of its duties or any other action with respect to, any Loan Document by or through any trustee, co-agent, employee, attorney-in-fact and any other Person (including any Secured Party). Any such Person shall benefit from this Article VIII to the extent provided by Agent.

8.5 Reliance and Liability .

(a) Agent may, without incurring any liability hereunder, (i) treat the payee of any Note as its holder until such Note has been assigned in accordance with Section 9.9, (ii) rely on the Register to the extent set forth in Section 1.4, (iii) consult with any of its Related Persons and, whether or not selected by it, any other advisors, accountants and other experts (including advisors to, and accountants and experts engaged by, any Credit Party) and (iv) rely and act upon any document and information (including those transmitted by Electronic Transmission) and any telephone message or conversation, in each case believed by it to be genuine and transmitted, signed or otherwise authenticated by the appropriate parties.

(b) None of Agent and its Related Persons shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document, and each Secured Party waives and shall not assert any right, claim or cause of action based thereon, except to the extent of liabilities resulting primarily from the gross negligence or willful misconduct of Agent or, as the case may be, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in connection with the duties expressly set forth herein. Without limiting the foregoing, Agent:

(i) shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Required Lenders or the Required Revolving Lenders or for the actions or omissions of any of its Related Persons selected with reasonable care (other than employees, officers and directors of Agent, when acting on behalf of Agent);

(ii) shall not be responsible to any Lender, L/C Issuer or other Person for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document;

(iii) makes no warranty or representation, and shall not be responsible, to any Lender, L/C Issuer or other Person for any statement, document, information, representation or warranty made or furnished by or on behalf of any Credit Party or any Related Person of any Credit Party in connection with any Loan Document or any transaction contemplated therein or any other document or information with respect to any Credit Party, whether or not transmitted or (except for documents expressly required under any Loan Document to be transmitted to the Lenders) omitted to be transmitted by Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by Agent in connection with the Loan Documents; and

(iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any provision of any Loan Document, whether any condition set forth in any Loan Document is satisfied or waived, as to the financial condition of any Credit Party or as to the existence or continuation or possible occurrence or continuation of any Default or Event of Default and shall not be deemed to have notice or knowledge of such occurrence or continuation unless it has received a notice from the Borrower, any Lender or L/C Issuer describing such Default or Event of Default clearly labeled “notice of default” (in which case Agent shall promptly give notice of such receipt to all Lenders);

and, for each of the items set forth in clauses (i) through (iv) above, each Lender and each L/C Issuer hereby waives and agrees not to assert any right, claim or cause of action it might have against Agent based thereon.

8.6 Agent Individually . Agent and its Affiliates may make loans and other extensions of credit to, acquire Stock and Stock Equivalents of, engage in any kind of business with, any Credit Party or Affiliate thereof as though it were not acting as Agent and may receive separate fees and other payments therefor. To the extent Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and liabilities as any other Lender and the terms “Lender”, “Revolving Lender”, “Required Lenders”, “Required Revolving Lenders” and any similar terms shall, except where otherwise expressly provided in any Loan Document, include, without limitation, Agent or such Affiliate, as the case may be, in its individual capacity as Lender, Revolving Lender or as one of the Required Lenders or Required Revolving Lenders, respectively.

8.7 Lender Credit Decision .

(a) Each Lender and each L/C Issuer acknowledges that it shall, independently and without reliance upon Agent, any Lender or L/C Issuer or any of their Related Persons or upon any document (including any offering and disclosure materials in connection with the syndication of the Loans) solely or in part because such document was transmitted by Agent or any of its Related Persons, conduct its own independent investigation of the financial condition and affairs of each Credit Party and make and continue to make its own credit decisions in connection with entering into, and taking or not taking any action under, any Loan Document or with respect to any transaction contemplated in any Loan

Document, in each case based on such documents and information as it shall deem appropriate. Except for documents expressly required by any Loan Document to be transmitted by Agent to the Lenders or L/C Issuers, Agent shall not have any duty or responsibility to provide any Lender or L/C Issuer with any credit or other information concerning the business, prospects, operations, Property, financial and other condition or creditworthiness of any Credit Party or any Affiliate of any Credit Party that may come in to the possession of Agent or any of its Related Persons.

(b) If any Lender or L/C Issuer has elected to abstain from receiving MNPI concerning the Credit Parties or their Affiliates, such Lender or L/C Issuer acknowledges that, notwithstanding such election, Agent and/or the Credit Parties will, from time to time, make available syndicate-information (which may contain MNPI) as required by the terms of, or in the course of administering the Loans to the credit contact(s) identified for receipt of such information on the Lender’s administrative questionnaire who are able to receive and use all syndicate-level information (which may contain MNPI) in accordance with such Lender’s compliance policies and contractual obligations and applicable law, including federal and state securities laws; provided , that if such contact is not so identified in such questionnaire, the relevant Lender or L/C Issuer hereby agrees to promptly (and in any event within one (1) Business Day) provide such a contact to Agent and the Credit Parties upon request therefor by Agent or the Credit Parties. Notwithstanding such Lender’s or L/C Issuer’s election to abstain from receiving MNPI, such Lender or L/C Issuer acknowledges that if such Lender or L/C Issuer chooses to communicate with Agent, it assumes the risk of receiving MNPI concerning the Credit Parties or their Affiliates.

8.8 Expenses; Indemnities; Withholding .

(a) Each Lender agrees to reimburse Agent and each of its Related Persons (to the extent not reimbursed by any Credit Party) promptly upon demand, severally and ratably, of any costs and expenses (including fees, charges and disbursements of financial, legal and other advisors and Other Taxes paid in the name of, or on behalf of, any Credit Party) that may be incurred by Agent or any of its Related Persons in connection with the preparation, syndication, execution, delivery, administration, modification, consent, waiver or enforcement (whether through negotiations, through any work-out, bankruptcy, restructuring or other legal or other proceeding or otherwise) of, or legal advice in respect of its rights or responsibilities under, any Loan Document.

(b) Each Lender further agrees to indemnify Agent and each of its Related Persons (to the extent not reimbursed by any Credit Party), severally and ratably, from and against Liabilities (including taxes, interests and penalties imposed for not properly withholding or backup withholding on payments made to on or for the account of any Lender) that may be imposed on, incurred by or asserted against Agent or any of its Related Persons in any matter relating to or arising out of, in connection with or as a result of any Loan Document, the Management Agreement or any other act, event or transaction related, contemplated in or attendant to any such document, or, in each case, any action taken or omitted to be taken by Agent or any of its Related Persons under or with respect to any of the foregoing; provided, however, that no Lender shall be liable to Agent or any of its Related Persons to the extent such liability has resulted primarily from the gross negligence or willful misconduct of Agent or, as the case may be, such Related Person, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.

8.9 Resignation of Agent or L/C Issuer .

(a) Agent may resign at any time by delivering notice of such resignation to the Lenders and the Borrower, effective on the date set forth in such notice or, if no such date is set forth therein, upon the date such notice shall be effective, in accordance with the terms of this Section 8.9. If Agent delivers any such notice, the Required Lenders shall have the right to appoint a successor Agent. If, after thirty (30) days after the date of the retiring Agent’s notice of resignation, no successor Agent has been appointed by the Required Lenders that has accepted such appointment, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent from among the Lenders. Each appointment under this clause (a) shall be subject to the prior consent of the Borrower, which may not be unreasonably withheld or delayed but shall not be required during the continuance of an Event of Default.

(b) Effective immediately upon its resignation, (i) the retiring Agent shall be discharged from its duties and obligations under the Loan Documents, (ii) the Lenders shall assume and perform all of the duties of the retiring Agent until a successor Agent shall have accepted a valid appointment hereunder, (iii) the retiring Agent and its Related Persons shall no longer have the benefit of any provision of any Loan Document other than with respect to any actions taken or omitted to be taken while such retiring Agent was, or because such retiring Agent had been, validly acting as Agent under the Loan Documents and (iv) subject to its rights under Section 8.3, the retiring Agent shall take such action as may be reasonably necessary to assign to the successor Agent its rights as Agent under the Loan Documents. Effective immediately upon its acceptance of a valid appointment as Agent, a successor Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Agent under the Loan Documents.

(c) Any L/C Issuer may resign at any time by delivering notice of such resignation to Agent, effective on the date set forth in such notice or, if no such date is set forth therein, on the date such notice shall be effective. Upon such resignation, the L/C Issuer shall remain an L/C Issuer and shall retain its rights and obligations in its capacity as such (other than any obligation to Issue Letters of Credit but including the right to receive fees or to have Lenders participate in any L/C Reimbursement Obligation thereof) with respect to Letters of Credit issued by such L/C Issuer prior to the date of such resignation and shall otherwise be discharged from all other duties and obligations under the Loan Documents.

8.10 Release of Collateral or Guarantors . Each Lender and L/C Issuer hereby consents to the release and hereby directs Agent to release (or, in the case of clause (b)(ii) below, release or subordinate) the following:

(a) any Subsidiary of Holdings from its guaranty of any Obligation if all of the Stock and Stock Equivalents of such Subsidiary owned by any Credit Party are sold or transferred in a transaction permitted under the Loan Documents (including pursuant to a waiver or consent), to the extent that, after giving effect to such transaction, such Subsidiary would not be required to guaranty any Obligations pursuant to Section 4.13; and

(b) any Lien held by Agent for the benefit of the Secured Parties against (i) any Collateral that is sold, transferred, conveyed or otherwise disposed of by a Credit Party in a transaction permitted by the Loan Documents (including pursuant to a valid waiver or consent), to the extent all Liens required to be granted in such Collateral pursuant to Section 4.13 after giving effect to such transaction have been granted, (ii) any property subject to a Lien permitted hereunder in reliance upon subsection 5.1(h) or (i) and (iii) all of the Collateral and all Credit Parties, upon (A) termination of the Revolving Loan Commitments, (B) payment and satisfaction in full of all Loans, all L/C Reimbursement Obligations and all other Obligations under the Loan Documents and all Obligations arising under Secured Rate Contracts, that Agent has theretofore been notified in writing by the holder of such Obligation are then due and payable, (C) deposit of cash collateral with respect to all contingent Obligations (or, as an alternative to cash collateral, in the case of any Letter of Credit Obligation, receipt by Agent of a back-up letter of credit) in amounts and on terms and conditions and with parties satisfactory to Agent and each Indemnitee that is, or may be, owed such Obligations (excluding contingent Obligations (other than L/C Reimbursement Obligations) as to which no claim has been asserted) and (D) to the extent requested by Agent, receipt by Agent and the Secured Parties of liability releases from the Credit Parties each in form and substance reasonably acceptable to Agent.

Each Lender and L/C Issuer hereby directs Agent, and Agent hereby agrees, upon receipt of reasonable advance notice from the Borrower, to execute and deliver or file such documents and to perform other actions reasonably necessary to release the guarantees and Liens when and as directed in this Section 8.10.

8.11 Additional Secured Parties . The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not a Lender or L/C Issuer party hereto as long as, by accepting such benefits, such Secured Party agrees, as among Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by Agent, shall confirm such agreement in a writing in form and substance reasonably acceptable to Agent) this Article VIII, Section 9.3, Section 9.9, Section 9.10, Section 9.11, Section 9.17, Section 9.24 and Section 10.1 (and, solely with respect to L/C Issuers, subsection 1.1(c)) and the decisions and actions of Agent and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders or other parties hereto as required herein) to the same extent a Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such Secured Party shall be bound by Section 8.8 only to the extent of Liabilities, costs and expenses with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party and for such purposes the obligations of such Secured Party hereunder shall not exceed its pro rata share or similar concept in respect of all Obligations secured by such Collateral, (b) each of Agent, the Lenders and the L/C Issuers party hereto shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (c) except as otherwise set forth herein, such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.

ARTICLE IX

MISCELLANEOUS

9.1 Amendments and Waivers .

(a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by any Credit Party therefrom, shall be effective unless the same shall be in writing and signed by Agent, the Required Lenders (or by Agent with the consent of the Required Lenders), and the Borrower and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided , however , that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders directly affected thereby (or by Agent with the consent of all the Lenders directly affected thereby), in addition to Agent, the Required Lenders (or by Agent with the consent of the Required Lenders) and the Borrower, do any of the following:

(i) increase or extend the Commitment of any Lender (or reinstate any Commitment terminated pursuant to subsection 7.2(a));

(ii) postpone or delay any date fixed for, or reduce or waive, any scheduled installment of principal or any payment of interest, fees or other amounts (other than principal) due to the Lenders (or any of them) or L/C Issuer hereunder or under any other Loan Document (for the avoidance of doubt, mandatory prepayments pursuant to Section 1.9 (other than scheduled installments under subsection 1.9(a)) may be postponed, delayed, reduced, waived or modified with the consent of Required Lenders);

(iii) reduce the principal of, or the rate of interest specified herein (it being agreed that waiver of the default interest margin shall only require the consent of Required Lenders) or the amount of interest payable in cash specified herein on any Loan, or of any fees or other amounts payable hereunder or under any other Loan Document, including L/C Reimbursement Obligations;

(iv) amend or modify subsections 1.8(d) or 1.10(c);

(v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for the Lenders or any of them to take any action hereunder;

(vi) amend this Section 9.1 (other than subsection 9.1(c)) or, subject to the terms of this Agreement, the definition of Required Lenders or any provision providing for consent or other action by all Lenders; or

(vii) discharge any Credit Party from its respective payment Obligations under the Loan Documents, or release all or substantially all of the Collateral, except as otherwise may be provided in this Agreement or the other Loan Documents;

it being agreed that all Lenders shall be deemed to be directly affected by an amendment or waiver of the type described in the preceding clauses (v), (vi) and (vii).

(b) No amendment, waiver or consent shall, unless in writing and signed by Agent or the L/C Issuer, as the case may be, in addition to the Required Lenders or all Lenders directly affected thereby, as the case may be (or by Agent with the consent of the Required Lenders or all the Lenders directly affected thereby, as the case may be), affect the rights or duties of Agent or the L/C Issuer, as applicable, under this Agreement or any other Loan Document. No amendment, modification or waiver of this Agreement or any Loan Document altering the treatment of Obligations arising under Secured Rate Contracts resulting in such Obligations owing to any Secured Swap Provider becoming unsecured (other than releases of Liens permitted in accordance with the terms hereof), in each case in a manner adverse to any Secured Swap Provider, shall be effective without the written consent of such Secured Swap Provider. No amendment, modification or waiver of this Agreement or any Loan Document altering the treatment of Bank Product Obligations resulting in Bank Product Obligations owing to any Bank Product Provider becoming unsecured (other than releases of Liens permitted in accordance with the terms hereof), in each case in a manner adverse to any Bank Product Provider, shall be effective without the written consent of such Bank Product Provider.

(c) No amendment or waiver shall, unless signed by Agent and Required Revolving Lenders (or by Agent with the consent of Required Revolving Lenders) in addition to the Required Lenders (or by Agent with the consent of the Required Lenders): (i) amend or waive compliance with the conditions precedent to the obligations of Lenders to make any Revolving Loan (or of any L/C Issuer to Issue any Letter of Credit) in Section 2.2; or (ii) waive any Default or Event of Default for the purpose of satisfying the conditions precedent to the obligations of Lenders to make any Revolving Loan (or of any L/C Issuer to Issue any Letter of Credit) in Section 2.2. No amendment shall: (x) amend or waive this subsection 9.1(c) or the definitions of the terms used in this subsection 9.1(c) insofar as the definitions affect the substance of this subsection 9.1(c); (y) change the definition of the term Required Revolving Lenders; or (z) change the percentage of Lenders which shall be required for Revolving Lenders to take any action hereunder, in each case, unless such amendment or waiver shall have been signed by all Revolving Lenders (or by Agent with the consent of all Revolving Lenders).

(d) This Agreement may be amended with the written consent of Agent, the Borrower and the Required Lenders to (i) add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the outstanding principal and accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and Revolving Loans and the accrued interest and fees in respect thereof and (ii) include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.

(e) Notwithstanding anything to the contrary contained in this Section 9.1, (i) the Borrower may amend Schedules 3.19 and 3.21 upon notice to Agent, (ii) Agent may amend Schedule 1.1(b) to reflect Sales entered into pursuant to Section 9.9, and (iii) Agent and the Borrower may amend or modify this Agreement and any other Loan Document to (1) cure any ambiguity, omission, defect or inconsistency therein, and (2) grant a new Lien for the benefit of the Secured Parties, extend an existing Lien over additional property for the benefit of the Secured Parties or join additional Persons as Credit Parties.

9.2 Notices .

(a) Addresses . All notices and other communications required or expressly authorized to be made by this Agreement shall be given in writing, unless otherwise expressly specified herein, and (i) addressed to the addressee set forth on the applicable signature page hereto, (ii) posted to any E-System approved by or set up by or at the direction of Agent or (iii) addressed to such other address as shall be notified in writing (A) in the case of the Borrower and Agent, to the other parties hereto and (B) in the case of all other parties, to the Borrower and Agent, and in each case, with a copy sent via email to loan_admin@golubcapital.com and portfoliomanager@golubcapital.com,. Transmissions made by electronic mail or E-Fax to Agent shall be effective only (x) for notices where such transmission is specifically authorized by this Agreement, (y) if such transmission is delivered in compliance with procedures of Agent applicable at the time and previously communicated to the Borrower, and (z) if receipt of such transmission is acknowledged by Agent.

(b) Effectiveness . (i) All communications described in clause (a) above and all other notices, demands, requests and other communications made in connection with this Agreement shall be effective and be deemed to have been received (i) if delivered by hand, upon personal delivery, (ii) if delivered by overnight courier service, one (1) Business Day after delivery to such courier service, (iii) if delivered by mail, three (3) Business Days after deposit in the mail registered or certified, return receipt requested, (iv) if delivered by facsimile (other than to post to an E-System pursuant to clause (a)(ii) or (a)(iii) above), upon sender’s receipt of confirmation of proper transmission, and (v) if delivered by posting to any E-System, on the later of the Business Day of such posting and the Business Day access to such posting is given to the recipient thereof in accordance with the standard procedures applicable to such E-System; provided , however , that no communications to Agent pursuant to Article I shall be effective until received by Agent.

(ii) The posting, completion and/or submission by any Credit Party of any communication pursuant to an E-System shall constitute a representation and warranty by the Credit Parties that any representation, warranty, certification or other similar statement required by the Loan Documents to be provided, given or made by a Credit Party in connection with any such communication is true, correct and complete except as expressly noted in such communication or E-System.

(c) Each Lender shall notify Agent in writing of any changes in the address to which notices to such Lender should be directed, of addresses of its Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as Agent shall reasonably request.

9.3 Electronic Transmissions .

(a) Authorization . Subject to the provisions of subsection 9.2(a), each of Agent, Lenders, each Credit Party and each of their Related Persons, is authorized (but not required) to transmit, post or otherwise make or communicate, in its sole discretion, Electronic Transmissions in connection with any Loan Document and the transactions contemplated therein. Each Credit Party and each Secured Party hereto acknowledges and agrees that the use of Electronic Transmissions is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure and abuse and each indicates it assumes and accepts such risks by hereby authorizing the transmission of Electronic Transmissions.

(b) Signatures . Subject to the provisions of subsection 9.2(a), (i)(A) no posting to any E-System shall be denied legal effect merely because it is made electronically, (B) each E-Signature on any such posting shall be deemed sufficient to satisfy any requirement for a “signature” and (C) each such posting shall be deemed sufficient to satisfy any requirement for a “writing”, in each case including pursuant to any Loan Document, any applicable provision of any UCC, the federal Uniform Electronic Transactions Act, the Electronic Signatures in Global and National Commerce Act and any substantive or procedural Requirement of Law governing such subject matter, (ii) each such posting that is not readily capable of bearing either a signature or a reproduction of a signature may be signed, and shall be deemed signed, by attaching to, or logically associating with such posting, an E-Signature, upon which Agent, each other Secured Party and each Credit Party may rely and assume the authenticity thereof, (iii) each such posting containing a signature, a reproduction of a signature or an E-Signature shall, for all intents and purposes, have the same effect and weight as a signed paper original and (iv) each party hereto or beneficiary hereto agrees not to contest the validity or enforceability of any posting on any E-System or E-Signature on any such posting under the provisions of any applicable Requirement of Law requiring certain documents to be in writing or signed; provided , however , that nothing herein shall limit such party’s or beneficiary’s right to contest whether any posting to any E-System or E-Signature has been altered after transmission.

(c) Separate Agreements . All uses of an E-System shall be governed by and subject to, in addition to Section 9.2 and this Section 9.3, the separate terms, conditions and privacy policy posted or referenced in such E-System (or such terms, conditions and privacy policy as may be updated from time to time, including on such E-System) and related Contractual Obligations executed by Agent and Credit Parties in connection with the use of such E-System.

(d) LIMITATION OF LIABILITY . ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC TRANSMISSION AND DISCLAIMS ALL LIABILITY FOR ERRORS OR OMISSIONS THEREIN. NO WARRANTY OF ANY KIND IS MADE BY AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E-SYSTEMS OR ELECTRONIC COMMUNICATION, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS. Each of the Borrower, each other Credit Party executing this Agreement and each Secured Party agrees that Agent has no responsibility for maintaining or providing any equipment, software, services or any testing required in connection with any Electronic Transmission or otherwise required for any E-System.

9.4 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. No course of dealing between any Credit Party, any Affiliate of any Credit Party, Agent or any Lender shall be effective to amend, modify or discharge any provision of this Agreement or any of the other Loan Documents.

9.5 Costs and Expenses . Any action taken by any Credit Party under or with respect to any Loan Document, even if required under any Loan Document or at the request of Agent or the Required Lenders, shall be at the expense of such Credit Party, and neither Agent nor any other Secured Party shall be required under any Loan Document to reimburse any Credit Party or any Subsidiary of any Credit Party therefor except as expressly provided therein. In addition, the Borrower agrees to pay or reimburse upon demand (a) Agent for all reasonable and documented out-of-pocket costs and expenses incurred by it or any of its Related Persons, in connection with the investigation, development, preparation, negotiation, execution, interpretation or administration of, any modification of any term of or termination of, any Loan Document, any commitment or proposal letter therefor, any other document prepared in connection therewith or the consummation and administration of any transaction contemplated therein, in each case including Attorney Costs of Agent, the cost of environmental audits, Collateral audits and appraisals, background checks and similar expenses, to the extent permitted hereunder, (b) Agent for all reasonable and documented costs and expenses incurred by it or any of its Related Persons in connection with internal audit reviews, field examinations and Collateral examinations, to the extent permitted hereunder (which shall be reimbursed, in addition to the out-of-pocket costs and expenses of such examiners, at the per diem rate per individual charged by Agent for its examiners) and (c) each of Agent, its Related Persons, the Lenders and L/C Issuer for all costs and expenses incurred in connection with (i) any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out”, (ii) the enforcement or preservation of any right or remedy under any Loan Document, any Obligation, with respect to the Collateral or any other related right or remedy or (iii) the commencement, defense, conduct of, intervention in, or the taking of any other action with respect to, any proceeding (including any bankruptcy or Insolvency Proceeding) related to any Credit Party, any Subsidiary of any Credit Party, Loan Document, Obligation or Related Transaction (or the response to and preparation for any subpoena or request for document production relating thereto), including Attorney Costs of one (1) law firm plus one (1) local counsel in each applicable jurisdiction on behalf of Agent, its Related Persons, the Lenders and L/C Issuer, taken as a whole in connection with any of the matters except to the extent of an actual or perceived conflict of interest, in which case, one counsel plus one local counsel in each applicable jurisdiction shall be permitted for each class of similarly situated individuals.

9.6 Indemnity .

(a) Each Credit Party agrees to indemnify, hold harmless and defend Agent, each Lender, each L/C Issuer and each of their respective Related Persons (each such Person being an “Indemnitee”) from and against all Liabilities (including brokerage commissions, fees and other compensation, but excluding taxes) that may be imposed on, incurred by or asserted against any such Indemnitee in any matter relating to or arising out of, in connection with or as a result of (i) any Loan Document, the Management Agreement, any Obligation (or the repayment thereof), any Letter of Credit, the use or intended use of the proceeds of any Loan or the use of any Letter of Credit or any securities filing of, or with respect to, any Credit Party, (ii) any commitment letter, proposal letter or term sheet with any Person or any Contractual Obligation, arrangement or understanding with any broker, finder or consultant, in each case entered into by or on behalf of any Credit Party or any Affiliate of any of them in connection with any of the foregoing and any Contractual Obligation entered into in connection with any E-Systems or other Electronic Transmissions, (iii) any actual or prospective investigation, litigation or other proceeding, whether or not brought by any such Indemnitee or any of its Related Persons, any holders of securities or creditors (and including attorneys’ fees in any case), whether or not any such Indemnitee, Related Person, holder or creditor is a party thereto, and whether or not based on any securities or commercial law or regulation or any other Requirement of Law or theory thereof, including common law, equity, contract, tort or otherwise or (iv) any other act, event or transaction related, contemplated in or attendant to any of the foregoing (collectively, the “Indemnified Matters”); provided , however , that no Credit Party shall have any liability under this Section 9.6 to any Indemnitee with respect to any Indemnified Matter, and no Indemnitee shall have any liability with respect to any Indemnified Matter other than (to the extent otherwise liable), to the extent such liability has resulted primarily from the gross negligence or willful misconduct of such Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. Furthermore, each of the Borrower and each other Credit Party executing this Agreement waives and agrees not to assert against any Indemnitee, and shall cause each other Credit Party to waive and not assert against any Indemnitee, any right of contribution with respect to any Liabilities that may be imposed on, incurred by or asserted against any Related Person. For the avoidance of doubt, nothing in this subsection 9.6(a) is intended to be duplicative, or to limit the application, of Section 10.1.

(b) Without limiting the foregoing, “Indemnified Matters” includes all Environmental Liabilities imposed on, incurred by or asserted against any Indemnitee, including those arising from, or otherwise involving, any property of any Credit Party or any Related Person of any Credit Party or any actual, alleged or prospective damage to property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such property or natural resource or any property on or contiguous to any Real Estate of any Credit Party or any Related Person of any Credit Party, whether or not, with respect to any such Environmental Liabilities, any Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor-in-interest to any Credit Party or any Related Person of any Credit Party or the owner, lessee or operator of any property of any Related Person through any foreclosure action, in each case except to the extent such Environmental Liabilities (i) are incurred solely following foreclosure by Agent or following Agent or any Lender having become the successor-in-interest to any Credit Party or any Related Person of any Credit Party and (ii) are attributable solely to acts of such Indemnitee.

9.7 Marshaling; Payments Set Aside . No Secured Party shall be under any obligation to marshal any property in favor of any Credit Party or any other Person or against or in payment of any Obligation. To the extent that any Secured Party receives a payment from Borrower, from any other Credit Party, from the proceeds of the Collateral, from the exercise of its rights of setoff, any enforcement action or otherwise, and such payment is subsequently, in whole or in part, invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not occurred.

9.8 Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that any assignment by any Lender shall be subject to the provisions of Section 9.9, and provided further that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender.

9.9 Assignments and Participations; Binding Effect .

(a) Binding Effect . This Agreement shall become effective when it shall have been executed by Holdings, the Borrower, the other Credit Parties signatory hereto and Agent and when Agent shall have been notified by each Lender that such Lender has executed it. Thereafter, it shall be binding upon and inure to the benefit of, but only to the benefit of, Holdings, the Borrower, the other Credit Parties hereto (in each case except for Article VIII, other than Section 8.9), Agent, each Lender and each L/C Issuer receiving the benefits of the Loan Documents and, to the extent provided in Section 8.11, each other Secured Party and, in each case, their respective successors and permitted assigns. Except as expressly provided in any Loan Document (including in Section 8.9), none of Holdings, the Borrower, any other Credit Party, any L/C Issuer or Agent shall have the right to assign any rights or obligations hereunder or any interest herein.

(b) Right to Assign . Each Lender may sell, transfer, negotiate or assign (a “Sale”) all or a portion of its rights and obligations hereunder (including all or a portion of its Commitments and its rights and obligations with respect to Loans and Letters of Credit) to (i) any existing Lender (other than a Non-Funding Lender or Impacted Lender), (ii) any Affiliate or Approved Fund of any existing Lender (other than a Non-Funding Lender or Impacted Lender), or (iii) subject to compliance in all respects with subsection 9.9(g), an Affiliated Lenders, or (iv) any other Person acceptable (which acceptance shall not be unreasonably withheld or delayed) to Agent and, as long as no Event of Default is continuing, the Borrower ( provided , that the Borrower’s consent shall in all cases be required (and may be withheld in the Borrower’s discretion notwithstanding the foregoing) with respect to a Sale to any Disqualified Lender), and, in the case of any Sale of a Revolving Loan, Letter of Credit or Revolving Loan Commitment, Agent and each L/C Issuer that is a Lender (which acceptances of L/C Issuer and the Borrower shall be deemed to have been given unless an objection is delivered to Agent within five (5) Business Days after notice of a proposed Sale is delivered to the Borrower); provided , however , that (w) such Sales do not have to be ratable between the Revolving Loan and the Term Loans or between each Term Loan but must be ratable among the obligations owing to and owed by such Lender with respect to the Revolving Loans or a

Term Loan, (x) for each Loan, the aggregate outstanding principal amount (determined as of the effective date of the applicable Assignment) of the Loans, Commitments and Letter of Credit Obligations subject to any such Sale shall be in a minimum amount of $1,000,000, unless such Sale is made to an existing Lender or an Affiliate or Approved Fund of any existing Lender, is of the assignor’s (together with its Affiliates and Approved Funds) entire interest in such facility or is made with the prior consent of the Borrower (to the extent Borrower’s consent is otherwise required) and Agent, (y) interest accrued prior to and through the date of any such Sale may not be assigned, and (z) such Sales by Lenders who are Non-Funding Lenders due to clause (a) of the definition of Non-Funding Lender shall be subject to Agent’s prior written consent in all instances, unless in connection with such sale, such Non-Funding Lender cures, or causes the cure of, its Non-Funding Lender status as contemplated in subsection 1.11(e)(v). Notwithstanding the foregoing, no Sale may be made to a Credit Party, an Affiliate of a Credit Party other than an Affiliated Lender in accordance with subsection 9.9(g), a holder of Subordinated Indebtedness or an Affiliate of such a holder (other than an Affiliate Lender in accordance with Section 9.9(g)). Agent’s refusal to accept a Sale to a Person that would be a Non-Funding Lender or an Impacted Lender, or the imposition of conditions or limitations (including limitations on voting) upon Sales to such Persons, shall not be deemed to be unreasonable.

(c) Procedure . The parties to each Sale made in reliance on clause (b) above (other than those described in clause (e) or (f) below) shall execute and deliver to Agent an Assignment via an electronic settlement system designated by Agent (or, if previously agreed with Agent, via a manual execution and delivery of the Assignment) evidencing such Sale, together with any existing Note subject to such Sale (or any affidavit of loss therefor acceptable to Agent), any tax forms required to be delivered pursuant to Section 10.1 and payment of an assignment fee in the amount of $3,500, unless waived or reduced by Agent; provided that (i) if a Sale by a Lender is made to an Affiliate or an Approved Fund of such assigning Lender, then no assignment fee shall be due in connection with such Sale, and (ii) if a Sale by a Lender is made to an assignee that is not an Affiliate or Approved Fund of such assignor Lender, and concurrently to one or more Affiliates or Approved Funds of such assignee, then only one assignment fee of $3,500 (unless waived or reduced by Agent) shall be due in connection with such Sale. Upon receipt of all the foregoing, and conditioned upon such receipt and, if such Assignment is made in accordance with clause (iii) of subsection 9.9(b), upon Agent (and the Borrower, if applicable) consenting to such Assignment, from and after the effective date specified in such Assignment, Agent shall record or cause to be recorded in the Register the information contained in such Assignment.

(d) Effectiveness . Subject to the recording of an Assignment by Agent in the Register pursuant to subsection 1.4(b), (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment, shall have the rights and obligations of a Lender, (ii) any applicable Note shall be transferred to such assignee through such entry and (iii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment, relinquish its rights (except for those surviving the termination of the Commitments and the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).

(e) Grant of Security Interests . In addition to the other rights provided in this Section 9.9, each Lender may grant a security interest in, or otherwise assign as collateral, any of its rights under this Agreement, whether now owned or hereafter acquired (including rights to payments of principal or interest on the Loans), to (A) any federal reserve bank (pursuant to Regulation A of the Federal Reserve Board), without notice to Agent or (B) any holder of, or trustee for the benefit of the holders of, such Lender’s Indebtedness or equity securities, by notice to Agent (which underlying indebtedness to Borrower or their direct and indirect interests may be privately rated by one or more of the nationally recognized rating agencies); provided , however , that no such holder or trustee, whether because of such grant or assignment or any foreclosure thereon (unless such foreclosure is made through an assignment in accordance with clause (b) above), shall be entitled to any rights of such Lender hereunder and no such Lender shall be relieved of any of its obligations hereunder.

(f) Participants and SPVs . In addition to the other rights provided in this Section 9.9, each Lender may, (x) with notice to Agent, grant to an SPV the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder (and the exercise of such option by such SPV and the making of Loans pursuant thereto shall satisfy the obligation of such Lender to make such Loans hereunder) and such SPV may assign to such Lender the right to receive payment with respect to any Obligation and (y) without notice to (other than with respect to any such participation to an Affiliated Lender Participant, which participation shall be permitted only to the extent that a written notice with respect thereto shall have been provided to Agent at least three (3) Business Days prior to such participation) or consent from Agent or the Borrower, sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Term Loans, Revolving Loans and Letters of Credit); provided , however , that, whether as a result of any term of any Loan Document or of such grant or participation, (i) no such SPV or participant shall have a commitment, or be deemed to have made an offer to commit, to make Loans hereunder, and, except as provided in the applicable option agreement, none shall be liable for any obligation of such Lender hereunder, (ii) such Lender’s rights and obligations, and the rights and obligations of the Credit Parties and the Secured Parties towards such Lender, under any Loan Document shall remain unchanged and each other party hereto shall continue to deal solely with such Lender, which shall remain the holder of the Obligations in the Register, except that (A) each such participant and SPV shall be entitled to the benefit of Article X, but only to the extent the Borrower is notified of the participation sold to such participant or SPV and such participant or SPV delivers the tax forms such Lender is required to collect pursuant to subsection 10.1(f) and then only to the extent of any amount to which such Lender would be entitled in the absence of any such grant or participation and (B) each such SPV may receive other payments that would otherwise be made to such Lender with respect to Loans funded by such SPV to the extent provided in the applicable option agreement and set forth in a notice provided to Agent by such SPV and such Lender, provided , however , that in no case (including pursuant to clause (A) or (B) above) shall an SPV or participant have the right to enforce any of the terms of any Loan Document, and (iii) the consent of such SPV or participant shall not be required (either directly, as a restraint on such Lender’s ability to consent hereunder or otherwise) for any amendments,

waivers or consents with respect to any Loan Document or to exercise or refrain from exercising any powers or rights such Lender may have under or in respect of the Loan Documents (including the right to enforce or direct enforcement of the Obligations), except for those described in clauses (ii) and (iii) of subsection 9.1(a) with respect to amounts, or dates fixed for payment of amounts, to which such participant or SPV would otherwise be entitled and, in the case of participants, except for those described in clause (vi) of subsection 9.1(a); provided that each Affiliated Lender Participant shall be deemed to grant or withhold consent under its participation with respect to any amendments, waivers or consents with respect to any Loan Document or to exercise or refrain from exercising any powers or rights under or in respect of the Loan Documents in the same manner in which an Affiliated Lender is deemed to vote in accordance with subsection 9.9(g)(iii) (and each participation agreement with respect to a participation to an Affiliated Lender Participant must provide for such deemed consent or withholding of consent). Each Lender that grants an option to a SPV or sells a participation, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register on which it enters the name and address of each SPV and participant and the principal amounts (and stated interest) of each SPV and participant’s interest in the Loans or other obligations under the Loan Documents (the “SPV/Participant Register”). The entries in the SPV/Participant Register shall be conclusive absent manifest error, and the parties hereto shall treat each Person whose name is recorded in the SPV/Participant Register as the owner of such portion of the Loan or participation for all purposes of this Agreement notwithstanding any notice to the contrary. No party hereto shall institute (and the Borrower and Holdings shall cause each other Credit Party not to institute) against any SPV grantee of an option pursuant to this clause (f) any bankruptcy, reorganization, insolvency, liquidation or similar proceeding, prior to the date that is one (1) year and one day after the payment in full of all outstanding commercial paper of such SPV; provided , however , that each Lender having designated an SPV as such agrees to indemnify each Indemnitee against any Liability that may be incurred by, or asserted against, such Indemnitee as a result of failing to institute such proceeding (including a failure to be reimbursed by such SPV for any such Liability). The agreement in the preceding sentence shall survive the termination of the Commitments and the payment in full of the Obligations.

(g) Affiliated Lenders .

(i) In addition to the other rights provided in this Section 9.9, each Lender may assign all or a portion of any one or more of its Term Loans (or grant a participation in the Term Loan) to any Person who, after giving effect to such assignment or participation, would be an Affiliated Lender or an Affiliated Lender Participant, as applicable (without the consent of any Person but subject to acknowledgment by Agent (which acknowledgment shall be provided promptly after request therefor)); provided that:

(A) except as previously disclosed in writing to Agent, such Affiliated Lender represents and warrants as of the date of any assignment to such Affiliated Lender pursuant to this Section 9.9, that such Affiliated Lender has no MNPI that both (1) has not been disclosed to the assigning Lender (other than because such assigning Lender does not wish to receive MNPI with respect to any Credit Party or any of their respective securities) prior to such date and (2) could reasonably be expected to have a material effect upon a Lender’s decision to assign Term Loans to such Affiliated Lender;

(B) the assigning Lender and the Affiliated Lender purchasing such Lender’s Term Loans shall execute and deliver to Agent an assignment agreement substantially in the form of Exhibit 9.9(g)(i)(B) hereto (an “Affiliated Lender Assignment and Assumption”), which among other things shall provide for a power of attorney in favor of Agent to vote the claims in respect of Term Loans held by such Affiliated Lender in an Insolvency Proceeding as provided in clause (iv) of this subsection 9.9(g);

(C) for the avoidance of doubt Lenders shall not be permitted to assign any Revolving Loan Commitments or Revolving Loans (or grant any participation therein) to an Affiliated Lender or Affiliated Lender Participant, as applicable and any purported assignment of or participation in any Revolving Loan Commitments or Revolving Loans to an Affiliated Lender or Affiliated Lender Participant shall be null and void; and

(D) at the time of such assignment (or any participation under subsection 9.9(f)) and after giving affect to such assignment (or participation), (1) the aggregate principal amount of all Term Loans held by all Affiliated Lenders (or in which Affiliated Lender Participants have a participation) shall not exceed twenty percent (20%) of all Term Loans outstanding under this Agreement, and (2) there shall be no more than two (2) Affiliated Lenders and Affiliated Lender Participants in the aggregate.

(ii) Notwithstanding anything to the contrary in this Agreement, no Affiliated Lender shall have any right to (A) attend (including by telephone) any meeting or discussions (or portion thereof) among Agent or any Lender to which representatives of the Credit Parties are not invited or (B) receive any information or material prepared by Agent or any Lender or any communication by or among Agent and/or one or more Lenders (and their respective auditors, advisors and attorneys), except to the extent such information or materials have been made available to any Credit Party or any representative of any Credit Party.

(iii) Notwithstanding anything in Section 9.1 or the definition of “Required Lenders” to the contrary, for purposes of determining whether the Required Lenders, all affected Lenders or all Lenders have (A) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Credit Party therefrom, (B) otherwise acted on any matter related to any Loan Document or (C) directed or required Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, Affiliated Lenders shall not be permitted to vote on such matters submitted to Lenders for consideration and their Term Loan shall be disregarded in determining the aggregate unpaid principal balance of the Term Loan then outstanding held by other Lenders ; provided that, without the consent of an Affiliated Lender, no such amendment, modification, waiver consent or other action shall (1) increase any Commitment of such Affiliated Lender, (2) extend the due date for any scheduled

installment of principal of any Term Loan held by such Affiliated Lender, (3) extend the due date for interest under the Loan Documents owed to such Affiliated Lender, (4) reduce any amount owing to such Affiliated Lender under any Loan Document, or (5) result in a disproportionate and adverse effect on an Affiliated Lender, in relation to all non-Affiliated Lenders’ Term Loans.

(iv) Each Affiliated Lender, solely in its capacity as a holder of any Term Loans, hereby agrees, and each Affiliated Lender Assignment and Assumption shall provide a confirmation that, if any Credit Party shall be subject to any Insolvency Proceeding, with respect to any matter requiring the vote of holders of any Term Loans during the pendency of any such Insolvency Proceeding (including voting on any plan of reorganization pursuant to 11 U.S.C. §1126), Term Loans held by such Affiliated Lender (and any claim with respect thereto) shall be deemed assigned for all purposes to Agent, which shall cast such vote in the same proportion, for or against, as votes were case on each matter by Lenders that are not Affiliated Lenders, except with respect to matters that result in a disproportionate and adverse effect on an Affiliated Lender, in relation to all non-Affiliated Lenders’ Term Loans (in which case the express consent of the Affiliated Lender shall be required).

9.10 Non-Public Information; Confidentiality .

(a) Non-Public Information . Each of Agent, each Lender and each L/C Issuer acknowledges and agrees that it may receive material non-public information (“MNPI”) hereunder concerning the Credit Parties and their Affiliates and agrees to use such information in compliance with all relevant policies, procedures and applicable Requirements of Laws (including United States federal and state securities laws and regulations).

(b) Confidential Information . Each Lender, each L/C Issuer and Agent agrees to use all reasonable efforts to maintain, in accordance with its customary practices, the confidentiality of information obtained by it pursuant to any Loan Document, except that such information may be disclosed (i) with the Borrower’s consent, (ii) to Related Persons of such Lender, L/C Issuer or Agent, as the case may be, or to any Person that any L/C Issuer causes to issue Letters of Credit hereunder, that are advised of the confidential nature of such information and are instructed to keep such information confidential in accordance with the terms hereof, (iii) to the extent such information presently is or hereafter becomes (A) publicly available other than as a result of a breach of this Section 9.10 or (B) available to such Lender, L/C Issuer or Agent or any of their Related Persons, as the case may be, from a source (other than any Credit Party) not known by them to be subject to disclosure restrictions, (iv) to the extent disclosure is required by applicable Requirements of Law or other legal process or requested or demanded by any Governmental Authority, (v) to the extent necessary or customary for inclusion in league table measurements, (vi) (A) to the National Association of Insurance Commissioners or any similar organization, any examiner or any nationally recognized rating agency or (B) otherwise to the extent consisting of general portfolio information that does not identify Credit Parties, (vii) to current or prospective assignees, SPVs (including the investors and prospective investors therein) or participants, Persons that hold a security interest in any Lender’s rights under this Agreement in accordance with Section 9.9(e) (and those Persons for whose benefit such holder of a security interest is acting), direct or

contractual counterparties to any Secured Rate Contracts and to their respective Related Persons, in each case to the extent such assignees, investors, participants, secured parties (and such benefited Persons), counterparties or Related Persons agree to be bound by provisions substantially similar to the provisions of this Section 9.10 (and such Person may disclose information to their respective Related Persons in accordance with clause (ii) above) and, (viii) to any other party hereto, and (ix) in connection with the exercise or enforcement of any right or remedy under any Loan Document, in connection with any litigation or other proceeding to which such Lender, L/C Issuer or Agent or any of their Related Persons is a party or bound, or to the extent necessary to respond to public statements or disclosures by Credit Parties or their Related Persons referring to a Lender, L/C Issuer or an Agent or any of their Related Persons. In the event of any conflict between the terms of this Section 9.10 and those of any other Contractual Obligation entered into with any Credit Party (whether or not a Loan Document), the terms of this Section 9.10 shall govern.

(c) Tombstones . Each Credit Party consents to the publication by Agent or any Lender of any press releases, tombstones, advertising or other promotional materials (including, without limitation, via any Electronic Transmission) relating to the financing transactions contemplated by this Agreement using such Credit Party’s name, product photographs, logo or trademark. Agent or such Lender shall provide a draft of any such press release, advertising or other promotional material to the Borrower for review and comment prior to the publication thereof.

(d) Press Release and Related Matters . No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, issue any press release or other public disclosure in connection with the transactions contemplated hereby (other than any document filed with any Governmental Authority relating to a public offering of securities of any Credit Party) using the name, logo or otherwise referring to Agent or of any of its Affiliates, the Loan Documents or any transaction contemplated therein to which Agent is party without the prior consent of Agent except to the extent required to do so under applicable Requirements of Law and then, only after consulting with Agent.

(e) Distribution of Materials to Lenders and L/C Issuers . The Credit Parties acknowledge and agree that the Loan Documents and all reports, notices, communications and other information or materials provided or delivered by, or on behalf of, the Credit Parties hereunder (collectively, the “Borrower Materials”) may be disseminated by, or on behalf of, Agent, and made available, to the Lenders and the L/C Issuers by posting such Borrower Materials on an E-System. The Credit Parties authorize Agent to download copies of their logos from its website and post copies thereof on an E-System.

(f) Material Non-Public Information . The Credit Parties hereby agree that if either they, any parent company or any Subsidiary of the Credit Parties has publicly traded equity or debt securities in the United States, they shall (and shall cause such parent company or Subsidiary, as the case may be, to) (i) identify in writing, and (ii) to the extent reasonably practicable, clearly and conspicuously mark such Borrower Materials that contain only information that is publicly available or that is not material for purposes of United States federal and state securities laws as “PUBLIC”. The Credit Parties agree that by identifying such Borrower Materials as “PUBLIC” or publicly filing such Borrower Materials with the

Securities and Exchange Commission, then Agent, the Lenders and the L/C Issuers shall be entitled to treat such Borrower Materials as not containing any MNPI for purposes of United States federal and state securities laws. The Credit Parties further represent, warrant, acknowledge and agree that the following documents and materials shall be deemed to be PUBLIC, whether or not so marked, and do not contain any MNPI: (A) the Loan Documents, including the schedules and exhibits attached thereto, and (B) administrative materials of a customary nature prepared by the Credit Parties or Agent (including, Notices of Borrowing, Notices of Conversion/Continuation, L/C Requests, and any similar requests or notices posted on or through an E-System). Before distribution of any Borrower Materials, the Credit Parties agree to execute and deliver to Agent a letter authorizing distribution of the evaluation materials to prospective Lenders and their employees willing to receive MNPI, and a separate letter authorizing distribution of evaluation materials that do not contain MNPI and represent that no MNPI is contained therein.

9.11 Set-off; Sharing of Payments .

(a) Right of Setoff . Each of Agent, each Lender, each L/C Issuer and each Affiliate (including each branch office thereof) of any of them is hereby authorized, without notice or demand (each of which is hereby waived by each Credit Party), at any time and from time to time during the continuance of any Event of Default and to the fullest extent permitted by applicable Requirements of Law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other Indebtedness, claims or other obligations at any time owing by Agent, such Lender, such L/C Issuer or any of their respective Affiliates to or for the credit or the account of the Borrower or any other Credit Party against any Obligation of any Credit Party now or hereafter existing, whether or not any demand was made under any Loan Document with respect to such Obligation and even though such Obligation may be unmatured. No Lender or L/C Issuer shall exercise any such right of set off without the prior written consent of Agent. Each of Agent, each Lender and each L/C Issuer agrees promptly to notify the Borrower and Agent after any such setoff and application made by such Lender or its Affiliates; provided , however , that the failure to give such notice shall not affect the validity of such setoff and application. The rights under this Section 9.11 are in addition to any other rights and remedies (including other rights of setoff) that Agent, the Lenders, the L/C Issuer, their Affiliates and the other Secured Parties, may have.

(b) Sharing of Payments, Etc . If any Lender, directly or through an Affiliate or branch office thereof, obtains any payment of any Obligation of any Credit Party (whether voluntary, involuntary or through the exercise of any right of setoff or the receipt of any Collateral or “proceeds” (as defined under the applicable UCC) of Collateral) other than pursuant to Section 9.9 or Article X or a Discounted Prepayment and such payment exceeds the amount such Lender would have been entitled to receive if all payments had gone to, and been distributed by, Agent in accordance with the provisions of the Loan Documents, such Lender shall purchase for cash from other Lenders such participations in their Obligations as necessary for such Lender to share such excess payment with such Lenders to ensure such payment is applied as though it had been received by Agent and applied in accordance with this Agreement (or, if such application would then be at the discretion of the Borrower, applied to repay the Obligations in accordance herewith); provided, however, that (i) if such payment is rescinded or otherwise recovered from such Lender or L/C Issuer in whole or in part, such

purchase shall be rescinded and the purchase price therefor shall be returned to such Lender or L/C Issuer without interest and (ii) such Lender shall, to the fullest extent permitted by applicable Requirements of Law, be able to exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the applicable Credit Party in the amount of such participation. If a Non-Funding Lender receives any such payment as described in the previous sentence, such Lender shall turn over such payments to Agent in an amount that would satisfy the cash collateral requirements set forth in subsection 1.11(e).

9.12 Counterparts; Facsimile Signature . This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this Agreement by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart hereof.

9.13 Severability . The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

9.14 Captions . The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

9.15 Independence of Provisions . The parties hereto acknowledge that this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement.

9.16 Interpretation . This Agreement is the result of negotiations among and has been reviewed by counsel to Credit Parties, Agent, each Lender and other parties hereto, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Lenders or Agent merely because of Agent’s or Lenders’ involvement in the preparation of such documents and agreements. Without limiting the generality of the foregoing, each of the parties hereto has had the advice of counsel with respect to Sections 9.18 and 9.19.

9.17 No Third Parties Benefited . This Agreement is made and entered into for the sole protection and legal benefit of the Borrower, the Lenders, the L/C Issuers party hereto, Agent and, subject to the provisions of Section 8.11, each other Secured Party, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. Neither Agent nor any Lender shall have any obligation to any Person not a party to this Agreement or the other Loan Documents.

9.18 Governing Law and Jurisdiction .

(a) Governing Law . The laws of the State of New York shall govern all matters arising out of, in connection with or relating to this Agreement, including, without limitation, its validity, interpretation, construction, performance and enforcement (including, without limitation, any claims in contract or tort law arising out of the subject matter hereof and any determinations with respect to post-judgment interest).

(b) Submission to Jurisdiction . Any legal action or proceeding with respect to any Loan Document shall be brought exclusively in the courts of the State of New York located in the City of New York, Borough of Manhattan, or of the United States of America sitting in the Southern District of New York and, by execution and delivery of this Agreement, each party executing this Agreement hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts; provided that nothing in this Agreement shall limit the right of Agent to commence any proceeding in the federal or state courts of any other jurisdiction to the extent Agent determines that such action is necessary or appropriate to exercise its rights or remedies under the Loan Documents. The parties hereto (and, to the extent set forth in any other Loan Document, each other Credit Party) hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions.

(c) Service of Process . Each party hereto hereby irrevocably waives personal service of any and all legal process, summons, notices and other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States of America with respect to or otherwise arising out of or in connection with any Loan Document by any means permitted by applicable Requirements of Law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address of such Person specified herein (and shall be effective when such mailing shall be effective, as provided therein). Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing contained in this Section 9.18 shall affect the right of any party hereto to serve process in any other manner permitted by applicable Requirements of Law.

9.19 Waiver of Jury Trial . THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

9.20 Entire Agreement; Release; Survival .

(a) THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER THEREOF AND ANY PRIOR LETTER OF INTEREST, COMMITMENT LETTER, CONFIDENTIALITY AND SIMILAR AGREEMENTS INVOLVING ANY CREDIT PARTY AND ANY LENDER OR ANY L/C ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES RELATING TO A FINANCING OF SUBSTANTIALLY SIMILAR FORM, PURPOSE OR EFFECT OTHER THAN THE FEE LETTER. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE TERMS OF THIS AGREEMENT SHALL GOVERN (UNLESS OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS OR SUCH TERMS OF SUCH OTHER LOAN DOCUMENTS ARE NECESSARY TO COMPLY WITH APPLICABLE REQUIREMENTS OF LAW, IN WHICH CASE SUCH TERMS SHALL GOVERN TO THE EXTENT NECESSARY TO COMPLY THEREWITH).

(b) Execution of this Agreement by the Credit Parties constitutes a full, complete and irrevocable release of any and all claims which each Credit Party may have at law or in equity in respect of all prior discussions and understandings, oral or written, relating to the subject matter of this Agreement and the other Loan Documents. In no event shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). Each of the Borrower and each other Credit Party signatory hereto hereby waives, releases and agrees (and shall cause each other Credit Party to waive, release and agree) not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.

(c) (i) Any indemnification or other protection provided to any Indemnitee pursuant to Article VIII (Agent), Section 9.5 (Costs and Expenses), Section 9.6 (Indemnity), this Section 9.20, and Article X (Taxes, Yield Protection and Illegality), and (ii) the provisions of Section 8.1 of the Guaranty and Security Agreement, in each case, shall (x) survive the termination of the Commitments and the payment in full of all other Obligations and (y) with respect to clause (i) above, inure to the benefit of any Person that at any time held a right thereunder (as an Indemnitee or otherwise) and, thereafter, its successors and permitted assigns.

9.21 Patriot Act . Each Lender that is subject to the Patriot Act hereby notifies the Credit Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of each Credit Party and other information that will allow such Lender to identify each Credit Party in accordance with the Patriot Act.

9.22 Replacement of Lender . Within forty five (45) days after: (i) receipt by the Borrower of written notice and demand from any Lender (an “Affected Lender”) for payment of additional costs as provided in Sections 10.1, 10.3 and/or 10.6; or (ii) any failure by any Lender (other than Agent or an Affiliate of Agent) to consent to a requested amendment, waiver or modification to any Loan Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender (or each Lender directly affected thereby, as applicable) is required with respect thereto, the Borrower may, at its option, notify Agent and such Affected Lender (or such non-consenting Lender) of the Borrower’s

intention to obtain, at the Borrower’s expense, a replacement Lender (“Replacement Lender”) for such Affected Lender (or such non-consenting Lender), which Replacement Lender shall be reasonably satisfactory to Agent. In the event the Borrower obtains a Replacement Lender within forty five (45) days following notice of its intention to do so, the Affected Lender (or defaulting or non-consenting Lender, as the case may be) shall sell and assign its Loans and Commitments to such Replacement Lender, at par, provided that the Borrower has reimbursed such Affected Lender for its increased costs for which it is entitled to reimbursement under this Agreement through the date of such sale and assignment. In the event that a replaced Lender does not execute an Assignment pursuant to Section 9.9 within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this Section 9.22 and presentation to such replaced Lender of an Assignment evidencing an assignment pursuant to this Section 9.22, the Borrower shall be entitled (but not obligated) to execute such an Assignment on behalf of such replaced Lender, and any such Assignment so executed by the Borrower, the Replacement Lender and Agent, shall be effective for purposes of this Section 9.22 and Section 9.9. Notwithstanding the foregoing, with respect to a Lender that is a Non-Funding Lender or an Impacted Lender, Agent may, but shall not be obligated to, obtain a Replacement Lender and execute an Assignment on behalf of such Non-Funding Lender or Impacted Lender at any time with three (3) Business’ Days prior notice to such Lender (unless notice is not practicable under the circumstances) and cause such Lender’s Loans and Commitments to be sold and assigned, in whole or in part, at par. Upon any such assignment and payment and compliance with the other provisions of Section 9.9, such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided , any rights of such replaced Lender to indemnification hereunder shall survive.

9.23 Joint and Several . The obligations of the Credit Parties hereunder and under the other Loan Documents are joint and several. Without limiting the generality of the foregoing, reference is hereby made to Article II of the Guaranty and Security Agreement, to which the obligations of the Borrower and the other Credit Parties are subject.

9.24 Creditor-Debtor Relationship . The relationship between Agent, each Lender and the L/C Issuer, on the one hand, and the Credit Parties, on the other hand, is solely that of creditor and debtor. No Secured Party has any fiduciary relationship or duty to any Credit Party arising out of or in connection with, and there is no agency, tenancy or joint venture relationship between the Secured Parties and the Credit Parties by virtue of, any Loan Document or any transaction contemplated therein.

ARTICLE X

TAXES, YIELD PROTECTION AND ILLEGALITY

10.1 Taxes .

(a) Except as otherwise provided in this Section 10.1, each payment by any Credit Party under any Loan Document shall be made free and clear of all present or future taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (and without deduction for any of them), but excluding Excluded Taxes (collectively, the “Taxes”).

(b) If any Taxes shall be required by law to be deducted from or in respect of any amount payable under any Loan Document to any Secured Party (i) such amount shall be increased as necessary to ensure that, after all required deductions for Taxes are made (including deductions applicable to any increases to any amount under this Section 10.1), such Secured Party receives the amount it would have received had no such deductions been made, (ii) the relevant Credit Party shall make such deductions, (iii) the relevant Credit Party shall timely pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable Requirements of Law and (iv) within thirty (30) days after such payment is made, the relevant Credit Party shall deliver to Agent an original or certified copy of a receipt evidencing such payment or other evidence of payment reasonably satisfactory to Agent.

(c) In addition, the Borrower agrees to pay, and authorizes Agent to pay in its name, any stamp, documentary, excise or property tax, charges or similar levies imposed by any applicable Requirement of Law or Governmental Authority and all Liabilities with respect thereto (including by reason of any delay in payment thereof), in each case arising from the execution, delivery or registration of, or otherwise with respect to, any Loan Document or any transaction contemplated therein, except for any such taxes imposed solely as a result of an assignment by a Lender under Section 9.9 (other than under Section 9.22) (collectively, “Other Taxes”). Within thirty (30) days after the date of any payment of Taxes or Other Taxes by any Credit Party, the Borrower shall furnish to Agent, at its address referred to in Section 9.2, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment reasonably satisfactory to Agent.

(d) The Borrower shall reimburse and indemnify, within thirty (30) days after receipt of demand therefor (with copy to Agent), each Secured Party for all Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 10.1) paid by such Secured Party and any Liabilities arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. A certificate of the Secured Party (or of Agent on behalf of such Secured Party) claiming any compensation under this clause (d), setting forth the amounts to be paid thereunder and delivered to the Borrower with copy to Agent, shall be conclusive, binding and final for all purposes, absent manifest error.

(e) Any Secured Party claiming any additional amounts payable pursuant to this Section 10.1 shall use its reasonable efforts (consistent with its internal policies and Requirements of Law) to change the jurisdiction of its Lending Office if such a change would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender.

(f) (i) Each Non-U.S. Lender Party that, at any of the following times, is entitled to an exemption from United States withholding tax or is subject to such withholding tax at a reduced rate under an applicable tax treaty, shall (w) on or prior to the date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it

pursuant to this clause (i) and (z) from time to time if requested by the Borrower or Agent (or, in the case of a participant or SPV, the relevant Lender), provide Agent and the Borrower (or, in the case of a participant or SPV, the relevant Lender) with two completed originals of each of the following, as applicable: (A) Forms W-8ECI (claiming exemption from U.S. withholding tax because the income is effectively connected with a U.S. trade or business), W-8BEN (claiming exemption from, or a reduction of, U.S. withholding tax under an income tax treaty) and/or W-8IMY or any successor forms, (B) in the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN (claiming exemption from U.S. withholding tax under the portfolio interest exemption) or any successor form and a certificate in form and substance acceptable to Agent that such Non-U.S. Lender Party is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code or (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code or (C) any other applicable document prescribed by the IRS or reasonably requested by Agent or the Borrower certifying as to the entitlement of such Non-U.S. Lender Party to such exemption from United States withholding tax or reduced rate with respect to all payments to be made to such Non-U.S. Lender Party under the Loan Documents. Unless the Borrower and Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document to or for a Non-U.S. Lender Party are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Credit Parties and Agent shall withhold amounts required to be withheld by applicable Requirements of Law from such payments at the applicable statutory rate.

(ii) Each U.S. Lender Party and Agent shall (A) in the case of a U.S. Lender Party, on or prior to the date such U.S. Lender Party becomes a “U.S. Lender Party” hereunder and, in the case of the Agent, on or prior to the date of the first payment by a Credit Party hereunder, (B) on or prior to the date on which any such form or certification expires or becomes obsolete, (C) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (f) and (D) from time to time if requested by the Borrower or Agent (or, in the case of a participant or SPV, the relevant Lender), provide Agent and the Borrower (or, in the case of a participant or SPV, the relevant Lender) with two completed originals of Form W-9 (certifying that such U.S. Lender Party is entitled to an exemption from U.S. backup withholding tax) or any successor form.

(iii) Each Lender having sold a participation in any of its Obligations or identified an SPV as such to Agent shall collect from such participant or SPV the documents described in this clause (f) and provide them to Agent.

(iv) If a payment made to a Non-U.S. Lender Party would be subject to United States federal withholding tax imposed by FATCA if such Non-U.S. Lender Party fails to comply with the applicable reporting requirements of FATCA, such Non-U.S. Lender Party shall deliver to Agent and Borrower any documentation under any Requirement of Law or reasonably requested by Agent or Borrower sufficient for Agent or Borrower to comply with their obligations under FATCA and to determine that such Non-U.S. Lender has complied with such applicable reporting requirements or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(g) Each Secured Party shall promptly notify the Borrower (or in the case of a participant or SPV, the Lender granting the participation only), in writing, of any change in circumstances that, to the knowledge of such Lender (or participant), would modify or render invalid any exemption or reduction claimed under clause (f) above.

(h) To the extent required by any applicable law, the Borrower or Agent may withhold from any payment to any Secured Party under a Loan Document an amount equal to any applicable withholding tax. If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Borrower or Agent did not properly withhold tax from amounts paid to or for the account of any Secured Party (because the appropriate certification form was not delivered by such Secured Party, was not properly executed by such Secured Party, or because such Secured Party failed to notify the Borrower or Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Secured Party shall promptly indemnify the Borrower or Agent fully for all amounts paid, directly or indirectly, by the Borrower or Agent as tax or otherwise, including penalties and interest, and together with all reasonable out-of-pocket expenses incurred by the Borrower or Agent. The Borrower or Agent may offset against any payment to any Secured Party under a Loan Document, any applicable withholding tax that was required to be withheld from any prior payment to such Secured Party but which was not so withheld, as well as any other amounts for which the Borrower or Agent is entitled to indemnification from such Secured Party under this Section 10.1(h).

(i) If the Borrower determines in good faith that substantial authority exists for contesting a Tax as to which a Secured Party has been paid any additional amounts by the Borrower pursuant to clause (b) above or has received an indemnification payment pursuant to clause (d) above, and if the Secured Party agrees with such determination, the Secured Party shall reasonably cooperate at the Borrower’s expense in challenging such Tax. In the event that any Secured Party receives a refund (whether in cash or by offset against taxes otherwise due) in respect of Taxes from a Governmental Authority as to which such Secured Party has been paid any additional amounts by the Borrower pursuant to clause (b) above or has received an indemnification payment pursuant to clause (d) above, then the Secured Party shall pay over such refund (including any interest paid by the relevant Governmental Authority with respect to such refund) within ten (10) Business Days from the date of the receipt to the Borrower, net of all out of pocket expenses, or any Taxes imposed on, such Secured Party, provided, however, that the Borrower, upon the request of a Secured Party, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Secured Party in the event such Secured Party is required to repay such refund to such Governmental Authority. This clause (i) shall not be construed to require any Secured Party to make available its tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

10.2 Illegality . If after the date a Lender becomes a party to this Agreement, or with regard to SPVs or participants, the date the SPV or participant acquired an option or participation, any Lender shall determine that the introduction of any Requirement of Law, or any change in any Requirement of Law or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to make LIBOR Rate Loans, then, on notice

thereof by such Lender to the Borrower through Agent, the obligation of that Lender to make LIBOR Rate Loans shall be suspended until such Lender shall have notified Agent and the Borrower that the circumstances giving rise to such determination no longer exists.

(a) Subject to clause (c) below, if any Lender shall determine that it is unlawful to maintain any LIBOR Rate Loan, the Borrower shall prepay in full all LIBOR Rate Loans of such Lender then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if such Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 10.4.

(b) If the obligation of any Lender to make or maintain LIBOR Rate Loans has been terminated, the Borrower may elect, by giving notice to such Lender through Agent that all Loans which would otherwise be made by any such Lender as LIBOR Rate Loans shall be instead Base Rate Loans.

(c) Before giving any notice to Agent pursuant to this Section 10.2, the affected Lender shall designate a different Lending Office with respect to its LIBOR Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender.

10.3 Increased Costs and Reduction of Return .

(a) If any Lender or L/C Issuer shall determine that, due to either (i) the introduction of, or any change in, or in the interpretation of, any Requirement of Law or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in the case of either clause (i) or (ii) subsequent to the date such Lender or L/C Issuer becomes a party to this Agreement, or with regard to SPVs or participants, the date the SPV or participant acquired an option or participation, there shall be any increase in the cost to such Lender or L/C Issuer of agreeing to make or making, funding or maintaining any LIBOR Rate Loans or of issuing or maintaining any Letter of Credit, then the Borrower shall be liable for, and shall from time to time, within thirty (30) days of demand therefor by such Lender or L/C Issuer (with a copy of such demand to Agent), pay to Agent for the account of such Lender or L/C Issuer, additional amounts as are sufficient to compensate such Lender or L/C Issuer for such increased costs; provided, that the Borrower shall not be required to compensate any Lender or L/C Issuer pursuant to this subsection 10.3(a) for any increased costs incurred more than one hundred and eighty (180) days prior to the date that such Lender or L/C Issuer notifies the Borrower, in writing of the increased costs and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided, further, that if the circumstance giving rise to such increased costs is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

(b) If any Lender or L/C Issuer shall have determined that for each such case below, for events occurring after such Lender or L/C Issuer becomes a party to this Agreement, or with regards to SPVs or participants, the date the SPV or participant acquired an option or participation:

(i) the introduction of any Capital Adequacy Regulation;

(ii) any change in any Capital Adequacy Regulation;

(iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof; or

(iv) compliance by such Lender or L/C Issuer (or its Lending Office) or any entity controlling the Lender or L/C Issuer, with any Capital Adequacy Regulation;

affects the amount of capital required or expected to be maintained by such Lender or L/C Issuer or any entity controlling such Lender or L/C Issuer and (taking into consideration such Lender’s or such entities’ policies with respect to capital adequacy and such Lender’s or L/C Issuer’s desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment(s), loans, credits or obligations under this Agreement, then, within thirty (30) days of demand of such Lender or L/C Issuer (with a copy to Agent), the Borrower shall pay to such Lender or L/C Issuer, from time to time as specified by such Lender or L/C Issuer, additional amounts sufficient to compensate such Lender or L/C Issuer (or the entity controlling the Lender or L/C Issuer) for such increase; provided, that the Borrower shall not be required to compensate any Lender or L/C Issuer pursuant to this subsection 10.3(b) for any amounts incurred more than one hundred eighty (180) days prior to the date that such Lender or L/C Issuer notifies the Borrower, in writing of the amounts and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided , further , that if the event giving rise to such increase is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

(c) Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a change in a Requirement of Law under subsection (a) above and/or a change in a Capital Adequacy Regulation under subsection (b) above, as applicable, regardless of the date enacted, adopted or issued.

(d) For the avoidance of doubt, this Section 10.3 shall not apply to taxes, which shall be governed solely by Section 10.1.

10.4 Funding Losses . The Borrower agrees to reimburse each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of:

(a) the failure of the Borrower to make any payment or mandatory prepayment of principal of any LIBOR Rate Loan (including payments made after any acceleration thereof);

(b) the failure of the Borrower to borrow, continue or convert a Loan after the Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;

(c) the failure of the Borrower to make any prepayment after the Borrower has given a notice in accordance with Section 1.8;

(d) the prepayment (including pursuant to Section 1.8) of a LIBOR Rate Loan on a day which is not the last day of the Interest Period with respect thereto; or

(e) the conversion pursuant to Section 1.6 of any LIBOR Rate Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period;

including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained; provided that, with respect to the expenses described in clauses (d) and (e) above, such Lender shall have notified Agent of any such expense within two (2) Business Days of the date on which such expense was incurred. Solely for purposes of calculating amounts payable by the Borrower to the Lenders under this Section 10.4 and under subsection 10.3(a): each LIBOR Rate Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the interest rate for such LIBOR Rate Loan by a matching deposit or other borrowing in the interbank Eurodollar market for a comparable amount and for a comparable period, whether or not such LIBOR Rate Loan is in fact so funded.

10.5 Inability to Determine Rates . If Agent shall have determined in good faith that for any reason adequate and reasonable means do not exist for ascertaining the LIBOR for any requested Interest Period with respect to a proposed LIBOR Rate Loan or that the LIBOR applicable pursuant to subsection 1.3(a) for any requested Interest Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding or maintaining such Loan, Agent will forthwith give notice of such determination to the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended until Agent revokes such notice in writing. Upon receipt of such notice, the Borrower may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Borrower does not revoke such notice, the Lenders shall make, convert or continue the Loans, as proposed by the Borrower, in the amount specified in the applicable notice submitted by the Borrower, but such Loans shall be made, converted or continued as Base Rate Loans.

10.6 Reserves on LIBOR Rate Loans . The Borrower shall pay to each Lender, as long as such Lender shall be required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional costs on the unpaid principal amount of each LIBOR Rate Loan equal to actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), payable on each date on which interest is payable on

such Loan provided the Borrower shall have received at least fifteen (15) days’ prior written notice (with a copy to Agent) of such additional interest from the Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest shall be payable fifteen (15) days from receipt of such notice.

10.7 Certificates of Lenders . Any Lender claiming reimbursement or compensation pursuant to this Article X shall deliver to the Borrower (with a copy to Agent) a certificate setting forth in reasonable detail the amount payable to such Lender hereunder and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error.

ARTICLE XI

DEFINITIONS

11.1 Defined Terms . The following terms are defined in the Sections or subsections referenced opposite such terms:


“Acceptable Discount Price”		1.8(d)(ii)
“Affected Lender”		9.22
“Affiliated Lender Assignment and Assumption”		9.9(g)(i)(B)
“Aggregate Excess Funding Amount”		1.11(e)(iv)
“Applicable Discount Price		1.8(d)(ii)
“Borrower”		Preamble
“Borrower Materials”		9.10(e)
“Capital Expenditures		Exhibit 4.2(b)
“Compliance Certificate”		4.2(b)
“Discount Price Range”		1.8(d)(ii)
“Discounted Prepayment Amount”		1.8(d)(ii)
“Discounted Prepayment”		1.8(d)(i)
“Discounted Prepayment Notice”		1.8(d)(ii)
“EBITDA”		Exhibit 4.2(b)
“Event of Default”		7.1
“Excess Cash Flow”		Exhibit 4.2(b)
“Fee Letter”		1.9(a)
“Fixed Charge Coverage Ratio”		Exhibit 4.2(b
“Holdings”		Recitals
“Indemnified Matters”		9.6
“Indemnitee”		9.6
“Interest Coverage Ratio”		Exhibit 4.2(b)
“Investments”		5.4
“L/C Reimbursement Agreement”		1.1(c)
“L/C Reimbursement Date”		1.1(c)
“L/C Request”		1.1(c)
“L/C Sublimit”		1.1(c)
“Lender”		Preamble
“Letter of Credit Fee”		1.9(c)
“Leverage Ratio”		Exhibit 4.2(b)


“Maximum Lawful Rate”		1.3(d)
“Maximum Revolving Loan Balance”		1.1(b)
“Miller Note”		5.5(n)
“MNPI”		9.10(a)
“Notice of Conversion/Continuation”		1.6(a)
“OFAC”		3.27
“Other Taxes”		10.1(c)
“Permitted Liens”		5.1
“Qualifying Term Loans”		1.8(d)(iii)
“Register”		1.4(b)
“Restricted Payments”		5.11
“Replacement Lender”		9.22
“Revolving Loan Commitment”		1.1(b)
“Revolving Loan”		1.1(b)
“Sale”		9.9(b)
“SDN List”		3.27
“Specified Equity Contribution”		6.4
“SPV/Participant Register”		9.9(f)

“Tax Distribution”		5.11(e)
“Taxes”		10.1(a)
“Term Loan” and “Term Loans”		1.1(a)
“Term Loan Commitment”		1.1(a)
“Unused Commitment Fee”		1.9(b)

In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings:

“Account” means, as at any date of determination, all “accounts” (as such term is defined in the UCC) of the Borrower and its Subsidiaries, including, without limitation, the unpaid portion of the obligation of a customer of the Borrower or any of its Subsidiaries in respect of Inventory purchased by and shipped to such customer and/or the rendition of services by the Borrower or such Subsidiary, as stated on the respective invoice of the Borrower or such Subsidiary, net of any credits, rebates or offsets owed to such customer.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of fifty percent (50%) of the Stock and Stock Equivalents of any Person or otherwise causing any Person to become a Subsidiary of the Borrower, or (c) a merger or consolidation or any other combination with another Person.

“Additional Permitted Concept” means (i) the “take and bake” pizza segment and (ii) Project Pie.

“Adjustment Date” means the earlier of (i) after the consummation of an IPO and the payment of the Loans pursuant to Section 1.8(f) that results in the Leverage Ratio calculated on a pro forma basis for the most recently ended Fiscal Quarter for which financial statements have been delivered to be equal to or less than 4.25, the first Business Day following such prepayment and (ii) one Business Day after the delivery of financial statements that demonstrate a Leverage Ratio less than or equal to 4.25.

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of ten percent (10%) or more of the voting Stock (either directly or through ownership of Stock Equivalents) of a Person shall for the purposes of this Agreement, be deemed an Affiliate of such other Person. Notwithstanding the foregoing, neither Agent nor any Lender shall be deemed an “Affiliate” of any Credit Party or of any Subsidiary of any Credit Party solely by reason of the provisions of the Loan Documents.

“Affiliated Lender” means, at any time, the Sponsor or an Affiliate (other than Parent, Holdings, the Borrower or any of their respective Subsidiaries) of the Sponsor including Sponsor-affiliated debt funds.

“Affiliated Lender Participant” means, at any time, a Person who holds or who, upon the effectiveness of a grant of a participation in a Term Loan would hold, a participation in a Term Loan, and who would be, if such Person were a Lender, an Affiliated Lender, provided that for the purposes of subsection 9.9(g)(i)(D), a Person that holds a participation in a Term Loan solely granted by an Affiliated Lender shall not be an Affiliated Lender Participant.

“Agent” means Golub Capital LLC in its capacity as administrative agent for the Lenders hereunder, and any successor administrative agent.

“Aggregate Revolving Loan Commitment” means the combined Revolving Loan Commitments of the Lenders, which shall initially be in the amount of $10,000,000, as such amount may be reduced from time to time pursuant to this Agreement.

“Aggregate Term Loan Commitment” means the combined Term Loan Commitments of the Lenders, which shall initially be in the amount of $167,000,000, as such amount may be reduced from time to time pursuant to this Agreement.

“Applicable Margin” means:

(a) initially, (i) if a Base Rate Loan, 4.75% per annum and (ii) if a LIBOR Rate Loan, 5.75% per annum; and

(b) from the Adjustment Date and at all times thereafter, the Applicable Margin shall equal (i) if a Base Rate Loan, 3.50% per annum and (ii) if a LIBOR Rate Loan, 4.50% per annum.

“Approved Fund” means, with respect to any Lender, any Person (other than a natural Person) that (a) (i) is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business or (ii) temporarily warehouses loans for any Lender or any Person described in clause (i) above and (b) is advised or managed by (i) such Lender, (ii) any Affiliate of such Lender or (iii) any Person (other than an individual) or any Affiliate of any Person (other than an individual) that administers or manages such Lender.

“Assignment” means an assignment agreement entered into by a Lender, as assignor, and any Person, as assignee, pursuant to the terms and provisions of Section 9.9 (with the consent of any party whose consent is required by Section 9.9), accepted by Agent, substantially in the form of Exhibit 11.1(a) or any other form approved by Agent.

“Attorney Costs” means and includes all reasonable and documented out-of-pocket fees and disbursements of any law firm or other external counsel.

“Availability” means, as of any date of determination, the amount by which (a) the Maximum Revolving Loan Balance exceeds (b) the aggregate outstanding principal balance of Revolving Loans.

“Available Amount” means $4,000,000, less the combined amount of, as of any date of determination, (i) all outstanding Contingent Obligations of the type described in subsection 5.9(j)(vi) hereof, and (ii) all outstanding Investments of the type described in subsection 5.4(b)(iii), clause (y) of subsection 5.4(c) and subsection 5.4(m) hereof.

“Bank Product” means any one or more of the following financial products or accommodations extended to any Credit Party or its Subsidiaries by a Bank Product Provider: (a) credit cards (including commercial credit cards (including so-called “procurement cards” or “Pcards”)), (b) credit card processing services, (c) debit cards, (d) stored value cards, or (e) Cash Management Services.

“Bank Product Agreements” means those agreements entered into from time to time by any Credit Party with any Bank Product Provider in connection with the obtaining of any of the Bank Products.

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement obligations, fees, or expenses owing by any Credit Party or its Subsidiaries to any Bank Product Provider pursuant to or evidenced by a Bank Product Agreement and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and (b) all amounts that Agent or any Lender is obligated to pay to any Bank Product Provider as a result of Agent or any Lender purchasing participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to any Credit Party or its Subsidiaries; provided, however, that Bank Product Obligations shall in no event exceed $2,000,000 (it being agreed that (i) to the extent any obligations, liabilities, reimbursement obligations, fee, expenses or other amounts described in the foregoing clauses (a) and (b) would be a Bank Product Obligation were it not for such cap, Agent may decide in its

reasonable discretion which of such amounts shall constitute Bank Product Obligations and (ii) upon the request of Agent, each Bank Product Provider shall promptly provide Agent with a statement of the amount of Bank Product Obligations owing to such Bank Product Provider).

“Bank Product Provider” means any Lender (or any Affiliate of such Lender which has appointed Agent as its agent pursuant to documentation reasonable acceptable to Agent) providing Bank Products to any Credit Party.

“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.)

“Base Rate” means, for any day, a floating rate equal to the greater of (x) the higher of (i) the per annum rate publicly quoted from time to time by The Wall Street Journal as the “Prime Rate” in the United States (or, if The Wall Street Journal ceases quoting a prime rate of the type described, either (a) the per annum rate quoted as the base rate on such corporate loans in a different national publication as reasonably selected by Agent or (b) the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis points per annum and (y) the sum of (a) the LIBOR Rate calculated for each such day based on a LIBOR Period of three (3) months determined two (2) Business Days prior to the first day of the then current month (but in no event less than one percent (1.0%) per annum) plus (b) the excess of the Applicable Margin for LIBOR Rate Loans over the Applicable Margin for Base Rate Loans, in each instance, as of such day. Each change in any interest rate provided for in this Agreement based upon the Base Rate shall take effect at the time of such change in the Base Rate.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“Battleground Acquisition” as defined on Schedule 1.1(c).

“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA (whether governed by the laws of the United States or otherwise) to which any Credit Party incurs or otherwise has any obligation or liability, contingent or otherwise.

“Borrowing” means a borrowing hereunder consisting of Loans made to or for the benefit of the Borrower on the same day by the Lenders pursuant to Article I.

“Business Day” means any day other than a Saturday, Sunday or other day on which federal reserve banks are authorized or required by law to close and, if the applicable Business Day relates to any LIBOR Rate Loan, a day on which dealings are carried on in the London interbank market.

“Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any Lender or of any corporation controlling a Lender.

“Capital Lease” means any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease.

“Capital Lease Obligations” means all monetary obligations of any Credit Party or any Subsidiary of any Credit Party under any Capital Leases.

“Cash Equivalents” means (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the United States federal government or (ii) issued by any agency of the United States federal government the obligations of which are fully backed by the full faith and credit of the United States federal government, (b) any readily-marketable direct obligations issued by any other agency of the United States federal government, any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1” from Standard & Poor’s or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by Standard & Poor’s or “P-1” by Moody’s and issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by (i) any Lender or (ii) any commercial bank that is (A) organized under the laws of the United States, any state thereof or the District of Columbia, (B) “adequately capitalized” (as defined in the regulations of its primary federal banking regulators) and (C) has Tier 1 capital (as defined in such regulations) in excess of $250,000,000 and (e) shares of any United States money market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of $500,000,000 and (iii) has obtained from either Standard & Poor’s or Moody’s the highest rating obtainable for money market funds in the United States; provided, however, that the maturities of all obligations specified in any of clauses (a), (b), (c) or (d) above shall not exceed 365 days.

“Cash Management Services” means any cash management or related services including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other customary cash management arrangements.

“Closing Checklist” means that certain closing checklist as attached hereto as Exhibit 2.1 .

“Closing Date” means October 25, 2013.

“Closing Date Dividend” means a one-time distribution on or within two Business Days following the Closing Date made by the Borrower to (or for the account of) Holdings, which Holdings will distribute to Parent in an aggregate amount of up to $31,503,608.53.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all Property and interests in Property and proceeds thereof, whether now owned or hereafter acquired by any Credit Party, any of their respective Subsidiaries and any other Person, in each case, who has granted a Lien to Agent, in or upon which a Lien is

granted, or purported to be granted now or hereafter exists in favor of any Lender or Agent for the benefit of Agent, the Lenders and other Secured Parties, whether under this Agreement or under any other documents executed by any such Persons and delivered to Agent.

“Collateral Documents” means, collectively, the Guaranty and Security Agreement, the Mortgages, each Control Agreement and all other security agreements, pledge agreements, patent and trademark security agreements, lease assignments, guarantees and other similar agreements, and all amendments, restatements, modifications or supplements thereof or thereto, by or between any one or more of any Credit Party, any of their respective Subsidiaries or any other Person pledging or granting a lien on Collateral or guarantying the payment and performance of the Obligations, and any Lender or Agent for the benefit of Agent, the Lenders and other Secured Parties now or hereafter delivered to the Lenders or Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the UCC or comparable law) against any such Person as debtor in favor of any Lender or Agent for the benefit of Agent, the Lenders and the other Secured Parties, as secured party, as any of the foregoing may be amended, restated and/or modified from time to time.

“Commitment” means, for each Lender, the sum of its Revolving Loan Commitment and Term Loan Commitment.

“Commitment Percentage” means, as to any Lender, the percentage equivalent of such Lender’s Revolving Loan Commitment, or Term Loan Commitment divided by the Aggregate Revolving Loan Commitment or Aggregate Term Loan Commitment, as applicable; provided that after the Term Loan has been funded, Commitment Percentages shall be determined for the Term Loan by reference to the outstanding principal balance thereof as of any date of determination rather than the Commitments therefor; provided, further, that following acceleration of the Loans, such term means, as to any Lender, the percentage equivalent of the principal amount of the Loans held by such Lender, divided by the aggregate principal amount of the Loans held by all Lenders.

“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person: (i) with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (iii) under any Rate Contracts; (iv) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (v) for the obligations of another Person through any agreement to purchase, repurchase or otherwise acquire such obligation or any Property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported.

“Continuing Directors” means the directors or members or equivalent body of Holdings or the Borrower, as the case may be, on the Closing Date, and each other director or member of equivalent body, if, in each case, such other director’s or member’s equivalent body’s nomination for election to the board of directors or other governing body of Holdings or the Borrower, as the case may be (or the direct or indirect parent of the Borrower after an IPO of such direct or indirect parent) is recommended by a majority of the then Continuing Directors or such other director or member of equivalent body receives the vote of the Permitted Holders in his or her election by the stockholders or partners of Holdings or the Borrower, as the case may be (or the direct or indirect parent of the Borrower after an IPO of such direct or indirect parent).

“Contractual Obligations” means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.

“Control Agreement” means a tri-party deposit account, securities account or commodities account control agreement by and among the applicable Credit Party, Agent and the depository, securities intermediary or commodities intermediary, and each in form and substance reasonably satisfactory to Agent and in any event providing to Agent “control” of such deposit account, securities or commodities account within the meaning of Articles 8 and 9 of the UCC.

“Controlled Investment Affiliates” means, with respect to Lee Equity Partners, LLC, any fund or investment vehicle that (i) is organized by Lee Equity Partners, LLC or an Affiliate of Lee Equity Partners, LLC for the purpose of making investments in one or more companies and is controlled by Lee Equity Partners, LLC or an Affiliate of Lee Equity Partners, LLC or (ii) has the same principal fund advisor as Lee Equity Partners, LLC or such Affiliate of Lee Equity Partners, LLC. For purposes of this definition “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.

“Conversion Date” means any date on which the Borrower converts a Base Rate Loan to a LIBOR Rate Loan or a LIBOR Rate Loan to a Base Rate Loan.

“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

“Credit Parties” means Holdings, the Borrower and each other Person (i) which executes a guaranty of the Obligations, (ii) which grants a Lien on all or substantially all of its assets to secure payment of the Obligations and (iii) all of the Stock of which is pledged to Agent for the benefit of the Secured Parties.

“Default” means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.

“Disclosure Document” means all of the uniform franchise offering circulars and franchise disclosure documents used by (and, to the extent required, filed by) any Credit Party to comply with any Requirement of Law.

“Disqualified Lender” means each Person identified in the list of “Disqualified Lenders” prepared by the Borrower and delivered to Agent on October 11, 2013.

“Disposition” means (a) the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted under subsections 5.2(a), 5.2(c), 5.2(d), 5.2(e), 5.2(f), 5.2(g) and 5.2(h) and (b) the sale or transfer by the Borrower or any Subsidiary of the Borrower of any Stock or Stock Equivalent issued by any Subsidiary of the Borrower and held by such transferor Person.

“Disregarded Domestic Person” means any direct or indirect Domestic Subsidiary of which substantially all of its assets consist of the equity of one or more direct or indirect Foreign Subsidiaries.

“Dollars”, “dollars” and “$” each mean lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary incorporated, organized or otherwise formed under the laws of the United States, any state thereof or the District of Columbia.

“Electronic Transmission” means each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise made or communicated by e-mail or E-Fax, or otherwise to or from an E-System or equivalent service.

“Environmental Laws” means all present and future Requirements of Law and Permits imposing liability or standards of conduct for or relating to the regulation and protection of the environment and natural resources, and occupational safety as it relates to exposure to hazardous or toxic materials, substances or products, including public notification requirements and environmental transfer of ownership, notification or approval statutes.

“Environmental Liabilities” means all Liabilities (including costs of Remedial Actions, natural resource damages and costs and expenses of investigation and feasibility studies, including the cost of environmental consultants and Attorney Costs) that may be imposed on, incurred by or asserted against any Credit Party or any Subsidiary of any Credit Party as a result of, or related to, any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law or otherwise, arising under any Environmental Law or in connection with any environmental condition or with any Release and resulting from the ownership, lease, sublease or other operation or occupation of property by any Credit Party or any Subsidiary of any Credit Party, whether on, prior or after the date hereof.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means, collectively, any Credit Party and any Person under common control or treated as a single employer with, any Credit Party, within the meaning of Section 414(b), (c), (m) or (o) of the Code.

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“ERISA Event” means any of the following: (a) a reportable event described in Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been duly waived under the applicable regulations, Section 4043(c) of ERISA) with respect to a Title IV Plan; (b) the withdrawal of any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any ERISA Affiliate from any Multiemployer Plan; (d) with respect to any Multiemployer Plan, the filing of a notice of reorganization, insolvency or termination (or treatment of a plan amendment as termination) under Section 4041A of ERISA; (e) the filing of a notice of intent to terminate a Title IV Plan (or treatment of a plan amendment as termination) under Section 4041 of ERISA; (f) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to make any required contribution to any Title IV Plan or Multiemployer Plan when due; (h) the imposition of a lien under Section 412 or 430(k) of the Code or Section 303 or 4068 of ERISA on any property (or rights to property, whether real or personal) of any ERISA Affiliate; (i) the failure of a Benefit Plan or any trust thereunder intended to qualify for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law to qualify thereunder except as would not be reasonably expected to result in liability in excess of $1,000,000 in the aggregate to the Credit Parties; (j) a determination that a Title IV plan is in “at risk” status within the meaning of Code Section 430(i); (k) a determination that a Multiemployer Plan is in “endangered status” or “critical status” within the meaning of Section 432(b) of the Code; and (l) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of any liability in excess of $1,000,000 upon any ERISA Affiliate under Title IV of ERISA other than for PBGC premiums due but not delinquent.

“Event of Loss” means, with respect to any Property, any of the following: (a) any loss, destruction or damage of such Property; (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such Property or for the exercise of any right of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means with respect to any Secured Party (a) taxes measured by net income, net receipts imposed in lieu of net income taxes, or overall net profits (including branch profit taxes) imposed in lieu of net income taxes and franchise taxes imposed in lieu of net income taxes (however denominated), in each case imposed by any Governmental Authority (i) in a jurisdiction in which such Secured Party is organized, (ii) in a jurisdiction in which such Secured Party’s principal office is located, (iii) in a jurisdiction in which such Secured Party’s lending office (or branch) in respect of which payments under this Agreement are made is located, or (iv) on any Secured Party as a result of a present or former connection between such Secured Party and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than such connection arising solely from any Secured Party having executed, delivered or performed its obligations or received a payment under, or enforced, any Loan Document); (b) withholding taxes to the extent that the obligation to withhold amounts existed on the date that such Person became a “Secured

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Party” under this Agreement (or, in the case of an SPV or participant, on the date such SPV or participant was granted an option or purchased a participation of a Loan) in the capacity under which such Person makes a claim under Section 10.1(b) or designates a new Lending Office, except in each case to the extent such Person is a direct or indirect assignee (other than pursuant to Section 9.22) of any other Secured Party that was entitled, at the time the assignment to such Person became effective, to receive additional amounts under Section 10.1(b); (c) taxes that are directly attributable to the failure (other than as a result of a change in any Requirement of Law after the date a Lender becomes a party to this Agreement, or with regards to SPVs or participants, the date the SPV or participant acquired an option or participation) by any Secured Party to deliver the documentation required to be delivered pursuant to Section 10.1(f); (d) in the case of a Non-U.S. Lender Party, any United States federal withholding taxes imposed on amounts payable to such Non-U.S. Lender Party as a result of such Non-U.S. Lender Party’s failure to comply with FATCA to establish a complete exemption from withholding thereunder; and (e) any backup withholding tax that is required under Code 3406 to be withheld from amounts payable to a Secured Party.

“E-Fax” means any system used to receive or transmit faxes electronically.

“E-Signature” means the process of attaching to or logically associating with an Electronic Transmission an electronic symbol, encryption, digital signature or process (including the name or an abbreviation of the name of the party transmitting the Electronic Transmission) with the intent to sign, authenticate or accept such Electronic Transmission.

“E-System” means any electronic system approved by Agent, including Syndtrak ^® , Intralinks, DebtX, and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by Agent, any of its Related Persons or any other Person, providing for access to data protected by passcodes or other security system.

“FATCA” means sections 1471, 1472, 1473 and 1474 of the Code, the United States Treasury Regulations promulgated thereunder and published guidance with respect thereto, in each case as of the date of this Agreement, and shall also include any amended or successor versions of such legislation (and any future regulations and interpretations) that are substantively comparable and that contain requirements to avoid withholding which are not materially more onerous than the current legislation.

“Federal Flood Insurance” means Federally backed Flood Insurance available under the National Flood Insurance Program to owners of real property improvements located in Special Flood Hazard Areas in a community participating in the National Flood Insurance Program.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day on such transactions as determined by Agent in a commercially reasonable manner.

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“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.

“FEMA” means the Federal Emergency Management Agency, a component of the U.S. Department of Homeland Security that administers the National Flood Insurance Program.

“Final Availability Date” means the earlier of the Revolving Termination Date and one (1) Business Day prior to the date specified in clause (a) of the definition of Revolving Termination Date.

“FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.

“First Tier Foreign Subsidiary” means a Foreign Subsidiary owned directly by a Credit Party.

“Fiscal Period” means any of the four- or five-week fiscal accounting periods as determined based on the Borrower’s fiscal calendar, as described in more detail on Schedule 11.1.

“Fiscal Quarter” means any of the quarterly accounting periods of the Credit Parties, each consisting of three consecutive Fiscal Periods ending nearest each March 31, June 30, September 30 and December 31, as described in more detail on Schedule 11.1.

“Fiscal Year” means any of the annual accounting periods of the Credit Parties ending nearest December 31 of each year, as described in more detail on Schedule 11.1.

“Flood Insurance” means, for any Real Estate located in a Special Flood Hazard Area, Federal Flood Insurance or private insurance that meets the requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance Guidelines . Flood Insurance shall be in an amount equal to the full, unpaid balance of the Loans and any prior liens on the Real Estate up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Agent, with deductibles not to exceed $50,000.

“Foreign Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which Subsidiary is not a Domestic Subsidiary.

“Franchise” means a franchise of the PAPA MURPHY’S® system for the development and operation of restaurants specializing in the sale of “take and bake” pizza and complementary side dishes and beverages, among other food products, under the PAPA MURPHY’S® brand and utilizing Intellectual Property owned by the Credit Parties.

“Franchise Agreement” means an agreement pursuant to which a Franchisee is awarded a Franchise.

“Franchisee” means any Person who has purchased a Franchise or who otherwise owns a Franchise.

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“Franchise Law” means Requirements of Law of the United States Federal Trade Commission or any other Governmental Authority relating to the relationship between franchisor and franchisees or to the offer, sale, termination, non-renewal or transfer of Franchises

“Funded Indebtedness” means, as of any date of measurement, all Indebtedness of Holdings and its Subsidiaries as of the date of measurement of the type described in clauses (a), (b) (with respect to deferred purchase price of property only and expressly excluding any Indebtedness relating to the Miller Note), (c) (with regard to reimbursement obligations in excess of $1,000,000 for standby letters of credit and all performance letters of credit only) and (f) of the definition of Indebtedness.

“GAAP” means generally accepted accounting principles in the United States set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), including, without limitation, the FASB Accounting Standards Codification™, which are applicable to the circumstances as of the date of determination, subject to Section 11.3 hereof.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Guaranty and Security Agreement” means that certain Guaranty and Security Agreement, dated as of even date herewith, in form and substance reasonably acceptable to Agent and the Borrower, made by the Credit Parties in favor of Agent, for the benefit of the Secured Parties, as the same may be amended, restated and/or modified from time to time.

“Hazardous Material” means any substance, material or waste that is regulated as “hazardous,” “toxic,” “pollutant” or “contaminent” or otherwise gives rise to liability under any Environmental Law, including but not limited to any “Hazardous Waste” as defined by the Resource Conservation and Recovery Act (RCRA) (42 U.S.C. § 6901 et seq. (1976)), any “Hazardous Substance” as defined under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. §9601 et seq. (1980)), petroleum or any fraction thereof, asbestos, asbestos containing material, polychlorinated biphenyls, mold in quantities and conditions that present an unreasonable risk to human health or the environment, and radioactive substances or any other substance that is toxic, ignitable, reactive, corrosive, caustic, or dangerous.

“Immaterial Subsidiary” mean, with respect to any Person, any Subsidiary that does not (a) own assets with a fair market value in excess of the Immaterial Subsidiary Individual Asset Value Limit or (b) comprise greater than three percent (3%) of the aggregate EBITDA of Holdings and its Subsidiaries as of the most recent date for which financial statements were delivered to Agent pursuant to Section 4.1 hereof; provided, that (i) the aggregate fair market value of the assets of all such Immaterial Subsidiaries shall not exceed the Immaterial Subsidiary

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Aggregate Asset Value Limit and (ii) the aggregate EBITDA of all such Immaterial Subsidiaries as of such date shall not comprise greater than five percent (5%) of the aggregate EBITDA of Holdings and its Subsidiaries as of such date.

“Immaterial Subsidiary Aggregate Asset Value Limit” means $1,000,000.

“Immaterial Subsidiary Individual Asset Value Limit” means $500,000.

“Impacted Lender” means any Lender that fails to provide Agent, within three (3) Business Days following Agent’s written request, satisfactory assurance that such Lender will not become a Non-Funding Lender, or any Lender that has a Person that directly or indirectly controls such Lender and such Person (a) becomes subject to a voluntary or involuntary case under the Bankruptcy Code or any similar bankruptcy laws, or (b) has appointed a custodian, conservator, receiver or similar official for such Person or any substantial part of such Person’s assets.

“Indebtedness” of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services, including earnouts (other than trade payables entered into in the Ordinary Course of Business); (c) the face amount of all letters of credit issued for the account of such Person and without duplication, all drafts drawn thereunder and all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments issued by such Person; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such Property); (f) all Capital Lease Obligations; (g) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off balance sheet financing product; (h) all obligations, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Stock or Stock Equivalents (or any Stock or Stock Equivalent of a direct or indirect parent entity thereof) prior to the date that is one hundred and eighty (180) days after the final scheduled installment payment date for the Term Loans, valued at, in the case of redeemable preferred Stock, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Stock plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness (but, in the event that such Person’s liability is limited to such Property, limited to the lesser of the fair market value of such Property (as set forth in a certificate of a Responsible Officer delivered to Agent) and the principal balance of such Indebtedness); and (j) all Contingent Obligations described in clause (i) of the definition thereof in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above.

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“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case in (a) and (b) above, undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.

“Intellectual Property” means all rights, title and interests in or relating to intellectual property and industrial property arising under any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet Domain Names, Trade Secrets and IP Licenses.

“Interest Payment Date” means, (a) with respect to any LIBOR Rate Loan (other than a LIBOR Rate Loan having an Interest Period six (6) months or more) the last day of each Interest Period applicable to such Loan, (b) with respect to any LIBOR Rate Loan having an Interest Period of six (6) or more), the last day of each three (3) month interval and, without duplication, the last day of such Interest Period, and (c) with respect to Base Rate Loans the first Business Day of each Fiscal Quarter.

“Interest Period” means, with respect to any LIBOR Rate Loan, the period commencing on the Business Day such Loan is disbursed or continued or on the Conversion Date on which a Base Rate Loan is converted to the LIBOR Rate Loan and ending on the date one, two, three, six or, if agreed to by all applicable Lenders, nine or twelve months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion/Continuation; provided , that:

(a) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;

(b) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;

(c) no Interest Period for the Term Loan shall extend beyond the last scheduled payment date therefor and no Interest Period for any Revolving Loan shall extend beyond the Revolving Termination Date; and

(d) no Interest Period applicable to the Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of the Term Loan unless the aggregate principal amount of Term Loan represented by Base Rate Loans or by LIBOR Rate Loans having Interest Periods that will expire on or before such date is equal to or in excess of the amount of such principal payment.

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“Internet Domain Name” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to internet domain names.

“Inventory” means all of the “inventory” (as such term is defined in the UCC) of the Borrower and its Subsidiaries, including, but not limited to, all merchandise, raw materials, parts, supplies, work-in-process and finished goods intended for sale, together with all the containers, packing, packaging, shipping and similar materials related thereto, and including such inventory as is temporarily out of the Borrower’s or such Subsidiary’s custody or possession, including inventory on the premises of others and items in transit.

“IP Ancillary Rights” means, with respect to any other Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right.

“IP License” means all Contractual Obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in or relating to any Intellectual Property.

“IPO” means the issuance by Holdings or any direct or indirect parent thereof of its common Stock in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended (whether alone or in connection with a secondary public offering); provided , that (a) in the event of any such issuance by any direct or indirect parent of Holdings, such direct or indirect parent of Holdings shall have contributed all of the net proceeds of such issuance to Holdings and (b) such issuance shall have generated net proceeds to Holdings (whether directly by way of an issuance by Holdings or indirectly by way of a cash capital contribution to Holdings as described in the preceding clause (a)) of not less than $25,000,000.

“IRS” means the Internal Revenue Service of the United States and any successor thereto.

“Issue” means, with respect to any Letter of Credit, to issue, extend the expiration date of, renew (including by failure to object to any automatic renewal on the last day such objection is permitted), increase the face amount of, or reduce or eliminate any scheduled decrease in the face amount of, such Letter of Credit, or to cause any Person to do any of the foregoing. The terms “Issued” and “Issuance” have correlative meanings.

“L/C Issuer” means any Lender or an Affiliate thereof or a bank or other legally authorized Person, in each case designated by Agent and reasonably acceptable to Borrower, in such Person’s capacity as an issuer of Letters of Credit hereunder. As of the Closing Date, Golub is an L/C Issuer.

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“L/C Reimbursement Obligation” means, for any Letter of Credit, the obligation of the Borrower to the L/C Issuer thereof, as and when matured, to pay all amounts drawn under such Letter of Credit.

“Lending Office” means, with respect to any Lender, the office or offices of such Lender specified as its “Lending Office” beneath its name on the applicable signature page hereto, or such other office or offices of such Lender as it may from time to time notify the Borrower and Agent.

“Letter of Credit” means documentary or standby letters of credit issued for the account of the Borrower by L/C Issuers, and bankers’ acceptances issued by the Borrower, for which Agent and Lenders have incurred Letter of Credit Obligations.

“Letter of Credit Obligations” means all outstanding obligations incurred by Agent and Lenders at the request of the Borrower, whether direct or indirect, contingent or otherwise, due or not due, in connection with the Issuance of Letters of Credit by L/C Issuers or the purchase of a participation as set forth in subsection 1.1(c) with respect to any Letter of Credit. The amount of such Letter of Credit Obligations shall equal the maximum amount that may be payable by Agent and Lenders thereupon or pursuant thereto.

“Liabilities” means all claims, actions, suits, judgments, damages, losses, liability, obligations, responsibilities, fines, penalties, sanctions, costs, fees, taxes, commissions, charges, disbursements and expenses, in each case of any kind or nature (including interest accrued thereon or as a result thereto and fees, charges and disbursements of financial, legal and other advisors and consultants), whether joint or several, whether or not indirect, contingent, consequential, actual, punitive, treble or otherwise.

“LIBOR” means, for each Interest Period, rate of interest determined by Agent equal to (a) the Base LIBOR for such LIBOR Period, divided by (b) 100% minus the Reserve Percentage. LIBOR shall be adjusted on and as of the effective day of any change in the Reserve Percentage. “Base LIBOR” means the greater of (a) 1.00% per annum, and (b) the rate per annum rate appearing on Bloomberg L.P.‘s (the “Service”) Page BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any successor or substitute page of such Service, or any successor to or substitute for such Service) two (2) LIBOR Business Days prior to the commencement of the requested Interest Period, for a term comparable to the Interest Period requested (whether as an initial LIBOR Loan or as a continuation of a LIBOR Loan or as a conversion of an Base Rate Loan to a LIBOR Loan) by Borrower in accordance with the Agreement, which determination shall be conclusive in the absence of manifest error. “Reserve Percentage” means, on any day, the maximum percentage prescribed by the Federal Reserve Board (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities”), but so long as no Lender is required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.

“LIBOR Rate Loan” means a Revolving Loan (or any one or more portions thereof) or Term Loan (or any one or more portions thereof) that bears interest based on LIBOR.

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“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or otherwise) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under a lease which is not a Capital Lease.

“Loan” means an extension of credit by a Lender to the Borrower pursuant to Article I hereof, and may be a Base Rate Loan or a LIBOR Rate Loan.

“Loan Documents” means this Agreement, the Notes, the Collateral Documents, the Fee Letter, and all documents required to be delivered to Agent and/or any Lender in connection with any of the foregoing.

“Management Agreement” means that certain Advisory Services and Monitoring Agreement dated as of May 5, 2010 between Sponsor and the Borrower, as successor by merger to Papa Murphy’s Merger Co., a Delaware corporation.

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the Federal Reserve Board.

“Material Adverse Effect” means: (a) a material adverse change in, or a material adverse effect upon, the operations, business, Properties or condition (financial or otherwise) of the Credit Parties and their Subsidiaries taken as a whole; (b) a material impairment of the ability of the Borrower or the Credit Parties taken as a whole to perform in any material respect its or their obligations under any Loan Document; or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability of any Loan Document, or (ii) the perfection or priority of any Lien granted to the Lenders or to Agent for the benefit of the Secured Parties under any of the Collateral Documents.

“Miller Acquisition” as defined on Schedule 1.1(c).

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means any deed of trust, leasehold deed of trust, mortgage, leasehold mortgage, deed to secure debt, leasehold deed to secure debt or other document creating a Lien on Real Estate or any interest in Real Estate.

“Multiemployer Plan” means any multiemployer plan, as defined in Section 4001(a)(3) of ERISA, as to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or otherwise.

“National Flood Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, that mandates the purchase of flood insurance to cover real property improvements located in Special Flood Hazard Areas in participating communities and provides protection to property owners through a Federal insurance program.

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“Net Issuance Proceeds” means, in respect of any issuance of debt, Stock or Stock Equivalents, cash proceeds (including cash proceeds as and when received in respect of non-cash proceeds received or receivable in connection with such issuance), net of underwriting discounts and reasonable out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of the Borrower.

“Net Proceeds” means proceeds in cash, checks or other cash equivalent financial instruments (including Cash Equivalents) as and when received by the Person making a Disposition and insurance proceeds and condemnation and similar awards received on account of an Event of Loss, net of: (a) in the event of a Disposition (i) the direct costs relating to such Disposition excluding amounts payable to the Borrower or any Affiliate of the Borrower, (ii) sale, use, transfer or other transaction taxes paid or payable as a result thereof, and income taxes (and, without duplication, Tax Distributions) reasonably estimated to be payable as a result thereof; (iii) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition and (iv) amounts reasonably and in good faith provided as a reserve, in accordance with GAAP, in respect of any retained liabilities or purchase price adjustments, or under any indemnification obligations, associated with such Disposition and (b) in the event of an Event of Loss, (i) all money actually applied to repair or reconstruct the damaged Property or Property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments, and (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments.

“Non-Funding Lender” means any Revolving Lender that has (a) failed to fund any payments required to be made by it under the Loan Documents within two (2) Business Days after any such payment is due (excluding expense and similar reimbursements that are subject to good faith disputes), or (b) given written notice (and Agent has not received a revocation in writing), to the Borrower, Agent, any Lender, or the L/C Issuer or has otherwise publicly announced (and Agent has not received notice of a public retraction) that such Lender believes it will fail to fund payments or purchases of participations required to be funded by it under the Loan Documents or one or more other syndicated credit facilities.

“Non-U.S. Lender Party” means each of Agent, each Lender, each L/C Issuer, each SPV and each participant, in each case that is not a United States person as defined in Section 7701(a)(30) of the Code.

“Note” means any Revolving Note or Term Notes and “Notes” means all such Notes.

“Notice of Borrowing” means a notice given by the Borrower to Agent pursuant to Section 1.5, in substantially the form of Exhibit 11.1(b) hereto.

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“Obligations” means all Loans, and other Indebtedness, advances, debts, liabilities, obligations (including but not limited to Bank Product Obligations), covenants and duties owing by any Credit Party to any Lender, Agent, any L/C Issuer, any Secured Swap Provider, and Bank Product Provider or any other Person required to be indemnified, that arises under any Loan Document or any Secured Rate Contract, or any Bank Product Agreements, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired.

“Ordinary Course of Business” means, in respect of any transaction involving any Person, the ordinary course of such Person’s business, as conducted by any such Person in accordance with past practice.

“Organization Documents” means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, and any shareholder rights agreement, (b) for any partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c) for any limited liability company, the operating agreement and articles or certificate of formation or (d) any other document setting forth the manner of election or duties of the officers, directors, managers or other similar persons, or the designation, amount or relative rights, limitations and preference of the Stock of a Person.

“Papa Murphy’s Permitted Concept” means the operation of Papa Murphy’s Restaurants, as such restaurant concept is maintained as of the Closing Date

“Parent” means Papa Murphy’s Holdings, Inc., a Delaware corporation.

“Patents” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to letters patent and applications therefor.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L. 107-56, as amended.

“PBGC” means the United States Pension Benefit Guaranty Corporation or any successor thereto.

“Permits” means, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other Contractual Obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Permitted Acquisition” means any Acquisition by (i) a Credit Party (other than Holdings) or any Subsidiary of a Credit Party of substantially all of the assets, or a division or line of business, of a Target, or (ii) a Credit Party (other than Holdings) or any Subsidiary of a Credit Party of at least fifty percent (50%) of the Stock and Stock Equivalents of a Target, in each case, to the extent that each of the following conditions shall have been satisfied:

(a) to the extent the Acquisition will be financed in whole or in part with the proceeds of any Loan, the conditions set forth in Section 2.2 shall have been satisfied;

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(b) the Borrower shall have delivered to Agent (1) if the purchase price for the applicable Acquisition is equal to or greater than $1,000,000, at least ten (10) Business Days prior to the consummation thereof (or such shorter period as Agent may agree to), (A) a description of the proposed Acquisition and a due diligence package and (B) copies of such other agreements, instruments and other documents as Agent reasonably shall request, and (2) a certificate of a Responsible Officer of the Borrower demonstrating compliance with the covenants set forth in Sections 6.2 and 6.3 for the most recently completed trailing period of twelve (12) consecutive Fiscal Periods after giving pro forma effect to the consummation of such Acquisition ;

(c) the Borrower and the other Credit Parties (including any new Subsidiary) shall execute and deliver the agreements, instruments and other documents required by Section 4.13;

(d) such Acquisition shall not be hostile and shall have been approved by the board of directors (or other similar body) and/or the stockholders or other equityholders of the Target;

(e) no Default or Event of Default shall then exist or would exist after giving effect thereto;

(f) after giving effect to such Acquisition, the sum of Availability plus (x) unrestricted cash and Cash Equivalents of Holdings and its Subsidiaries and (y) cash and Cash Equivalents of Holdings and its Subsidiaries held in deposit accounts and securities account subject to a Control Agreement in favor of Agent for the benefit of Agent and Lenders is at least $1,000,000;

(g) the Target (1) operates (or is intended and expected to operate within thirty (30) days after the Acquisition thereof) a Papa Murphy’s location, or (2) constitutes a commissary, service provider or other, similar line of business reasonably related to the operation and management of a Papa Murphy’s location or the Papa Murphy’s system, and, in any event, is organized in the United States and its assets are located in the United States, provided, however, (x) Acquisitions where the Target is located outside the United States with an aggregate purchase price not in excess of $2,000,000 during the term of this Agreement shall not be prohibited hereby, and (y) the Credit Parties (other than Holdings) may acquire and maintain Additional Permitted Concepts so long as the gross revenues from such concept at the time of such Acquisition do not exceed ten percent (10%) of the gross revenues of the system-wide sales of Holdings and its Subsidiaries at the time of such Acquisition;

(h) the total consideration paid or payable (including without limitation, all assumed Indebtedness and Liabilities incurred, assumed or reflected on a consolidated balance sheet of the Credit Parties and their Subsidiaries after giving effect to such Acquisition and the maximum amount of all deferred payments, including earnouts (which earnouts shall be valued as the amount required to be recorded as a liability on the financial statements of Holdings and its Subsidiaries at the time of such Acquisition in accordance with GAAP)) for all Acquisitions (other than those Acquisitions and/or Investments set forth on Schedule 1.1(c)) consummated on or after the date of this Agreement shall not exceed $40,000,000 in the aggregate for all such Acquisitions; and

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(i) the Target has EBITDA that, when combined with the EBITDA of all substantially concurrent Targets of Permitted Acquisitions as of such date, for the most recent four Fiscal Quarters prior to the acquisition date for which financial statements are available, is greater than $(250,000); provided that the requirement in this clause (i) shall not apply to Project Pie.

“Permitted Holder” means (i) prior to an IPO, (x) Sponsor and (y) the Principal, and any funds or investment vehicles controlled by the Principal (provided that for purposes of Section 7.1, any holdings under this clause (y) shall be capped at 10% of the voting and economic interests in the Stock and Stock Equivalents of Holdings) and (ii) upon and following an IPO, Sponsor, its co-investors (including any limited partner investing through a side by side or similar arrangement), members of management or board members of Parent and its Subsidiaries (or Parent’s direct or indirect parent) and any principals of Sponsor and any funds or investment vehicles controlled by or under common control with it.

“Permitted Refinancing” means Indebtedness constituting a refinancing or extension of Indebtedness permitted under subsection 5.5(c) or 5.5(d) that (a) has an aggregate outstanding principal amount not greater than the aggregate principal amount of the Indebtedness being refinanced or extended, (b) has a weighted average maturity (measured as of the date of such refinancing or extension) and maturity no shorter than that of the Indebtedness being refinanced or extended, (c) is not entered into as part of a sale leaseback transaction, (d) is not secured by a Lien on any assets other than the collateral securing the Indebtedness being refinanced or extended, (e) the obligors of which are the same as the obligors of the Indebtedness being refinanced or extended and (f) is otherwise on terms no less favorable to the Credit Parties and their Subsidiaries, taken as a whole, than those of the Indebtedness being refinanced or extended.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.

“Project Pie” as defined on Schedule 1.1(c).

“Pledged Collateral” has the meaning specified in the Guaranty and Security Agreement and shall include any other Collateral required to be delivered to Agent pursuant to the terms of any Collateral Document.

“Prepayment Premium” means, in the event that all or any portion of the Term Loans is repaid through the incurrence of any long-term secured term loan financing with the effect of refinancing the Term Loans, in whole or in part, with such Indebtedness having an all-in-yield (with any original issue discount or upfront fees being equated with rate assuming four (4) year life to maturity and excluding any arrangement, commitment, amendment or similar fees) that is less than the all-in-yield (calculated on the same basis) of the Term Loans immediately prior to giving effect to such transaction, including without limitation, any such transaction effected through any amendment to this Agreement, each Lender holding Term Loans shall be paid an amount equal to 1% of the amount of such Term Loans repaid or repriced, if such repayment or repricing is effected prior to the eighteen-month anniversary of the Closing Date.

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“Principal” means Thomas H. Lee, an individual.

“Prior Indebtedness” means the Indebtedness and obligations outstanding under (i) that certain Credit Agreement, dated as of June 11, 2012, by and among the Borrower, the other persons party thereto designated as “Credit Parties”, the financial institutions from time to time party thereto and General Electric Capital Corporation as agent for such lenders (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof) and (ii) that certain Second Lien Credit Agreement, dated as of June 11, 2012, by and among the Borrower, the other persons party thereto designated as “Credit Parties”, the financial institutions from time to time party thereto and Gleacher Mezzanine Fund II, L.P. as administrative agent and collateral agent for such lenders (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof).

“Prior Lender” means, collectively the lenders and other creditors with respect to the Prior Indebtedness.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.

“Qualified Preferred Equity” means preferred equity securities that do not provide for required cash distributions or dividends or mandatory redemptions (other than (x) in exchange for common equity securities or other such preferred equity securities that would otherwise be permitted hereunder and the other Loan Documents or (y) as a result of a change of control event or asset sale or other disposition or casualty event, so long as any rights of the holders thereof to require the redemption thereof upon the occurrence of such a change of control event or asset sale or other disposition or casualty event are subject to the prior payment in full of the Credit Facilities) prior to the 91st day following the later to occur of the Revolving Termination Date and the stated maturity date of the Term Loan.

“Rate Contracts” means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates.

“Real Estate” means any real property owned, leased, subleased or otherwise operated or occupied by any Credit Party or any Subsidiary of any Credit Party.

“Related Persons” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained in connection with the satisfaction or attempted satisfaction of any condition set forth in Article II) and other consultants and agents of or to such Person or any of its Affiliates.

“Release” means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material into or through the environment.

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“Remedial Action” means all actions required to (a) clean up, remove, treat or in any other way address any Hazardous Material in the indoor or outdoor environment, (b) prevent or minimize any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre remedial studies and investigations and post-remedial monitoring and care with respect to any Hazardous Material.

“Required Lenders” means at any time, subject to subsections 1.11(e) and 9.9(g), (a) Lenders then holding more than fifty percent (50%) of the sum of the Aggregate Revolving Loan Commitment then in effect plus the aggregate unpaid principal balance of the Term Loan then outstanding, or (b) if the Aggregate Revolving Loan Commitments have terminated, Lenders then holding more than fifty percent (50%) of the sum of the aggregate unpaid principal amount of Loans then outstanding, outstanding Letter of Credit Obligations; provided , that, if at any time there is more than one (1) Lender, “Required Lenders” shall include at least two (2) Lenders. For purposes of this definition, all Lenders that are Affiliates, and each Lender and its Approved Funds, shall in each case be deemed to constitute a single Lender

“Required Revolving Lenders” means at any time, subject to subsection 1.11(e), (a) Lenders then holding more than fifty percent (50%) of the sum of the Aggregate Revolving Loan Commitments then in effect, or (b) if the Aggregate Revolving Loan Commitments have terminated, Lenders then holding more than fifty percent (50%) of the sum of the aggregate outstanding amount of Revolving Loans, outstanding Letter of Credit Obligations; provided , that, if at any time there is more than one (1) Revolving Lender, “Required Revolving Lenders” shall include at least two (2) Revolving Lenders. For purposes of this definition, all Lenders that are Affiliates, and each Lender and its Approved Funds, shall in each case be deemed to constitute a single Lender.

“Requirement of Law” means, as to any Person, any law (statutory or common), including, without limitation, Franchise Laws, ordinance, treaty, rule, regulation, order, policy, other legal requirement or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

“Responsible Officer” means the chief executive officer, the president, chief financial officer, treasurer, controller or general counsel of the Borrower or, in the event the Borrower shall have no chief executive officer, president, chief financial officer, treasurer, controller or general counsel, then any other officer having substantially the same authority and responsibility of a chief executive officer, president or chief financial officer, as applicable; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer of the Borrower, or in the event the Borrower shall have no chief financial officer, treasurer, controller or general counsel, then any other officer having substantially the same authority and responsibility.

“Revolving Lender” means each Lender with a Revolving Loan Commitment (or if the Revolving Loan Commitments have terminated, who hold Revolving Loans or participations in Letter of Credit Obligations).

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“Revolving Note” means a promissory note of the Borrower payable to a Lender in substantially the form of Exhibit 11.1(c) hereto, evidencing Indebtedness of the Borrower under the Revolving Loan Commitment of such Lender.

“Revolving Termination Date” means the earlier to occur of: (a) October 25, 2018; and (b) the date on which the Aggregate Revolving Loan Commitment shall terminate in accordance with the provisions of this Agreement.

“Secured Party” means Agent, each Lender, each L/C Issuer, each other Indemnitee and each other holder of any Obligation of a Credit Party including each Secured Swap Provider and each Bank Product Provider.

“Secured Rate Contract” means any Rate Contract between a Borrower and the counterparty thereto, which (i) has been provided or arranged by a Secured Swap Provider of the type described in clauses (i) or (ii) of the definition thereof or (ii) Agent has acknowledged in writing constitutes a “Secured Rate Contract” hereunder.

“Secured Swap Provider” means to the extent prior written notice thereof is given to Agent, any Lender or an Affiliate of any Lender.

“Software” means (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data, whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.

“Solvent” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person (both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature and (c) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Special Flood Hazard Area” means an area that FEMA’s current flood maps indicate has at least a one percent (1%) chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.

“Sponsor” means Lee Equity Partners, LLC and its Controlled Investment Affiliates.

“SPV” means any special purpose funding vehicle identified as such in a writing by any Lender to Agent.

“Standard & Poor’s” means Standard & Poor’s Rating Services

“Stock” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting.

116

“Stock Equivalents” means all securities convertible into or exchangeable for Stock or any other Stock Equivalent and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible, exchangeable or exercisable.

“Subordinated Indebtedness” means any Indebtedness of any Credit Party or any Subsidiary of any Credit Party which is subordinated as to right and time of payment and as to other rights and remedies thereunder and having such other terms as are, in each case, reasonably satisfactory to Agent.

“Subsidiary” of a Person means any corporation, association, limited liability company, partnership, joint venture or other business entity of which more than fifty percent (50%) of the voting Stock, is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof.

“Target” means any other Person or business unit or asset group of any other Person acquired or proposed to be acquired in an Acquisition.

“Term Note” means a promissory note of the Borrower payable to a Lender, in substantially the form of Exhibit 11.1(e) hereto, evidencing the Indebtedness of the Borrower to such Lender resulting from the Term Loan made to the Borrower by such Lender or its predecessor(s).

“Title IV Plan” means a pension plan subject to Title IV of ERISA, other than a Multiemployer Plan, to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or otherwise.

“Trade Secrets” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trade secrets.

“Trademark” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

“Transactions” has the meaning given to such term in the recitals hereto.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.

“United States” and “U.S.” each means the United States of America.

117

“U.S. Lender Party” means each of Agent, each Lender, each L/C Issuer, each SPV and each participant, in each case that is a United States person as defined in Section 7701(a)(30) of the Code.

“Wholly-Owned Subsidiary” means any Subsidiary in which (other than directors’ qualifying shares required by law) one hundred percent (100%) of the Stock and Stock Equivalents, at the time as of which any determination is being made, is owned, beneficially and of record, by any Credit Party, or by one or more of the other Wholly-Owned Subsidiaries, or both.

11.2 Other Interpretive Provisions .

(a) Defined Terms . Unless otherwise specified herein or therein, all terms defined in this Agreement or in any other Loan Document shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meanings of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described.

(b) The Agreement . The words “hereof”, “herein”, “hereunder” and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document; and subsection, section, schedule and exhibit references are to this Agreement or such other Loan Documents unless otherwise specified.

(c) Certain Common Terms . The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term “including” is not limiting and means “including without limitation.”

(d) Performance; Time . Whenever any performance obligation hereunder or under any other Loan Document (other than a payment obligation) shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”

(e) Contracts . Unless otherwise expressly provided herein or in any other Loan Document, references to agreements and other contractual instruments, including this Agreement and the other Loan Documents, shall be deemed to include all subsequent amendments, thereto, restatements and substitutions thereof and other modifications and supplements thereto which are in effect from time to time, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document.

(f) Laws . References to any statute or regulation may be made by using either the common or public name thereof or a specific cite reference and are to be construed as including all statutory and regulatory provisions related thereto or consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

118

11.3 Accounting Terms and Principles . All accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in accordance with GAAP. No change in the accounting principles used in the preparation of any financial statement hereafter adopted by Holdings shall be given effect for purposes of measuring compliance with any provision of Article V or VI unless the Borrower, Agent and the Required Lenders agree to modify such provisions to reflect such changes in GAAP and, unless such provisions are modified, all financial statements, Compliance Certificates and similar documents provided hereunder shall be provided together with a reconciliation between the calculations and amounts set forth therein before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to in Article V and Article VI shall be made, without giving effect to any election under Statement of Financial Accounting Standards 825-10 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Credit Party or any Subsidiary of any Credit Party at “fair value.” A breach of a financial covenant contained in Article VI shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified measurement period, regardless of when the financial statements reflecting such breach are delivered to Agent.

11.4 Payments . Agent may set up standards and procedures to determine or redetermine the equivalent in Dollars of any amount expressed in any currency other than Dollars and otherwise may, but shall not be obligated to, rely on any determination made by any Credit Party or any L/C Issuer. Any such determination or redetermination by Agent shall be conclusive and binding for all purposes, absent manifest error. No determination or redetermination by any Secured Party or any Credit Party and no other currency conversion shall change or release any obligation of any Credit Party or of any Secured Party (other than Agent and its Related Persons) under any Loan Document, each of which agrees to pay separately for any shortfall remaining after any conversion and payment of the amount as converted. Agent may round up or down, and may set up appropriate mechanisms to round up or down, any amount hereunder to nearest higher or lower amounts and may determine reasonable de minimis payment thresholds.

- Remainder of page intentionally blank; signature pages follow -

119

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written.


BORROWER : PMI HOLDINGS, INC., a Delaware corporation

By:		/s/ Ken Calwell
Name:		Ken Calwell
Title:		Chief Executive Officer
Address for notices: PMI Holdings, Inc. 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662 Attention: Facsimile: Email: with a copy to (which shall not constitute notice): Lee Equity Partners, LLC 650 Madison Avenue New York, NY 10022 Attn: Yoo Jin Kim Facsimile: (646) 781-3700 Email: ykim@thlcapital.com with a copy to (which shall not constitute notice: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Attn: Andrew Yoon Facsimile: (212) 310-8007 Email: andrew.yoon@weil.com

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written.


OTHER CREDIT PARTIES : PAPA MURPHY’S INTERMEDIATE, INC., a Delaware corporation		PAPA MURPHY’S COMPANY STORES, INC., a Washington corporation

By:	/s/ Ken Calwell	By:	/s/ Ken Calwell
Name:	Ken Calwell	Name:	Ken Calwell
Title:	Chief Executive Officer	Title:	Chief Executive Officer


PAPA MURPHY’S INTERNATIONAL LLC, a Delaware limited liability company		MURPHY’S MARKETING SERVICES, INC., a Florida corporation

By:	/s/ Ken Calwell	By:	/s/ Ken Calwell
Name:	Ken Calwell	Name:	Ken Calwell
Title:	Chief Executive Officer	Title:	Chief Executive Officer
PAPA MURPHY’S WORLDWIDE LLC, a Delaware limited liability company

By:	/s/ Ken Calwell
Name:	Ken Calwell
Title:	Chief Executive Officer

[Signature Page to Credit Agreement]

Address for notices for all such other Credit Parties:

c/o PMI Holdings, Inc.

8000 N.E. Parkway Drive, Suite 350

Vancouver, WA 98662

Attention: Treasurer

Facsimile: (360) 260-0500

Email: janetp@papamurphys.com

with a copy to (which shall not constitute notice):

Lee Equity Partners, LLC

650 Madison Avenue

New York, NY 10022

Attn: Yoo Jin Kim

Facsimile: (646) 781-3700

Email: ykim@thlcapital.com

with a copy to (which shall not constitute notice):

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Facsimile: (212) 310-8007

Email: andrew.yoon@weil.com

[Signature Page to Credit Agreement]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written.


GOLUB CAPITAL LLC , as Agent

By:		/s/ Marc C. Robinson
Name:		Marc C. Robinson
Title:		Managing Director
GOLUB CAPITAL LLC , as L/C Issuer

By:		/s/ Marc C. Robinson
Name:		Marc C. Robinson
Title:		Managing Director
Address for Notices: Notice Address for Legal:
Golub Capital Incorporated 666 Fifth Avenue, 18th Floor New York, New York 10103 Attn: Facsimile No.: E-Mail: In each case, with copies (which shall not constitute notice) to: Proskauer Rose LLP One International Place Boston, MA 02110 Attn: Steve Ellis Facsimile No.: 617-526-9899 E-Mail: sellis@proskauer.com

[Signature Page to Credit Agreement]

Notice for all Financial Reporting Deliveries:

Golub Capital LLC (address above)

and

Attn: Portfolio Manager

E-Mail: portfoliomanager@golubcapital.com

Notices Regarding Borrowings, Notice of Advance,

Borrowing Base Certificate, Notices of LIBOR

Continuation/Conversions:

Attn: Loan Administrator

E-Mail: loan_administrator@golubcapital.com

[Signature Page to Credit Agreement]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written:


GOLUB CAPITAL FINANCE FUNDING LLC, as a Lender By: GC Advisors LLC, its Manager		GOLUB CAPITAL BDC 2010-1 LLC, as a Lender By: GC Advisors LLC, its Collateral Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
GOLUB CAPITAL BDC FUNDING LLC, as a Lender By: GC Advisors LLC, as agent		GOLUB CAPITAL PEARLS DIRECT LENDING PROGRAM, L.P., as a Lender By: GC Advisors LLC, its Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
PEARLS VIII, L.P., as a Lender By: GC Advisors LLC, its Manager		PEARLS VIII, LLC , as a Lender By: GC Advisors LLC, its Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
PEARLS IX, L.P. , as a Lender By: GC Advisors LLC, its Manager		PEARLS IX, LLC , as a Lender By: GC Advisors LLC, its Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
PEARLS X, L.P. , as a Lender By: GC Advisors LLC, its Manager		PEARLS 11, LLC , as a Lender By: GC Advisors LLC, its Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director


PEARLS 11-A, LLC, as a Lender By: PEARLS 11, LLC, its sole Member By: GC Advisors LLC, its Manager		GC FINANCE OPERATIONS LLC, as a Lender By: GC Advisors LLC, its Manager

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
GOLUB CAPITAL BDC HOLDINGS LLC , as a Lender By: GC Advisors LLC, its Manager,		GOLUB CAPITAL LLC

By:	/s/ Marc C. Robinson	By:	/s/ Marc C. Robinson
Name:	Marc C. Robinson	Name:	Marc C. Robinson
Title:	Managing Director	Title:	Managing Director
Address for notices for each of the foregoing:		Lending office for each of the foregoing:

[Signature Page to Credit Agreement]

Schedule 1.1(a)

Term Loan Commitments


Golub Capital Finance Funding LLC	$	76,684,510.00
Golub Capital BDC 2010-1 LLC	$	3,000,000.00
Golub Capital BDC Funding LLC	$	15,000,000.00
Golub Capital PEARLS Direct Lending Program, L.P.	$	14,694,430.00
PEARLS VIII, LLC	$	3,396,610.00
PEARLS IX, LLC	$	2,405,930.00
PEARLS X, L.P.	$	6,559,570.00
PEARLS 11-A, LLC	$	3,640,180.00
Golub Capital BDC Holdings LLC	$	15,326,240.00
Golub Capital LLC	$	26,292,530.00

Schedule 1.1(b)

Revolving Loan Commitments


Golub Capital PEARLS Direct Lending Program, L.P.	$	879,840.00
PEARLS VIII, L.P.	$	203,390.00
PEARLS IX, L.P.	$	144,070.00
PEARLS X, L.P.	$	392,720.00
PEARLS 11, LLC	$	217,970.00
GC Finance Operations LLC	$	4,592,010.00
Golub Capital BDC Holdings LLC	$	1,995,630.00
Golub Capital LLC	$	1,574,370.00

S CHEDULE 1.1( C )

C ERTAIN P ERMITTED A CQUISITIONS

1.	The Acquisition of the following stores (1736 West State Street, Boise, Idaho 83702; 10545 Overland Road, Boise, Idaho 83709; 2412 South Apple Street, Boise, Idaho 83706; and 7320 West Fairview Avenue, Boise, Idaho 83704) (collectively, the “Miller Acquisition”).

The Acquisition of the following stores (2009 West Broadway Avenue, Forest Lake, Minnesota 55025; 1754 Market Drive, Suite 300, Stillwater, Minnesota 55082; 5466 St. Croix Trail, North Branch, Minnesota 55056; and 109 Carmichael Road, Hudson, Wisconsin 54016) (collectively, the “Knoop Acquisition”).

****

4.	The Acquisition of certain membership interests of Project Pie, LLC (“Project Pie”).

S CHEDULE 1.5

W IRE T RANSFER I NSTRUCTIONS

S CHEDULE 3.5

L ITIGATION

DTD Pizza, LLC v. Papa Murphy’s International LLC , Cause No. 13-11188, Dallas County, Texas District Court. In a lawsuit filed September 18, 2013, a franchise owner has made a broad range of allegations regarding PMI’s franchise sales and development systems, alleged misrepresentations in PMI’s Franchise Disclosure Document, oral promises made by PMI employees, improper collection and use of advertising funds, and the validity and profitability potential of our franchise model as whole. Many of the allegations appear factually inaccurate, but outside counsel advises that thorough investigation be conducted before any opinion is given on the magnitude of the risk. The complaint asks for $12 million dollars in punitive damages.

S CHEDULE 3.7

ERISA

None.

S CHEDULE 3.8

M ARGIN S TOCK

None.

S CHEDULE 3.9

R EAL E STATE

Owned Real Property :

O WNER

L OCATION

Papa Murphy’s Company Stores, Inc.

3921 23rd Street

Columbus, NE 68601

Leased Real Property :


L ESSEE		L OCATION
Papa Murphy’s International LLC		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s International LLC		Store CO059 Wal-Mart Store #5334 3301 North Tower Road Aurora, CO 80011

Papa Murphy’s International LLC		Store WI055 Wal-Mart Store #1982 955 Mutual Way Appleton, WI 54913

Papa Murphy’s International LLC		Store WI063 – Sublet to Franchisee Wal-Mart Store #2421 2212 Glacier Drive St. Croix Falls, WI 54024

Papa Murphy’s International LLC		Store WI067 – Sublet to Franchisee Wal-Mart Store #1571 250 East Wolf Run Mukwonago, WI 5314

Papa Murphy’s International LLC		Store WI070 – Sublet to Franchisee Wal-Mart Store #5432 250 West Richmond Way Richmond, WI 54017

Papa Murphy’s International LLC		Records Storage Access Storage 7207 N. Leadbetter Road Portland, OR 97203

Papa Murphy’s International LLC		Commercial Storage Crown Moving Co., Inc. 705 SE Victory Avenue, Suite 100 Vancouver, WA

Papa Murphy’s International LLC		Convention Model Store The Wasserstrom Company 2300 Lockbourne Road Columbus, OH 43207


L ESSEE		L OCATION
Papa Murphy’s International LLC		Convention Model Store Curtis Equipment, Inc. 555 Shelley Street Springfield, OR 97477

Papa Murphy’s Company Stores, Inc.		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s Company Stores, Inc.		Store CO002 2800 West 10th Street Greeley, CO 80634

Papa Murphy’s Company Stores, Inc.		Store CO006 1708 Dublin Boulevard Colorado Springs, CO 80918

Papa Murphy’s Company Stores, Inc.		Store CO008 12158 East Mississippi Avenue Aurora, CO 80012

Papa Murphy’s Company Stores, Inc.		Store CO010 15440 East Hampden Avenue Aurora, CO 80013

Papa Murphy’s Company Stores, Inc.		Store CO013 18741 Ponderosa Drive, Suite E Parker, CO 80134

Papa Murphy’s Company Stores, Inc.		Store CO017 6350 Sheridan Boulevard, Unit 105A Arvada, CO 80003

Papa Murphy’s Company Stores, Inc.		Store CO019 840 South Prairie Avenue, Suite 2 Pueblo, CO 81005

Papa Murphy’s Company Stores, Inc.		Store CO022 2888 North Powers Boulevard Colorado Springs, CO 80922

Papa Murphy’s Company Stores, Inc.		Store CO024 680 E. 120th Avenue, Suite A Northglenn, CO 80233

Papa Murphy’s Company Stores, Inc.		Store CO029 12650 W. 64th Avenue, Suite D Arvada, CO 80004

Papa Murphy’s Company Stores, Inc.		Store CO030 3782 E. 104th Avenue Thornton, CO 80233

Papa Murphy’s Company Stores, Inc.		Store CO032 18525 East Smoky Hill Road, Suite J Centennial, CO 80015

Papa Murphy’s Company Stores, Inc.		Store CO033 50 W. Littleton Boulevard, Suite 303 Littleton, CO 80120


L ESSEE		L OCATION
Papa Murphy’s Company Stores, Inc.		Store CO045 2460 South Academy Boulevard Colorado Springs, CO 80916

Papa Murphy’s Company Stores, Inc.		Store CO046 754 South Perry Street, Unit F Castle Rock, CO 80104

Papa Murphy’s Company Stores, Inc.		Store CO047 1203 North Circle Drive Colorado Springs, CO 80909

Papa Murphy’s Company Stores, Inc.		Store CO055 7669 McLaughlin Road Falcon, CO 80831

Papa Murphy’s Company Stores, Inc.		Store CO058 1617 West US Highway 50 Pueblo, CO 81008

Papa Murphy’s Company Stores, Inc.		Store CO064 1725 Sheridan Boulevard, Unit C Edgewater, CO 80214

Papa Murphy’s Company Stores, Inc.		Store CO070 11614 W. Belleview Avenue, Suite N Littleton, CO 80127

Papa Murphy’s Company Stores, Inc.		Store CO073 300 East Highway 24, Unit B Woodland Park, CO 80863

Papa Murphy’s Company Stores, Inc.		Store CO083 9231 E. Lincoln Avenue Lonetree, CO 80124

Papa Murphy’s Company Stores, Inc.		Store ID005 920 Caldwell Boulevard Nampa, ID 83651

Papa Murphy’s Company Stores, Inc.		Store ID011 2707 10th Avenue South Caldwell, ID 83605

Papa Murphy’s Company Stores, Inc.		Store ID022 2418 12th Avenue Road Nampa, ID 83686

Papa Murphy’s Company Stores, Inc.		Store ID027 1545 Linder Road Kuna, ID 83634

Papa Murphy’s Company Stores, Inc.		Store KS010 2110 North Maize Road, Suite 100 Wichita, KS 67212

Papa Murphy’s Company Stores, Inc.		Store KS013 9747 East 21st Street North Wichita, KS 67206

Papa Murphy’s Company Stores, Inc.		Store KS014 1636 North Rock Road, Suite 400 Derby, KS 67037


L ESSEE		L OCATION
Papa Murphy’s Company Stores, Inc.		Store KS028 13303 West Maple Street, Suite 127 Wichita, KS 67235

Papa Murphy’s Company Stores, Inc.		Store KS029 229 N. Andover Road, Suite 700 Andover, KS 67002

Papa Murphy’s Company Stores, Inc.		Store KS031 1400 S. Kansas Avenue, Suite 1200 Newton, KS 67114

Papa Murphy’s Company Stores, Inc.		Store KS034 2712 S. Seneca Street Wichita, KS 67217

Papa Murphy’s Company Stores, Inc.		Store KS036 4813 E. Central Avenue Wichita, KS 67208

Papa Murphy’s Company Stores, Inc.		Store KS039 2348 W. Central Avenue, #A El Dorado, KS 67042

Papa Murphy’s Company Stores, Inc.		Store MI009 5311 Eastern Avenue SW Kentwood, MI 49508

Papa Murphy’s Company Stores, Inc.		Store MI014 809 S. Beacon Boulevard Grand Haven, MI 49417

Papa Murphy’s Company Stores, Inc.		Store MI018 5751 Byron Center Avenue SW Wyoming, MI 49519

Papa Murphy’s Company Stores, Inc.		Store MI026 5210 Northland Drive NE Grand Rapids, MI 49525

Papa Murphy’s Company Stores, Inc.		Store MI030 3355 Henry Street, Suite H Muskegon, MI 49441

Papa Murphy’s Company Stores, Inc.		Store MI031 1239 Leonard Street NE Grand Rapids, MI 49505

Papa Murphy’s Company Stores, Inc.		Store MI042 650 Baldwin Street Jenison, MI 49428

Papa Murphy’s Company Stores, Inc.		Store MN012 10604 France Avenue South, Suite B Bloomington, MN 55431

Papa Murphy’s Company Stores, Inc.		Store MN021 8471 East Point Douglas Road South Cottage Grove, MN 55016

Papa Murphy’s Company Stores, Inc.		Store MN023 15052 Gleason Path Apple Valley, MN 55124


L ESSEE		L OCATION
Papa Murphy’s Company Stores, Inc.		Store MN030 8507 Lyndale Avenue South Bloomington, MN 55420

Papa Murphy’s Company Stores, Inc.		Store MN037 7455 Currell Boulevard Woodbury, MN 55125

Papa Murphy’s Company Stores, Inc.		Store MN038 15043 Crestone Avenue Rosemount, MN 55068

Papa Murphy’s Company Stores, Inc.		Store MN047 172 Tyler Road South Red Wing, MN 55066

Papa Murphy’s Company Stores, Inc.		Store MN056 1771 Market Boulevard Hastings, MN 55033

Papa Murphy’s Company Stores, Inc.		Store MN088 20190 Heritage Drive Lakeville, MN 55044

Papa Murphy’s Company Stores, Inc.		Store MN089 7017 10th Street North Oakdale, MN 55128

Papa Murphy’s Company Stores, Inc.		Store NM003 2800 Coors Boulevard NW Albuquerque, NM 87120

Papa Murphy’s Company Stores, Inc.		Store NM014 200 Tramway Blvd SE Albuquerque, NM 87123 (Smith’s Store #427)

Papa Murphy’s Company Stores, Inc.		Store NM018 1000 Rio Rancho Drive SE Albuquerque, NM 87124 (Smith’s Store #413)

Papa Murphy’s Company Stores, Inc.		Store NM019 8400 Menaul Boulevard NE, Suite G Albuquerque, NM 87112

Papa Murphy’s Company Stores, Inc.		Store NM029 2839 Carlisle Boulevard NE, Suite 110 Albuquerque, NM 87110

Papa Murphy’s Company Stores, Inc.		Store NM031 1121 Unser Blvd SE Rio Rancho, NM 87124

Papa Murphy’s Company Stores, Inc.		Store OR004 5541 SW Beaverton-Hillsdale Highway Portland, OR 97221

Papa Murphy’s Company Stores, Inc.		Store OR042 1503 North Pacific Highway Woodburn, OR 97071

Papa Murphy’s Company Stores, Inc.		Store OR055 4350 SW Multnomah Boulevard Portland, OR 97219


L ESSEE		L OCATION
Papa Murphy’s Company Stores, Inc.		Store WA082 3404 Kitsap Way Bremerton, WA 98312

Papa Murphy’s Company Stores, Inc.		Store WA087 1468 Olney Street SE, Suite 105 Port Orchard, WA 98366

Papa Murphy’s Company Stores, Inc.		Store WA100 4213 Wheaton Way Bremerton, WA 98310

Papa Murphy’s Company Stores, Inc.		Store WA132 6715 NE 63rd Street, Suite 105 Vancouver, WA 98661

Papa Murphy’s Company Stores, Inc.		Store WA147 2220 Bucklin Hill Road, Suite 102 Silverdale, WA 98383

Papa Murphy’s Company Stores, Inc.		Store WI071 2304 South Main Street, Suite 7 Rice Lake, WI 54868

Papa Murphy’s Company Stores, Inc.		Equipment in Storage State Line Storage 200 State Line Road Temperance, MI 48182

Papa Murphy’s Company Stores, Inc.		Equipment in Storage Mini U Storage 5980 Sheridan Boulevard Arvada, CO 80003

Papa Murphy’s Company Stores, Inc.		Equipment in Storage Van Mall Storage 4214 NE 72 ^nd Avenue Vancouver, WA 98661

Papa Murphy’s Company Stores, Inc.		OR103 – Assigned to Franchisee 16810 SW Langer Drive Sherwood, OR 97140

Papa Murphy’s Company Stores, Inc.		Sublet to Play It! Games Movies and Music LLC 9733 Sawmill Parkway, Suite E Powell, OH 43065

S CHEDULE 3.12

E NVIRONMENTAL

None.

S CHEDULE 3.15

L ABOR R ELATIONS

None.

S CHEDULE 3.17

B ROKERS ’ AND T RANSACTION F EES

Lee Equity Partners, LLC will receive a transaction fee equal to $1,770,000.

S CHEDULE 3.19

V ENTURES , S UBSIDIARIES AND A FFILIATES ; O UTSTANDING S TOCK

Joint Ventures/Partnerships :

None.

Capitalization Table:


E NTITY	O WNED B Y	P ERCENTAGE OF O WNERSHIP			N UMBER OF S HARES
Papa Murphy’s Holdings, Inc.	LEP Papa Murphy’s Holdings, LLC		60.81	%	1,895,854 shares of Preferred A
					1,045,385 shares of Unrestricted Common
	Gleacher Mezzanine II, LP		3.21	%	74,750 shares of Preferred A
					25,287 shares of Preferred B
					55,161 shares of Unrestricted Common
	Other Co-Investors		23.57	%	734,837 shares of Preferred A
					405,195 shares of Unrestricted Common
	Outside Directors, et. al.		0.19	%	2,679 shares of Preferred A
					1,477 shares of Unrestricted Common
					5,000 shares of Restricted Common
	Management Ownership		12.22	%	145,689 shares of Preferred A
					1,264 shares of Preferred B
					81,011 shares of Unrestricted Common
					363,108 shares of Restricted Common

Papa Murphy’s Intermediate, Inc.	Papa Murphy’s Holdings, Inc.		100	%	1,000

PMI Holdings, Inc.	Papa Murphy’s Intermediate, Inc.		100	%	1,000

Papa Murphy’s Company Stores, Inc.	PMI Holdings, Inc.		100	%	500

Papa Murphy’s International LLC	Papa Murphy’s Company Stores, Inc.		100	%	N/A

Papa Murphy’s Worldwide LLC	Papa Murphy’s International LLC		100	%	N/A

Murphy’s Marketing Services, Inc.	Papa Murphy’s Company Stores, Inc.		100	%	1,000

PMI Canada ULC	Papa Murphy’s Worldwide LLC		100	%	1,000

Preemptive and Other Outstanding Rights :

None.

ORGANIZATIONAL CHART

See Attached.

S CHEDULE 3.20

J URISDICTION OF O RGANIZATION ; C HIEF E XECUTIVE O FFICE


C REDIT P ARTY	J URISDICTION	O RGANIZATIONAL I D N UMBER	C HIEF E XECUTIVE O FFICE	F ORMER N AMES /L OCATIONS WITHIN THE LAST 5 YEARS
Papa Murphy’s Intermediate, Inc.	Delaware	4814363	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

PMI Holdings, Inc.	Delaware	3814836	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662	Papa Murphy’s Merger Co.

Papa Murphy’s International LLC	Delaware	3814784	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662	Papa Murphy’s International, Inc.

Papa Murphy’s Company Stores, Inc.	Washington	602001747	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s Worldwide LLC	Delaware	4148329	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662	Papa Murphy’s Canada, Inc. Papa Murphy’s Canada LLC

Murphy’s Marketing Services, Inc.	Florida	P10000071270	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

S CHEDULE 3.26

F RANCHISE M ATTERS

None.

S CHEDULE 5.1

L IENS

None.

S CHEDULE 5.2

P ERMITTED S TORE D ISPOSITIONS


Papa Murphy’s Company Stores, Inc.		Store KS010 2110 North Maize Road, Suite 100 Wichita, KS 67212

Papa Murphy’s Company Stores, Inc.		Store KS013 9747 East 21st Street North Wichita, KS 67206

Papa Murphy’s Company Stores, Inc.		Store KS028 13303 West Maple Street, Suite 127 Wichita, KS 67235

Papa Murphy’s Company Stores, Inc.		Store KS034 2712 S. Seneca Street Wichita, KS 67217

Papa Murphy’s Company Stores, Inc.		Store KS036 4813 E. Central Avenue Wichita, KS 67208

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

Papa Murphy’s Company Stores, Inc.		****

S CHEDULE 5.4

I NVESTMENTS

1.	Promissory Note dated August 18, 2009 issued by Pizza Masters of Illinois, Inc. to Papa Murphy’s Company Stores, Inc. in the amount of $492,000, as amended by First Amendment to Promissory Note dated September 31, 2013.

2.	Promissory Note dated December 15, 2009 issued by Ananda Holdings Ltd. to PMI Canada, ULC in the amount of $1,000,000 (CAD), as amended and assigned to Papa Murphy’s Worldwide LLC by Amendment and Assignment to Promissory Note dated March 13, 2012.

3.	Replacement Promissory Note dated as of June 7, 2012 issued as replacement for that certain Promissory Note dated May 25, 2011, as amended by Amendment to Promissory Note dated June 1, 2011, issued by Ken Calwell to Papa Murphy’s International LLC in the amount of $547,949.

4.	Promissory Note dated December 28, 2012 issued by Victoria T. Blackwell to Papa Murphy’s International LLC in the amount of $85,788, and replaced by the Promissory Note dated March 28, 2013 issued by Victoria T. Blackwell to Papa Murphy’s International LLC in the amount of $85,838.77.

5.	Promissory Note dated December 19, 2012 issued by Jayson Tipp to Papa Murphy’s International LLC in the amount of $85,788, and replaced by the Promissory Note dated March 19, 2013 issued by Jayson Tipp to Papa Murphy’s International LLC in the amount of $85,838.77.

6.	Promissory Note dated November 20, 2012 issued by Jayson Tipp to Papa Murphy’s International LLC in the amount of $120,000, and subject to terms therein regarding revolving credit availability.

7.	Promissory Note dated September 14, 2012 issued by Jayson Tipp to Papa Murphy’s International LLC in the amount of $49,985.89.

8.	Promissory Note dated September 14, 2012 issued by Jayson Tipp to Papa Murphy’s International LLC in the amount of $32,173.

9.	Promissory Note dated December 31, 2012 issued by Craig Weiss to Papa Murphy’s International LLC in the amount of $85,788, and replaced by the Promissory Note dated March 31, 2013 issued by Craig Weiss to Papa Murphy’s International LLC in the amount of $85,838.77.

10.	Promissory Note dated April 1, 2013 issued by Richard Key to Papa Murphy’s International LLC in the amount of $54,220.

11.	Promissory Note dated June 12, 2013 issued by Tom Marchese to Papa Murphy’s International LLC in the amount of $59,243.50.

12.	Promissory Note dated October 9, 2013 issued by Dan Harmon to Papa Murphy’s International LLC in the amount of $196,300.

S CHEDULE 5.5

I NDEBTEDNESS

Under Addendum Number 3 dated September 27, 2013, to the Radiant Software License, Support and Purchase Agreement dated August 12, 2009, between Papa Murphy’s International LLC and Radiant Systems, Inc., Papa Murphy’s agreed to purchase 597 Radiant site-based licenses for an aggregate total of $2,257,615 and 1,347 hosted licenses for an aggregate total of $2,289,900, to be paid in quarterly payments of $909,503.

S CHEDULE 5.6

T RANSACTIONS WITH A FFILIATES

1.	Advisory Services and Monitoring Agreement dated May 5, 2010 between Lee Equity Partners LLC and Papa Murphy’s Merger Co.

2.	Trademark License Agreement dated June 1, 2006 between Papa Murphy’s International, Inc. and PMI Canada, ULC.

S CHEDULE 5.9

C ONTINGENT O BLIGATIONS

Under a Franchisor Agreement effective December 25, 2011, between Papa Murphy’s International LLC and Valassis Direct Mail, Inc., Murphy’s Marketing Services, Inc. agreed to an annual revenue commitment of $6,200,000. In the event the annual revenue is not met, Papa Murphy’s International LLC will owe Valassis Direct Mail, Inc. an amount which would in no event exceed 50% of the anticipated annual revenue minus the amount of payments already made in such fiscal year.

Pursuant to certain licensing agreements with NCR Corporation, certain Credit Parties have agreed to install a certain amount of “point of sale” operating systems in company stores. Pursuant to the terms of these agreements, if company stores do not adopt these systems, such Credit Parties may still be responsible for payments relating thereto.

Schedule 11.1

Fiscal Periods

Fiscal Period end dates are denoted below. Fiscal Quarter (other than the last Fiscal Quarter of each Fiscal Year) end dates are denoted in italics and the end dates of each Fiscal Year (including the last Fiscal Quarter of each Fiscal Year) are denoted in bold italics .


2013	2014	2015	2016	2017	2018
01/01/13	12/31/13	12/30/14	12/29/15	01/03/17	01/02/18
02/04/13	02/03/14	02/02/15	02/01/16	02/06/17	02/05/18
03/04/13	03/03/14	03/02/15	02/29/16	03/06/17	03/05/18
04/01/13	03/31/14	03/30/15	03/28/16	04/03/17	04/02/18
05/06/13	05/05/14	05/04/15	05/02/16	05/08/17	05/07/18
06/03/13	06/02/14	06/01/15	05/30/16	06/05/17	06/04/18
07/01/13	06/30/14	06/29/15	06/27/16	07/03/17	07/02/18
08/05/13	08/04/14	08/03/15	08/01/16	08/07/17	08/06/18
09/02/13	09/01/14	08/31/15	08/29/16	09/04/17	09/03/18
09/30/13	09/29/14	09/28/15	09/26/16	10/02/17	10/01/18
11/04/13	11/03/14	11/02/15	10/31/16	11/06/17	11/05/18
12/02/13	12/01/14	11/30/15	11/28/16	12/04/17	12/03/18
*12/30/13*	*12/29/14*	*12/28/15*	*12/26/16*	*01/01/18*	*12/31/18*

EXHIBIT 1.6

CREDIT AGREEMENT

FORM OF NOTICE OF CONVERSION OR CONTINUATION

GOLUB CAPITAL LLC,

as Agent under the Credit Agreement referred to below

666 Fifth Avenue, 18 ^th Floor

New York, New York 10103

, 201

Re:

PMI HOLDINGS, INC., a Delaware corporation (the “Borrower”)

Reference is made to the Credit Agreement, dated as of October [ — ], 2013 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrower, the other Credit Parties party thereto, Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity, together with successors and permitted assigns in such capacity, “ Agent ”) and as a Lender, the other Lenders and the L/C Issuers party thereto. Capitalized terms used herein without definition are used as defined in the Credit Agreement.

The Borrower hereby gives you irrevocable notice, pursuant to Section 1.6 of the Credit Agreement of its request for the following:

(i) a continuation, on , , as LIBOR Rate Loans having an Interest Period of months of [Term Loans] [Revolving Loans] in an aggregate outstanding principal amount of $ having an Interest Period ending on the proposed date for such continuation;

(ii) a conversion, on , , to LIBOR Rate Loans having an Interest Period of months of [Term Loans] [Revolving Loans] in an aggregate outstanding principal amount of $ ; and

(iii) a conversion, on , , to Base Rate Loans of [Term Loans] [Revolving Loans] in an aggregate outstanding principal amount of $ .

In connection herewith, the undersigned hereby certifies that, except as set forth on Schedule A attached hereto, no Event of Default has occurred and is continuing on the date hereof, both before and after giving effect to any Loan to be made or Letter of Credit to be Issued on or before any date for any proposed conversion or continuation set forth above.

[Balance of page intentionally left blank; signature page follows.]

[SIGNATURE PAGE TO NOTICE OF CONVERSION/CONTINUATION DATED , ]


PMI HOLDINGS, INC. , a Delaware corporation, as Borrower

By:
		Name:
		Title:

Exhibit 2.1

$177,000,000 CREDIT FACILITY

Closing Date: October 25, 2013

CLOSING AGENDA AND DOCUMENT CHECKLIST

PMI HOLDINGS, INC., as the Borrower,

THE OTHER PERSONS PARTY HERETO THAT ARE

DESIGNATED AS CREDIT PARTIES,

GOLUB CAPITAL LLC

for itself, as a Lender and as Agent for all Lenders,

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

as Lenders,

and

GOLUB CAPITAL LLC,

as Sole Lead Arranger and Sole Lead Bookrunner

Capitalized Terms used herein and otherwise not defined

have the meanings ascribed to them in the Credit Agreement

TABLE OF PARTIES:


Agent		GC, in its capacity as Agent
Borrower		PMI Holdings, Inc., a Delaware corporation
Credit Parties		Borrower and Guarantors
Domestic Subsidiaries		PM Company Stores; Murphy’s Marketing; PM International; PM Worldwide
GC		Golub Capital LLC, a Delaware limited liability company
Guarantors		Holdings and each Domestic Subsidiary
Holdings		Papa Murphy’s Intermediate, Inc., a Delaware corporation
Proskauer or PR		Proskauer Rose LLP, counsel for Agent
Lenders		Affiliates of GC
Murphy’s Marketing		MURPHY’S MARKETING SERVICES, INC., a Florida corporation
PM Company Stores		Papa Murphy’s Company Stores, Inc., a Washington corporation
PM International		Papa Murphy’s International LLC, a Delaware limited liability company
PM Worldwide		Papa Murphy’s Worldwide LLC, a Delaware limited liability company
Sponsor		Lee Equity Partners, LLC
Weil		Weil Gotshal & Manges LLP, counsel for Credit Parties and Sponsor

I.	PRINCIPAL LOAN DOCUMENTS


Item No.	Document	Responsible Party	Status
1.	Credit Agreement	Proskauer
	Schedules to Credit Agreement	—
	1.1 (a) - Term Loan Commitments	Proskauer


Item No.	Document	Responsible Party	Status
	1.1 (b) - Revolving Loan Commitments	Proskauer
	1.1 (c) - Certain Permitted Acquisitions	Weil/Credit Parties
	1.5 - Wire Transfer Instructions	Weil/Credit Parties
	3.5 - Litigation	Weil/Credit Parties
	3.7 - ERISA	Weil/Credit Parties
	3.8 - Margin Stock	Weil/Credit Parties
	3.9 - Real Estate	Weil/Credit Parties
	3.12 - Environmental	Weil/Credit Parties
	3.15 - Labor Relations	Weil/Credit Parties
	3.17 - Brokers’ and Transaction Fees	Weil/Credit Parties
	3.19 - Ventures; Subsidiaries and Affiliates; Outstanding Stock	Weil/Credit Parties
	3.20 - Jurisdiction of Organization; Chief Executive Office	Weil/Credit Parties
	3.21 - Deposit Accounts and Other Accounts	Weil/Credit Parties
	3.26 - Franchise Matters	Weil/Credit Parties
	5.1 - Liens	Weil/Credit Parties
	5.4 - Investments	Weil/Credit Parties
	5.5 - Indebtedness	Weil/Credit Parties
	5.6 - Transactions with Affiliates	Weil/Credit Parties
	5.9 - Contingent Obligations	Weil/Credit Parties
	11.1 - Fiscal Periods	Weil/Credit Parties

	Exhibits to Credit Agreement	—
	1.6 - Form of Notice of Conversion/ Continuation	Proskauer
	2.1 - Closing Checklist	Proskauer
	4.2(b) - Form of Compliance Certificate	Proskauer
	9.9(g)(i)(B) - Form of Affiliated Lender Assignment and Assumption	Proskauer

II.

SECURITY DOCUMENTS


Item No.	Document	Responsible Party	Status
2.	Guaranty and Security Agreement	Proskauer
	Annex 1 - Form of Pledge Amendment	Weil/Credit Parties
	Annex 2 - Form of Joinder Agreement	Weil/Credit Parties
	Annex 3 - Form of IP Security Agreement	Weil/Credit Parties
	Schedule 1 - Commercial Tort Claims	Weil/Credit Parties
	Schedule 2 - Filings	Weil/Credit Parties
	Schedule 3 - Jurisdiction of Organization; Chief Executive Office	Weil/Credit Parties
	Schedule 4 - Location of Inventory and Equipment	Weil/Credit Parties
	Schedule 5 - Pledged Collateral	Weil/Credit Parties
	Schedule 6 - Intellectual Property	Weil/Credit Parties
	(a) Stock Certificate No. 1, representing all of the issued and outstanding capital stock of Borrower	Weil/Credit Parties
	(i) Stock Power	Weil/Credit Parties
	(b) Stock Certificate No. 3, representing all of the issued and outstanding capital stock of PM Company Stores	Weil/Credit Parties
	(i) Stock Power	Weil/Credit Parties


Item No.	Document	Responsible Party	Status
	(c) Stock Certificate No. 1, representing all of the issued and outstanding capital stock of Murphy’s Marketing	Weil/Credit Parties
	(i) Stock Power	Weil/Credit Parties
	(d) Stock Certificate No. 2, representing all of the issued and outstanding capital stock of PMI Canada ULC	Weil/Credit Parties
	(i) Stock Power	Weil/Credit Parties
	(e) Revolving Promissory Note dated December 15, 2011 (Intercompany Note) in the original principal amount of $15,000,000	Weil/Credit Parties
	(i) Allonge	Weil/Credit Parties
	(f) Replacement Promissory Note dated June 7, 2012 to replace the Promissory Note dated May 25, 2011 payable by Ken C. Calwell to PM International in the original principal amount of $547,949, including Amendment thereto	Weil/Credit Parties
	(i) Allonge	Weil/Credit Parties
	(g) Promissory Note dated December 15, 2009 payable by Ananda Holdings Ltd. to PM Worldwide in the original principal amount of CAD $1,000,000, including Amendment thereto	Weil/Credit Parties
	(i) Allonge	Weil/Credit Parties
	(h) Promissory Note dated August 18, 2009 payable by Pizza Masters of Illinois, Inc. to PM Company Stores in the original principal amount of $492,000	Weil/Credit Parties
	(i) Allonge
3.	Trademark Security Agreement	Proskauer
	Schedule	Weil/Credit Parties
4.	Deposit Account Control Agreement with Wells Fargo (60 days post-closing)	Weil/Credit Parties
5.	Landlord Waiver and Consent to Collateral Access Agreements executed by the landlord party to the lease for 8000 NE Parkway Drive, Vancouver, Washington (60 days post-closing)	Weil/Credit Parties

III.

COLLATERAL DUE DILIGENCE


Item No.	Document	Responsible Party	Status
6.	Perfection Certificate	Weil/Credit Parties
	Schedules to Perfection Certificate	Weil/Credit Parties
7.	Pre-Closing Lien Search Reports detailing the searches in those jurisdictions listed on Exhibit A attached hereto and a summary thereof	Proskauer
8.	UCC Financing Statements listed on Exhibit B attached hereto	Proskauer
9.	Post-Closing Lien Search Reports	Proskauer
10.	Intellectual Property Searches	Proskauer
11.	W-9’s for each Credit Party and for each party to directly receive funds from Agent on the Closing Date *Needed 1 week before closing*	Weil/Credit Parties
12.	Borrower’s Administrative Details Form	Weil/Credit Parties

IV.

ANCILLARY DOCUMENTS


Item No.	Document	Responsible Party	Status
13.	Initial Notice of Borrowing	Weil/Credit Parties
	Schedule I - Disbursement of Proceeds	Weil/Credit Parties


Item No.	Document	Responsible Party	Status
14.	Funds Flow Memorandum	Credit Parties
15.	Officer’s Closing Certificate (includes Solvency Cert)	Weil/Credit Parties
	Exhibits to Officer’s Closing Certificate
16.	Fee Letter	Proskauer
17.	Financial Statements, including pro forma balance sheet and projections	Weil/Credit Parties
18.	Insurance Certificates & Endorsements naming Agent as additional insured/loss payee and conforming to requirements provided by Agent to Credit Parties	Credit Parties

V.	ORGANIZATIONAL DOCUMENTS


Item No.	Document	Responsible Party	Status
19.	Secretary’s Certificate of Holdings	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)
	Exhibit B - Certificate of Incorporation certified by the Secretary of State of Delaware
	Exhibit C- Bylaws
	Exhibit D - Good Standing Certificate certified by the Secretary of State of Delaware
	Exhibit E - Incumbency
20.	Secretary’s Certificate of Borrower	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)
	Exhibit B - Certificate of Incorporation certified by the Secretary of State of Delaware
	Exhibit C-Bylaws


Item No.	Document	Responsible Party	Status
	Exhibit D - Good Standing Certificate certified by the Delaware Secretary of State
	Exhibit E - Incumbency
21.	Secretary’s Certificate of PM Company Stores	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)
	Exhibit B - Certificate of Incorporation certified by the Secretary of State of Washington
	Exhibit C - Bylaws
	Exhibit D - Good Standing Certificate certified by the Secretary of State of Washington
	Exhibit E - Incumbency
22.	Secretary’s Certificate of Murphy’s Marketing	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)
	Exhibit B - Certificate of Incorporation certified by the Secretary of State of Florida
	Exhibit C - Bylaws
	Exhibit D - Good Standing Certificate certified by the Florida Secretary of State
	Exhibit E - Incumbency
23.	Secretary’s Certificate of PM International	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)
	Exhibit B - Certificate of Formation certified by the Secretary of State of Delaware
	Exhibit C - Operating Agreement
	Exhibit D - Good Standing Certificates certified by the Delaware Secretary of State
	Exhibit E - Incumbency
24.	Secretary’s Certificate of PM Worldwide	Weil/Credit Parties
	Exhibit A - Resolutions (re: Loan Documents)

VI.

DEBT REPAYMENT DOCUMENTS


Item No.	Document	Responsible Party	Status
25.	Payoff/Lien Release Letters:	Weil/Credit Parties
	(a) General Electric Capital Corporation
	(b) Gleacher Mezzanine Fund II, L.P.
26.	Termination of Wells Fargo Deposit Account Control Agreement	Weil/Credit Parties
27.	UCC Terminations listed on Exhibit C hereto	Weil/Credit Parties
28.	Intellectual Property Releases listed on Exhibit C hereto (for GE and Gleacher)	Weil/Credit Parties

VII.

LEGAL OPINIONS


Item No.	Document	Responsible Party	Status
29.	Opinion of Credit Parties’ Counsel re: Loan Documents	Weil
30.	Opinion of Credit Parties’ local Washington counsel re: Loan Documents w/r/t PM Company Stores	Perkins Coie LLP

EXHIBIT A

Search Jurisdictions


Entity		Jurisdiction
1. Papa Murphy’s Intermediate, Inc.		Delaware SOS Clark County, Washington
2. PMI Holdings, Inc.		Delaware SOS Clark County, Washington
3. Papa Murphy’s Company Stores, Inc.		Washington, SOS Clark County, Washington each county encompassing each property listed on Exhibit D hereto
4. MURPHY’S MARKETING, INC.		Florida SOS Clark County, Washington
5. Papa Murphy’s International LLC		Delaware SOS Clark County, Washington
6. Papa Murphy’s International Inc.		Delaware SOS Clark County, Washington
7. Papa Murphy’s Worldwide LLC		Delaware SOS Clark County, Washington
8. Papa Murphy’s of Canada, Inc.		Washington SOS Clark County, Washington

A-1

EXHIBIT B

UCC Filings


Name	Jurisdiction	Type of Filing	Filing Date & Filing No.	Post-filing Search
1. Papa Murphy’s Intermediate, Inc.	Delaware SOS	All Assets
2. PMI Holdings, Inc.	Delaware SOS	All Assets
3. Papa Murphy’s Company Stores, Inc.	Washington SOS	All Assets
4. MURPHY’S MARKETING SERVICES, INC.	Florida SOS	All Assets
5. Papa Murphy’s International LLC	Delaware SOS	All Assets
6. Papa Murphy’s Worldwide LLC	Delaware SOS	All Assets

B-1

EXHIBIT C

Terminations and Releases


Debtor Name	Secured Party Name	Filing Jurisdiction	Orig. Filing Date & Filing	Termination Filing Date & Filing No.
Papa Murphy’s Intermediate, Inc.	General Electric Capital Corporation, as Agent	Delaware SOS-	20122231142 6/11/12
Papa Murphy’s Intermediate, Inc.	Gleacher Mezzanine Fund II, L.P., as Agent	Delaware SOS-	20122255240 6/11/12
PMI Holdings, Inc.	General Electric Capital Corporation, as Agent	Delaware SOS	20122231134 6/11/12
PMI Holdings, Inc.	Gleacher Mezzanine Fund II, L.P., as Agent	Delaware SOS	20122256099 6/12/12
Papa Murphy’s Company Stores, Inc.	General Electric Capital Corporation, as Agent	Washington Dept. of Licensing	2012-163-0153-4 6/11/12
Papa Murphy’s Company	Gleacher Mezzanine Fund II, L.P., as Agent	Washington Dept. of Licensing	2012-165-0957- 2 6/11/12
Papa Murphy’s International LLC	General Electric Capital Corporation, as Agent	Delaware SOS	20122231126 6/11/12
Papa Murphy’s International LLC	Gleacher Mezzanine Fund II, L.P., as Agent	Delaware SOS	20122255653 6/21/12
Papa Murphy’s Worldwide LLC	General Electric Capital Corporation, as Agent	Delaware SOS	20122231100 6/11/12


Debtor Name	Secured Party Name	Filing Jurisdiction	Orig. Filing Date & Filing	Termination Filing Date & Filing No.
Papa Murphy’s Worldwide LLC	Gleacher Mezzanine Fund II, L.P., as Agent	Delaware SOS	20122255844 6/12/12
Murphy’s Marketing Services, Inc.	General Electric Capital Corporation, as Agent	Florida SOS	2012069150 89 6/11/12
Murphy’s Marketing Services, Inc.	Gleacher Mezzanine Fund II, L.P., as Agent	Florida SOS	2012069316 45 6/12/12

Release of that certain Trademark Security Agreement executed as of June 11, 2012 by PM International in favor of General Electric Capital Corporation, as Agent and recorded with the United States Patent and Trademark Office on June 11, 2012 at Reel 4798, Frame 0955.

EXHIBIT 4.2(b) TO CREDIT AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

PMI HOLDINGS, INC.

Date: , 201

This Compliance Certificate (this “Certificate”) is given by PMI Holdings, Inc., a Delaware corporation (“Borrower”), pursuant to subsection 4.2(b) of that certain Credit Agreement dated as of October 25, 2013 among the Borrower, the other Credit Parties party thereto, Golub Capital LLC, as administrative agent (in such capacity, “Agent”), and as a Lender, and the additional Lenders party thereto (as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

The officer executing this Certificate is a Responsible Officer of the Borrower and as such is duly authorized to execute and deliver this Certificate on behalf of the Borrower. By executing this Certificate, such officer hereby certifies to Agent, the Lenders and the L/C Issuers, on behalf of the Borrower, that:

(a) the financial statements delivered with this Certificate in accordance with subsection 4.1(a) and/or 4.1(b) of the Credit Agreement fairly present, in all material respects, in accordance with GAAP the financial position and the results of operations of Parent and its Subsidiaries as of the dates of and for the periods covered by such financial statements (subject, in the case of interim financial statements, to normal year-end adjustments and the absence of footnote disclosure);

(b) [Borrower Note (include this paragraph only with respect to Certificates delivered for the last Fiscal Period of the first, second and third Fiscal Quarter and the end of each Fiscal Year):] Annex A hereto includes a correct calculation of EBITDA, and Net Interest Expense for the relevant Fiscal [Period/Year] ended , 20 and Annex B includes a correct calculation of each of the financial covenants contained in Sections 6.2 and 6.3 of the Credit Agreement for the relevant periods ended , 20 ] [Borrower Note (include following re: Excess Cash Flow only for Certificate delivered for end of applicable Fiscal Years): and Annex C includes a correct calculation of Excess Cash Flow (including a correct calculation of any required prepayment) and the financial covenant contained in Section 6.1 of the Credit Agreement for the Fiscal Year ended [December/January] , 201 ] ;

(c) [Borrower Note: Include this paragraph only with respect to Certificates delivered for the last Fiscal Period of each Fiscal Quarter] as of , 20 , no Credit Party or any Subsidiary of any Credit Party owns any Margin Stock [, except as specified on Annex D attached hereto] .

(d) to the best of such officer’s knowledge, no Default or Event of Default exists [except as specified on Annex E attached hereto] ;

(e) based on the Leverage Ratio, the Applicable Margin for (i) Revolving Loans and portions of the Term Loan which are Base Rate Loans is , and (ii) Revolving Loans and portions of the Term Loan which are LIBOR Rate Loans is ; and

(f) since the Closing Date and except as disclosed in prior Certificates delivered to Agent, no Credit Party has:

(i) changed its legal name or jurisdiction of incorporation, organization or formation or formed or acquired any Subsidiary except as follows: ;

(ii) acquired all or substantially all of the assets of, or merged or consolidated with or into, any Person, except as follows: ; or

(iii) changed the location of its chief executive office or acquired fee simple title to any real property with a fair market value in excess of $500,000, except as follows: .

IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed by one of its Responsible Officers as of the first date written above.


PMI HOLDINGS, INC. , a Delaware corporation

Name:
Title:

Note: Unless otherwise specified, all financial covenants are calculated for Holdings and its Subsidiaries on a consolidated basis in accordance with GAAP and all calculations are without duplication.

ANNEX A

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations


I. Definition/Calculation of EBITDA and Adjusted EBITDA
EBITDA is defined as follows:

A.	Net income (or loss) for the applicable period of measurement of Holdings, Borrower and their Subsidiaries on a consolidated basis determined in accordance with GAAP; provided that, solely for the purposes of this calculation, Murphy’s Marketing Services shall not be considered a “Subsidiary” of Holdings or Borrower.

Less (or plus), to the extent such items would otherwise be included in the calculation of net income (or loss):

	(1)	the income (or loss) of any Person which is not a Subsidiary of the Borrower, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries in cash by such Person during such period and the payment of dividends or similar distributions by that Person is not at the time of such payment or distribution prohibited by operation of the terms of its charter or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Person

	(2)	the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries

	(3)	gains (or losses) from the sale, exchange, transfer or other disposition of property or assets (other than accounts and inventory) not in the ordinary course of business of the Borrower and its Subsidiaries

	(4)	any other extraordinary gains (or losses) of the Borrower or its Subsidiaries, and related tax effects in accordance with GAAP

B.	Total exclusions from (additions to) net income (sum of (1)-(4) above)

Plus, without duplication, to the extent deducted in (or excluded from) the calculation of net income (or loss) for such period:

	(1)	Depreciation, depletion and amortization

	(2)	Interest expense (less interest income), fees, commissions, discounts and premiums incurred in connection with Indebtedness (including, for purposes of clarification, Unused Commitment Fees)

	(3)	All taxes on or measured by income, profits or capital, including federal, foreign and state taxes, to the extent deducted in calculating net income (or loss) or other franchise, excise, revenue or similar taxes for such period and, without duplication, permitted Tax Distributions and including, in any event, tax effects in accordance with GAAP resulting from gains (or losses) from the sale, exchange, transfer or other disposition of property or assets (other than accounts and inventory) not in the ordinary course of business of the Borrower and its Subsidiaries

A-1

ANNEX A

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations



		(4)		Restricted Payments made and permitted by Section 5.11(b), (f) ¹ or (g) of the Credit Agreement and payments made and permitted by Section 5.7(c) of the Credit Agreement

		(5)		Fees paid to independent directors not to exceed an amount that is reasonable and customary for independent directors for a company of the type and size of the Borrower and reimbursements of reasonable out-of-pocket expenses of directors (including in connection with attending board of director meetings) permitted to be paid in accordance with the Credit Agreement

		(6)		All non-cash losses or expenses (or minus non-cash income or gain) (including but not limited to non-cash stock option- and equity-based compensation expenses) for such period, but excluding any non-cash loss or expense that is an accrual of a reserve for a cash expenditure or payment to be made, or anticipated to be made, in a future period (other than any accruals or reserves associated with rent)

		(7)		Non-recurring or unusual cash fees, costs, charges, losses and expenses of Holdings and its Subsidiaries during such period, in an aggregate amount not to exceed ten percent (10%) of trailing twelve Fiscal Period EBITDA

		(8)		Fees, costs and expenses that are expensed before or within twelve (12) Fiscal Periods of the applicable transaction, incurred in connection with the negotiation and documentation of permitted dispositions, Permitted Acquisitions, permitted equity issuances (including an IPO), permitted Investments (or proposed Investments that would have been a Permitted Acquisition or permitted Investment) and permitted incurrences, amendments, modifications or refinancings of Indebtedness (or proposed incurrences, amendments, modifications or refinancings of Indebtedness that would have been a permitted incurrence, amendment, modification or refinancing of Indebtedness), in each case, whether or not consummated

		(9)		Pre-opening costs with respect to a new store and, to the extent specific to such store, grand opening marketing costs related thereto, in an aggregate amount not to exceed $75,000 per store for all periods

		(10)		Net Issuance Proceeds of Specified Equity Contributions

		(11)		Fees and expenses incurred in connection with the issuance of the Loans and the Related Transactions

		(12)		Non-cash expenses resulting from purchase accounting adjustments made in accordance with GAAP with respect to Permitted Acquisitions

		(13)		The difference (or surplus, if any) of cash rent expense for such period to the extent it is less than (or greater than, as the case may be) such rent expense under GAAP as derived by straight-line rent adjustment

		(14)		Fees and expenses to Sponsor and its Affiliates on the Closing Date in connection with the Credit Agreement and the Related Transactions as set forth on the funds flow memorandum delivered by the Borrower to Agent prior to the Closing Date

¹	NTD: Section 5.1(f) picks up post-IPO public company compliance expenses.

A-2

ANNEX A

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations



C.		Total add backs to net income (sum of (1)-(14) above):

D.		EBITDA (result of A minus (or plus) B plus (or minus) C above) ²

E.		Adjusted EBITDA (EBITDA on a Pro Forma Basis)

“Pro Forma Basis” means, for purposes of calculating compliance with any financial covenant or financial ratio that all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable measurement period with respect to such covenant or condition: income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (A) in the case of a sale, transfer or other disposition of all or substantially all capital stock in any Subsidiary or any division or product line of Borrower or any Subsidiary, shall be excluded, and (B) in the case of a Permitted Acquisition or Investment described in the definition of the term “Specified Transaction,” shall be included; provided, that, EBITDA may be further adjusted without duplication of any adjustments to EBITDA set forth in the definition of EBITDA by, without duplication, (x) any credit received for acquisition-related costs and savings to the extent permitted pursuant to Article 11 of Regulation S-X under the Securities Act, (y) actions taken by Holdings or any of its Subsidiaries prior to or during such period (or reasonably expected to be taken within 12 months of such Specified Transaction) for the purposes of realizing reasonably identifiable and factually supportable cost savings (including the “run-rate” cost savings and synergies resulting from such Specified Transaction that have been or are expected to be realized (“run-rate” means the full recurring benefit for a period that is associated with any action taken or expected to be taken, net of the amount of actual benefits realized during such period from such actions)), in each case under this clause (y) calculated in good faith by the Borrower and, with respect to any Material Specified Transaction, reasonably acceptable to Agent, and/or (z) other extraordinary expenses, increased costs, identifiable and verifiable expense reductions, excess management compensation and other adjustments, if any, incurred by Holdings or any of its Subsidiaries prior to or during such period, in each case under this clause (z) calculated by the Borrower and reasonably acceptable to Agent.

As used above, the term (x) “Specified Transaction” means, with respect to any period, any Permitted Acquisition or any permitted Investment or disposition of assets consummated by Holdings or any of its Subsidiaries during such period (or the effects of which have occurred or are implemented during such period), and (y) “Material Specified Transaction” means any Specified Transaction or a series of related Specified Transactions which involves more than 20 store locations or units.

²	Notwithstanding the foregoing, EBITDA for any period set forth below shall be deemed to equal the amount set forth below for such period


Period:	Pre-Closing EBITDA

Fiscal Period ending December 24, 2012	$	7,186,546
Fiscal Quarter ending March 25, 2013	$	6,955,951
Fiscal Quarter ending June 24, 2013	$	5,886,254
Fiscal Period ending September 30, 2013	$	5,581,568

A-3

ANNEX A

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations

II. Definition/Calculation of Net Interest Expense


Net Interest Expense (used for calculating Interest Coverage Ratio) is defined as: ³

	A.	Gross interest expense for such period paid or required to be paid in cash (excluding all paid in kind interest, capitalized interest and deferred and unpaid financing fees, original interest discount amortization, fees and other charges in connection with letters of credit and similar instruments, agent administrative fees and net amounts paid or payable and/or received or receivable under permitted Rate Contracts in respect of interest rates and other permitted interest rate management products) for Holdings and its Subsidiaries on a consolidated basis, other than interest expense in respect of the Miller Note

	B.	Less: Interest income for such period

Net Interest Expense (result of A minus B above)

³	Notwithstanding the foregoing, Net Interest Expense for any period set forth below shall be deemed to be equal to the amount set forth below for such period:


Period	Pre-Closing Net Interest Expense

Fiscal Quarter ending March 25, 2013	$	2,818,125
Fiscal Quarter ending June 24, 2013	$	2,818,125
Fiscal Period ending September 30, 2013	$	2,818,125

A-4

ANNEX B

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations


I. Section 6.2: Leverage Ratio


Leverage Ratio is defined as follows:

A.	Aggregate balance of outstanding Revolving Loans as of the date of measurement

Plus:

	(1)	L/C Reimbursement Obligations in excess of $1,000,000 with respect to standby letters of credit (and, without duplication, related bankers’ acceptances) and all L/C Reimbursement Obligations with respect to performance letters of credit (and, without duplication, related bankers’ acceptances), in each case as of date of measurement, whether or not then due and payable

	(2)	Outstanding principal balance of the Term Loans as of date of measurement

	(3)	Principal portion of Capital Lease Obligations and Indebtedness secured by purchase money Liens as of date of measurement

	(4)	Outstanding principal balance in respect of Subordinated Indebtedness as of the date of measurement

	(5)	Without duplication, the outstanding principal balance of all other Indebtedness of the types described in clauses (a) and (b) (with respect to the deferred purchase price of Property only) of the definition thereof

	(6)	Prepayments of Term Loans made with Net Issuance Proceeds of Specified Equity Contributions included in the calculation of EBITDA for the twelve (12) consecutive Fiscal Periods ending on the date of measurement (per I of Annex A)

B.	Funded Indebtedness (sum of A plus sum of (1)-(6) above)

C.	The lesser of: (i) the aggregate amount of [unrestricted cash and Cash Equivalents of Holdings and its Subsidiaries plus] cash and Cash Equivalents of Holdings and its Subsidiaries held in a deposit account subject to a Control Agreement in favor of Agent for the benefit of the Agent and the Lenders in excess of $1,000,000 and (ii) $5,000,000

D.	Net Funded Indebtedness (result of B minus C above)

E.	Adjusted EBITDA for the twelve (12) consecutive Fiscal Periods ending on the date of measurement (per I of Annex A)

Leverage Ratio (result of D divided by E above)

Permitted maximum Leverage Ratio

In Compliance			Yes/No

B-1

ANNEX B

TO COMPLIANCE CERTIFICATE

Selected Financial Definitions and Calculations


II. Section 6.3: Interest Coverage Ratio


Interest Coverage Ratio is defined as follows:

	A.	EBITDA for the twelve (12) consecutive Fiscal Periods ending on the date of measurement (per I of Annex A)

	B.	Net Interest Expense (per II of Annex A)

Interest Coverage (result of A divided by B above)

Required minimum Interest Coverage Ratio

In Compliance			Yes/No

B-2

[Borrower Note: Include Annex C calculations only for Certificate delivered for end of applicable Fiscal Years.]


I. Section 6.1: Fiscal Year Capital Expenditures Calculation


Capital Expenditures are defined as follows: ⁴

A.	The aggregate of all expenditures and obligations, for the relevant Fiscal Year set forth in Section 6.1 of the Credit Agreement, which should be capitalized under GAAP

	Less, in each case, to the extent included in A above:

	(1)	Net Proceeds from Dispositions which have been reinvested pursuant to the terms of the Credit Agreement

	(2)	Expenditures financed with cash proceeds from Stock issuances

	(3)	All Net Proceeds received on account of any Event of Loss to the extent any such amounts are actually applied to replace, repair or reconstruct the damaged Property or Property affected by the condemnation or taking in connection with such Event of Loss

	(4)	That portion of the purchase price of a Permitted Acquisition that constitutes a capital expenditure under GAAP

	(5)	That portion of the expenditures and obligations capitalized under GAAP that were made by funds attributable to the Borrower’s Advertising Development Fund

B.	Capital Expenditures (result of A minus sum of (1)- (5)) above)

C.	Capital Expenditure Limitation per Section 6.1

D.	Carry forward from prior Fiscal Year (75% multiplied by $ )

Total maximum permitted Capital Expenditures (result of C plus D)

In Compliance			Yes/No

⁴	Notwithstanding the foregoing, unfinanced capital expenditures for any period set forth below shall be deemed to equal the amount set forth below for such period:


Period	Pre-Closing Unfinanced Capital Expenditures

Fiscal Quarter ending March 25, 2013	$	337,537
Fiscal Quarter ending June 24, 2013	$	677,173
Fiscal Period ending September 30, 2013	$	1,226,656


II. Definition/Calculation of Cash Flow


Cash Flow (used for calculating Excess Cash Flow) is defined as:

A.	EBITDA (per Annex A)

Less unfinanced capital expenditures:

	(1)	Gross capital expenditures: the aggregate of all expenditures and other obligations for the period of measurement which should be capitalized under GAAP

		Less, in each case, to the extent included in (1) above:

		(a)	Net Proceeds from Dispositions which have been reinvested during such period pursuant to the terms of the Credit Agreement

		(b)	Expenditures financed with cash proceeds from Stock issuances

		(c)	All insurance proceeds and condemnation awards received on account of any Event of Loss to the extent any such amounts are actually applied during such period to replace, repair or reconstruct the damaged Property or Property affected by the condemnation or taking in connection with such Event of Loss

	(2)	Total deductions from gross capital expenditures (sum of (a)-(d) above)

	(3)	Net capital expenditures (result of (1) minus (2) above)

	(4)	Less: Portion of capital expenditures financed under Capital Leases or other long-term Indebtedness (Indebtedness, for this purpose, does not include drawings under the Revolving Loan Commitment or other revolving Indebtedness)

B.	Unfinanced capital expenditures (result of (3) minus (4) above)

Cash Flow (result of A minus B above)


III. Excess Cash Flow Calculation


Excess Cash Flow is defined as follows:

A.	Cash Flow (per II above) (to the extent positive)

Less, without duplication, and (other than with respect to items (6) and, with respect to clause (10) of EBITDA only, (11) below) to the extent actually paid in cash, in each case to the extent not financed with proceeds of Stock issuances or Indebtedness (other than Revolving Loans):

	(1)	Scheduled principal payments with respect to Indebtedness and, in an aggregate amount not to exceed $3,000,000 for all periods, voluntary prepayments of Indebtedness consisting of Capital Lease Obligations, Purchase Money Indebtedness ⁵ and unsecured Indebtedness owing to sellers of assets or Stock to any of the Credit Parties and their Subsidiaries that is incurred in connection with the consummation of one or more Permitted Acquisitions or other Investments permitted hereunder

⁵	For purposes hereof, “Purchase Money Indebtedness” means Indebtedness which is secured solely by Liens of the type described in Section 5.1(h) of the Credit Agreement.


	(2)	Interest expense (less interest income), fees, commissions, discounts and premiums incurred in connection with Indebtedness (including, for purposes of clarification, Unused Commitment Fees)

	(3)	All taxes on or measured by income, profits or capital, including federal, foreign and state taxes, to the extent deducted in calculating net income (or loss) or other franchise, excise, revenue or similar taxes for such period and, without duplication, permitted Tax Distributions and including, in any event, tax effects in accordance with GAAP resulting from gains (or losses) from the sale, exchange, transfer or other disposition of property or assets (other than accounts and inventory) not in the ordinary course of business of the Borrower and its Subsidiaries

	(4)	Payments paid in cash permitted by Section 5.7(c)

	(5)	Restricted Payments of the type described in Sections 5.11(b), (f) and (g) of the Credit Agreement

	(6)	Increase in working capital (if any) (see Working Capital Calculation below) (regardless of whether actually paid in cash)

	(7)	The purchase price paid in cash for all Permitted Acquisitions and other permitted Investments as referenced by Section 5.4(m) of the Credit Agreement (other than any Investments in any Person which was already a Subsidiary or Investments in cash and Cash Equivalents) (other than any Investments in any Person which was already a Subsidiary or Investments in cash and Cash Equivalents)

	(8)	Earn-out payments paid in cash in connection with Permitted Acquisitions in compliance with the terms of the Credit Agreement

	(9)	Fees and expenses paid in cash to Sponsor and its Affiliates on the Closing Date in connection with the Credit Agreement and the Related Transactions as set forth on the funds flow memorandum delivered by the Borrower to Agent prior to the Closing Date

	(10)	Investments made pursuant to and in accordance with Section 5.4(n)

	(11)	Amounts added to the calculation of EBITDA pursuant to clauses (5), (7), (8), (9), (10), (11) and (13) thereof

B.	Total deductions from Cash Flow (sum of (1)-(8) above)

C.	Decrease in Working Capital (if any) (see Working Capital Calculation below)

D.	Excess Cash Flow (result of A minus B plus C above)

E.	Required prepayment percentage (see Section 1.8(e) for percentage)		%

F.	Required gross prepayment amount (result of D multiplied by E above)

Minus:

G.	Voluntary prepayments of the Term Loan during such period [other than Discounted Prepayments, in each case] to the extent such prepayments are


		applied in the same manner mandatory prepayments under Section 1.8(e) of the Credit Agreement are required to be applied in accordance with Section 1.8(f) thereof (or in the inverse order of maturity) against all remaining scheduled installments of the Term Loan and are not funded with the proceeds of other Indebtedness

H.		Voluntary prepayments of Revolving Loans during such period accompanied by a permanent reduction of the Revolving Loan Commitment, to the extent not funded with the proceeds of other Indebtedness

I.		Required prepayment amount (result of F minus G minus H above)


IV. Working Capital Calculation

Decrease (increase) in working capital, for the purposes of the calculation of Excess Cash Flow, means the following:


	Beg. of Period	End of Period
Current assets:	$	$
Less (to the extent included in current Assets):
Cash	$	$
Cash Equivalents	$	$
Deferred tax assets	$	$
Adjusted current assets	$	$
Current liabilities:	$	$
Less (to the extent included in current liabilities):
Revolving Loans	$	$
Current portion of Indebtedness (to the extent not included above)	$	$
Deferred tax liabilities	$	$
Adjusted current liabilities	$	$
Working capital (adjusted current assets minus adjusted current liabilities)	$	$
Decrease (Increase) in working capital (beginning of period minus end of period working capital)		$

To the extent Holdings or any of its Subsidiaries consummates a Permitted Acquisition during such period, beginning of period Working Capital shall be recalculated on a pro forma basis to include Working Capital acquired in such Permitted Acquisition.

EXHIBIT 9.9(g)(i)(B)

CREDIT AGREEMENT

FORM OF AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION

This ASSIGNMENT (this “ Assignment ”), dated as of the Effective Date, is entered into between (“ Assignor ”) and (“ Assignee ”).

The parties hereto hereby agree as follows:


Borrower:		PMI HOLDINGS, INC., a Delaware corporation (the “Borrower”)

Agent:		Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity and together with its successors and permitted assigns, “ Agent ”)

Credit Agreement:		Credit Agreement, dated as of October [ — ], 2013, among the Borrower, the other Credit Parties party thereto, Golub Capital LLC as Agent and as a Lender, the other Lenders and the L/C Issuers party thereto (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; capitalized terms used herein without definition are used as defined in the Credit Agreement)

[Trade Date:		, ] ⁶

Effective Date:		, ⁷

⁶	Insert for informational purposes only if needed to determine other arrangements between Assignor and Assignee.

⁷	To be filled out by Agent upon entry in the Register.

Loan/Commitment Assigned ⁸

Aggregate amount
of Commitments
or principal
amount of Loans
for all Lenders ⁹

Aggregate amount
of Commitments or
principal amount of
Loans Assigned ¹⁰

Percentage Assigned ¹¹

[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]

⁸

Fill in the appropriate defined term for the type of Loans and/or Commitment under the Credit Agreement that are being assigned under this Assignment. No Revolving Loans, Extended Revolving Loans, Revolving Loan Commitments or Extended Revolving Loan Commitments may be assigned to Affiliated Lenders.

⁹

Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. The aggregate amounts are inserted for informational purposes only to help in calculating the percentages assigned which, themselves, are for informational purposes only.

¹⁰

¹¹

Set forth, to at least 9 decimals, the Assigned Interest as a percentage of the aggregate Commitment or Loans in the Facility. This percentage is set forth for informational purposes only and is not intended to be binding. The assignments are based on the amounts assigned not on the percentages listed in this column.

Section 1 . Assignment . Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes from Assignor, Assignor’s rights and obligations in its capacity as Lender under the Credit Agreement (including Liabilities owing to or by Assignor thereunder) and the other Loan Documents, in each case to the extent related to the amounts identified above (the “ Assigned Interest ”).

Section 2 . Representations, Warranties and Covenants of Assignors . Assignor:

(a) represents and warrants to Assignee and Agent that (i) it has full power and authority, and has taken all actions necessary for it, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and (ii) it is the legal and beneficial owner of its Assigned Interest and that such Assigned Interest is free and clear of any Lien and other adverse claims and (iii) by executing signing and delivering this Assignment via ClearPar® or any other electronic settlement system designated by Agent, the Person signing, executing and delivering this Assignment on behalf of Assignor is an authorized signer for Assignor and is authorized to execute, sign and deliver this Assignment;

(b) makes no other representation or warranty and assumes no responsibility, including with respect to the aggregate amount of the Loans and Commitments, the percentage of the Loans and Commitments represented by the amounts assigned, any statements, representations and warranties made in or in connection with any Loan Document or any other document or information furnished pursuant thereto, the execution, legality, validity, enforceability or genuineness of any Loan Document or any document or information provided in connection therewith and the existence, nature or value of any Collateral;

(c) assumes no responsibility (and makes no representation or warranty) with respect to the financial condition of any Credit Party or the performance or nonperformance by any Credit Party of any obligation under any Loan Document or any document provided in connection therewith; and

(d) attaches any Notes held by it evidencing any part of the Assigned Interest of such Assignor (or, if applicable, an affidavit of loss or similar affidavit therefor) and requests that Agent exchange such Notes for new Notes in accordance with Section 1.2 of the Credit Agreement.

Section 3 . Representations, Warranties and Covenants of Assignees . Assignee:

(a) represents and warrants to Assignor and Agent that (i) it has full power and authority, and has taken all actions necessary for Assignee, to execute and deliver this Assignment and to consummate the transactions contemplated hereby, (ii) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest assigned to it hereunder and either Assignee or the Person exercising discretion in making the decision for such assignment is experienced in acquiring assets of such type, (iii) by executing, signing and delivering this Assignment via ClearPar® or any other electronic settlement system designated by Agent, the Person signing, executing and delivering this Assignment on behalf of Assignee is an authorized signer for Assignee and is authorized to execute, sign and deliver this Assignment and (iv) (A) it is an Affiliated Lender and (B) as of the date hereof, Assignee does not have any material non-public information (“ MNPI ”) that both (1) has not been disclosed to Assignor

(other than because such Assignor does not wish to receive MNPI with respect to any Credit Party or any of their respective securities) prior to such date and (2) could reasonably be expected to have a material effect upon a Lender’s decision to assign Term Loans to such Affiliated Lender;

(b) irrevocably appoints and authorizes Agent to take such action as (i) administrative agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto and (ii) its attorney in fact, to vote during the pendency of an Insolvency Proceeding involving any Credit Party as a debtor (including voting on any plan of reorganization pursuant to 11 U.S.C. §1126), Term Loans held by Assignee (and any claim with respect thereto) in accordance with Section 9.9(g)(iv) of the Credit Agreement;

(c) shall perform in accordance with their terms all obligations that, by the terms of the Loan Documents, including, without limitation, Section 9.9(g) of the Credit Agreement, are required to be performed by it as a Lender;

(d) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and shall continue to make its own credit decisions in taking or not taking any action under any Loan Document independently and without reliance upon Agent, any L/C Issuer, any Lender, any other Indemnitee or any other holder of any Obligation of a Credit Party and based on such documents and information as it shall deem appropriate at the time;

(e) acknowledges and agrees that, as a Lender, it may receive material non-public information and confidential information concerning the Credit Parties and their Affiliates and their Stock and agrees to use such information in accordance with Section 9.10 of the Credit Agreement;

(f) specifies as its applicable Lending Offices (and addresses for notices) the offices at the addresses set forth beneath its name on the signature pages hereof;

(g) shall pay to Agent an assignment fee in the amount of $3,500 to the extent such fee is required to be paid under Section 9.9 of the Credit Agreement; and

(h) to the extent required pursuant to Section 10.1(f) of the Credit Agreement, attaches two (2) completed originals of Forms W-8ECI, W-8BEN, W-8IMY or W-9 and, if applicable, a portfolio interest exemption certificate.

Section 4 . Determination of Effective Date; Register . Following the due execution and delivery of this Assignment by Assignor and Assignee, this Assignment (including its attachments) will be delivered to Agent for its acceptance and recording in the Register. The effective date of this Assignment (the “ Effective Date ”) shall be the later of (i) the acceptance of this Assignment by Agent and (ii) the recording of this Assignment in the Register. Agent shall insert the Effective Date when known in the space provided therefor at the beginning of this Assignment.

Section 5 . Effect . As of the Effective Date, (a) Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and the Credit Agreement, have

the rights and obligations of a Lender under the Credit Agreement and (b) Assignor shall, to the extent provided in this Assignment, relinquish its rights (except those surviving the termination of the Commitments and payment in full of the Obligations) and be released from its obligations under the Loan Documents other than those obligations relating to events and circumstances occurring prior to the Effective Date.

Section 6 . Distribution of Payments . On and after the Effective Date, Agent shall make all payments under the Loan Documents in respect of the Assigned Interest (a) in the case of amounts accrued to but excluding the Effective Date, to Assignor and (b) otherwise, to Assignee.

Section 7 . Miscellaneous . (a) The parties hereto, to the extent permitted by law, waive all right to trial by jury in any action, suit, or proceeding arising out of, in connection with or relating to, this Assignment and any other transaction contemplated hereby. This waiver applies to any action, suit or proceeding whether sounding in tort, contract or otherwise.

(b) On and after the Effective Date, this Assignment shall be binding upon, and inure to the benefit of, Assignor, Assignee, Agent and their Related Persons and their successors and assigns.

(c) This Assignment shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York.

(d) This Assignment may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(e) Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this Assignment by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart of this Assignment.

[Balance of page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed by their respective officers thereunto duly authorized, as of the date first above written.


[NAME OF ASSIGNOR]
as Assignor

By:
		Name:
		Title:

[NAME OF ASSIGNEE] as Assignee

By:
		Name:
		Title:

Lending Office for LIBOR Rate Loans :

[Insert Address (including contact name, fax number and e-mail address)]

Lending Office (and address for notices) for any other purpose :

[Insert Address (including contact name, fax number and e-mail address)]


ACCEPTED this day of :

GOLUB CAPITAL LLC , as Agent

By:
		Name:
		Title:

EXHIBIT 11.1(a)

CREDIT AGREEMENT

FORM OF ASSIGNMENT

This ASSIGNMENT (this “ Assignment ”), dated as of the Effective Date, is entered into between (the “ Assignor ”) and (the “ Assignee ”).

The parties hereto hereby agree as follows:


Borrower:		PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”)

Agent:		Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity and together with its successors and permitted assigns, “ Agent ”)

Credit Agreement:		Credit Agreement, dated as of October [ — ], 2013, among the Borrower, the other Credit Parties party thereto, Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity, together with successors and permitted assigns in such capacity, “Agent”) and as a Lender, the other Lenders and the L/C Issuers party thereto (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; capitalized terms used herein without definition are used as defined in the Credit Agreement)

[Trade Date:		, ] ¹²

Effective Date:		, ¹³

¹²	Insert for informational purposes only if needed to determine other arrangements between Assignor and Assignee.

¹³	To be filled out by Agent upon entry in the Register.

Loan/Commitment Assigned ¹⁴

Aggregate amount of
Commitments or
principal amount of
Loans for all Lenders ⁷

Aggregate amount of
Commitments ¹⁵ or
principal amount of
Loans Assigned ¹⁶

Percentage Assigned ¹⁷

[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]

¹⁴	Fill in the appropriate defined term for the type of Loan and/or Commitment under the Credit Agreement that are being assigned under this Assignment. (e.g., “Revolving Loan Commitment”, “Term Loan Commitment”, etc.)

¹⁵	In the case of the Revolving Loan Commitment, including Revolving Loans and interests, participations and obligations to participate in Letter of Credit Obligations.

¹⁶

¹⁷

Section 2 . Representations, Warranties and Covenants of Assignors . Assignor (a) represents and warrants to Assignee and Agent that (i) it has full power and authority, and has taken all actions necessary for it, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and (ii) it is the legal and beneficial owner of its Assigned Interest and that such Assigned Interest is free and clear of any Lien and other adverse claims and (iii) by executing signing and delivering this Assignment via ClearPar ^® or any other electronic settlement system designated by Agent, the Person signing, executing and delivering this Assignment on behalf of Assignor is an authorized signer for Assignor and is authorized to execute, sign and deliver this Assignment, (b) makes no other representation or warranty and assumes no responsibility, including with respect to the aggregate amount of the Loans and Commitments, the percentage of the Loans and Commitments represented by the amounts assigned, any statements, representations and warranties made in or in connection with any Loan Document or any other document or information furnished pursuant thereto, the execution, legality, validity, enforceability or genuineness of any Loan Document or any document or information provided in connection therewith and the existence, nature or value of any Collateral, (c) assumes no responsibility (and makes no representation or warranty) with respect to the financial condition of any Credit Party or the performance or nonperformance by any Credit Party of any obligation under any Loan Document or any document provided in connection therewith and (d) attaches any Notes held by it evidencing any part of the Assigned

Interest of such Assignor (or, if applicable, an affidavit of loss or similar affidavit therefor) and requests that Agent exchange such Notes for new Notes in accordance with Section 1.2 of the Credit Agreement.

Section 3 . Representations, Warranties and Covenants of Assignees . Assignee (a) represents and warrants to Assignor and Agent that (i) it has full power and authority, and has taken all actions necessary for Assignee, to execute and deliver this Assignment and to consummate the transactions contemplated hereby, (ii) it is [not an Affiliate or an Approved Fund of any Lender] [an [Affiliate][Approved Fund of any Lender] of , a Lender] , (iii) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest assigned to it hereunder and either Assignee or the Person exercising discretion in making the decision for such assignment is experienced in acquiring assets of such type, (iv) by executing, signing and delivering this Assignment via ClearPar ^® or any other electronic settlement system designated by Agent, the Person signing, executing and delivering this Assignment on behalf of Assignee is an authorized signer for Assignee and is authorized to execute, sign and deliver this Assignment (b) appoints and authorizes Agent to take such action as administrative agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (c) shall perform in accordance with their terms all obligations that, by the terms of the Loan Documents, are required to be performed by it as a Lender, (d) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and shall continue to make its own credit decisions in taking or not taking any action under any Loan Document independently and without reliance upon Agent, any L/C Issuer, any Lender or any other Indemnitee and based on such documents and information as it shall deem appropriate at

the time, (e) acknowledges and agrees that, as a Lender, it may receive material non-public information and confidential information concerning the Credit Parties and their Affiliates and their Stock and agrees to use such information in accordance with Section 9.10 of the Credit Agreement, (f) specifies as its applicable Lending Offices (and addresses for notices) the offices at the addresses set forth beneath its name on the signature pages hereof, (g) shall pay to Agent an assignment fee in the amount of $3,500 to the extent such fee is required to be paid under Section 9.9 of the Credit Agreement and (h) to the extent required pursuant to Section 10.2(f) of the Credit Agreement, attaches two completed originals of Forms W-8ECI, W-8BEN, W-8IMY or W-9 and, if applicable, a portfolio interest exemption certificate.

Section 4 . Determination of Effective Date; Register . Following the due execution and delivery of this Assignment by Assignor, Assignee and, to the extent required by Section 9.9 of the Credit Agreement, the Borrower and/or each L/C Issuer that is a Lender, this Assignment (including its attachments) will be delivered to Agent for its acceptance and recording in the Register. The effective date of this Assignment (the “ Effective Date ”) shall be the later of (i) the acceptance of this Assignment by Agent and (ii) the recording of this Assignment in the Register. Agent shall insert the Effective Date when known in the space provided therefor at the beginning of this Assignment.

Section 5 . Effect . As of the Effective Date, (a) Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment, have the rights and obligations of a Lender under the Credit Agreement and (b) Assignor shall, to the extent provided in this Assignment, relinquish its rights (except those surviving the termination of the Commitments and payment in full of the Obligations) and be released from its obligations under the Loan Documents other than those obligations relating to events and circumstances occurring prior to the Effective Date.

(b) On and after the Effective Date, this Assignment shall be binding upon, and inure to the benefit of, Assignor, Assignee, Agent and their Related Persons and their successors and assigns.

(c) This Assignment shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed by their respective officers thereunto duly authorized, as of the date first above written.


[NAME OF ASSIGNOR] as Assignor

By:
		Name:
		Title:

[NAME OF ASSIGNEE] as Assignee

By:
		Name:
		Title:

Lending Office for LIBOR Rate Loans :

[Insert Address (including contact name, fax number and email address)]

Lending Office (and address for notices) for any other purpose :

[Insert Address (including contact name, fax number and Email address)]


ACCEPTED and AGREED this day of , 201 :

GOLUB CAPITAL LLC as Agent

By:
		Name:
		Title:

[NAME OF BORROWER] ¹⁸

By:
		Name:
		Title:

[NAME OF L/C ISSUER] ⁷

By:
		Name:
		Title:

¹⁸	Include only if required pursuant to Section 9.9 of the Credit Agreement.

EXHIBIT 11.1(b)

CREDIT AGREEMENT

FORM OF NOTICE OF BORROWING

GOLUB CAPITAL LLC,

as Agent under the Credit Agreement referred to below

666 Fifth Avenue, 18 ^th Floor

New York, New York 10103

, 201

Re:

PMI HOLDINGS, INC., a Delaware corporation (the “Borrower”)

The Borrower hereby gives you irrevocable notice, pursuant to Section 1.5 of the Credit Agreement of its request of a Borrowing (the “ Proposed Borrowing ”) under the Credit Agreement and, in that connection, sets forth the following information:

A. The date of the Proposed Borrowing is , ¹⁹ (the “ Funding Date ”).

B. The aggregate principal amount of requested Revolving Loans is $ , of which $ consists of Base Rate Loans and $ consists of LIBOR Rate Loans having an initial Interest Period of months.

C. The aggregate principal amount of the Term Loans is $ , of which $ consists of Base Rate Loans and $ consists of LIBOR Rate Loans having an initial Interest Period of months.

¹⁹	For the Term Loans, must be the Closing Date.

The undersigned hereby certifies that, except as set forth on Schedule A attached hereto, the following statements are true on the date hereof and will be true on the Funding Date, both before and after giving effect to the Proposed Borrowing and any other Loan to be made or Letter of Credit to be Issued on or before the Funding Date:

(i) the representations and warranties set forth in Article III of the Credit Agreement and elsewhere in the Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein), except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such date;

(ii) no Default or Event of Default has occurred and is continuing; and

(iii) after giving effect to the Proposed Borrowing, the aggregate outstanding amount of the Revolving Loans would exceed the Maximum Revolving Loan Balance.

[Balance of page intentionally left blank; signature page follows.]


PMI HOLDINGS, INC. , a Delaware corporation, as Borrower

By:
		Name:
		Title:

EXHIBIT 11.1(c)

CREDIT AGREEMENT

FORM OF REVOLVING NOTE


Lender: [NAME OF LENDER]		New York, New York
Principal Amount: $		, 201

FOR VALUE RECEIVED, the undersigned, PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”), hereby promises to pay to the Lender set forth above (the “ Lender ”) the Principal Amount set forth above, or, if less, the aggregate unpaid principal amount of all Revolving Loans (as defined in the Credit Agreement referred to below) of the Lender to the Borrower, payable at such times and in such amounts as are specified in the Credit Agreement.

The Borrower promises to pay interest on the unpaid principal amount of the Revolving Loans from the date made until such principal amount is paid in full, payable at such times and at such interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest and notice of non-payment and protest are hereby waived by the Borrower.

Both principal and interest are payable in Dollars to Golub Capital LLC, as Agent, at the address set forth in the Credit Agreement, in immediately available funds.

This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, dated as of October [ — ], 2013 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrower, the other Credit Parties party thereto, Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity, together with successors and permitted assigns in such capacity, “ Agent ”) and as a Lender, the other Lenders and the L/C Issuers party thereto. Capitalized terms used herein without definition are used as defined in the Credit Agreement.

The Credit Agreement, among other things, (a) provides for the making of Revolving Loans by the Lender to the Borrower in an aggregate amount not to exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Borrower resulting from such Revolving Loans being evidenced by this Note and (b) contains provisions for acceleration of the maturity of the unpaid principal amount of this Note upon the happening of certain stated events and also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms and conditions specified therein.

This Note is a Loan Document, is entitled to the benefits of the Loan Documents and is subject to certain provisions of the Credit Agreement, including Sections 9.18(b ) ( Submission to Jurisdiction ), 9.19 ( Waiver of Jury Trial ) and 11.2 ( Other Interpretive Provisions ) thereof.

This Note is a registered obligation, transferable only upon notation in the Register, and no assignment hereof shall be effective until recorded therein.

This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

[Balance of page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place set forth above.


PMI HOLDINGS, INC. , a Delaware corporation, as Borrower

By:
Name:
Title:

EXHIBIT 11.1(e)

CREDIT AGREEMENT

FORM OF TERM NOTE


Lender: [NAME OF LENDER]		New York, New York
Principal Amount: $		, 201

FOR VALUE RECEIVED, the undersigned, PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”), hereby promises to pay to the Lender set forth above (the “ Lender ”) the Principal Amount set forth above, or, if less, the aggregate unpaid principal amount of the Term Loans (as defined in the Credit Agreement referred to below) of the Lender to the Borrower, payable at such times and in such amounts as are specified in the Credit Agreement.

The Borrower promises to pay interest on the unpaid principal amount of the Term Loan from the date made until such principal amount is paid in full, payable at such times and at such interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest and notice of non-payment and protest are hereby waived by the Borrower.

Both principal and interest are payable in Dollars to Golub Capital LLC, as Agent, at the address set forth in the Credit Agreement, in immediately available funds.

This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, dated as of October [ — ], 2013 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among the Borrower, the other Credit Parties party thereto, Golub Capital LLC, as administrative agent for the Lenders and L/C Issuers (in such capacity, together with successors and permitted assigns in such capacity, “ Agent ”) and as a Lender, the other Lenders and the L/C Issuers party thereto. Capitalized terms used herein without definition are used as defined in the Credit Agreement.

The Credit Agreement, among other things, (a) provides for the making of the Term Loan by the Lender to the Borrower in an aggregate amount not to exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Borrower resulting from such Term Loan being evidenced by this Note and (b) contains provisions for acceleration of the maturity of the unpaid principal amount of this Note upon the happening of certain stated events and also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms and conditions specified therein.

This Note is a registered obligation, transferable only upon notation in the Register, and no assignment hereof shall be effective until recorded therein.

This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

[Balance of page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place set forth above.


PMI HOLDINGS, INC. , a Delaware corporation, as Borrower

By:
Name:
Title:

Exhibit 10.4

Execution Version

GUARANTY AND SECURITY AGREEMENT

Dated as of October 25, 2013

among

PMI HOLDINGS, INC.,

a Delaware corporation

and

Each Other Grantor

From Time to Time Party Hereto

and

GOLUB CAPITAL LLC,

as Agent

TABLE OF CONTENTS


			Page
ARTICLE I DEFINED TERMS				1
	Section 1.1	Definitions		1
	Section 1.2	Certain Other Terms		4

ARTICLE II GUARANTY				5
	Section 2.1	Guaranty		5
	Section 2.2	Limitation of Guaranty		6
	Section 2.3	Contribution		6
	Section 2.4	Authorization; Other Agreements		6
	Section 2.5	Guaranty Absolute and Unconditional		7
	Section 2.6	Waivers		8
	Section 2.7	Reliance		8

ARTICLE III GRANT OF SECURITY INTEREST				8
	Section 3.1	Collateral		8
	Section 3.2	Grant of Security Interest in Collateral		9

ARTICLE IV REPRESENTATIONS AND WARRANTIES				9
	Section 4.1	Title; No Other Liens		9
	Section 4.2	Perfection and Priority		10
	Section 4.3	Jurisdiction of Organization; Chief Executive Office		10
	Section 4.4	Locations of Inventory, Equipment and Books and Records		11
	Section 4.5	Pledged Collateral		11
	Section 4.6	Instruments and Tangible Chattel Paper Formerly Accounts		11
	Section 4.7	Intellectual Property		11
	Section 4.8	Commercial Tort Claims		12
	Section 4.9	Specific Collateral		12
	Section 4.10	Enforcement		12

ARTICLE V COVENANTS				13
	Section 5.1	Maintenance of Perfected Security Interest; Further Documentation and Consents		13
	Section 5.2	Changes in Locations, Name, Etc.		13
	Section 5.3	Pledged Collateral		14
	Section 5.4	Accounts		15
	Section 5.5	Commodity Contracts		15
	Section 5.6	Delivery of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper		15
	Section 5.7	Intellectual Property		17
	Section 5.8	Notices		18
	Section 5.9	Notice of Commercial Tort Claims		18

ARTICLE VI REMEDIAL PROVISIONS				18
	Section 6.1	Code and Other Remedies		18

TABLE OF CONTENTS

(continued)


			Page
	Section 6.2	Accounts and Payments in Respect of General Intangibles		22
	Section 6.3	Pledged Collateral		23
	Section 6.4	Proceeds to be Turned over to and Held by Agent		24
	Section 6.5	Sale of Pledged Collateral		24
	Section 6.6	Deficiency		25

ARTICLE VII AGENT				25
	Section 7.1	Agent’s Appointment as Attorney-in-Fact		25
	Section 7.2	Authorization to File Financing Statements		27
	Section 7.3	Authority of Agent		27
	Section 7.4	Duty; Obligations and Liabilities		27

ARTICLE VIII MISCELLANEOUS				28
	Section 8.1	Reinstatement		28
	Section 8.2	Release of Collateral		28
	Section 8.3	Independent Obligations		29
	Section 8.4	No Waiver by Course of Conduct		29
	Section 8.5	Amendments in Writing		29
	Section 8.6	Additional Grantors; Additional Pledged Collateral		29
	Section 8.7	Notices		30
	Section 8.8	Successors and Assigns		30
	Section 8.9	Counterparts		30
	Section 8.10	Severability		30
	Section 8.11	Governing Law		30
	Section 8.12	Waiver of Jury Trial		30
	Section 8.13	ULC Limitation		31
	Section 8.14	Subordination of Intercompany Indebtedness		32

ANNEXES AND SCHEDULES


Annex 1		Form of Pledge Amendment
Annex 2		Form of Joinder Agreement
Annex 3		Form of Intellectual Property Security Agreement

Schedule 1		Commercial Tort Claims
Schedule 2		Filings
Schedule 3		Jurisdiction of Organization; Chief Executive Office
Schedule 4		Location of Inventory and Equipment
Schedule 5		Pledged Collateral
Schedule 6		Intellectual Property

iii

GUARANTY AND SECURITY AGREEMENT, dated as of October 25, 2013, by PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”) and each of the other entities listed on the signature pages hereof or that becomes a party hereto pursuant to Section 8.6 (together with the Borrower, the “ Grantors ”), in favor of Golub Capital LLC (“ Golub Capital ”), as administrative agent (in such capacity, together with its successors and permitted assigns, “ Agen t”) for the Lenders, the L/C Issuers and each other Secured Party (each as defined in the Credit Agreement referred to below).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement dated as of the date hereof (as the same may be amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the “ Credit Agreement ”) by and among the Borrower, the other Credit Parties party thereto, the Lenders, the L/C Issuers from time to time party thereto and Golub Capital, as Agent for the Lenders and the L/C Issuers, and as a Lender, the Lenders and the L/C Issuers have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

WHEREAS, each Grantor (other than the Borrower) has agreed to guaranty the Obligations (as defined in the Credit Agreement) of the Borrower;

WHEREAS, each Grantor will derive substantial direct and indirect benefits from the making of the extensions of credit under the Credit Agreement; and

WHEREAS, it is a condition precedent to the obligation of the Lenders and the L/C Issuers to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to Agent;

NOW, THEREFORE, in consideration of the premises and to induce the Lenders, the L/C Issuers and Agent to enter into the Credit Agreement and to induce the Lenders and the L/C Issuers to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees with Agent as follows:

ARTICLE I

DEFINED TERMS

Section 1.1 Definitions . (a) Capital terms used herein without definition are used as defined in the Credit Agreement.

(b) The following terms have the meanings given to them in the UCC and terms used herein without definition that are defined in the UCC have the meanings given to them in the UCC (such meanings to be equally applicable to both the singular and plural forms of the terms defined): “ account ”, “ account debtor ”, “ as-extracted collateral ”, “ certificated security ”, “ chattel paper ”, “ commercial tort claim ”, “ commodity contract ”, “ deposit account ”, “ electronic chattel paper ”, “ equipment ”, “ farm products ”, “ fixture ”, “ general intangible ”, “ goods ”, “ health-care-insurance receivable ”, “ instruments ”, “ inventory ”, “ investment property ”, “ letter-of-credit right ”, “ proceeds ”, “ record ”, “ securities account ”, “ security ”, “ supporting obligation ” and “ tangible chattel paper ”.

(c) The following terms shall have the following meanings:

“ Agreement ” means this Guaranty and Security Agreement.

“ Applicable IP Office ” means the United States Patent and Trademark Office, or the United States Copyright Office.

“ Cash Collateral Account ” means a deposit account or securities account subject, in each instance, to a Control Agreement, other than accounts established to cash collateralize L/C Reimbursement Obligations.

“ Collateral ” has the meaning specified in Section 3.1 .

“ Controlled Securities Account ” means each securities account (including all financial assets held therein and all certificates and instruments, if any, representing or evidencing such financial assets) that is the subject of an effective Control Agreement.

“ Excluded Equity ” means any voting stock in excess of sixty-five percent (65%) of the outstanding voting stock of any Foreign Subsidiary, which, pursuant to the terms of the Credit Agreement, is not required to guaranty the Obligations. For the purposes of this definition, “ voting stock ” means, with respect to any issuer, the issued and outstanding shares of each class of Stock of such issuer entitled to vote (within the meaning of Treasury Regulations § 1.956-2(c)(2)).

“ Excluded Property ” means, collectively, (i) Excluded Equity, (ii) any permit or license or any Contractual Obligation entered into by any Grantor (A) that prohibits or requires the consent of any Person other than the Borrower and its Affiliates which has not been obtained as a condition to the creation by such Grantor of a Lien on any right, title or interest in such permit, license or Contractual Obligation or any Stock or Stock Equivalent related thereto or (B) to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, with respect to the prohibition in (A) and (B), to the extent, and for as long as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the UCC or any other Requirement of Law, (iii) Property owned by any Grantor that is subject to a purchase money Lien or a Capital Lease permitted under the Credit Agreement if the Contractual Obligation pursuant to which such Lien is granted (or in the document providing for such Capital Lease) prohibits or requires the consent of any Person other than the Borrower and its Affiliates which has not been obtained as a condition to the creation of any other Lien on such equipment and (iv) any “intent to use” Trademark applications for which a statement of use has not been filed (but only until such statement is filed); provided , however , “ Excluded Property ” shall not include any proceeds, products, substitutions or replacements of Excluded Property (unless such proceeds, products, substitutions or replacements would otherwise constitute Excluded Property).

“ Guaranteed Obligations ” has the meaning set forth in Section 2.1 .

“ Guarantor ” means each Grantor other than the Borrower.

“ Guaranty ” means the guaranty of the Guaranteed Obligations made by the Guarantors as set forth in this Agreement.

“ Internet Domain Name ” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to Internet domain names.

“ Material Intellectual Property ” means Intellectual Property that is owned by or licensed to a Grantor and material to the conduct of the Grantors’ business taken as a whole.

“ Pledged Certificated Stock ” means all certificated securities and any other Stock or Stock Equivalent of any Person evidenced by a certificate, instrument or other similar document (as defined in the UCC), in each case owned by any Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including all Stock and Stock Equivalents listed on Schedule 5 . Pledged Certificated Stock excludes any Excluded Property and any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted by Section 5.3 hereof.

“ Pledged Collateral ” means, collectively, the Pledged Stock and the Pledged Debt Instruments.

“ Pledged Debt Instruments ” means all right, title and interest of any Grantor in instruments evidencing any Indebtedness owed to such Grantor or other obligations owed to such Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including all Indebtedness described on Schedule 5 , issued by the obligors named therein. Pledged Debt Instruments excludes any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted by Section 5.3 hereof.

“ Pledged Investment Property ” means any investment property of any Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, other than any Pledged Stock or Pledged Debt Instruments. Pledged Investment Property excludes any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted by Section 5.3 hereof.

“ Pledged Stock ” means all Pledged Certificated Stock and all Pledged Uncertificated Stock.

“ Pledged ULC Shares ” means the Pledged Stock which are shares in capital stock of a ULC.

“ Pledged Uncertificated Stock ” means any Stock or Stock Equivalent of any Person that is not Pledged Certificated Stock, including all right, title and interest of any Grantor as a limited or general partner in any partnership not constituting Pledged Certificated Stock or as a member of any limited liability company, all right, title and interest of any Grantor in, to and under any Organization Document of any partnership or limited liability company to which it is a party, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including in each case those interests set forth on Schedule 5 , to the extent such interests are not certificated. Pledged Uncertificated Stock excludes any Excluded Property and any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted by Section 5.3 hereof.

“ Software ” means (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data, whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.

“ UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York; provided , however , that, in the event that, by reason of mandatory provisions of any applicable Requirement of Law, any of the attachment, perfection or priority of Agent’s or any other Secured Party’s security interest in any Collateral is governed by the Uniform Commercial Code of a jurisdiction other than the State of New York, “ UCC ” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of the definitions related to or otherwise used in such provisions.

“ ULC ” means any unlimited company, unlimited liability company or unlimited liability corporation or any similar entity existing under the laws of any province or territory of Canada and any successor to any such entity.

Section 1.2 Certain Other Terms .

(a) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The terms “herein”, “hereof” and similar terms refer to this Agreement as a whole and not to any particular Article, Section or clause in this Agreement. References herein to an Annex, Schedule, Article, Section or clause refer to the appropriate Annex or Schedule to, or Article, Section or clause in this Agreement. Where the context requires, provisions relating to any Collateral when used in relation to a Grantor shall refer to such Grantor’s Collateral or any relevant part thereof.

(b) Other Interpretive Provisions .

(i) Defined Terms . Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.

(ii) The Agreement . The words “hereof”, “herein”, “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(iii) Certain Common Terms . The term “including” is not limiting and means “including without limitation.”

(iv) Performance; Time . Whenever any performance obligation hereunder shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”

(v) Contracts . Unless otherwise expressly provided herein, references to agreements and other contractual instruments, including this Agreement and the other Loan Documents, shall be deemed to include all subsequent amendments, thereto, restatements and substitutions thereof and other modifications and supplements thereto which are in effect from time to time, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document.

(vi) Laws . References to any statute or regulation are to be construed as including all statutory and regulatory provisions related thereto or consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

ARTICLE II

GUARANTY

Section 2.1 Guaranty . To induce the Lenders to make the Loans, the L/C Issuers to Issue Letters of Credit and each other Secured Party to make credit available to or for the benefit of the Borrower, each Guarantor hereby, jointly and severally, absolutely, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, the full and punctual payment when due, whether at stated maturity or earlier, by reason of acceleration, mandatory prepayment or otherwise in accordance with any Loan Document, of all the Obligations of Borrower whether existing on the date hereof or hereinafter incurred or created (the “Guaranteed Obligations”). This Guaranty by each Guarantor hereunder constitutes a guaranty of payment and not of collection.

Section 2.2 Limitation of Guaranty . Any term or provision of this Guaranty or any other Loan Document to the contrary notwithstanding, the maximum aggregate amount for which any Guarantor shall be liable hereunder shall not exceed the maximum amount for which such Guarantor can be liable without rendering this Guaranty or any other Loan Document, as it relates to such Guarantor, subject to avoidance under applicable Requirements of Law relating to fraudulent conveyance or fraudulent transfer (including the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of title 11 of the United States Code or any applicable provisions of comparable Requirements of Law) (collectively, “Fraudulent Transfer Laws”). Any analysis of the provisions of this Guaranty for purposes of Fraudulent Transfer Laws shall take into account the right of contribution established in Section 2.3 and, for purposes of such analysis, give effect to any discharge of intercompany debt as a result of any payment made under the Guaranty.

Section 2.3 Contribution . To the extent that any Guarantor shall be required hereunder to pay any portion of any Guaranteed Obligation exceeding the greater of (a) the amount of the value actually received by such Guarantor and its Subsidiaries from the Loans and other Obligations and (b) the amount such Guarantor would otherwise have paid if such Guarantor had paid the aggregate amount of the Guaranteed Obligations (excluding the amount thereof repaid by the Borrower) in the same proportion as such Guarantor’s net worth on the date enforcement is sought hereunder bears to the aggregate net worth of all the Guarantors on such date, then such Guarantor shall be reimbursed by such other Guarantors for the amount of such excess, pro rata, based on the respective net worth of such other Guarantors on such date.

Section 2.4 Authorization; Other Agreements . The Secured Parties are hereby authorized, without notice to or demand upon any Guarantor and without discharging or otherwise affecting the obligations of any Guarantor hereunder and without incurring any liability hereunder, from time to time, to do each of the following:

(a) (i) subject to compliance, if applicable, with Section 9.1 of the Credit Agreement, modify, amend, supplement or otherwise change, (ii) accelerate or otherwise change the time of payment or (iii) waive or otherwise consent to noncompliance with, any Guaranteed Obligation or any Loan Document;

(b) apply to the Guaranteed Obligations any sums by whomever paid or however realized to any Guaranteed Obligation in such order as provided in the Loan Documents;

(c) refund at any time any payment received by any Secured Party in respect of any Guaranteed Obligation;

(d) (i) sell, exchange, enforce, waive, substitute, liquidate, terminate, release, abandon, fail to perfect, subordinate, accept, substitute, surrender, exchange, affect, impair or otherwise alter or release any Collateral for any Guaranteed Obligation or any other guaranty therefor in any manner, (ii) receive, take and hold additional

Collateral to secure any Guaranteed Obligation, (iii) add, release or substitute any one or more other Guarantors, makers or endorsers of any Guaranteed Obligation or any part thereof and (iv) otherwise deal in any manner with the Borrower or any other Guarantor, maker or endorser of any Guaranteed Obligation or any part thereof; and

(e) settle, release, compromise, collect or otherwise liquidate the Guaranteed Obligations.

Section 2.5 Guaranty Absolute and Unconditional . Each Guarantor hereby waives and agrees not to assert any defense, whether arising in connection with or in respect of any of the following or otherwise, and hereby agrees that its obligations under this Guaranty are irrevocable, absolute and unconditional and shall not be discharged as a result of or otherwise affected by any of the following (which may not be pleaded and evidence of which may not be introduced in any proceeding with respect to this Guaranty, in each case except as otherwise agreed in writing by Agent):

(a) the invalidity or unenforceability of any obligation of the Borrower or any other Guarantor under any Loan Document or any other agreement or instrument relating thereto (including any amendment, consent or waiver thereto), or any security for, or other guaranty of, any Guaranteed Obligation or any part thereof, or the lack of perfection or continuing perfection or failure of priority of any security for the Guaranteed Obligations or any part thereof;

(b) the absence of (i) any attempt to collect any Guaranteed Obligation or any part thereof from the Borrower or any other Guarantor or other action to enforce the same or (ii) any action to enforce any Loan Document or any Lien thereunder;

(c) the failure by any Person to take any steps to perfect and maintain any Lien on, or to preserve any rights with respect to, any Collateral;

(d) any workout, insolvency, bankruptcy proceeding, reorganization, arrangement, liquidation or dissolution by or against the Borrower, any other Guarantor or any of the Borrower’s other Subsidiaries or any procedure, agreement, order, stipulation, election, action or omission thereunder, including any discharge or disallowance of, or bar or stay against collecting, any Guaranteed Obligation (or any interest thereon) in or as a result of any such proceeding;

(e) any foreclosure, whether or not through judicial sale, and any other sale or other disposition of any Collateral or any election following the occurrence of an Event of Default that is continuing by any Secured Party to proceed separately against any Collateral in accordance with such Secured Party’s rights under any applicable Requirement of Law; or

(f) any other defense, setoff, counterclaim or any other circumstance that might otherwise constitute a legal or equitable discharge of the Borrower, any other Guarantor or any other Subsidiary of the Borrower, in each case other than the payment in full of the Guaranteed Obligations.

Section 2.6 Waivers . Each Guarantor hereby unconditionally and irrevocably waives and agrees not to assert any claim, defense, setoff or counterclaim based on diligence, promptness, presentment, requirements for any demand or notice hereunder including any of the following: (a) any demand for payment or performance and protest and notice of protest; (b) any notice of acceptance; (c) any presentment, demand, protest or further notice or other requirements of any kind with respect to any Guaranteed Obligation (including any accrued but unpaid interest thereon) becoming immediately due and payable; and (d) any other notice in respect of any Guaranteed Obligation or any part thereof, and any defense arising by reason of any disability or other defense of the Borrower or any other Guarantor. Each Guarantor further unconditionally and irrevocably agrees not to (x) enforce or otherwise exercise any right of subrogation or any right of reimbursement or contribution or similar right against the Borrower or any other Guarantor by reason of any Loan Document or any payment made thereunder or (y) assert any claim, defense, setoff or counterclaim it may have against any other Credit Party or set off any of its obligations to such other Credit Party against obligations of such Credit Party to such Guarantor. No obligation of any Guarantor hereunder shall be discharged other than by complete performance.

Section 2.7 Reliance . Each Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower, each other Guarantor and any other guarantor, maker or endorser of any Guaranteed Obligation or any part thereof, and of all other circumstances bearing upon the risk of nonpayment of any Guaranteed Obligation or any part thereof that diligent inquiry would reveal, and each Guarantor hereby agrees that no Secured Party shall have any duty to advise any Guarantor of information known to it regarding such condition or any such circumstances. In the event any Secured Party, in its sole discretion, undertakes at any time or from time to time to provide any such information to any Guarantor, such Secured Party shall be under no obligation to (a) undertake any investigation not a part of its regular business routine, (b) disclose any information that such Secured Party, pursuant to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (c) make any future disclosures of such information or any other information to any Guarantor.

ARTICLE III

GRANT OF SECURITY INTEREST

Section 3.1 Collateral . For the purposes of this Agreement, all of the following property now owned or at any time hereafter acquired by a Grantor or in which a Grantor now has or at any time in the future may acquire any right, title or interests is collectively referred to as the “ Collateral ”:

(a) all accounts, chattel paper, deposit accounts, documents, equipment, general intangibles, instruments, insurance, inventory, investment property, letter of credit rights, each Cash Collateral Account, each Controlled Securities Account, all Pledged Collateral and any supporting obligations related to any of the foregoing;

(b) the commercial tort claims described on Schedule 1 and on any supplement thereto received by Agent pursuant to Section 5.9 ;

(c) all books and records pertaining to the other property described in this Section 3.1 ;

(d) all property of such Grantor held by any Secured Party, including all property of every description, in the custody of or in transit to such Secured Party for any purpose, including safekeeping, collection or pledge, for the account of such Grantor or as to which such Grantor may have any right or power, including but not limited to cash;

(e) all other goods (including but not limited to fixtures) and personal property of such Grantor, whether tangible or intangible and wherever located; and

(f) to the extent not otherwise included, all proceeds of the foregoing.

Section 3.2 Grant of Security Interest in Collateral . Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of such Grantor (the “ Secured Obligations ”), hereby mortgages, pledges and hypothecates to Agent for the benefit of the Secured Parties, and grants to Agent for the benefit of the Secured Parties a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral of such Grantor; provided , however , notwithstanding the foregoing, no Lien or security interest is hereby granted on any Excluded Property; provided , further , that if and when any property shall cease to be Excluded Property, a Lien on and security in such property shall be deemed granted therein.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

To induce the Lenders, the L/C Issuers and Agent to enter into the Loan Documents, each Grantor hereby represents and warrants each of the following to Agent, the Lenders, the L/C Issuers and the other Secured Parties:

Section 4.1 Title; No Other Liens . Except for the Lien granted to Agent pursuant to this Agreement and other Permitted Liens under any Loan Document (including Section 4.2 ), such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. Such Grantor (a) is the record and beneficial owner of the Collateral pledged by it hereunder constituting instruments or certificates and (b) has rights in or the power to transfer each other item of Collateral in which a Lien is granted by it hereunder, free and clear of any other Lien (other than Permitted Liens).

Section 4.2 Perfection and Priority . The security interest granted pursuant to this Agreement constitutes a valid and continuing perfected security interest in favor of Agent in all Collateral subject, for the following Collateral, to the occurrence of the following: (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on Schedule 2 (which, in the case of all filings and other documents referred to on such schedule, have been delivered to Agent in completed and duly authorized form), (ii) with respect to any deposit account or securities account, the execution of Control Agreements, (iii) in the case of all Copyrights, Trademarks and Patents for which UCC filings are insufficient, all appropriate filings having been made with the United States Copyright Office or the United States Patent and Trademark Office, as applicable, (iv) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a Contractual Obligation granting control to Agent over such letter-of-credit rights and (v) in the case of electronic chattel paper, the completion of all steps necessary to grant control to Agent over such electronic chattel paper. Such security interest shall be prior to all other Liens on the Collateral except for Permitted Liens having priority over Agent’s Lien by operation of law or permitted pursuant to subsections 5.1(e), (g), (h), (i), (j) or (k) of the Credit Agreement upon (i) in the case of all Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property, the delivery thereof to Agent of such Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property consisting of instruments and certificates, in each case properly endorsed for transfer to Agent or in blank, (ii) in the case of all Pledged Investment Property not in certificated form, the execution of Control Agreements with respect to such investment property; (iii) in the case of all other instruments and tangible chattel paper that are not Pledged Certificated Stock, Pledged Debt Instruments or Pledged Investment Property, the delivery thereof to Agent of such instruments and tangible chattel paper; (iv) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a Contractual Obligation granting control to Agent over such letter-of-credit rights and (v) in the case of electronic chattel paper, the completion of all steps necessary to grant control to Agent over such electronic chattel paper. Except as set forth in this Section 4.2 , all actions by each Grantor necessary to protect and perfect the Lien granted hereunder on the Collateral have been duly taken to the extent requested by Agent.

Section 4.3 Jurisdiction of Organization; Chief Executive Office . Such Grantor’s jurisdiction of organization, legal name and organizational identification number, if any, and the location of such Grantor’s chief executive office or sole place of business, in each case as of the date hereof, is specified on Schedule 3 and such Schedule 3 also lists all jurisdictions of incorporation, legal names and locations of such Grantor’s chief executive office or sole place of business for the five years preceding the date hereof.

Section 4.4 Locations of Inventory, Equipment and Books and Records . On the date hereof, such Grantor’s inventory and equipment (other than inventory or equipment in transit) and books and records concerning the Collateral are kept at the locations listed on Schedule 4 .

Section 4.5 Pledged Collateral . (a) The Pledged Stock pledged by such Grantor hereunder (a) is listed on Schedule 5 and constitutes that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on Schedule 5 , (b) has been duly authorized, validly issued and is fully paid and non-assessable (other than Pledged Stock in limited liability companies and partnerships) and (c) constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms.

(b) As of the Closing Date, all Pledged Collateral (other than Pledged Uncertificated Stock) and all Pledged Investment Property consisting of instruments and certificates has been delivered to Agent in accordance with Section 5.3(a) .

(c) Upon the occurrence and during the continuance of an Event of Default, upon notice by Agent to a Grantor, Agent shall be entitled to exercise all of the rights of such Grantor granting the security interest in any Pledged Stock, and a transferee or assignee of such Pledged Stock shall become a holder of such Pledged Stock to the same extent as such Grantor and be entitled to participate in the management of the issuer of such Pledged Stock and, upon the transfer of the entire interest of such Grantor, such Grantor shall, by operation of law, cease to be a holder of such Pledged Stock.

(d) No Grantor shall take any action to cause any membership interest, partnership interest, or other equity interest, comprising the Pledged Uncertificated Stock to be or become a “security” within the meaning of, or to be governed by Article 8 of the UCC as in effect under the laws of any state having jurisdiction and shall not cause or permit any Subsidiary to “opt in” or to take any other action seeking to establish any membership interest or partnership interest of the Pledged Uncertificated Stock as a “security” or to become certificated.

Section 4.6 Instruments and Tangible Chattel Paper Formerly Accounts . No amount payable to such Grantor under or in connection with any account is evidenced by any instrument or tangible chattel paper that has not been delivered to Agent, properly endorsed for transfer, to the extent delivery is required by Section 5.6(a) .

Section 4.7 Intellectual Property .

(a) Schedule 6 sets forth a true and complete list of the following Intellectual Property such Grantor owns and is registered or subject to applications for registration, including for each of the foregoing items (1) the owner, (2) the title, (3) the jurisdiction in which such item has been registered or otherwise arises or in which an application for registration has been filed and (4) the registration or application number and registration or application date.

(b) On the Closing Date, all Material Intellectual Property owned by such Grantor is valid, in full force and effect, subsisting, unexpired and enforceable, and no Material Intellectual Property has been abandoned. No breach or default of any material IP License shall be caused by any of the following, and none of the following shall limit or impair the ownership, use, validity or enforceability of, or any rights of such Grantor in, any Material Intellectual Property: (i) the consummation of the transactions contemplated by any Loan Document or (ii) any holding, decision, judgment or order rendered by any Governmental Authority. There are no pending (or, to the knowledge of such Grantor, threatened) actions, investigations, suits, proceedings, audits, claims, demands, orders or disputes challenging the ownership, use, validity, enforceability of, or such Grantor’s rights in, any Intellectual Property of such Grantor that could reasonably be expected to result in a Material Adverse Effect. To such Grantor’s knowledge, no Person has been or is infringing, misappropriating, diluting, violating or otherwise impairing any Intellectual Property of such Grantor that could reasonably be expected to result in a Material Adverse Effect. Such Grantor, and to such Grantor’s knowledge each other party thereto, is not in material breach or default of any material IP License.

Section 4.8 Commercial Tort Claims . The only commercial tort claims of any Grantor existing on the date hereof (regardless of whether such commercial tort claim has been asserted, threatened or has otherwise been made known to the obligee thereof or whether litigation has been commenced for such claims) are those listed on Schedule 1 , which sets forth such information separately for each Grantor.

Section 4.9 Specific Collateral . None of the Collateral is or is proceeds or products of farm products, as-extracted collateral, health-care-insurance receivables or timber to be cut.

Section 4.10 Enforcement . No Permit, notice to or filing with any Governmental Authority or any other Person or any consent from any Person is required for the exercise by Agent of its rights (including voting rights) provided for in this Agreement or the enforcement of remedies in respect of the Collateral pursuant to this Agreement, including the transfer of any Collateral, except as may be required in connection with the disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities generally or any approvals that may be required to be obtained from any bailees or landlords to collect the Collateral.

ARTICLE V

COVENANTS

Each Grantor agrees with Agent to the following, as long as any Obligation or Commitment remains outstanding (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted):

Section 5.1 Maintenance of Perfected Security Interest; Further Documentation and Consents . (a) Generally . Such Grantor shall (i) not use or permit any Collateral to be used unlawfully or in violation of any provision of any Loan Document, any Related Agreement, any material Requirement of Law or any policy of insurance covering the Collateral and (ii) not enter into any Contractual Obligation or undertaking restricting the right or ability of such Grantor or Agent to sell, assign, convey or transfer any Collateral if such restriction would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(b) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.2 and shall defend such security interest and such priority against the claims and demands of all Persons.

(c) Such Grantor shall furnish to Agent from time to time statements and schedules further identifying and describing the Collateral and such other documents in connection with the Collateral as Agent may reasonably request, all in reasonable detail and in form and substance reasonably satisfactory to Agent.

(d) At any time and from time to time, upon the written request of Agent, such Grantor shall, for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, (i) promptly and duly execute and deliver, and have recorded, such further documents, including an authorization to file (or, as applicable, the filing) of any financing statement or amendment under the UCC (or other filings under similar Requirements of Law) in effect in any jurisdiction with respect to the security interest created hereby and (ii) take such further action as Agent may reasonably request, including (A) using its commercially reasonable efforts to secure all approvals necessary or appropriate for the assignment to or for the benefit of Agent of any Contractual Obligation, including any IP License, held by such Grantor and to enforce the security interests granted hereunder and (B) executing and delivering any Control Agreements with respect to deposit accounts and securities accounts to the extent required by Section 4.11 of the Credit Agreement.

(e) To ensure that a Lien and security interest is granted on any of the Excluded Property set forth in clause (ii) of the definition of “ Excluded Property ”, such Grantor shall use its commercially reasonable efforts to obtain any required consents from any Person other than the Borrower and its Affiliates with respect to any permit or license or any Contractual Obligation with such Person entered into by such Grantor that requires such consent as a condition to the creation by such Grantor of a Lien on any right, title or interest in such permit, license or Contractual Obligation or any Stock or Stock Equivalent related thereto.

Section 5.2 Changes in Locations, Name, Etc . Except upon five (5) days’ prior written notice to Agent (or such lesser period of notice as Agent, in its sole discretion, from time to time may agree in writing) and delivery to Agent of (a) all documents reasonably requested by Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 4 showing any additional and/or change in chief executive office, such Grantor shall not do any of the following:

(i) change its jurisdiction of organization or its location, in each case from that referred to in Section 4.3; or

(ii) change its legal name or organizational identification number, if any, or corporation, limited liability company, partnership or other organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.

Section 5.3 Pledged Collateral . (a) Delivery of Pledged Collateral . Such Grantor shall (i) deliver to Agent, in suitable form for transfer and in form and substance reasonably satisfactory to Agent, (A) all Pledged Certificated Stock, (B) all Pledged Debt Instruments in excess of $250,000 individually and $1,000,000 in the aggregate and (C) all certificates and instruments evidencing Pledged Investment Property in excess of $250,000 individually and $500,000 in the aggregate and (ii) maintain all other Pledged Investment Property in excess of $250,000 in the aggregate in a Controlled Securities Account.

(b) Event of Default . During the continuance of an Event of Default, Agent shall have the right, at any time in its discretion and without notice to the Grantor, to (i) transfer to or to register in its name or in the name of its nominees any Pledged Collateral or any Pledged Investment Property and (ii) exchange any certificate or instrument representing or evidencing any Pledged Collateral or any Pledged Investment Property for certificates or instruments of smaller or larger denominations.

(c) Cash Distributions with respect to Pledged Collateral . Except as provided in Article VI and subject to the limitations set forth in the Credit Agreement, such Grantor shall be entitled to receive all cash distributions paid in respect of the Pledged Collateral.

(d) Voting Rights . Except as provided in Article VI , such Grantor shall be entitled to exercise all voting, consent and corporate, partnership, limited liability company and similar rights with respect to the Pledged Collateral; provided , however , that no vote shall be cast, consent given or right exercised or other action taken by such Grantor that would result in any violation of any provision of any Loan Document, except to the extent such vote, consent, right or action results in payment in full of the Obligations.

(e) Each Grantor irrevocably waives any and all of its rights under those provisions of the operating agreement or limited partnership agreement of (and the laws under which there has been organized) each Subsidiary of such Grantor which is a limited liability company or limited partnership, respectively, that (a) prohibit, restrict, condition or otherwise affect the grant hereunder of any security interest or lien on any of the Pledged Collateral or any enforcement action which may be taken in respect of any

such security interest or lien or (b) otherwise conflict with the terms of this Agreement. To the extent that this provision is inconsistent with the terms of the operating agreement or limited partnership agreement, as applicable, of any such Subsidiary, such operating agreement or limited partnership agreement, as applicable, shall be deemed to be amended so as to be consistent with the terms of this Section 5.3(e) . With respect to any of such Grantor’s Pledged Stock in a limited liability company or limited partnership, each Grantor hereby irrevocably consents to the grant of the security interest provided for herein and to the Agent or its nominee becoming a member, limited partner or general partner, as applicable, in such limited liability company or limited partnership, as applicable (including succeeding to any management rights appurtenant thereto), pursuant to a disposition thereof in connection with (or in lieu of) an exercise of remedies pursuant to this Agreement; provided that such successor member or partner, as applicable, then agrees in writing to be bound by, and a party to, the applicable operating agreement or limited partnership agreement.

Section 5.4 Accounts .

(a) Such Grantor shall not, other than in the ordinary course of business, (i) grant any extension of the time of payment of any account, (ii) compromise or settle any account for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any account, (iv) allow any credit or discount on any account or (v) amend, supplement or modify any account in any manner that could adversely affect the value thereof.

(b) So long as an Event of Default is continuing, Agent shall have the right to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and such Grantor shall furnish all such assistance and information as Agent may reasonably require in connection therewith. At any time and from time to time during the continuance of an Event of Default, upon Agent’s reasonable request, such Grantor shall cause independent public accountants or others satisfactory to Agent to furnish to Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the accounts.

Section 5.5 Commodity Contracts . Such Grantor shall not have commodity contracts in excess of $50,000 individually or $150,000 in the aggregate unless subject to a Control Agreement.

Section 5.6 Delivery of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper . (a) If any amount in excess of $100,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced by an instrument or tangible chattel paper, other than such instrument delivered in accordance with Section 5.3(a) and in the possession of Agent, such Grantor shall (i) promptly provide notice to Agent and (ii) at the request of Agent mark all such instruments and tangible chattel paper with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of General Electric Capital Corporation, as Agent” and, at

the request of Agent, shall immediately deliver such instrument or tangible chattel paper to Agent, duly indorsed in a manner satisfactory to Agent. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, such Grantor may retain for collection in the Ordinary Course of Business any instrument received for payment in the Ordinary Course of Business, and the Agent shall, within reasonable time upon request of the Grantor, make appropriate arrangements for making any instrument or tangible chattel paper delivered by Grantor available to Grantor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by Agent, against trust receipts or like document).

(b) Such Grantor shall not grant “ control ” (within the meaning of such term under Article 9-106 of the UCC) over any investment property to any Person other than Agent, a securities intermediary or a commodity intermediary.

(c) If such Grantor is or becomes the beneficiary of a letter of credit that is (i) not a supporting obligation of any Collateral and (ii) in excess of $500,000, such Grantor shall promptly, and in any event within five (5) Business Days after becoming a beneficiary (or such later date as Agent, in its sole discretion, from time to time may agree in writing), notify Agent thereof and use commercially reasonable efforts to enter into a Contractual Obligation with Agent, the issuer of such letter of credit or any nominated person with respect to the letter-of-credit rights under such letter of credit. Such Contractual Obligation shall assign such letter-of-credit rights to Agent and such assignment shall be sufficient to grant control for the purposes of Section 9-107 of the UCC (or any similar section under any equivalent UCC). Such Contractual Obligation shall also direct all payments thereunder to a Cash Collateral Account. The provisions of the Contractual Obligation shall be in form and substance reasonably satisfactory to Agent. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, such Grantor may retain for collection (for a period of time not to exceed ten (10) days) in the Ordinary Course of Business any documentary letters of credit received in the Ordinary Course of Business, and Agent shall, within reasonable time upon the request of the Grantor, make appropriate arrangements for making any letters of credit delivered by Grantor available to Grantor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by Agent, against trust receipts or like document).

(d) If any amount in excess of $250,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced by electronic chattel paper, such Grantor shall take all steps reasonably requested by Agent after notification by Grantor of ownership of such Collateral, to grant Agent control of all such electronic chattel paper for the purposes of Section 9-105 of the UCC (or any similar section under any equivalent UCC) and all “ transferable records ” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

Section 5.7 Intellectual Property . (a) Within forty-five (45) days after any change to Schedule 6 for such Grantor, such Grantor shall provide Agent notification thereof and the short-form intellectual property agreements and assignments as described in this Section 5.7 and any other documents that Agent reasonably requests with respect thereto.

(b) Such Grantor shall (and shall cause all its licensees to) (i) (1) continue to use each Trademark included in the Material Intellectual Property in order to maintain such Trademark in full force and effect with respect to each class of goods for which such Trademark is currently used, free from any claim of abandonment for non-use, (2) maintain at least the same standards of quality of products and services offered under such Trademark as are currently maintained, (3) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (4) not adopt or use any other Trademark that is confusingly similar or a colorable imitation of such Trademark unless Agent shall obtain a perfected security interest in such other Trademark pursuant to this Agreement and (ii) not do any act or omit to do any act whereby (w) such Trademark (or any goodwill associated therewith) may become destroyed, invalidated, impaired or harmed in any way, (x) any Patent included in the Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, (y) any portion of the Copyrights included in the Material Intellectual Property may become invalidated, otherwise impaired or fall into the public domain or (z) any Trade Secret that is Material Intellectual Property may become publicly available or otherwise unprotectable.

(c) Such Grantor shall notify Agent immediately if it knows, or has reason to know, that any application or registration relating to any Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, or of any adverse determination or development regarding the validity or enforceability or such Grantor’s ownership of, interest in, right to use, register, own or maintain any Material Intellectual Property (including the institution of, or any such determination or development in, any proceeding relating to the foregoing in any Applicable IP Office). Such Grantor shall take all actions that are necessary or reasonably requested by Agent to maintain and pursue each application (and to obtain the relevant registration or recordation) and to maintain each registration and recordation included in the Material Intellectual Property.

(d) Such Grantor shall not knowingly do any act or omit to do any act to infringe, misappropriate, dilute, violate or otherwise impair the Intellectual Property of any other Person, except to the extent that such action would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. In the event that any Material Intellectual Property of such Grantor is or has been infringed, misappropriated, violated, diluted or otherwise impaired by a third party, such Grantor shall take such action as it reasonably deems appropriate under the circumstances in response thereto, including promptly bringing suit and recovering all damages therefor.

(e) Such Grantor shall execute and deliver to Agent in form and substance reasonably acceptable to Agent and suitable for (i) filing in the Applicable IP Office the short-form intellectual property security agreements in the form attached hereto as Annex 3 for all Copyrights, Trademarks and Patents of such Grantor and (ii) if requested by Agent, recording with the appropriate Internet domain name registrar, a duly executed form of assignment for all material Internet Domain Names of such Grantor (together with appropriate supporting documentation as may be requested by Agent).

Section 5.8 Notices . Such Grantor shall promptly notify Agent in writing of its acquisition of any interest hereafter in material property that is of a type where a security interest or lien must be or may be registered, recorded or filed under, or notice thereof given under, any federal statute or regulation.

Section 5.9 Notice of Commercial Tort Claims . Such Grantor agrees that, if it shall acquire any interest in any commercial tort claim in excess of $100,000 individually and $250,000 in the aggregate for all such commercial tort claims (whether from another Person or because such commercial tort claim shall have come into existence), (i) such Grantor shall, within five (5) Business Days (or such later period acceptable to Agent) of such acquisition, deliver to Agent, in each case in form and substance reasonably satisfactory to Agent, a notice of the existence and nature of such commercial tort claim and a supplement to Schedule 1 containing a specific description of such commercial tort claim, (ii) Section 3.1 shall apply to such commercial tort claim and (iii) such Grantor shall execute and deliver to Agent, in each case in form and substance reasonably satisfactory to Agent, any document, and take all other action, deemed by Agent to be reasonably necessary or appropriate for Agent to obtain, on behalf of the Lenders, a perfected security interest having at least the priority set forth in Section 4.2 in all such commercial tort claims. Any supplement to Schedule 1 delivered pursuant to this Section 5.9 shall, after the receipt thereof by Agent, become part of Schedule 1 for all purposes hereunder other than in respect of representations and warranties made prior to the date of such receipt.

ARTICLE VI

REMEDIAL PROVISIONS

Section 6.1 Code and Other Remedies . (a) UCC Remedies . During the continuance of an Event of Default, Agent may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to any Secured Obligation, all rights and remedies of a secured party under the UCC or any other applicable law.

(b) Disposition of Collateral . Without limiting the generality of the foregoing, Agent may, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), during the continuance of any Event of Default (personally or through its agents or attorneys), (i) enter upon the premises where any Collateral is located, without any obligation to pay rent, through self-help, without judicial process, without first obtaining a final judgment or giving any

Grantor or any other Person notice or opportunity for a hearing on Agent’s claim or action, (ii) collect, receive, appropriate and realize upon any Collateral and (iii) sell, assign, convey, transfer, grant option or options to purchase and deliver any Collateral (or enter into Contractual Obligations to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Agent shall have the right, upon any such public sale or sales and, to the extent permitted by the UCC and other applicable Requirements of Law, upon any such private sale, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption of any Grantor, which right or equity is hereby waived and released.

(c) Management of the Collateral . Each Grantor further agrees, that, during the continuance of any Event of Default, (i) at Agent’s request, it shall assemble the Collateral and make it available to Agent at places that Agent shall reasonably select, whether at such Grantor’s premises or elsewhere, (ii) without limiting the foregoing, Agent also has the right to require that each Grantor store and keep any Collateral pending further action by Agent and, while any such Collateral is so stored or kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain such Collateral in good condition, (iii) until Agent is able to sell, assign, convey or transfer any Collateral, Agent shall have the right to hold or use such Collateral to the extent that it deems appropriate for the purpose of preserving the Collateral or its value or for any other purpose deemed appropriate by Agent and (iv) Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and to enforce any of Agent’s remedies (for the benefit of the Secured Parties), with respect to such appointment without prior notice or hearing as to such appointment. Agent shall not have any obligation to any Grantor to maintain or preserve the rights of any Grantor as against third parties with respect to any Collateral while such Collateral is in the possession of Agent.

(d) Application of Proceeds . Agent shall apply the cash proceeds of any action taken by it pursuant to this Section 6. 1, as set forth in the Credit Agreement, and only after such application and after the payment by Agent of any other amount required by any Requirement of Law, need Agent account for the surplus, if any, to any Grantor.

(e) Direct Obligation . Neither Agent nor any other Secured Party shall be required to make any demand upon, or pursue or exhaust any right or remedy against, any Grantor, any other Credit Party or any other Person with respect to the payment of the Obligations or to pursue or exhaust any right or remedy with respect to any Collateral therefor or any direct or indirect guaranty thereof. All of the rights and remedies of Agent and any other Secured Party under any Loan Document shall be cumulative, may be exercised individually or concurrently and not exclusive of any other rights or remedies provided by any Requirement of Law. To the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and

advantage of, and covenants not to assert against Agent or any other Secured Party, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety, now or hereafter existing, arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of any Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

(f) Commercially Reasonable . To the extent that applicable Requirements of Law impose duties on Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is not commercially unreasonable for Agent to do any of the following:

(i) fail to incur significant costs, expenses or other Liabilities reasonably deemed as such by Agent to prepare any Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition;

(ii) fail to obtain Permits, or other consents, for access to any Collateral to sell or for the collection or sale of any Collateral, or, if not required by other Requirements of Law, fail to obtain Permits or other consents for the collection or disposition of any Collateral;

(iii) fail to exercise remedies against account debtors or other Persons obligated on any Collateral or to remove Liens on any Collateral or to remove any adverse claims against any Collateral;

(iv) advertise dispositions of any Collateral through publications or media of general circulation, whether or not such Collateral is of a specialized nature, or to contact other Persons, whether or not in the same business as any Grantor, for expressions of interest in acquiring any such Collateral;

(v) exercise collection remedies against account debtors and other Persons obligated on any Collateral, directly or through the use of collection agencies or other collection specialists, hire one or more professional auctioneers to assist in the disposition of any Collateral, whether or not such Collateral is of a specialized nature, or, to the extent deemed appropriate by Agent, obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any Collateral, or utilize Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets to dispose of any Collateral;

(vi) dispose of assets in wholesale rather than retail markets;

(vii) disclaim disposition warranties, such as title, possession or quiet enjoyment; or

(viii) purchase insurance or credit enhancements to insure Agent against risks of loss, collection or disposition of any Collateral or to provide to Agent a guaranteed return from the collection or disposition of any Collateral.

Each Grantor acknowledges that the purpose of this Section 6.1 is to provide a non-exhaustive list of actions or omissions that are commercially reasonable when exercising remedies against any Collateral and that other actions or omissions by the Secured Parties shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 6.1 . Without limitation upon the foregoing, nothing contained in this Section 6.1 shall be construed to grant any rights to any Grantor or to impose any duties on Agent that would not have been granted or imposed by this Agreement or by applicable Requirements of Law in the absence of this Section 6.1 .

(g) IP Licenses . For the purpose of enabling Agent to exercise rights and remedies under this Section 6.1 (including in order to take possession of, collect, receive, assemble, process, appropriate, remove, realize upon, sell, assign, convey, transfer or grant options to purchase any Collateral) at such time as Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to Agent, for the benefit of the Secured Parties, (i) an irrevocable, nonexclusive, worldwide license (exercisable without payment of royalty or other compensation to such Grantor), including in such license the right to sublicense, use and practice any Intellectual Property now owned or hereafter acquired by such Grantor and access to all media in which any of the licensed items may be recorded or stored and to all Software and programs used for the compilation or printout thereof and (ii) an irrevocable license (without payment of rent or other compensation to such Grantor) to use, operate and occupy all real Property owned, operated, leased, subleased or otherwise occupied by such Grantor.

(h) Exercise of Remedies Pursuant to Control Agreements . Agent agrees with each of the Grantors that, with respect to any deposit, securities or commodities account subject to a Control Agreement , Agent shall not be entitled to exercise sole control or send any “blockage” or equivalent notice under any such Control Agreement unless an Event of Default under Section 7.1(a), (c) (solely with respect to a breach of Article VI), (d) (solely with respect to a breach of Sections 4.1 or 4.2(b)), (f) or (g) of the Credit Agreement shall have occurred and be continuing or an acceleration of the Loans and/or termination of the Commitments has occurred pursuant to Section 7.2 of the Credit Agreement; provided, however, that Agent shall not have any withdrawal rights over such accounts in respect of which a notice of sole control, “blockage” or equivalent is given

Section 6.2 Accounts and Payments in Respect of General Intangibles . (a) In addition to, and not in substitution for, any similar requirement in the Credit Agreement, if required by Agent at any time during the continuance of an Event of Default, any payment of accounts or payment in respect of general intangibles, when collected by any Grantor, shall be promptly (and, in any event, within 2 Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to Agent, in a Cash Collateral Account, subject to withdrawal by Agent as provided in Section 6.4 . Until so turned over, such payment shall be held by such Grantor in trust for Agent, segregated from other funds of such Grantor. Each such deposit of proceeds of accounts and payments in respect of general intangibles shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

(b) At any time during the continuance of an Event of Default:

(i) each Grantor shall, upon Agent’s request, deliver to Agent all original and other documents evidencing, and relating to, the Contractual Obligations and transactions that gave rise to any account or any payment in respect of general intangibles, including all original orders, invoices and shipping receipts and notify account debtors that the accounts or general intangibles have been collaterally assigned to Agent and that payments in respect thereof shall be made directly to Agent;

(ii) Agent may, without notice, at any time during the continuance of an Event of Default, limit or terminate the authority of a Grantor to collect its accounts or amounts due under general intangibles or any thereof and, in its own name or in the name of others, communicate with account debtors to verify with them to Agent’s satisfaction the existence, amount and terms of any account or amounts due under any general intangible. In addition, Agent may at any time enforce such Grantor’s rights against such account debtors and obligors of general intangibles; and

(iii) each Grantor shall take all actions, deliver all documents and provide all information necessary or reasonably requested by Agent to ensure any Internet Domain Name is registered.

(c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each account and each payment in respect of general intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. No Secured Party shall have any obligation or liability under any agreement giving rise to an account or a payment in respect of a general intangible by reason of or arising out of any Loan Document or the receipt by any Secured Party of any payment relating thereto, nor shall any Secured Party be obligated in any manner to perform any obligation of any Grantor under or pursuant to any agreement giving rise to an account or a payment in respect of a general intangible, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

Section 6.3 Pledged Collateral . (a) Voting Rights . During the continuance of an Event of Default, upon notice by Agent to the relevant Grantor or Grantors, Agent or its nominee may exercise (A) any voting, consent, corporate and other right pertaining to the Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (B) any right of conversion, exchange and subscription and any other right, privilege or option pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any Pledged Collateral upon the merger, amalgamation, consolidation, reorganization, recapitalization or other fundamental change in the corporate or equivalent structure of any issuer of Pledged Stock, the right to deposit and deliver any Pledged Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as Agent may determine), all without liability except to account for property actually received by it; provided , however , that Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(b) Proxies . If an Event of Default has occurred and is continuing, each Grantor shall, at its sole cost and expense, from time to time execute and deliver to the Agent appropriate instruments as Agent may reasonably request in order to permit Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder. Each Grantor hereby grants to Agent an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other person (including the issuer of such Pledged Collateral or any officer or agent thereof) during the continuance of an Event of Default and which proxy shall only terminate upon the payment in full of the Secured Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted).

(c) Authorization of Issuers . Each Grantor hereby expressly and irrevocably authorizes and instructs, without any further instructions from such Grantor, each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with any instruction received by it from Agent in writing that states that an Event of Default is continuing and is otherwise in accordance with the terms of this Agreement and each Grantor agrees that such issuer shall be fully protected from Liabilities to such Grantor in so complying and (ii) unless otherwise expressly permitted hereby or the Credit Agreement, pay any dividend or make any other payment with respect to the Pledged Collateral directly to Agent.

(d) Pledged Stock . Upon the occurrence and during the continuance of an Event of Default, upon notice by Agent to the relevant Grantor or Grantors, Agent shall be entitled to exercise all of the rights of the Grantor granting the security interest in any Pledged Stock, and a transferee or assignee of such Pledged Stock shall become a holder of such Pledged Stock to the same extent as such Grantor and be entitled to participate in the management of the issuer of such Pledged Stock and, upon the transfer of the entire interest of such Grantor, such Grantor shall, by operation of law, cease to be a holder of such Pledged Stock.

Section 6.4 Proceeds to be Turned over to and Held by Agent . During the continuance of an Event of Default, unless otherwise expressly provided in the Credit Agreement or this Agreement, all proceeds of any Collateral received by any Grantor hereunder in cash or Cash Equivalents shall be held by such Grantor in trust for Agent and the other Secured Parties, segregated from other funds of such Grantor, and shall, promptly upon receipt by any Grantor, be turned over to Agent in the exact form received (with any necessary endorsement). All such proceeds of Collateral and any other proceeds of any Collateral received by Agent in cash or Cash Equivalents shall be held by Agent in a Cash Collateral Account. All proceeds being held by Agent in a Cash Collateral Account (or by such Grantor in trust for Agent) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in the Credit Agreement.

Section 6.5 Sale of Pledged Collateral . (a) Each Grantor recognizes that Agent may be unable to effect a public sale of any Pledged Collateral by reason of certain prohibitions contained in the Securities Act and applicable state or foreign securities laws or otherwise or may determine that a public sale is impracticable, not desirable or not commercially reasonable and, accordingly, may resort to one or more private sales thereof to a restricted group of purchasers that shall be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Agent shall be under no obligation to delay a sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register such securities for public sale under the Securities Act or under applicable state securities laws even if such issuer would agree to do so.

(b) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of any portion of the Pledged Collateral pursuant to Section 6.1 and this Section 6.5 valid and binding and in compliance with all applicable Requirements of Law. Each Grantor further agrees that a breach of any covenant contained herein will cause irreparable injury to Agent and other Secured Parties, that Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained herein shall be specifically enforceable against such Grantor, and such Grantor hereby

waives and agrees not to assert any defense against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement. Each Grantor waives any and all rights of contribution or subrogation upon the sale or disposition of all or any portion of the Pledged Collateral by Agent.

Section 6.6 Deficiency . Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of any Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorney employed by Agent or any other Secured Party to collect such deficiency.

ARTICLE VII

AGENT

Section 7.1 Agent’s Appointment as Attorney-in-Fact . (a) Each Grantor hereby irrevocably constitutes and appoints Agent and any Related Person thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of the Loan Documents, to take any appropriate action and to execute any document or instrument that may be necessary or desirable to accomplish the purposes of the Loan Documents, and, without limiting the generality of the foregoing, each Grantor hereby gives Agent and its Related Persons the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any of the following when an Event of Default shall be continuing:

(i) in the name of such Grantor, in its own name or otherwise, take possession of and indorse and collect any check, draft, note, acceptance or other instrument for the payment of moneys due under any account or general intangible or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Agent for the purpose of collecting any such moneys due under any account or general intangible or with respect to any other Collateral whenever payable;

(ii) in the case of any Intellectual Property owned by or licensed to the Grantors, execute, deliver and have recorded any document that Agent may request to evidence, effect, publicize or record Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;

(iii) pay or discharge taxes and Liens levied or placed on or threatened against any Collateral, effect any repair or pay any insurance called for by the terms of the Credit Agreement (including all or any part of the premiums therefor and the costs thereof);

(iv) execute, in connection with any sale provided for in Section 6.1 or Section 6.5 , any document to effect or otherwise necessary or appropriate in relation to evidence the sale of any Collateral; or

(v) (A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to Agent or as Agent shall direct, (B) ask or demand for, and collect and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) sign and indorse any invoice, freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice and other document in connection with any Collateral, (D) commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (E) defend any actions, suits, proceedings, audits, claims, demands, orders or disputes brought against such Grantor with respect to any Collateral, (F) settle, compromise or adjust any such actions, suits, proceedings, audits, claims, demands, orders or disputes and, in connection therewith, give such discharges or releases as Agent may deem appropriate, (G) assign any Intellectual Property owned by the Grantors or any IP Licenses of the Grantors throughout the world on such terms and conditions and in such manner as Agent shall in its sole discretion determine, including the execution and filing of any document necessary to effectuate or record such assignment and (H) generally, sell, assign, convey, transfer or grant a Lien on, make any Contractual Obligation with respect to and otherwise deal with, any Collateral as fully and completely as though Agent were the absolute owner thereof for all purposes and do, at Agent’s option, at any time or from time to time, all acts and things that Agent deems necessary to protect, preserve or realize upon any Collateral and the Secured Parties’ security interests therein and to effect the intent of the Loan Documents, all as fully and effectively as such Grantor might do.

(vi) If any Grantor fails to perform or comply with any Contractual Obligation contained herein, Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such Contractual Obligation.

(b) Subject to Section 9.5 of the Credit Agreement, the expenses of Agent incurred in connection with actions undertaken as provided in this Section 7.1 , shall be payable by such Grantor to Agent on demand.

(c) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Section 7.1 . All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

Section 7.2 Authorization to File Financing Statements . Each Grantor authorizes Agent and its Related Persons, at any time and from time to time, to file or record financing statements, amendments thereto, and other filing or recording documents or instruments with respect to any Collateral in such form and in such offices as Agent reasonably determines appropriate to perfect, or continue or maintain perfection of, the security interests of Agent under this Agreement, and such financing statements and amendments may describe the Collateral covered thereby as “ all assets of the debtor ”. To the extent permitted by applicable law, a photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. Such Grantor also hereby ratifies its authorization for Agent to have filed any initial financing statement or amendment thereto under the UCC (or other similar laws) in effect in any jurisdiction if filed prior to the date hereof.

Section 7.3 Authority of Agent . Each Grantor acknowledges that the rights and responsibilities of Agent under this Agreement with respect to any action taken by Agent or the exercise or non-exercise by Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between Agent and the other Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between Agent and the Grantors, Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation or entitlement to make any inquiry respecting such authority.

Section 7.4 Duty; Obligations and Liabilities . (a) Duty of Agent. Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as Agent deals with similar property for its own account. The powers conferred on Agent hereunder are solely to protect Agent’s interest in the Collateral and shall not impose any duty upon Agent to exercise any such powers. Agent shall be accountable only for amounts that it receives as a result of the exercise of such powers, and neither it nor any of its Related Persons shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. In addition, Agent shall not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehousemen, carrier, forwarding agency, consignee or other bailee if such Person has been selected by Agent in good faith.

(b) Obligations and Liabilities with respect to Collateral . No Secured Party and no Related Person thereof shall be liable for failure to demand, collect or realize upon any Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to any Collateral. The powers conferred on Agent hereunder shall not impose any duty upon any other Secured Party to exercise any such powers. The other Secured Parties shall be accountable only for

amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their respective officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Reinstatement . Each Grantor agrees that, if any payment made by any Credit Party or other Person and applied to the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of any Collateral are required to be returned by any Secured Party to such Credit Party, its estate, trustee, receiver or any other party, including any Grantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if such payment had never been made. If, prior to any of the foregoing, (a) any Lien or other Collateral securing such Grantor’s liability hereunder shall have been released or terminated by virtue of the foregoing or (b) any provision of the Guaranty hereunder shall have been terminated, cancelled or surrendered, such Lien, other Collateral or provision shall be reinstated in full force and effect and such prior release, termination, cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of any such Grantor in respect of any Lien or other Collateral securing such obligation or the amount of such payment.

Section 8.2 Release of Collateral . (a) At the time provided in Section 8.10 of the Credit Agreement, the Collateral shall be released from the Lien created hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. Each Grantor is hereby authorized to file UCC amendments at such time evidencing the termination of the Liens so released. At the request of any Grantor following any such termination, Agent shall deliver to such Grantor any Collateral of such Grantor held by Agent hereunder and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

(b) If Agent shall be directed or permitted pursuant to subsection 8.10(b) of the Credit Agreement to release any Lien or any Collateral, such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, such subsection. In connection therewith, Agent, at the request of any Grantor, shall execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such release.

(c) At the time provided in subsection 8.10(b) of the Credit Agreement and at the request of the Borrower, a Grantor shall be released from its obligations hereunder in the event that all the Stock and Stock Equivalents of such Grantor shall be sold to any Person other than Holdings or any of its Subsidiaries in a transaction permitted by the Loan Documents.

Section 8.3 Independent Obligations . The obligations of each Grantor hereunder are independent of and separate from the Secured Obligations and the Guaranteed Obligations. If any Secured Obligation or Guaranteed Obligation is not paid when due, or upon any Event of Default, Agent may, at its sole election, proceed directly and at once, without notice, against any Grantor and any Collateral to collect and recover the full amount of any Secured Obligation or Guaranteed Obligation then due, without first proceeding against any other Grantor, any other Credit Party or any other Collateral and without first joining any other Grantor or any other Credit Party in any proceeding.

Section 8.4 No Waiver by Course of Conduct . No Secured Party shall by any act (except by a written instrument pursuant to Section 8.5 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Secured Party would otherwise have on any future occasion.

Section 8.5 Amendments in Writing . None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 9.1 of the Credit Agreement; provided , however , that annexes to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released) through Pledge Amendments and Joinder Agreements, in substantially the form of Annex 1 and Annex 2, respectively, in each case duly executed by Agent and each Grantor directly affected thereby.

Section 8.6 Additional Grantors; Additional Pledged Collateral . (a) Joinder Agreements . If, at the option of the Borrower or as required pursuant to Section 4.13 of the Credit Agreement, the Borrower shall cause any Subsidiary that is not a Grantor to become a Grantor hereunder, such Subsidiary shall execute and deliver to Agent a Joinder Agreement substantially in the form of Annex 2 and shall thereafter for all purposes be a party hereto and have the same rights, benefits and obligations as a Grantor party hereto on the Closing Date.

(b) Pledge Amendments . To the extent any Pledged Collateral has not been delivered as of the Closing Date, such Grantor shall deliver a pledge amendment duly executed by the Grantor in substantially the form of Annex 1 (each, a “ Pledge Amendment ”). Such Grantor authorizes Agent to attach each Pledge Amendment to this Agreement.

Section 8.7 Notices . All notices, requests and demands to or upon Agent or any Grantor hereunder shall be effected in the manner provided for in Section 9.2 of the Credit Agreement; provided , however , that any such notice, request or demand to or upon any Grantor shall be addressed to the Borrower’s notice address set forth in such Section 9.2.

Section 8.8 Successors and Assigns . This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of each Secured Party and their successors and assigns; provided , however , that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of Agent.

Section 8.9 Counterparts . This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this Agreement by facsimile transmission or by Electronic Transmission shall be as effective as delivery of a manually executed counterpart hereof.

Section 8.10 Severability . Any provision of this Agreement being held illegal, invalid or unenforceable in any jurisdiction shall not affect any part of such provision not held illegal, invalid or unenforceable, any other provision of this Agreement or any part of such provision in any other jurisdiction.

Section 8.11 Governing Law . This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

Section 8.12 Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREIN OR RELATED THERETO (WHETHER FOUNDED IN CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO OTHER PARTY AND NO RELATED PERSON OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.

EACH GRANTOR AGREES TO BE BOUND BY THE PROVISIONS OF SUBSECTIONS 9.18(b) AND (c) OF THE CREDIT AGREEMENT.

Section 8.13 ULC Limitation . Notwithstanding any provisions to the contrary contained in this Agreement, the Credit Agreement or any other document or agreement among all or some of the parties hereto, each applicable Grantor is as of the date of this Agreement the sole registered and beneficial owner of all Pledged ULC Shares more particularly described in Schedule 5 to this Agreement and will remain so until such time as such Pledged ULC Shares are fully and effectively transferred into the name of Agent or any other person on the books and records of such ULC. Nothing in this Agreement, the Credit Agreement or any other document or agreement delivered among all or some of the parties hereto is intended to or shall constitute Agent or any person other than a Grantor to be a member or shareholder of any ULC until such time as written notice is given to the applicable Grantor and all further steps are taken so as to register Agent or other person as holder of the Pledged ULC Shares. The granting of the pledge and security interest pursuant to Article III does not make Agent a successor to any Grantor as a member or shareholder of any ULC, and neither Agent nor any of its respective successors or assigns hereunder shall be deemed to become a member or shareholder of any ULC by accepting this Agreement or exercising any right granted herein unless and until such time, if any, when Agent or any successor or assign expressly becomes a registered member or shareholder of any ULC. Each applicable Grantor shall be entitled to receive and retain for its own account any dividends or other distributions if any, in respect of the Collateral, and shall have the right to vote such Pledged ULC Shares and to control the direction, management and policies of the ULC issuing such Pledged ULC Shares to the same extent as such Grantor would if such Pledged ULC Shares were not pledged to Agent or to any other person pursuant hereto. To the extent any provision hereof would have the effect of constituting Agent to be a member or shareholder of any ULC prior to such time, such provision shall be severed herefrom and ineffective with respect to the relevant Pledged ULC Shares without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Collateral other than Pledged ULC Shares. Notwithstanding anything herein to the contrary (except to the extent, if any, that Agent or any of its successors or assigns hereafter expressly becomes a registered member or shareholder of any ULC), neither Agent nor any of its respective successors or assigns shall be deemed to have assumed or otherwise become liable for any debts or obligations of any ULC. Except upon the exercise by Agent or other persons of rights to sell or otherwise dispose of Pledged ULC Shares or other remedies following the occurrence and during the continuance of an Event of Default, each applicable Grantor shall not cause or permit, or enable any ULC in which it holds Pledged ULC Shares to cause or permit, Agent to: (a) be registered as member or shareholder of such ULC; (b) have any notation entered in its favour in the share register of such ULC; (c) be held out as member or shareholder of such ULC; (d) receive, directly or indirectly, any dividends, property or other distributions from such ULC by reason of Agent or other person holding a security interest in the Pledged ULC Shares; or (e) act as a member or shareholder of such ULC, or exercise any rights of a member or shareholder of such ULC, including the right to attend a meeting of such ULC or vote the shares of such ULC.

Section 8.14 Subordination of Intercompany Indebtedness . Each Grantor hereby agrees that all Indebtedness permitted by Section 5.4(b) of the Credit Agreement shall be subordinated to the prior payment in full in cash of the Obligations.

— Remainder of Page Intentionally Left Blank; Signature Pages Follow —

IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty and Security Agreement to be duly executed and delivered as of the date first above written.

GRANTORS:

PMI HOLDINGS, INC. , a Delaware corporation, as a Grantor

PAPA MURPHY’S INTERMEDIATE, INC. , a

Delaware corporation, as a Grantor

PAPA MURPHY’S COMPANY STORES, INC.,

a Washington corporation, as a Grantor

MURPHY’S MARKETING SERVICES, INC. , a Florida corporation, as a Grantor

PAPA MURPHY’S INTERNATIONAL LLC , a Delaware limited liability company, as a Grantor


PAPA MURPHY’S WORLDWIDE LLC , a Delaware limited liability company, as a Grantor

By:		/s/ Ken Calwell
		Name: Ken Calwell Title: Chief Executive Officer


ACCEPTED AND AGREED as of the date first above written: GOLUB CAPITAL LLC , as Agent

By:		/s/ Marc C. Robinson
		Name: Marc C. Robinson Title: Managing Director

ANNEX 1

GUARANTY AND SECURITY AGREEMENT ¹

FORM OF PLEDGE AMENDMENT

This Pledge Amendment, dated as of , 201 , is delivered pursuant to Section 8.6 of the Guaranty and Security Agreement, dated as of October 25, 2013, by PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”), the undersigned Grantor and the other Persons from time to time party thereto as Grantors in favor of Golub Capital LLC, as Agent for the Secured Parties referred to therein (as such agreement may be amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the “ Guaranty and Security Agreement ”). Capitalized terms used herein without definition are used as defined in the Guaranty and Security Agreement.

The undersigned hereby agrees that this Pledge Amendment may be attached to the Guaranty and Security Agreement and that the Pledged Collateral listed on Annex 1-A to this Pledge Amendment shall be and become part of the Collateral referred to in the Guaranty and Security Agreement and shall secure all Obligations of the undersigned.

The undersigned hereby represents and warrants that each of the representations and warranties contained in Sections 4.1 , 4.2 , 4.5 and 4.10 of the Guaranty and Security Agreement is true and correct in all material respects as of the date hereof as if made on and as of such date (except to the extent they relate to an earlier date, in which case, they are true and correct in all material respects as of such earlier date).

This Pledge Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.


[GRANTOR]

By:
		Name: Title:

To be used for pledge of Additional Pledged Collateral by existing Grantor.

A1-1

Annex 1-A

PLEDGED STOCK

ISSUER

CLASS

CERTIFICATE

NO(S).

PAR

VALUE

NUMBER

SHARES,

UNITS OR

INTERESTS

PLEDGED DEBT INSTRUMENTS

ISSUER

DESCRIPTION OF

DEBT

CERTIFICATE

NO(S).

FINAL

MATURITY

PRINCIPAL AMOUNT

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ACKNOWLEDGED AND AGREED as of the date first above written: GOLUB CAPITAL LLC , as Agent

By:
		Name: Title: Duly Authorized Signatory

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ANNEX 2

GUARANTY AND SECURITY AGREEMENT

FORM OF JOINDER AGREEMENT

This JOINDER AGREEMENT, dated as of , 201 , is delivered pursuant to Section 8.6 of the Guaranty and Security Agreement, dated as of October 25, 2013, by PMI HOLDINGS, INC., a Delaware corporation (the “ Borrower ”) and the other Persons from time to time party thereto as Grantors in favor of General Electric Capital Corporation, as Agent for the Secured Parties referred to therein (as such agreement may be amended, restated, amended and restated, supplemented, and/or otherwise modified from time to time, the “ Guaranty and Security Agreement ”). Capitalized terms used herein without definition are used as defined in the Guaranty and Security Agreement.

By executing and delivering this Joinder Agreement, the undersigned, as provided in Section 8.6 of the Guaranty and Security Agreement, hereby becomes a party to the Guaranty and Security Agreement as a Grantor thereunder with the same force and effect as if originally named as a Grantor therein and, without limiting the generality of the foregoing, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the undersigned, hereby mortgages, pledges and hypothecates to Agent for the benefit of the Secured Parties, and grants to Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the Collateral of the undersigned and expressly assumes all obligations and liabilities of a Grantor thereunder. The undersigned hereby agrees to be bound as a Grantor for the purposes of the Guaranty and Security Agreement.

The information set forth in Annex 1-A is hereby added to the information set forth in Schedules 1 through 6 to the Guaranty and Security Agreement By acknowledging and agreeing to this Joinder Agreement, the undersigned hereby agrees that this Joinder Agreement may be attached to the Guaranty and Security Agreement and that the Collateral listed on Annex 1-A to this Joinder Amendment shall be and become part of the Collateral referred to in the Guaranty and Security Agreement and shall secure all Secured Obligations of the undersigned.

The undersigned hereby represents and warrants that each of the representations and warranties contained in Article IV of the Guaranty and Security Agreement applicable to it is true and correct in all material respects as of the date hereof as if made on and as of such date (except to the extent they relate to an earlier date, in which case, they are true and correct in all material respects as of such earlier date.

This Joinder Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

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IN WITNESS WHEREOF, THE UNDERSIGNED HAS CAUSED THIS JOINDER AGREEMENT TO BE DULY EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.


[Additional Grantor]

By:
		Name: Title:

A2-2


ACKNOWLEDGED AND AGREED as of the date first above written: [EACH GRANTOR PLEDGING ADDITIONAL COLLATERAL]

By:
		Name: Title:


GOLUB CAPITAL LLC , as Agent

By:
		Name: Title: Duly Authorized Signatory

A2-3

ANNEX 3

GUARANTY AND SECURITY AGREEMENT

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of , 201_, is made by each of the entities listed on the signature pages hereof (each a “ Grantor ” and, collectively, the “ Grantors ”), in favor of Golub Capital LLC (“ Golub Capital ”), as administrative agent (in such capacity, together with its successors and permitted assigns, the “ Agent ”) for the Secured Parties (as defined in the Credit Agreement referred to below) and the other Secured Parties.

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, dated as of October 25, 2013 (as the same may be amended, restated, amended and restated, supplemented and/or modified from time to time, the “ Credit Agreement ”), by and among the PMI Holdings, Inc., a Delaware corporation (the “ Borrower ”), the other Credit Parties, the Lenders and the L/C Issuers from time to time party thereto and Golub Capital, as Agent for the Lenders and the L/C Issuers, the Lenders and the L/C Issuers have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

WHEREAS, each Grantor has agreed, pursuant to a Guaranty and Security Agreement of even date herewith in favor of Agent (as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Guaranty and Security Agreement ”), to guarantee the Obligations (as defined in the Credit Agreement) of the Borrower; and

WHEREAS, all of the Grantors are party to the Guaranty and Security Agreement pursuant to which the Grantors are required to execute and deliver this [Copyright] [Patent] [Trademark] Security Agreement;

Section 1 . Defined Terms . Capitalized terms used herein without definition are used as defined in the Guaranty and Security Agreement.

Section 2 . Grant of Security Interest in [Copyright] [Trademark] [Patent] Collateral . Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges and hypothecates to Agent for the benefit of the Secured Parties, and grants to Agent for the benefit of the Secured Parties a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor (the “ [Copyright] [Patent] [Trademark] Collateral ”):

(a) [all of its Copyrights including, without limitation, those referred to on Schedule 1 hereto;

A3-1

(b) all renewals, reversions and extensions of the foregoing; and

(c) all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof;]

(a) [all of its Patents including, without limitation, those referred to on Schedule 1 hereto;

(b) all reissues, reexaminations, continuations, continuations-in-part, divisionals, renewals and extensions of the foregoing; and

(a) [all of its Trademarks including, without limitation, those referred to on Schedule 1 hereto;

(b) all renewals and extensions of the foregoing;

(c) all goodwill of the business connected with the use of, and symbolized by, each such Trademark; and

(d) all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof;]

provided, however, the [Copyright][Patent][Trademark] Collateral shall not include any Excluded Property.

A3-2

Section 3 . Guaranty and Security Agreement . The security interest granted pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted in conjunction with the security interest granted to Agent pursuant to the Guaranty and Security Agreement and each Grantor hereby acknowledges and agrees that the rights and remedies of Agent with respect to the security interest in the [Copyright] [Patent] [Trademark] Collateral made and granted hereby are more fully set forth in the Guaranty and Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

Section 4 . Grantor Remains Liable . Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with their [Copyrights] [Patents] [Trademarks] and IP Licenses subject to a security interest hereunder.

Section 5 . Counterparts . This [Copyright] [Patent] [Trademark] Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

Section 6 . Governing Law . This [Copyright] [Patent] [Trademark] Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

[SIGNATURE PAGES FOLLOW]

A3-3

IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent] [Trademark] Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.


Very truly yours, [GRANTOR] as Grantor

By:
		Name: Title:


ACCEPTED AND AGREED as of the date first above written: GOLUB CAPITAL LLC , as Agent

By:
		Name: Title: Duly Authorized Signatory

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

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SCHEDULE I

[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT

[Copyright] [Patent] [Trademark] Registrations

1.	REGISTERED [COPYRIGHTS] [PATENTS] [TRADEMARKS]

[Include Registration Number and Date]

2.	[COPYRIGHT] [PATENT] [TRADEMARK] APPLICATIONS

[Include Application Number and Date]

S CHEDULE 1

C OMMERCIAL T ORT C LAIMS

None.

S CHEDULE 2

F ILINGS


C REDIT P ARTY		F ILING
Papa Murphy’s Intermediate, Inc.		Delaware Secretary of State
PMI Holdings, Inc.		Delaware Secretary of State
Papa Murphy’s International LLC		Delaware Secretary of State
Papa Murphy’s Company Stores, Inc		Washington Secretary of State
Papa Murphy’s Worldwide LLC		Delaware Secretary of State
Murphy’s Marketing Services, Inc.		Florida Secretary of State

S CHEDULE 3

J URISDICTION OF O RGANIZATION ; C HIEF E XECUTIVE O FFICE


C REDIT P ARTY	J URISDICTION	O RGANIZATIONAL I D N UMBER	C HIEF E XECUTIVE O FFICE
Papa Murphy’s Intermediate, Inc.	Delaware	4814363	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662
PMI Holdings, Inc.	Delaware	3814836	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662
Papa Murphy’s International LLC	Delaware	3814784	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662
Papa Murphy’s Company Stores, Inc	Washington	602001747	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662
Papa Murphy’s Worldwide LLC	Delaware	4148329	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662
Murphy’s Marketing Services, Inc.	Florida	P10000071270	8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

S CHEDULE 4

L OCATION OF I NVENTORY AND E QUIPMENT


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Intermediate, Inc.		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

PMI Holdings, Inc.		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s International LLC		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s International LLC		Commercial and Records Storage Bluebird Transfer 2500 East 5 ^th Street Vancouver, WA 98661

Papa Murphy’s International LLC		Records Storage Access Storage 7207 N. Leadbetter Road Portland, OR 97203

Papa Murphy’s International LLC		Commercial Storage Crown Moving Co., Inc. 705 SE Victory Avenue, Suite 100 Vancouver, WA

Papa Murphy’s International LLC		Convention Model Store The Wasserstrom Company 2300 Lockbourne Road Columbus, OH 43207

Papa Murphy’s International LLC		Convention Model Store Curtis Equipment, Inc. 555 Shelley Street Springfield, OR 97477

Papa Murphy’s Company Stores, Inc.		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Papa Murphy’s Company Stores, Inc.		Store CO002 2800 West 10th Street Greeley, CO 80634

Papa Murphy’s Company Stores, Inc.		Store CO006 1708 Dublin Boulevard Colorado Springs, CO 80918

Papa Murphy’s Company Stores, Inc.		Store CO008 12158 East Mississippi Avenue Aurora, CO 80012

Papa Murphy’s Company Stores, Inc.		Store CO010 15440 East Hampden Avenue Aurora, CO 80013


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Company Stores, Inc.		Store CO013 18741 Ponderosa Drive, Suite E Parker, CO 80134

Papa Murphy’s Company Stores, Inc.		Store CO017 6350 Sheridan Boulevard, Unit 105A Arvada, CO 80003

Papa Murphy’s Company Stores, Inc.		Store CO019 840 South Prairie Avenue, Suite 2 Pueblo, CO 81005

Papa Murphy’s Company Stores, Inc.		Store CO022 2888 North Powers Boulevard Colorado Springs, CO 80922

Papa Murphy’s Company Stores, Inc.		Store CO024 680 E. 120th Avenue, Suite A Northglenn, CO 80233

Papa Murphy’s Company Stores, Inc.		Store CO029 12650 W. 64th Avenue, Suite D Arvada, CO 80004

Papa Murphy’s Company Stores, Inc.		Store CO030 3782 E. 104th Avenue Thornton, CO 80233

Papa Murphy’s Company Stores, Inc.		Store CO032 18525 East Smokey Hill Road, Suite J Centennial, CO 80015

Papa Murphy’s Company Stores, Inc.		Store CO033 50 W. Littleton Boulevard, Suite 303 Littleton, CO 80120

Papa Murphy’s Company Stores, Inc.		Store CO045 2460 South Academy Boulevard Colorado Springs, CO 80916

Papa Murphy’s Company Stores, Inc.		Store CO046 754 South Perry Street, Unit F Castle Rock, CO 80104

Papa Murphy’s Company Stores, Inc.		Store CO047 1203 North Circle Drive Colorado Springs, CO 80909

Papa Murphy’s Company Stores, Inc.		Store CO055 7669 McLaughlin Road Falcon, CO 80831

Papa Murphy’s Company Stores, Inc.		Store CO058 1617 West US Highway 50 Pueblo, CO 81008

Papa Murphy’s Company Stores, Inc.		Store CO059 3301 North Tower Road Aurora, CO 80011 (Wal-Mart Store #5334)

Papa Murphy’s Company Stores, Inc.		Store CO064 1725 Sheridan Boulevard, Unit C Edgewater, CO 80214


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Company Stores, Inc.		Store CO070 11614 W. Belleview Avenue, Suite N Littleton, CO 80127

Papa Murphy’s Company Stores, Inc.		Store CO073 300 East Highway 24, Unit B Woodland Park, CO 80863

Papa Murphy’s Company Stores, Inc.		Store CO083 9231 E. Lincoln Avenue Lonetree, CO 80124

Papa Murphy’s Company Stores, Inc.		Store ID005 920 Caldwell Boulevard Nampa, ID 83651

Papa Murphy’s Company Stores, Inc.		Store ID011 2707 10th Avenue South Caldwell, ID 83605

Papa Murphy’s Company Stores, Inc.		Store ID022 2418 12th Avenue Road Nampa, ID 83686

Papa Murphy’s Company Stores, Inc.		Store ID027 1545 Linder Road Kuna, ID 83634

Papa Murphy’s Company Stores, Inc.		Store KS010 2110 North Maize Road, Suite 100 Wichita, KS 67212

Papa Murphy’s Company Stores, Inc.		Store KS013 9747 East 21st Street North Wichita, KS 67206

Papa Murphy’s Company Stores, Inc.		Store KS014 1636 North Rock Road, Suite 400 Derby, KS 67037

Papa Murphy’s Company Stores, Inc.		Store KS028 13303 West Maple Street, Suite 127 Wichita, KS 67235

Papa Murphy’s Company Stores, Inc.		Store KS029 229 N. Andover Road, Suite 700 Andover, KS 67002

Papa Murphy’s Company Stores, Inc.		Store KS031 1410 S. Kansas Avenue, Suite 1200 Newton, KS 67114

Papa Murphy’s Company Stores, Inc.		Store KS034 2712 S. Seneca Street Wichita, KS 67217

Papa Murphy’s Company Stores, Inc.		Store KS036 4813 E. Central Avenue Wichita, KS 67208

Papa Murphy’s Company Stores, Inc.		Store KS039 2348 W. Central Avenue El Dorado, KS 67042


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Company Stores, Inc.		Store MI009 5311 Eastern Avenue SW Kentwood, MI 49508

Papa Murphy’s Company Stores, Inc.		Store MI014 809 S. Beacon Boulevard Grand Haven, MI 49417

Papa Murphy’s Company Stores, Inc.		Store MI018 5751 Byron Center Avenue SW Wyoming, MI 49519

Papa Murphy’s Company Stores, Inc.		Store MI026 5210 Northland Drive NE Grand Rapids, MI 49525

Papa Murphy’s Company Stores, Inc.		Store MI030 3355 Henry Street, Suite H Muskegon, MI 49441

Papa Murphy’s Company Stores, Inc.		Store MI031 1239 Leonard Street NE Grand Rapids, MI 49505

Papa Murphy’s Company Stores, Inc.		Store MI042 650 Baldwin Street Jenison, MI 49428

Papa Murphy’s Company Stores, Inc.		Store MN012 10604 France Avenue South, Suite B Bloomington, MN 55431

Papa Murphy’s Company Stores, Inc.		Store MN021 8471 East Point Douglas Road South Cottage Grove, MN 55016

Papa Murphy’s Company Stores, Inc.		Store MN023 15052 Gleason Path Apple Valley, MN 55124

Papa Murphy’s Company Stores, Inc.		Store MN030 8507 Lyndale Avenue South Bloomington, MN 55420

Papa Murphy’s Company Stores, Inc.		Store MN037 7455 Currell Boulevard Woodbury, MN 55125

Papa Murphy’s Company Stores, Inc.		Store MN038 15043 Crestone Avenue Rosemount, MN 55068

Papa Murphy’s Company Stores, Inc.		Store MN047 172 Tyler Road South Red Wing, MN 55066

Papa Murphy’s Company Stores, Inc.		Store MN056 1771 Market Boulevard Hastings, MN 55033

Papa Murphy’s Company Stores, Inc.		Store MN088 20190 Heritage Drive Lakeville, MN 55044


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Company Stores, Inc.		Store MN089 7017 10th Street North Oakdale, MN 55128

Papa Murphy’s Company Stores, Inc.		Store NM003 2800 Coors Boulevard NW Albuquerque, NM 87120

Papa Murphy’s Company Stores, Inc.		Store NM014 200 Tramway Blvd SE Albuquerque, NM 87123 (Smith’s Store #427)

Papa Murphy’s Company Stores, Inc.		Store NM018 1000 Rio Rancho Drive SE Albuquerque, NM 87124 (Smith’s Store #413)

Papa Murphy’s Company Stores, Inc.		Store NM019 8400 Menaul Boulevard NE, Suite G Albuquerque, NM 87112

Papa Murphy’s Company Stores, Inc.		Store NM029 2839 Carlisle Boulevard NE, Suite 110 Albuquerque, NM 87110

Papa Murphy’s Company Stores, Inc.		Store NM031 1121 Unser Blvd SE Rio Rancho, NM 87124

Papa Murphy’s Company Stores, Inc.		Store OR004 5541 SW Beaverton-Hillsdale Highway Portland, OR 97221

Papa Murphy’s Company Stores, Inc.		Store OR042 1503 North Pacific Highway Woodburn, OR 97071

Papa Murphy’s Company Stores, Inc.		Store OR055 4350 SW Multnomah Boulevard Portland, OR 97219

Papa Murphy’s Company Stores, Inc.		Store WA082 3404 Kitsap Way Bremerton, WA 98312

Papa Murphy’s Company Stores, Inc.		Store WA087 1468 Olney Street SE, Suite 105 Port Orchard, WA 98366

Papa Murphy’s Company Stores, Inc.		Store WA100 4213 Wheaton Way Bremerton, WA 98310

Papa Murphy’s Company Stores, Inc.		Store WA132 6715 NE 63rd Street, Suite 105 Vancouver, WA 98661

Papa Murphy’s Company Stores, Inc.		Store WA147 2220 Bucklin Hill Road, Suite 102 Silverdale, WA 98383

Papa Murphy’s Company Stores, Inc.		Store WI055 955 Mutual Way Appleton, WI 54913 (Wal-Mart Store #1982)


C REDIT P ARTY		L OCATION OF I NVENTORY AND E QUIPMENT
Papa Murphy’s Company Stores, Inc.		Store WI071 2304 South Main Street, Suite 7 Rice Lake, WI 54868

Papa Murphy’s Company Stores, Inc.		Equipment in Storage State Line Storage 200 State Line Road Temperance, MI 48182

Papa Murphy’s Company Stores, Inc.		Equipment in Storage Mini U Storage 5980 Sheridan Boulevard Arvada, CO 80003

Papa Murphy’s Company Stores, Inc.		Equipment in Storage Van Mall Storage 4214 NE 72 ^nd Avenue Vancouver, WA 98661

Papa Murphy’s Worldwide LLC		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

Murphy’s Marketing Services, Inc.		Corporate Office 8000 N.E. Parkway Drive, Suite 350 Vancouver, WA 98662

S CHEDULE 5

P LEDGED C OLLATERAL

(A) A LL P LEDGED C ERTIFICATED S TOCK :


E NTITY	O WNED B Y	P ERCENTAGE OF P LEDGED I NTEREST			C ERTIFICATE N UMBER		N UMBER OF S HARES
PMI Holdings, Inc.	Papa Murphy’s Intermediate, Inc.		100	%		1		1,000
Papa Murphy’s Company Stores, Inc.	PMI Holdings, Inc.		100	%		3		500
Papa Murphy’s International LLC	Papa Murphy’s Company Stores, Inc.		100	%		N/A		N/A
Papa Murphy’s Worldwide LLC	Papa Murphy’s International LLC		100	%		N/A		N/A
Murphy’s Marketing Services, Inc.	Papa Murphy’s Company Stores, Inc.		100	%		1		1,000
PMI Canada ULC	Papa Murphy’s Worldwide LLC		66 1/3	%		2		666.33

(B) P LEDGED D EBT I NSTRUMENTS :

Promissory Note dated August 18, 2009 issued by Pizza Masters of Illinois, Inc. to Papa Murphy’s Company Stores, Inc. in the amount of $492,000, as amended by First Amendment to Promissory Note dated September 31, 2013.

Promissory Note dated December 15, 2009 issued by Ananda Holdings Ltd. to PMI Canada, ULC in the amount of $1,000,000 (CAD), as amended and assigned to Papa Murphy’s Worldwide LLC by Amendment and Assignment to Promissory Note dated March 13, 2012.

Replacement Promissory Note dated as of June 7, 2012 issued as replacement for that certain Promissory Note dated May 25, 2011, as amended by Amendment to Promissory Note dated June 1, 2011, issued by Ken Calwell to Papa Murphy’s International LLC in the amount of $547,949.

$15,000,000 Revolving Promissory Note dated as of December 15, 2011 by and among Papa Murphy’s Company Stores, Inc., Papa Murphy’s International LLC and Papa Murphy’s Canada LLC as Borrower and PMI Holdings, Inc. as Lender.

None.

S CHEDULE 6

I NTELLECTUAL P ROPERTY

Trademarks whose record owner is Papa Murphy’s International LLC:


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
UNITED STATES

A FRESH WAY OF MAKING PIZZA	Words	2,736,495	7/15/03	Unbaked pizza prepared for off-premises baking and consumption (IC030)

C.Y.O. CREATE YOUR OWN		85/938889* Serial No.	5/21/2013 Application Date	Retail store services featuring pizza (IC035)

CINNAMURPH	Words	86/033103* Serial No.	8/8/2013 Application Date	Desserts prepared for off premises baking and consumption. Retail store services featuring desserts (IC030, IC035)

CINNAWEEKEND	Words	86/033109* Serial No.	8/8/2013 Application Date	Desserts prepared for off premises baking and consumption. Retail store services featuring desserts (IC030, IC035)

deLITE		2,186,254	9/1/98	Unbaked pizza prepared for off-premises baking and consumption (IC030)

DELITE	Words	3,339,186	11/20/07	Unbaked pizza prepared for off-premises baking and consumption (IC030)

FAVES	Words	85/920760* Serial No.	5/1/2013 Application Date	Unbaked pizza prepared for off-premises baking and consumption Retail store services featuring pizza (IC030, IC035)

HAND MADE HOME BAKED	Words	2,815,887 Supp Reg	2/17/04	Unbaked pizza prepared for off-premises baking and consumption (IC030)

HANDMADE HOME BAKED	Words	4,137,870	5/8/2012	Unbaked pizza prepared for off-premises baking and consumption (IC030)

HANDMADE HOME BAKED	Words	4,145,311	5/22/2012	Retail Store services featuring pizza (IC035)

HEARTBAKER	Words	4,222,983	10/9/2012	Unbaked pizza prepared for off-premises baking and consumption (IC030)

JOIN THE TAKE ‘N’ BAKE REVOLUTION	Words	4,157,809	6/12/2012	Unbaked pizza prepared for off-premises baking and consumption (IC030)

LITTLE BIG FRESH PAN COOKIE	Words	86/033116*	8/8/2013	Desserts prepared for off premises baking and consumption. Retail store services featuring desserts (IC030, IC035)

MAKE IT A MEAL	Words	3,676,208	9/1/09	Retail Store services featuring pizza (IC035)

MINI MURPH	Words	85,451,478*	10/19/2011	Unbaked pizza prepared for off-premises baking and consumption (IC030)


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
OPEN OVEN DESIGN		3,211,275	2/20/07	Retail Store services featuring pizza (IC035)

OPEN OVEN DESIGN B&W		3,405,204	4/1/08	Food products, specifically unbaked pizza and calzone, prepared for off-premises baking and consumption (IC030)

PAPA ALDO’S	Words	1,837,441	5/24/94	Uncooked pizza, pastas, sauces, spices, lasagna and cookie dough (IC030)

PAPA MURPHY’S	Words	1,983,341	7/2/96	Unbaked pizza prepared for off-premises baking and consumption (IC030)

PAPA MURPHY’S PIZZA (black & white with design)		3,961,116	5/17/2011	Retail store services featuring pizza. (IC035)

PAPA MURPHY’S PIZZA (color with design)		4,131,041	4/24/2012	Retail store services featuring pizza. (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (standard characters)	Words	3,148,464	9/26/06	Retail store services featuring pizza. (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (stylized and/or with design)		3,148,456	9/26/06	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (with design)		3,148,457	9/26/06	Retail store services featuring pizza. (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (stylized and/or with design)		3,148,460	9/26/06	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (stylized and/or with design)		3,148,461	9/26/06	Retail store services featuring pizza. (IC035)


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA (stylized and/or with design)	Words	3,192,303	1/2/07	Precut vegetable salads, namely garden salads, club salads, Caesar salads and Italian salads (IC029) Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

PAPA’S FAVORITE	Words	1,447,787	7/14/87	Pizza for consumption off the premises.

PAPA-RONI	Words	2,924,995	2/8/05	Unbaked pizza prepared for off-premises cooking and consumption (IC030)

WE CAN DO THAT	Words	3,518,907	10/21/08	Retail store services featuring pizza (IC035)

AUSTRALIA

PAPA MURPHY’S	Words	1199578	5/28/2008	Bakery products and pre-prepared meals, including pizza,, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC030) Retail sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA & Design		1199577	5/28/2008	Bakery products and pre-prepared meals, including pizza,, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC030) Retail sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC035)

BAHRAIN

PAPA MURPHY’S		TM94380*	10/21/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

CANADA

HEARTBAKER	Words	TMA856,011	9/22/2011	Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off- premises baking and consumption.


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
PAPA MURPHY’S	Words	TMA674,442	10/6/2006	Pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls. Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls.

PAPA MURPHY’S	Words	TMA504,251	11/18/1998	Fresh pizza, fresh lasagna and fresh calzones

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA		TMA674,152	10/4/2006	Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off- premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls.

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA		TMA674,167	10/4/2006	Pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls. Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls.

COMMUNITY TRADEMARK (EUROPEAN UNION)

PAPA MURPHY’S PIZZA	Words	012110037*	9/3/2013	Advertising signs of paper or cardboard; paper; paper bags; paper boxes; cardboard boxes; printed matter; printed packaging materials of paper; printed paper labels; printed paper signs; printing paper; printed publications; stationery; paper, cardboard and goods made from these materials, not included in other classes; plastic material for packaging (IC016) Flour and preparations made from cereals; pizzas; pizza bases; pizza dough; pizza sauces; pizza flour; pizza mixes; prepared pizza meals; preparations for making pizza bases; chilled pizzas; frozen pizzas; fresh pizzas; uncooked pizzas; pizza spices; pizza crusts; bakery products and pre-prepared meals, including pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagne; salads; cheese bread; cookie dough; cookies; cinnamon rolls; baked goods, confectionery, chocolate and desserts; dessert pizzas (IC030)


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
				Retail services in connection with flour and preparations made from cereals, pizzas, pizza bases, pizza dough, pizza sauces, pizza flour, pizza mixes, prepared pizza meals, preparations for making pizza bases, chilled pizzas, frozen pizzas, fresh pizzas, uncooked pizzas, pizza spices, pizza crusts, calzones, lasagne, salads, cheese bread, cookie dough, cookies and cinnamon rolls, bakery products and pre-prepared meals, including pizza, namely, unbaked pizza prepared for off-premises baking and consumption; administration of the business affairs of franchises; advice in the running of establishments as franchises; advisory services (business -) relating to the establishment of franchises; advisory services (business -) relating to the operation of franchises; advisory services relating to publicity for franchisees; assistance in business management within the framework of a franchise contract; assistance in franchised commercial business management; assistance in product commercialization, within the framework of a franchise contract; business assistance relating to the establishment of franchises; provision of assistance [business] in the establishment of franchises; provision of assistance [business] in the operation of franchises (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA		012110052*	9/3/2013	Advertising signs of paper or cardboard; paper; paper bags; paper boxes; cardboard boxes; printed matter; printed packaging materials of paper; printed paper labels; printed paper signs; printing paper; printed publications; stationery; paper, cardboard and goods made from these materials, not included in other classes; plastic material for packaging (IC016) Flour and preparations made from cereals; pizzas; pizza bases; pizza dough; pizza sauces; pizza flour; pizza mixes; prepared pizza meals; preparations for making pizza bases; chilled pizzas; frozen pizzas; fresh pizzas; uncooked pizzas; pizza spices; pizza crusts; bakery products and pre-prepared meals, including pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagne; salads;


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
				cheese bread; cookie dough; cookies; cinnamon rolls; baked goods, confectionery, chocolate and desserts; dessert pizzas (IC030) Retail services in connection with flour and preparations made from cereals, pizzas, pizza bases, pizza dough, pizza sauces, pizza flour, pizza mixes, prepared pizza meals, preparations for making pizza bases, chilled pizzas, frozen pizzas, fresh pizzas, uncooked pizzas, pizza spices, pizza crusts, calzones, lasagne, salads, cheese bread, cookie dough, cookies and cinnamon rolls, bakery products and pre-prepared meals, including pizza, namely, unbaked pizza prepared for off-premises baking and consumption; administration of the business affairs of franchises; advice in the running of establishments as franchises; advisory services (business -) relating to the establishment of franchises; advisory services (business -) relating to the operation of franchises; advisory services relating to publicity for franchisees; assistance in business management within the framework of a franchise contract; assistance in franchised commercial business management; assistance in product commercialization, within the framework of a franchise contract; business assistance relating to the establishment of franchises; provision of assistance [business] in the establishment of franchises; provision of assistance [business] in the operation of franchises (IC035)

KINGDOM OF SAUDI ARABIA

PAPA MURPHY’S		182943*	6/5/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

KUWAIT

PAPA MURPHY’S		130459*	5/27/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
MEXICO

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA	Words	961633	2/17/2006	Servicios de comercializacion de productos alimenticios preparados para ser cocinados en casa, servicios de tiendas de comida preparada. (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA		975745	2/17/2006	Servicios de comercializacion de productos alimenticios preparados para ser cocinados en casa, servicios de tiendas de comida preparada. (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA	Words	950748	2/17/2006	Calzones, roles de canela; galletas, pizzas, pasta, calzone, pizzas dulce y pasteles preparado para hornear (IC030)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA		950749	2/17/2006	Calzones, roles de canela; galletas, pizzas, pasta, calzone, pizzas dulce y pasteles preparado para hornear (IC030)

NEW ZEALAND

PAPA MURPHY’S	Words	775967	11/13/2008	Pizza,, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC030) Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC035)

PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA & Design		775977	9/17/2007	Pizza,, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC030) Retail store services featuring the sale of pizza, namely, unbaked pizza prepared for off-premises baking and consumption; calzones; lasagna; salads; cheese bread; cookie dough; and cinnamon rolls (IC035)

OMAN

PAPA MURPHY’S		75015*	6/26/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

QATAR

PAPA MURPHY’S		75220*	6/6/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)


Mark	Example	Registration/ Application No.	Registration/ Application Date	For
UNITED ARAB EMIRATES

PAPA MURPHY’S		174511*	5/31/2012	Food products, specifically, unbaked pizza, calzones, dessert pizza, cinnamon rolls, and cookies, prepared for off-premises baking and consumption. (IC030)

*	Registration is pending. Serial number and filing date provided.

Exhibit 10.6

Papa Murphy’s International LLC

Franchise Agreement

Table of Contents


			Page
1.	DEFINITIONS			1
	1.1	“Franchised Business”		1
	1.2	“Internet”		1
	1.3	“Manual”		1
	1.4	“Marks”		1
	1.5	“Methods of Operation”		2
	1.6	“Multi-Area Marketing Programs”		2
	1.7	“Net Sales”		2
	1.8	“Transfer”		2

2.	GRANT OF FRANCHISE; TRAINING			2
	2.1	Grant of Franchise and Customer Solicitation Limitations		2
	2.2	Reservation of Rights		3
	2.3	Initial Training and Test Period		4
	2.4	Additional Training		5
	2.5	Duty to Maintain Computer Skills		5
	2.6	Franchise Advisory Board		5

3.	SITE SELECTION, PLANS AND CONSTRUCTION			5
	3.1	Site Selection Area		5
	3.2	Site Selection		6
	3.3	Our Approval of a Lease or Purchase Agreement		6
	3.4	Permits and Licenses		7
	3.5	Design Plan for Your Franchised Location		7
	3.6	Construction of Your Franchised Location		7
	3.7	Timing for Construction		8
	3.8	Timing for Opening the Franchised Business		8
	3.9	Relocation of Franchised Location		9

4.	FEES AND OTHER FINANCIAL AND MARKETING REQUIREMENTS			9
	4.1	Franchise Fees		9
	4.2	Royalty and Services Fee		9
	4.3	Advertising Fee and Advertising Requirements		9
	4.4	Local Marketing		10
	4.5	Multi-Area Marketing and Cooperative Advertising		11
	4.6	Manner of Payment and Reports		11
	4.7	Records		12
	4.8	Audits		13
	4.9	Application of Payments; Setoff; Security Interest		14


		i		March 2014


	4.10	Vendor and Supplier Payments	14
	4.11	Bookkeeping and Payroll Services	14
	4.12	Third Party Programs	14

5.	YOUR DUTIES		14
	5.1	Time to Complete Training and Commence Operation	14
	5.2	Permits, Licenses, and Laws	14
	5.3	Uniformity and Image	15
	5.4	Specifications and Standards	15
	5.5	Operations	15
	5.6	Right of Entry and Inspection	15
	5.7	Uniforms	16
	5.8	Upgrade, Refurbish and Replacement	16
	5.9	Computer and Communication Systems	16
	5.10	Approved Products	16
	5.11	Personal Participation	17
	5.12	Other Operating Standards	17
	5.13	Marks and Internet	18
	5.14	Manual and Methods of Operation	19
	5.15	Confidential Information	20
	5.16	Covenants Not to Compete	20
	5.17	Notice of Court or Government Action	21
	5.18	Compliance with Anti-Terrorism Laws	21
	5.19	Franchise Convention	22

6.	CONTINUATION OF ABILITY TO OPERATE, TERMINATION AND STEP-IN RIGHTS		22
	6.1	Continuing to Operate Beyond this Agreement	22
	6.2	Termination by You	23
	6.3	Termination by Us	23
	6.4	Effect of Termination	25
	6.5	Our Step-In Rights	26
	6.6	Interim Period	27

7.	TRANSFER		28
	7.1	Sale or Assignment by You	28
	7.2	Your Death or Disability	31

8.	INDEMNITY, INSURANCE, CONDEMNATION AND CASUALTY		31
	8.1	Indemnification	31
	8.2	Insurance	31
	8.3	Condemnation and Casualty	33

9.	NOTICE AND MISCELLANEOUS		33
	9.1	Notices	33
	9.2	Relationship of Parties	34
	9.3	Non-Waiver of Rights	34


		ii		March 2014


	9.4	Risk of Operations	35
	9.5	Severability	35
	9.6	Interpretation and Execution	35
	9.7	Modification	36
	9.8	Representations and Warranties by Franchise Owner	36
	9.9	Negotiation and Mediation	36
	9.10	Waiver of Rights	36
	9.11	Injunction, Enforcement, Costs and Venue	37
	9.12	Attorneys’ Fees	37
	9.13	Binding Effect	37
	9.14	Independent Investigation	37
	9.15	Our Acceptance	38
	9.16	Counterparts	38
	9.17	Time of Essence	38

10.	FRANCHISE OWNER INFORMATION.		38
	10.1	Managing Owner	38
	10.2	Statement of Ownership	38
	10.3	Financial Records	39

Attachments:


		iii		March 2014

FRANCHISE AGREEMENT

This Franchise Agreement (“ Agreement ”) is entered into and effective , (“ Effective Date ”) between Papa Murphy’s International LLC , a Delaware limited liability company, located at 8000 NE Parkway Drive, Suite 350, Vancouver, Washington 98662 (“ we ” “ us ” or “ our ”), and the person(s) listed as the Franchise Owner on the signature block of this Agreement (“ Franchise Owner, ” “ you ” or “ yours ”).

WHEREAS , we have developed a unique system for establishing and operating pizza stores under the service mark “Papa Murphy’s ^® ” and other related marks; and

WHEREAS , we grant franchises for the operation of Papa Murphy’s Take ‘N’ Bake Pizza stores to qualified candidates who are willing to adhere to our Methods of Operation and quality standards; and

WHEREAS , you desire to operate a Papa Murphy’s Take ‘N’ Bake Pizza store in compliance with our Methods of Operation and quality standards.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.	DEFINITIONS

1.1 “Franchised Business” means all business conducted at, through, or in relation to your Papa Murphy’s Take ‘N’ Bake Pizza store.

1.2 “Internet” means any of one or more local or global interactive communications media that is now available, or that may become available, and includes websites, domain names, social media, and any other existing or future form of electronic communication or commerce. Unless the context otherwise indicates, Internet includes methods of accessing limited access electronic networks, such as Intranets, Extranets, and wide area networks.

1.3 “Manual” means our confidential: (i) manual or manuals, and (ii) any Intranet, Extranet, or password protected portion of an Internet site that contain manual(s) or other embodiments of the Methods of Operation, and (iii) any embodiment of the Methods of Operation, including notices of new standards and techniques, and (iv) any amendments, supplements, derivative works, and replacements, whether embodied in electronic or other media.

1.4 “Marks” means our trade names, trademarks, service marks, logos, décor, trade dress, layout, and commercial symbols, and similar and related words, symbols or designs, now or in the future associated with us, you, the Methods of Operation or the Franchised Business, whether or not they are registered, including, but not limited to, “Papa Murphy’s ^® ,” “Papa Murphy’s Take ‘N’ Bake ^® ” and “Papa Murphy’s Take ‘N’ Bake Pizza ^® .”


		1		March 2014

1.5 “Methods of Operation” means, collectively, our valuable know-how, information, trade secrets, methods, Manual, standards, designs, usage of the Marks, copyrighted works, products and service sources and specifications, proprietary software, confidential electronic and other communications, methods of Internet usage, marketing programs, and research and development connected with the operation and promotion of the Franchised Business, as modified by us at any time. All such modifications become our property.

1.6 “Multi-Area Marketing Programs” means regional, national, or international programs designed to increase business or generate awareness and brand recognition for us and the franchise system; including multi-area customer, regional customer, national customer, commercial customer, Internet, social media, event, yellow pages, directory, affinity, vendor, stored value cards, gift cards, and any other program offered or produced, and co-branding programs.

1.7 “Net Sales” means the gross amount, whether in money or other form of consideration, earned or received by you from any source in connection with the operation of the Franchised Business or with any similar or related activity, whether on or off your business premises, and whether for goods, services or promotions, excluding only sales tax receipts that you must by law collect from customers and that you actually pay to the government, and any customer refunds paid. If you participate in certain online marketing programs in which a third party vendor accepts payment on your behalf in exchange for the sale of discount coupons, you must report Net Sales from such activity at the earlier of (a) the day a coupon is used to pay for goods or services from your Franchised Business, or (b) within 180 days of the day you receive cash payment from the third party vendor.

1.8 “Transfer” means to voluntarily or involuntarily transfer, assign, sell, or encumber any interest in or ownership or control of, the Franchised Business, substantial assets of the Franchised Business, of this Agreement or any interest in the legal entity, which owns the Franchised Business, including any change or series of changes in the percentage of the franchise owner entity which is owned, directly or indirectly, by any principal owner which results in any addition or deletion of any person or entity.

2.	GRANT OF FRANCHISE; TRAINING

2.1 Grant of Franchise and Customer Solicitation Limitations .

(a) If this is our first franchise agreement with you (the “ Initial Franchise Agreement ”), we grant to you a non-exclusive license to operate the Franchised Business at a specific location, using the Marks and Methods of Operation for ten years from the Commencement Date of this Agreement, unless terminated earlier under this Agreement. The “ Commencement Date ” shall be the first date the franchise premises opens for business. This grant is for your operation of one Papa Murphy’s Take ‘N’ Bake Pizza store at the location identified in Attachment A if such location has been identified at the time of execution of this Agreement. If the location has not been identified at the time of execution of this Agreement, the general location in which the Franchised Business may be located is identified in Attachment A . At or before the time the lease for the franchise premises is signed, the specific address will be added to Attachment A . You must obtain our prior written approval for the site of the franchise premises.


		2		March 2014

(b) If this Agreement with you is other than the Initial Franchise Agreement (in which event this is a “ Successive Franchise Agreement ”), we grant to you a non-exclusive license to operate the Franchised Business at its current location, using the Marks and Methods of Operation for five years from the expiration date of your prior Franchise Agreement, unless terminated earlier under this Agreement.

(c) You may not relocate the Franchised Business without our prior written approval as set forth in Section 3.9 of this Agreement.

(d) If you are a legal entity, each of your owners must sign the Owner Agreement and Guaranty for All Entity Franchise Owners in the form attached as Attachment B .

(e) You may not do business, solicit customers, or place advertisements by means, or using electronic or other media (including the Internet), that primarily reach persons outside your regional advertising (or local cooperative, if applicable) area, except with our prior written consent or by following the requirements of the Manual.

2.2 Reservation of Rights . You will not receive an exclusive territory or any protected area and we expressly reserve the following rights:

(a) We may establish company-owned or franchised operations using our Methods of Operation, trade names or trademarks, including one or more of the Marks, that will compete with you, at any location we select;

(b) We may offer and sell food products or other products, including products ready for immediate consumption, under the Marks or any other marks, through retail food stores, convenience stores, hotel shops, kiosks, theatres, malls, airports, gas stations, college campuses, or other non-traditional venues, at other retail locations, at special events or through any other channels of distribution, including other restaurants, mail order, catalog sales, over the Internet, and retail or government/military channels. The Internet is a channel of distribution reserved exclusively to us, and you may not independently market on the Internet, establish or operate your own website, accept online orders through any website or other form of e-commerce other than a website operated by us or conduct any other form of e-commerce. You may not, utilize social media sites or other forms of electronic communication to promote your Franchised Business. We may choose to direct or control use of social media sites and other electronic media;

(c) We may purchase or be purchased by, or merge or combine with, competing businesses wherever located, including a chain of company-owned or franchised locations that competes directly with your Franchised Business;

(d) We may offer franchises in the future, and have done so in the past, on terms we deem appropriate, including terms that differ from this Agreement; and


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(e) We may conduct Multi-Area Marketing Programs anywhere. We reserve the right to determine all policies and practices related to Multi-Area Marketing Programs, including the right to set maximum resale prices to the extent permitted by law.

2.3 Initial Training and Test Period .

(a) If this is your first Franchised Business, you or, if you are a legal entity, your designated owner, will work in an existing Papa Murphy’s store for approximately 30 hours within 30 days of the Effective Date of this Agreement, as a mutual test period (“ Phase 1 ”). Phase 1 will expire upon the earlier of the completion of the 30 hours or the expiration of the 30-day period, whichever occurs first. You will not be paid or insured, and will be subject to this Agreement, including but not limited to provisions related to indemnity, confidentiality, and noncompetition.

(b) You or we may decide for any reason to terminate this Agreement at any time during Phase 1. If you terminate this Agreement during Phase 1, we will return the Initial Franchise Fee, subject to compliance with this Section 2.3, less $5,000. If we terminate this Agreement during Phase 1, we will return the entire Initial Franchise Fee.

(c) If this is your first Franchised Business pursuant to a transfer agreement, and you terminate during Phase 1, we will return the Transfer Fee (as defined in Section 7.1(a)), less $5,000. If the Transfer Fee is less than $5,000, we will retain the entire fee. If this is your first Franchised Business pursuant to a transfer agreement, and we terminate during Phase 1, we will return the entire Transfer Fee.

(d) In the event either party is going to terminate pursuant to this Section, notice must be received during or within five days after Phase 1 and must be delivered in accordance with Section 9.1.

(e) In the case of termination by either party, you will be bound by, and must confirm before receiving your refund, your post-termination obligations, including but not limited to confidentiality, noncompetition, indemnity and mutual releases. You must also sign a Termination and Mutual Release Agreement releasing us from all claims.

(f) Phases 1 through 5 of the training program are mandatory. You will perform Phase 2 of the training program on your own. We will provide Phase 3 of the training program in a designated certified training store. Phase 5 of the training program will be held at our corporate headquarters in Vancouver, Washington. This training course will cover the operation of a Papa Murphy’s Take ‘N’ Bake Pizza store, including financial controls, marketing techniques, service methods, deployment of labor, and maintenance of quality standards. Phase 4 of the training program will be held either at our corporate headquarters or at a certified training site as designated by us. Phase 6 of the training program is optional. You will be responsible for travel, accommodations, meals and other expenses for all training.

(g) If you do not successfully complete Phase 2, Phase 3, Phase 4 or Phase 5 of the training program, we may terminate this Agreement and we will retain your Initial Franchise Fee.


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(h) All stores must be managed by a trained owner or a Certified Manager (“ Certified Manager ”). A Certified Manager is a manager or other employee who has received in-store training from the franchise owner in accordance with the In-Store Training Workbook and has successfully completed the Papa Murphy’s Basic Manager’s Class. Basic Manager’s Classes are offered by us at no additional expense to you, but you will be responsible for paying all costs associated with the manager or other employee’s attendance as well as all wages and benefits of the manager or other employee earned during the Basic Manager’s Class.

(i) You must successfully complete the mandatory training program no later than four weeks before opening for business. You must successfully complete each phase of the mandatory training program or we may revoke this Agreement and retain the Initial Franchise Fee.

2.4 Additional Training . You and your manager must complete to our satisfaction any additional or advanced training or attend any regional meetings we may at any time require. You will be responsible for the cost of any additional training on the PMI Enterprise Solution. All other training will be provided at no cost to you, other than any necessary travel, accommodations, meals, and other expenses which will be at your sole cost and expense.

2.5 Duty to Maintain Computer Skills . You must at all times have sufficient computer skills to operate your computer, understand how to utilize the software, and access email, the Internet, and our database management and Intranet system. If we determine that you require additional computer training, we will advise you in writing regarding the nature of the additional training required, and you will have 90 days to complete such training at a local computer training school at your expense. We reserve the right to designate the computer training school which you must attend. At the end of the training program, you must show us a certificate acceptable to us to prove that you passed the training course.

2.6 Franchise Advisory Board . A Franchise Advisory Board (“ FAB ”) has been formed and shall be utilized by us to gather input and advice from the franchise community on key initiatives and business issues. The FAB serves in an advisory capacity only. Members of the FAB are franchise owners elected by the franchise community or appointed by us. The purpose of the FAB is to encourage open communication and cooperation between us and our franchise owners. We may, as we deem necessary, create ad hoc committees to provide insight and advice on particular topics.

3.	SITE SELECTION, PLANS AND CONSTRUCTION

3.1 Site Selection Area . The site selection area (“ Site Selection Area ”) designated by us is described in Attachment A . Unless otherwise approved by us, you must obtain a site for your Franchised Business (“ Franchised Location ”) within the Site Selection Area. You will not have any exclusive rights to the Site Selection Area.


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3.2 Site Selection .

(a) You assume all cost, liability, expense and responsibility for locating, presenting for our prior review, securing and developing a site for the Franchised Business within the Site Selection Area. In fulfilling your responsibility, you may consult with real estate and other professionals identified by us. Our evaluation of a prospective site and the providing of assistance in the selection of a site does not mean that we represent, promise, warranty or guarantee that a Franchised Business operated at that site will be profitable or otherwise successful. You also assume all cost, liability, expense and responsibility for constructing and equipping the Franchised Business at the Franchised Location. You may not make any binding commitment to a prospective vendor or landlord with respect to a site for the Franchised Business until the site is reviewed, evaluated, and approved in accordance with this Section 3.

(b) Prior to securing a site for the Franchised Business by lease or purchase, you, with our site selection assistance, must locate a site that is approved by us.

(i) You must submit to us, in writing, in the form we specify, a description of the proposed site. You will complete a Site Submission Package as detailed in the Manual at least 20 days prior to executing your lease. This package will contain information that you prepare about your proposed site, proposed economics of the deal and other relevant information about your trade area. The Site Submission Package must be submitted with such other information and materials as we may reasonably require, including a letter of intent or other evidence satisfactory to us that confirms your favorable prospects for obtaining the proposed site and the landlord’s willingness to sign the Addendum to Lease attached to this Agreement as Attachment C . We will review and approve your proposed site based on this and other information in our sole and absolute discretion.

(ii) We will have 20 days after receipt of the Site Submission Package and additional information and materials to approve or disapprove the proposed site as the location for the Franchised Business. No site may be used for the location of the Franchised Business unless it is first reviewed, evaluated, and approved in writing by us, and any objections are resolved by you to our satisfaction. If within 20 days after submission of the Site Submission Package, we have not advised you in writing that the proposed site is disapproved, the proposed site will be deemed approved by us for you to use.

(iii) After a site for the Franchised Business is approved by us and acquired by you, the site shall be described as the Franchised Location in Attachment A .

3.3 Our Approval of a Lease or Purchase Agreement . If you purchase the Franchised Location, you must submit a copy of the proposed contract of sale to us for our review 20 days prior to your signing the contract and you must furnish to us a copy of the contract of sale within 10 days after the contract is signed by all parties. If you lease the Franchised Location, you must submit a copy of the proposed lease to us for our review 20 days prior to signing the lease and you must furnish to us a copy of the lease within 10 days after the lease is signed by all parties. Any lease for a Franchised Location must include an Addendum to the Lease between you and the landlord in substantially the form attached as Attachment C . We will have 10 days after receipt of the proposed lease or the proposed contract of sale to review and evaluate the contract or the lease and outline required revisions.


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3.4 Permits and Licenses . You are responsible for obtaining all zoning classifications, permits, variances, certificates of occupancy and clearances, that may be required by state or local laws, ordinances or regulations or that may be necessary as a result of any restrictive covenants, reciprocal easement agreement, or other similar documentation relating to the Franchised Location. Prior to beginning construction of the Franchised Business, you must (i) obtain all permits including, but not limited to, health code permits and building permits, licenses and certifications required for the lawful construction or remodeling and operation of the Franchised Business, and (ii) certify in writing to us that the insurance coverage specified in Section 8.2 is in full force and effect and that all required approvals, clearances, permits and certifications have been obtained. You must provide to us copies of your insurance policies or certificates of insurance and copies of all such approvals, clearances, permits and certifications prior to beginning construction of the Franchised Business. You must also provide us with a copy of your certificate of occupancy prior to opening the Franchised Business.

3.5 Design Plan for Your Franchised Location . We will loan you a copy of our standards and specifications for the construction of your Franchised Business, including interior and exterior design, layout, floor plans, signs, color, décor, equipment and fixtures and such design and permit guidance as we or our affiliate deems appropriate and you must construct your Franchised Location in accordance with our standards and specifications. Our design and permit guidance may include but not be limited to layout analyses, a preliminary design meeting for the layout of the Franchised Business site approved by us, layout design plans for the Franchised Location approved by us, and guidance with the permit process. You are solely responsible for all expenses incurred for permitting, construction, and architectural and engineering requirements to construct and open your Franchised Business.

3.6 Construction of Your Franchised Location .

(a) We will provide you with the design and pre-construction assistance described above. You must independently obtain stamped plans from a licensed architect or engineer and any additional architectural, engineering and design services you deem necessary for the construction of your Franchised Business at your own expense from an architectural, engineering or design firm approved by us.

(b) Any adaptations to the design plans for the Franchised Location provided by us must be at your sole expense and are subject to our approval. If we determine that your modified plans do not satisfy our architectural or design standards and specifications for a Franchised Business or are not consistent with the best interests of the Papa Murphy’s brand, we may deny you permission to use such plans, and in this event will advise you of any objections within 15 days of receiving your modified plans.

(c) If we fail to advise you of an objection to the plans within said 15-day time period, you may use your modified plans. If we object to your modified plans, we will provide you with a detailed list of changes necessary to make your modified plans acceptable.


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(d) We will, upon your resubmission of the plans with such changes, notify you within 10 days of receiving the resubmitted plans whether the plans are acceptable. If we conclude your changes are not acceptable, we will notify you of our objections as described above, and you must resubmit your modified plans in accordance with the procedures described above until we approve your modified plans. If we do not notify you of any objection within the time period described above, you may use the resubmitted plans.

(e) You acknowledge that our providing the design plans to you and/or accepting your modified design plans does not constitute a representation, warranty, or guarantee, express or implied, by us that your modified plans are free of architectural or design errors or that they comply with applicable legal requirements (including the requirements of the Americans With Disabilities Act) and we shall have no liability to you or any other party because of your use of the modified plans.

3.7 Timing for Construction . Once your modified plans have been approved and you have signed a lease or completed the purchase of the Franchised Location, you must start and diligently pursue construction or remodeling (as applicable) of the Franchised Business. You will be considered to have started construction at the time when any site work is initiated by or on behalf of you at the Franchised Location. Site work includes, but is not limited to, any site work commenced for the construction of a stand-alone building, removing prior tenant improvements, construction of interior walls, and installation of your tenant improvements. During construction or remodeling, you must provide us with periodic reports regarding the progress of the construction or remodeling as we reasonably request. In addition, we may make any on-site inspections as we may deem necessary to evaluate your progress. If, during any inspections, we identify instances where your construction or remodeling is inconsistent with, or does not meet, our standards, we will notify you in writing of the deficiencies, and you must correct the deficiencies prior to opening. You must notify us of the scheduled date you intend to complete construction or remodeling no later than 30 days prior to that date. Within a reasonable time after the date of completion of construction or remodeling, we may, at our option, conduct an inspection of the completed Franchised Business. You acknowledge and agree that you will not open the Franchised Business for business without our written authorization and that our written authorization to open will be conditioned upon your strict compliance with this Agreement.

3.8 Timing for Opening the Franchised Business . You acknowledge that time is of the essence. Subject to your compliance with the conditions contained herein, you must open the Franchised Business and commence operations within 12 months after the Effective Date (“ Required Opening Date ”) set forth in Attachment A , unless you obtain our written permission to extend the Required Opening Date. So long as you have been continuously and diligently pursuing opening the Franchised Business, an extension will not be unreasonably withheld. If this Agreement is signed as part of an Area Development Agreement, the Required Opening Date shall be the date required in the Area Development Agreement. If you fail to comply with the requirements identified in Section 3.7 above, we will have the right to prohibit you from opening the Franchised Business.


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3.9 Relocation of Franchised Location .

(a) You may not relocate the Franchised Business without our prior written consent. This Agreement does not grant you the right or license to operate the Franchised Business from any location except the Franchised Location or to use the Methods of Operation or the Marks to offer or sell any products, merchandise or services through any channel of distribution except the Franchised Business or as specified in the Manual.

(b) If you are unable to continue the operation of the Franchised Business at the Franchised Location because of a force majeure event, casualty, or condemnation, you may request, in writing, our approval to relocate the Franchised Business to another location in the Site Selection Area. Any such request to relocate the Franchised Business shall also be subject to our written approval. If we decide to grant you the right to relocate the Franchised Business, you must comply with the site selection and construction procedures described in this Section 3 with respect to the new Franchised Location.

4.	FEES AND OTHER FINANCIAL AND MARKETING REQUIREMENTS

4.1 Franchise Fees . You will pay us the applicable amount set forth below, plus, if due and payable, all applicable federal, state or municipal taxes, as a non-recurring franchise fee upon signing this Agreement. The franchise fee will be paid by means of check, money order or wire transfer. The franchise fee is fully earned upon payment and is nonrefundable.

(a) If this is your first franchise, you will pay us a nonrefundable Initial Franchise Fee (“ Initial Franchise Fee ”) upon the signing of this Agreement of $25,000.

(b) If you are an existing franchise owner and the franchise is being purchased by the same legal entity or principal owner, you will pay us a nonrefundable Subsequent Franchise Fee (“ Subsequent Franchise Fee ”) upon the signing of this Agreement of $15,000.

(c) If you have signed an Area Development Agreement and paid the Area Development Fee, you will pay us a nonrefundable Subsequent Franchise Fee of $10,000 at the time(s) set forth in the Area Development Agreement.

4.2 Royalty and Services Fee . Beginning on the Commencement Date, you will pay to us a continuing royalty and services fee equal to 5 percent of your Net Sales (“ Royalty Fee ”), which will be reported and paid to us as provided in this Agreement.

4.3 Advertising Fee and Advertising Requirements .

(a) You will pay us an advertising fee of 2 percent of your Net Sales (“ Advertising and Development Fee ”) that will be placed in an advertising and development fund (“ ADF ”). The Advertising and Development Fee will be paid in the same manner and at the same time as the Royalty Fee. We reserve the right to place the Advertising and Development Fees in a separate bank account administered by us or an affiliate but are not required to do so. We will use the ADF for marketing research and development, local franchise owner group advertising or marketing, public relations, local, regional, national, Internet, or international advertising or marketing, development and maintenance of any Internet or


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e-commerce programs, stored value card programs, gift card programs, point-of-purchase programs, administration of advertising or marketing (including reasonable salaries, accounting, collection, quality assurance, legal and other costs), related expenses, and any media or agency costs. We make no promise or guarantee that advertising expenditures will be proportionate to contributions or provide direct benefit, or any benefit, to you or any other franchise owner. We have the sole right to decide how to spend the Advertising and Development Fees, and have no fiduciary duty with regard to the ADF. Upon request, we will provide you with an unaudited annual summary report of Advertising and Development Fees and expenditures.

(b) We will administer the ADF and direct all advertising programs with sole decision-making authority over the creative concepts, materials, endorsements, placement, and allocation of overhead expenses. We will have the sole right to enforce the obligations to pay Advertising and Development Fees but we have no obligation to do so. Neither you nor any other of our franchise owners will be deemed a third party beneficiary with respect to the Advertising and Development Fees or ADF or have any right to enforce any obligation to pay Advertising and Development Fees.

(c) We may develop mandatory or voluntary special discount or free coupon programs and other Multi-Area Marketing Programs. You must follow our advertising guidelines and purchase and use advertising material that we may designate. You must place our franchise sales brochures that we provide at our cost in your store if we so request. You must participate in the Multi-Area Marketing Programs that we specify and we may specify maximum resale prices in connection with such programs. For example, you must participate in periodic national or international promotions, and purchase related marketing kits at your cost. If you participate in a voluntary program, you will follow all provisions of the program. If you elect to be excluded from a voluntary program, we may advise consumers, by advertising, sales solicitation or otherwise, that you are not a participant.

(d) You may not use any advertising, marketing, promotional materials, or advertising vendors that have not been provided by us or approved by us in writing. You may not embark upon advertising in any media or location without our written approval of the media. If within ten days after submission, we have not advised you in writing that the material is approved, the material will be deemed disapproved by us for you to use.

(e) We may, at our discretion, require that all or a portion of your Local Marketing Expense (as defined below) or advertising cooperative contribution be paid into the ADF. In the event that we require you to pay all or a portion of your Local Marketing Expense or advertising cooperative contribution into the ADF, such amounts will be credited toward the minimum Local Marketing Expense.

4.4 Local Marketing .

(a) You must spend each month on local marketing a minimum of the greater of $2,000 or 5 percent of your Net Sales (“ Local Marketing Expense ”). You will use only franchisor-approved advertising, marketing and promotional materials. You will report and document your Local Marketing Expense to us at such times and in such manner as we specify, including by electronic means.


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(b) You must spend through us or at our direction up to $30,000 on advertising, including local marketing, prior to and during your first 180 days of operation. In addition, you may be required to obtain professional public relations assistance and advice, to effectively execute the opening marketing plan.

(c) You must adhere to, participate in, and follow our marketing programs and guidance, including local store marketing activities, displays, signage, customer loyalty, gift certificates, stored value cards, or gift cards, online ordering and advertising in accordance with our Manual.

4.5 Multi-Area Marketing and Cooperative Advertising .

(a) You must participate in Multi-Area Marketing Programs. Such programs will allow us or others to solicit or sell to customers anywhere, and may require your cooperation (including refraining from certain channels of marketing and distribution), participation (including payment of commissions or referral fees or accepting gift cards and stored value cards sold by us or other franchise owners), and adherence to maximum retail pricing to the extent permitted by law. All such programs are our proprietary trade secrets. We reserve the right to issue mandatory policies to coordinate such Multi-Area Marketing Programs. For example, you must participate in periodic national promotions, and in connection with such promotions purchase related marketing kits at your cost.

(b) We may designate local or regional advertising coverage areas to develop cooperative local or regional advertising and promotional programs. You must participate in and contribute your share to the cooperative advertising and promotional programs in your advertising coverage area.

(c) Your contributions to cooperative advertising or promotional programs will be credited toward the minimum Local Marketing Expense. Any such cooperatives will establish the procedures for contribution payments. You may be required to belong to and contribute a minimum of 3 percent of Net Sales to a maximum of 5 percent of Net Sales to any cooperative to which you are assigned. The cooperative membership may elect to require a greater contribution rate than is required by this Agreement. The minimum contribution may be reduced by the cooperative if your Franchised Location does not receive full benefit of the cooperative’s advertising. We may designate the coverage area and method and timing of payment; and may form, change, merge or dissolve cooperatives; and may approve or disapprove any outside agencies, articles, bylaws, other governing documents, and all activities and advertising; of any such cooperative; and may specify maximum resale prices to the extent permitted by law. All cooperatives will report to us in the manner required by, and follow all requirements of, this Agreement.

4.6 Manner of Payment and Reports .

(a) On Tuesday of each week, or such other time that we specify, you will deliver an itemized report of your Net Sales for the prior week just ended (or other period), and other statistics we specify, on such form and in the manner, including electronically, that we prescribe. Upon request, you will provide us with all hard copies and access to electronic reports that we prescribe, including a list of prices and products sold. We reserve the right to electronically poll your computer system at any time and to use the data we obtain from such polling for any legal purpose.


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(b) On or before Monday of each week, or such other time that we specify, you must make all payments to us by any method we specify, including electronic funds transfer or the Internet, for the sales week ending on the preceding Monday. We currently require you to sign an Automated Clearinghouse (“ ACH ”) Authorization allowing us to automatically deduct payments or any other amounts you owe to us from your franchise bank account. The ACH Authorization also authorizes us to withdraw or deposit amounts resulting from gift card or stored value card activations or redemptions, orders placed on our website, and any other amounts that may become due to you into your franchise bank account. We will not for this purpose require you to deposit all your revenue into an account that we control, or from which withdrawals may be made only with our consent. You must make funds available to us for withdrawal by electronic transfer no later than the due date for payment. If you have not reported the Net Sales to us for any reporting period as required, then we shall be authorized, at our option, to debit your account in an amount equal to (a) 150 percent of the fees transferred from your account for the last reporting period for which a report of the Net Sales was provided from you as required hereunder; or (b) the amount due based on information retrieved from our approved computer system. Upon receipt of your report of Net Sales, the amount due will be reconciled with the amount withdrawn.

(c) You will not set off any claim for damages or money due to you from us against any payments to be paid by you to us under this Agreement or any related agreement between the parties. No endorsement or statement will be effective as an acknowledgment of payment in full. We will have the right to accept any payment and to recover the balance due or to pursue any other remedy available to us.

(d) Interest of 1.5 percent per month (18 percent per annum), or the maximum allowed by law if less, will be added to any sums to be paid under this Agreement that remain unpaid after the date due. If we are unable to withdraw funds from your franchise bank account because you have insufficient funds in the account, you have closed the account, or you have placed or caused a “stop payment” instruction on the account for any reason, we have the right to charge you a non-sufficient funds fee (“ NSF Fee ”) of $35. In addition, you must reimburse us for any non-sufficient funds fees that we incur.

4.7 Records .

(a) You will keep full, complete, and accurate books, records, and accounts for your Franchised Business, in accordance with generally accepted accounting principles and all requirements of the law, and in the form and manner prescribed below or as we may prescribe from time to time.

(b) You will submit to us, on a form approved by us and in the manner prescribed by us, no later than 30 days after the close of our fiscal month, a profit and loss statement, including a year-to-date summary, and, if available, balance sheet for that month. You will also submit to us, on a form and manner approved by us, no later than 90 days after the close of our fiscal year, a profit and loss statement and balance sheet prepared in accordance with generally accepted accounting principles for the full 12 months of each fiscal year.


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(c) You will maintain and submit to us such other reports and information as we may reasonably require from time to time, in the form and manner prescribed by us.

(d) You will maintain and preserve, for no less than the current fiscal year and the seven immediate past fiscal years, all books, tax returns, accounting records, and supporting documents relating to your Franchised Business, including but not limited to:

(i) daily cash reports;

(ii) cash receipts journal and general ledger;

(iii) cash disbursements journal and weekly payroll register;

(iv) monthly bank statements, daily deposit slips, and canceled checks;

(v) business tax returns, and individual tax returns for each person with an ownership interest in the business;

(vi) dated cash register tapes, detailed and summary;

(vii) monthly and annual profit and loss statements and balance sheets;

(viii) such other records and information as we may request from time to time; and

(ix) all records that you are required to keep by law.

(e) You hereby grant us the right to obtain and inspect all records of all suppliers, distributors, and other third parties who supply you with food and paper products, supplies, equipment, and other materials, and you hereby authorize your suppliers, distributors, and other third parties to provide us with those records upon our request.

4.8 Audits . In addition to those rights granted to us herein, from the Effective Date of this Agreement until three years after the end of the term of this Agreement, we or our representatives shall have the right to examine your original books, records, and supporting documents, including but not limited to all of those listed in Section 4.7, above, wherever they are located, at reasonable times, and to perform, with or without notice to you, such tests, analyses, and inspections as we deem appropriate to verify your sales and your compliance with any other terms of the Franchise Agreement. Upon our request and at your sole expense, you will send copies of these books, records, and documents to us or our representatives. If we determine that your actual Net Sales are higher than those you have reported to us, you will immediately pay all sums owed to us, the ADF, and your advertising cooperative, plus interest at 1.5 percent per month (18 percent per annum) or the highest permissible rate. We will bear the cost of the audit, unless you (1) understate Net Sales by 2 percent or more for any reported time period, (2) fail or


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refuse to furnish required reports or supporting records on a timely basis for two or more consecutive reporting periods, (3) fail or refuse to make the books and records available for an audit after receiving reasonable, advanced notice from us, or (4) otherwise fail or refuse to cooperate with the audit or requests made by us or our representatives, in which case you will reimburse us for the audit cost, including travel, accommodations, meals, salaries, and other expenses of the inspecting or audit personnel, plus pay us interest at 1.5 percent per month (18 percent per annum) or the highest permissible rate. Any payments made pursuant to this Section will be without prejudice to any other remedies that we may have under this Agreement or by law, including but not limited to the right to terminate this Agreement, without opportunity to cure, in the case of intentional underreporting of Net Sales, regardless of the amount involved.

4.9 Application of Payments; Setoff; Security Interest . We may apply any payment from you to any past due indebtedness you owe to us or to our affiliates, whether from fee payments, purchases, late payment charges, or for any other reason. We may set off from any amount due you any amount past due us, our affiliates or any designated cooperative. You hereby grant us a security interest in all of your business assets, including furniture, fixtures, equipment, and inventory, to secure any amounts due us. You hereby authorize us to file a standard UCC-1 financing statement, or its equivalent for the applicable state, to record our security interest.

4.10 Vendor and Supplier Payments . We may receive payments from vendors or suppliers. All payments received shall be placed into the ADF or a fund established for the benefit of the franchise system.

4.11 Bookkeeping and Payroll Services . We require you to retain an approved bookkeeping and payroll service for the first year of operation of the Franchised Business. We will have access to and specify requirements and forms of all information and reports generated by the service.

4.12 Third Party Programs . In the Manual, we may require at your expense, participation in certain third party vendor programs. We may require payment directly to a third party provider or reimbursement to us for our payment thereto.

5.	YOUR DUTIES

5.1 Time to Complete Training and Commence Operation . You will complete to our satisfaction the mandatory training program and commence full and continuous operation of the Franchised Business by the Required Opening Date as set forth on Attachment A . You must comply with the provisions of this Agreement, including, without limitation, those regarding site location and premises development before opening.

5.2 Permits, Licenses, and Laws . You will obtain all local permits and licenses necessary to operate the Franchised Business before you begin operation. You must comply with all civil and criminal laws, ordinances, rules, regulations, and orders of public authorities relating to the maintenance and operation of the Franchised Business, including but not limited to those relating to health, safety, sanitation, employment, immigration, taxation, privacy, accommodation, and environmental regulation.


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5.3 Uniformity and Image . Your adherence to the Methods of Operation and proper use of the Marks is essential to maintaining a uniform image and high standards of the Franchised Business. In order to maintain uniform standards of quality, appearance, and marketing, you must conform to our Mark usage standards and specifications, including signage and marketing.

5.4 Specifications and Standards . We may set standards or specifications, including but not limited to those applicable to menus, fixtures, equipment, interior décor, inventory, food preparation, Methods of Operation, Multi-Area Marketing Programs, trade dress, signs, systems, forms, policies and procedures, and other goods and services, and including our determinations relating to quality, value, and appearance of products, services and premises, which you must follow. We may change the standards and specifications from time to time and you agree to implement any such changes as if they were part of the standards and specifications at the time you signed this Agreement. You must purchase all such goods and services, from sources and suppliers that have been approved or designated by us. We do not profit from the sale of mandatory goods and services to you. You must participate in and cooperate with promotional programs, and follow our and our suppliers’ guidelines. Your supply sources must conform to our requirements. You will repair or replace equipment with equipment that meets our specifications.

5.5 Operations . You will operate the Franchised Business in accordance with the Methods of Operation and Manual, as amended by us from time to time. We have the right to prescribe additions to, deletions from or revisions of the Manual (the “Supplements to the Manual”), all of which will be considered a part of the Manual. All references to the Manual in this Agreement will include the Supplements to the Manual. Supplements to the Manual will become binding on you as if originally set forth in the Manual, upon being delivered to you. The Manual and any Supplements to the Manual are material in that they will affect the operation of the Franchised Business, but they will not conflict with or materially alter your rights and obligations under this Agreement.

5.6 Right of Entry and Inspection . We or our authorized agents or representatives, with or without prior notice to you, may enter the Franchised Location during normal business hours and inspect the operations of the Franchised Business and to select materials, ingredients, products, supplies, paper goods, uniforms, fixtures, furnishings, signs, equipment, and any other item for evaluation, in order to ensure that these items conform to our operating standards. We may photograph or electronically record any part of the Franchised Business, whether or not you are present. Without any liability to you, we may remove any materials that we, in our judgment, determine to be illegal, unsafe, not in conformity with our operating standards, or in violation of this Agreement. If we find any condition in your Franchised Business that we consider to be hazardous, unsafe, unhealthy, unclean, unsanitary, or in material disrepair, then we have the right to require you to immediately close your Franchised Business and to take such actions as we deem necessary to remedy the condition. You will be solely responsible for the costs and damages incurred in connection with complying with this Section.


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5.7 Uniforms . You will wear and you will provide and cause your employees to wear our required uniforms and comply with the standard uniform policy set forth in the Manual.

5.8 Upgrade, Refurbish and Replacement . You will upgrade, refurbish and replace the Franchised Location, fixtures, and equipment to conform to the then-current Manual and Methods of Operation as required by us. We may require you to invest up to $30,000 (“ Upgrade Investment ”), cumulatively, to upgrade and replace the Franchised Location, fixtures, and equipment during the initial term of this Agreement. You understand, acknowledge and agree that any general maintenance and repair expenses incurred by you in operating the Franchised Business shall not be considered part of your required Upgrade Investment.

5.9 Computer and Communication Systems .

(a) You must acquire, use, maintain and upgrade point-of-sale, computer, information processing and communication systems, accounting, cash control, labor management, and inventory control systems, including all applicable hardware, software, and hosting services and Internet and other network access providers, email address, and website vendors and/or services, as we may prescribe in the Manual, as amended periodically. You must comply with any separate software or other license agreement that we or our designee uses in connection with providing these services. You must utilize our required software, point-of-sale, proprietary database management and Intranet system, when available, as the exclusive means of tracking and maintaining customer, vendor, and related information, and for such other purposes as prescribed by us periodically in the Manual. We reserve the right to require you to submit reports or data electronically on a frequency determined by us. You must comply with all policies adopted and revised by us regarding the use of email, by you and your employees or agents. You may not use social media or, other forms of electronic communication or electronic commerce to promote your Franchised Business. You must maintain a minimum of three telephone lines, or more as determined by us based on volume, for receiving inbound voice calls. You must maintain one business-class high speed Internet access circuit, or more, as required by us. You must access your email account regularly and at least once each day. We or our agents may enter your business, physically or electronically, have access to the PMI Enterprise Solution and the data within it, along with any records, and examine or audit your business, at any reasonable time without notice.

(b) Computer systems are vulnerable in varying degrees to hardware and software failures, configuration-related problems, computer viruses, bugs, power disruptions, communication line disruptions, Internet access failures, Internet content failures, date-related problems, and attacks by hackers and other unauthorized intruders (“ E-Problems ”). We do not guarantee that information or communication systems that we or others supply will not be vulnerable to E-Problems. It is your responsibility to protect yourself from E-Problems and you waive any and all claims you may have against us as the direct or indirect result of E-Problems.

5.10 Approved Products . Because the reputation of the Marks and the Franchised Business depends on a uniform high quality of products and services, you may sell only approved products and services, from specified or approved vendors. You will sell, serve or distribute all products and services we require. You must maintain, at all times, a sufficient supply of products to meet customer demand. If you want to purchase any product of an unapproved brand or from an unapproved supplier, you will notify us, and will pay us a processing fee and a reasonable testing fee as determined by us. We will, within a reasonable time, determine whether the unapproved brand or unapproved supplier has performance characteristics, quality, appearance, reliability and other relevant characteristics similar to the


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product brands and suppliers then approved by us. If so, our approval will not be unreasonably withheld, unless we develop a specified vendor program for specific products or services, in which case you will use our specified vendor. You recognize that specified vendor programs may lower your or our costs or improve quality control. You must obtain our written approval of your supply sources before their use. We may require your suppliers to sign a nondisclosure agreement and an indemnity agreement to guarantee our level of quality, and produce sufficient samples or access to their facilities to allow us to test the samples at your expense.

5.11 Personal Participation . You understand, acknowledge and agree that your personal supervision, full-time participation, and example are essential to the success of the Franchised Business. Except as we may agree in writing, for good cause, you, or your designated operating partner if the Franchise Owner is a legal entity, must participate personally in the Franchised Business. If you own more than one Franchised Business, you must actively participate in the management and operation of each of the Franchised Businesses owned by you. In addition, we may impose requirements that include but are not limited to requiring Certified Managers at each location and providing equity ownership or similar incentives to store operating personnel as a condition to granting you additional franchises. These specific requirements will become part of your Agreement.

5.12 Other Operating Standards .

(a) You will operate the Franchised Business in a clean, orderly and respectable manner in strict compliance with this Agreement and the Manual. Unless otherwise approved by us, the Franchised Location will be used only as a Papa Murphy’s Franchised Business. You will only use signs, fixtures, equipment, materials, food products, other products, inventory, décor, plans, and services that conform to our specifications to conduct the Franchised Business. You will participate in gift, stored value and loyalty card programs, accept credit cards and apply to accept and accept electronic benefit transfer cards and food stamps in compliance with the Manual.

(b) You will not allow the Franchised Business to be used for any unauthorized or illegal purpose.

(d) You will not install or use any vending machines, televisions, juke boxes, games or musical devices on the Franchised Location without our prior written approval.

(e) You will offer for sale all menu items we require.

(f) You will not sell, serve or dispense any products, services or activities other than those we specifically approve in writing.

(g) You will maintain the Franchised Location, equipment and furnishings in good repair, attractive appearance, and sound operating condition in compliance with the Manual. At our request, you will make necessary repairs to the Franchised Location to comply with our operating standards. You will complete all repairs and changes within a reasonable


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time after notice from us. You will not make any change in the layout and décor of the Franchised Location without our prior written approval. In addition, you must comply with any requirement we may impose to upgrade, refurbish and replace the Franchised Location, fixtures, and equipment to conform to the then-current Manual and Methods of Operation as required by us.

(h) You will pay all business debts and expenses when due, including taxes and government obligations, and you will comply with all contracts with third parties.

5.13 Marks and Internet and Electronic Communications Media.

(a) You will conduct and diligently promote the Franchised Business under the name Papa Murphy’s Take ‘N’ Bake Pizza, or other Marks we specify, continuously throughout the term of this Agreement and any applicable Interim Period as defined in Section 6.6. You will follow our directions for use of the Marks.

(b) Although you must use the Marks as your trade name, in the manner that we specify, you must also have a separate business name. You may not use the Marks or any similar marks or words in your business name.

(c) You must obtain our prior written approval for any use of any item of printed, audio, visual, Internet, electronic media, or multimedia material of any kind bearing any of the Marks, unless we supplied the item. You must follow our trademark and copyright usage directions. You will indicate to third parties that your business is “independently owned and operated” and that we own the Marks and you use them under license.

(d) You must convey to us for nominal consideration any new developments or additional rights you acquire in using the Marks, Methods of Operation, and Manual. We may change the Marks, Manual, or Methods of Operation.

(e) Any licenses, permits, official documents, bank accounts or other accounts will be in your separate business name, and if they refer to the Marks, will state that your use of the Marks is limited by this Agreement.

(f) You must notify us immediately if there is any infringement or challenge to your use of the Marks. We are not obligated to protect your right to use the Marks and may direct you not to use the Marks. We will reimburse you only for actual direct costs of purchasing new signage and stationery that we require as a result of changed Marks.

(g) You agree that we own the Marks and all goodwill associated with the Marks and you will not contest our ownership of the Marks.

(h) You must not sublicense our Marks. You have no rights in the Marks other than those explicitly granted by this Agreement. You further agree that any unauthorized, injurious or prejudicial use of the Marks during the term of or after the expiration or the earlier termination of this Agreement shall constitute an incurable default causing irreparable harm entitling us to injunctive relief.


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(i) You hereby permanently and irrevocably assign to us any and all rights and interests (including intellectual property rights and interests) to any and all of the following which is developed by you, or on your behalf, if developed in whole or in part in connection with your Franchised Business or Franchised Store: all products or services; all variations, modifications and/or improvements on products or services; your means, manner and style of offering and selling products and services; management techniques or protocols you may develop (or have developed on your behalf); all sales, marketing, advertising and promotional programs, campaigns or materials developed by you or on your behalf; and, all other intellectual property developed by you or on behalf of your Franchised Business, and any customer information or similar data that you collect, or is collected on your behalf, using any means, including the Internet or any form of electronic communication.

(j) You may not independently have a site or market on the Internet, or use any domain name, address, locator, link, metatag, or search technique, with words or symbols the same as or similar to the Marks. You may not have any Internet presence outside our website or social media sites. We retain the sole right to market on the Internet, including all use of websites, domain names, URL’s, linking, advertising, and co-branding arrangements. You will provide us content for our Internet marketing. We also retain the sole right to use the Marks on the Internet, including on websites, as domain names, directory addresses, metatags, and in connection with linking, advertising, co-branding, social media, and other arrangements. We retain the right to approve any linking or other use of our website. You may not establish a presence on or market using the Internet except as we may specify, or with our prior written consent. You may not engage in text marketing or marketing using any other form of electronic communication via cell phone, smart phone, or other personal digital assistant without our express permission and ensuring that such marketing complies with our policies and requirements set forth in the Manual. All Internet marketing and websites, and forms of electronic communication are a part of Multi-Area Marketing Programs, and must be coordinated through us and approved by us.

5.14 Manual and Methods of Operation .

(a) We will lend you the confidential Manual for the initial franchise owner training session and if you satisfactorily complete training, for the term of the Agreement and any applicable Interim Period. If you lose the Manual or require a replacement upon expiration of the term, you will pay a fee of $1,000. All Manuals must be returned upon termination.

(b) The Marks, Manual and Methods of Operations are our sole and exclusive property. Nothing in this Agreement or any other agreement gives you or others any right in them. We own all copyrights to the Manual, advertising material, menus and any other marketing and promotional materials produced by us, and other works of authorship related to the Methods of Operation, and to the Franchised Business.

(c) We may change or modify any part of the Manual and the Methods of Operation. You will accept and comply with all changes and modifications. You will bear all costs and expenses that may be necessary because of such changes or modifications.


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(d) Changes in the Manual and the Methods of Operation may include but will not be limited to required use of new or modified Marks, expansion of existing services, introduction of new services or programs, compliance with new techniques, standards, specifications and procedures and other developments of the Methods of Operation.

5.15 Confidential Information .

(a) You agree that the Methods of Operation include valuable know-how, information, trade secrets, methods, Manual, standards, designs, usage of the Marks, copyrighted works, products and service sources and specifications, proprietary software, confidential electronic and other communications, methods of Internet and other electronic communications media usage, marketing programs, and research and development connected with the operation and promotion of the Franchised Business, as modified by us at any time. You agree not to communicate or divulge the contents of our Manual or any other information related to the Methods of Operation to any person or entity except those we authorize in writing.

(b) You must keep the Methods of Operation and Manual confidential, and not disclose them other than to your employees and only to the extent necessary for those employees to perform authorized duties. You will not at any time copy, duplicate, record or otherwise reproduce any material that is set forth in the Methods of Operation and Manual or other proprietary materials. You must follow our security procedures, which include the execution of approved nondisclosure agreements by you and all of your managers. Unauthorized use of the Manual and the Methods of Operation will constitute a breach of this Agreement and infringement of our proprietary rights, including trade secrets and copyrights.

5.16 Covenants Not to Compete .

(a) During the term of this Agreement, and any applicable Interim Period as defined in Section 6.6 or any extension, neither you, your immediate family and household members, nor persons associated with you, including owners, managers, assistant managers, or agents involved in the operation of the Franchised Business, will participate directly or indirectly or serve in any capacity in any business engaged in the wholesale or retail sale of take-and-bake pizza or services or other products or services competitive with those offered by the Franchised Business.

(b) For a period of two years after the transfer, assignment, expiration or termination of this Agreement, for any reason, neither you, your immediate family and household members, nor persons associated with you, including owners, managers, assistant managers, or agents involved in the operation of the Franchised Business, will participate directly or indirectly or serve in any capacity in a competitive business, including but not limited to any business engaged in the wholesale or retail sale of take-and-bake pizza or services or other products or services competitive with those offered by the Franchised Business. This post-termination covenant applies within a 25-mile radius of the Franchised Location, and of the premises of any other Papa Murphy’s location. If anyone successfully contests the validity or enforceability of this section in its present form predicated upon the duration or area of coverage, this provision will not be deemed invalid or unenforceable, but will instead be deemed modified, so as to be valid and enforceable, to provide coverage for the maximum duration that any court of competent jurisdiction will deem reasonable, necessary and equitable.


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(c) This covenant not to compete is given in part in consideration for training and access to our trade secrets, which, if used in a competitive business, would give you or others an unfair advantage.

(d) At our request, we may require you to obtain the execution of covenants similar to those contained in this Section from all officers, directors, managers, and holders of a beneficial interest in five percent (5%) or more of the securities issued by you, and of any legal entity directly or indirectly controlling you, if you are a corporation; from all members, if you are a limited liability company; and from all general partners, if you are a partnership. Each covenant shall be in a form approved by us, and shall identify us as a third party beneficiary with the independent right to enforce the covenant.

5.17 Notice of Court or Government Action . You will notify us in writing within 15 days of the commencement of any action, suit or proceeding, or of the issuance of any order, writ, injunction, award or decree of any court, agency or government instrumentality, or of any other action of any kind, which may adversely affect your operation of or the financial condition of the Franchised Business.

5.18 Compliance with Anti-Terrorism Laws . You and your owners must comply with and/or assist us to the fullest extent possible in our efforts to comply with Anti-Terrorism Laws (as defined below). In connection with such compliance, you and each of your owners certify, represent and warrant that none of your or their property or interests is subject to being “blocked” under any of the Anti-Terrorism Laws and that you and each of your owners are not otherwise in violation of any of the Anti-Terrorism Laws.

(a) You and each of your owners certify that none of you or them, your or their employees, or anyone associated with you or each of your owners is listed in the Annex to Executive Order 13224 (which can be accessed at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx ). You and each of your owners agrees not to hire (or, if already employed, retain the employment of) any individual who is listed in the Annex.

(b) You and each of your owners certifies that you have no knowledge or information that, if generally known, would result in you, your owners, your or their employees, or anyone associated with you or each of your owners being listed in the Annex to Executive Order 13224.

(c) You are solely responsible for determining what actions you must take to comply with the Anti-Terrorism Laws, and you specifically acknowledge and agree that your indemnification responsibilities set forth in this Agreement pertain to your obligations under this Section 5.18(a) through (e).

(d) Any misrepresentation under this Section 5.18 or any violation of the Anti-Terrorism Laws by you, your owners, agents, or employees shall constitute grounds for immediate termination of this Agreement and any other agreement you have entered into with us or any of our affiliates.


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(e) “ Anti-Terrorism Laws ” means Executive Order 13224 issued by the President of the United States, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), the Cuban Assets Control Regulations (Title 31, Part 515 of the U.S. Code of Federal Regulations), the USA PATRIOT Act, and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any governmental authority (including, without limitation, the United States Department of Treasury Office of Foreign Assets Control and any government agency outside the U.S.) addressing or in any way relating to terrorist acts and/or acts of war.

5.19 Franchise Convention . Your attendance at each convention is strongly encouraged. You will pay your cost for travel, accommodations, meals and other expenses.

6.	CONTINUATION OF ABILITY TO OPERATE, TERMINATION AND STEP-IN RIGHTS

6.1 Continuing to Operate Beyond this Agreement . This Agreement grants you the right to operate using our Methods of Operation and our Marks for ten years, unless terminated earlier under this Agreement. In order for you to continue to operate beyond the ten-year term, you must enter into a new Franchise Agreement and a Successive Addendum in the form attached hereto as Attachment E , the terms of which may vary substantially from this Agreement. The term of any Franchise Agreement successive to your initial Franchise Agreement (“ Successive Franchise Agreement ”) will be for five years. Your ability to enter into a Successive Franchise Agreement and continue to operate is contingent on satisfactory performance of this Agreement and any other agreements with us, and our approval of your current location and lease, and you must not be in default under this Agreement or any other agreements between you and us or our affiliates or a third party that relates to the franchise in any way. In addition, in order to receive a Successive Franchise Agreement, the following must occur:

(a) You must submit a written request to continue operating to us not sooner than 12 months before the end of the term and not later than 6 months before the end of the term.

(b) At least 60 days before the expiration date, you must execute the Successive Franchise Agreement and Successive Addendum which may vary in material respects from this Agreement.

(c) At least 60 days before the expiration date, you must pay us a $7,500 fee for our costs incurred in connection with issuing a Successive Franchise Agreement and continuing your right to operate the Franchised Business.

(d) You will remodel the Franchised Location, fixtures, and equipment to conform to the then-current Manual and Methods of Operation as required by us. A remodel is defined as an investment of greater than $30,000, cumulatively, but excludes replacement of damaged or broken equipment or work required by health department or other legal requirements. The remodeling requirements will be generally consistent with those required of other franchises of the same age, condition, and geographic region as your franchise.


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(e) You must execute a general release, in a form we prescribe, following applicable law, to release us from any claims you may have against us. This general release will apply only to the Franchised Business which is the subject of the Successive Franchise Agreement.

(f) At least 60 days before the expiration date, you or your designated manager will attend and successfully complete any training program we prescribe. This will be done at your expense, including travel, meals, accommodations, and other expenses and our then-current training fee, if any.

If we decide not to continue your franchise rights to operate the Franchised Business, we will give you written notice of our intent not to continue within 60 days after receiving your written request to continue operating. We may extend the term of the franchise for a limited period in order to satisfy this notice requirement, or any other notice requirement under applicable law.

6.2 Termination by You . If you are in compliance with the terms of this Agreement, you may terminate this Agreement if we substantially breach any material provision of this Agreement and fail to cure or reasonably begin to cure that breach within 60 days after receipt of written notice specifying the breach. Termination will be effective ten days after you deliver to us written notice of termination for our failure to cure (or begin to cure) within the allowed period. You will be bound by and must confirm in writing all of your post-termination obligations thereafter, including confidentiality, noncompetition, indemnity, mutual releases, and our option to purchase your business assets. You must close the Franchised Business at the Franchised Location before your termination can be effective.

6.3 Termination by Us . We may terminate this Agreement and any other related agreements between the parties for “good cause” if you default under the terms of this Agreement and do not cure the default within the applicable cure period provided below, unless this Agreement specifies that no cure period shall apply. Termination will occur immediately upon delivery to you of our written declaration of termination for failure to cure within the allowed time frame.

(a) Thirty-Day Cure Period . Without limitation we may terminate this Agreement if you default under the terms of this Agreement and do not cure the default within 30 days after receipt of our written notice to cure, if you:

(i) Fail to begin full and continuous operation of the Franchised Business within 12 months after the Effective Date of signing this Agreement; or

(ii) Breach or violate this Agreement, or any other agreement between you and us or our affiliates, except as otherwise set forth herein; or

(iii) Fail to operate in accordance with the Methods of Operation.


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(b) Ten-Day Cure Period . We may terminate this Agreement if you fail to pay any amounts required to be paid under this Agreement and do not cure the default within ten days after receipt of our written notice to cure. We may also terminate this Agreement if you close your account or place or cause a “stop payment” instruction with your bank that restricts our ability to electronically withdraw amounts required to be paid to us or our affiliates from your franchise bank account and you fail to open a new account or remove such “stop payment” instruction within ten days after receipt of our written notice to cure.

(c) Twenty-Four Hour Cure Period . We may give you 24 hours’ written notice to cure any default under this Agreement that creates an unsafe, unhealthy, unclean, or unsanitary condition at the Franchised Location or in connection with any product sold or delivered to consumers by the Franchised Business. We may terminate this Agreement if you fail to cure any such defaults within the 24-hour cure period. In addition, if you have not cured a default within the 24-hour cure period, we have the right to enter your Franchised Business and cause the conditions therein to be corrected without being guilty of or liable for trespass or tort, at your expense, and without prejudice to any other rights or remedies that we may have available to us, including the right to terminate this Agreement.

(d) Immediate Termination . We may immediately terminate this Agreement and any other agreements between the parties without other cause, and without giving you an opportunity to cure, if you:

(i) Fail to continuously actively operate the Franchised Business for two consecutive days or for any shorter period after which it is reasonable under the facts and circumstances to conclude that you do not intend to continue the Franchised Business, unless you close the Franchised Business for a purpose we approve or because of casualty or government order. “Actively operate” means to be open for business and offering all required menu items for sale; or

(ii) Fail to comply with the same obligation under this Agreement on two or more occasions within any 6 consecutive month period, or three or more occasions within any 36 consecutive month period, whether or not you correct any of the above failures after we deliver written notice to you; or

(iii) Make or have made any material misrepresentation or misstatement in connection with your franchise application or with respect to ownership of the Franchised Business; or

(iv) Are convicted of or plead guilty to a felony, a crime involving moral turpitude, or any other crime or offense that we believe is injurious or prejudicial to the Papa Murphy’s franchise system, our Marks, or our goodwill, or if we have proof that you have committed such a felony, crime, or offense; or

(v) Operate the Franchised Business in a way that creates an imminent danger to public health or safety in our discretion; or

(vi) Make any misrepresentation under Section 5.18 or commit any violation of Anti-Terrorism Laws, or your owners, agents or employees make any misrepresentation under Section 5.18 or commit any violation of Anti-Terrorism Laws; or


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(vii) Become insolvent or make a general assignment for the benefit of creditors; or if you file a petition in bankruptcy or such a petition is filed against you and not opposed by you; or if you are adjudicated as bankrupt or insolvent; or if a bill in equity or other proceeding for the appointment of a receiver or other custodian for your business or assets is filed and consented to by you; or if a receiver or other custodian of any part of your business or assets is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law is instituted by or against you; or if your real or personal property shall be sold at levy thereupon by any sheriff, marshal, or constable; or

(viii) Intentionally underreport Net Sales, falsify financial data, or commit any other act of fraud in connection with our relationship or this Agreement; or

(ix) Fail to comply with any civil or criminal law, ordinance, rule, regulation, or order of public authorities relating to the maintenance or operation of the Franchised Business, including but not limited to those relating to health, safety, sanitation, taxation, employment, immigration, and environmental regulation; or

(x) Allow your lease to terminate or expire; or

(xi) Permit the use of the Franchised Business for any illegal or unauthorized purpose, including but not limited to substitution of products under our trademarks; or

(xii) Undertake or engage, or your owners or employees undertake or engage, in any activity that we deem to be materially detrimental, injurious or prejudicial to the value or reputation of the Marks, the System or the Papa Murphy’s brand; or

(xiii) Have an interest, or a legal entity in which you are an owner has an interest, in any other development agreement, franchise agreement or other agreement with us and that agreement is terminated by us due to any default.

6.4 Effect of Termination . Upon any termination or expiration of this Agreement, you will immediately:

(a) Return to us all copies of the Manual, all items displaying any Marks and all copyrighted and proprietary items;

(b) Authorize telephone, Internet, email, electronic network, directory and listing entities to transfer all numbers, addresses, domain names, locators, directories, listings and customer lists to us or our designee;


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(c) Cease doing business under any of the Marks, cancel any assumed or fictitious business name registration that includes any of the Marks, assign all domain names and Internet directory listings that contain the Marks to us, and refrain from identifying yourself as our franchise owner;

(d) Allow us or our representatives access to the Franchised Business and your computer systems to verify and secure your compliance with your obligations;

(e) Allow us to make a final inspection and audit of your computer system, books, records and accounts;

(f) Abide by the provisions of noncompetition, confidentiality, indemnification, dispute resolution and venue, and all other provisions that expressly or by their nature survive the termination or expiration of this Agreement;

(g) Pay us all amounts you owe us and pay us royalties and other ongoing fees, as though you were still an active franchise owner, for the longer of: (i) so long as you continue to use the Marks or Methods of Operation; or (ii) so long as you or your successor or assignee remains in a competitive business, unless we have approved the assignment in accordance with this Agreement;

(h) At our option, perform any or all of the following:

(i) Remove all franchise-related equipment, furnishings, décor, signage, trade dress and inventory from the Franchised Location;

(ii) Upon termination, sell the equipment, furnishings, and inventory to us (or such of the same as we may determine), at the depreciated book value (straight-line depreciation over five years) for equipment and furnishings and at your invoice cost for inventory. We will not be liable for payment to you for intangibles, including goodwill and may set off any amounts owed to us by you;

(iii) Upon expiration, sell the equipment, furnishings, and inventory to us (or such of the same as we may determine), at fair market value. We will not be liable for payment to you for intangibles, including goodwill and may set off any amounts owed to us by you; and

(iv) Assign to us the lease of the Franchised Location.

6.5 Our Step-In Rights .

(a) In order to prevent any significant interruption of the operation of the Franchised Business that could cause significant harm to the Franchised Business, you grant us the right to operate the Franchised Business in your place for a period up to 90 days. Causes for interruption include but are not limited to our determination that you are absent or incapacitated because of disability, death or abandonment of the Franchised Business; or creditors have begun proceedings that are likely to result in seizing of significant business assets or closing the Franchised Business. After an initial 30-day evaluation period, we will either operate the Franchised Business for an additional 60-day period of time or return it to you. At the end of 90 days, we will return the Franchised Business to you provided the cause for interruption has been remedied.


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(b) You will receive the Net Sales generated by our operation of the Franchised Business provided that we will pay from Net Sales all expenses, debts and liabilities we incur during our operation of the Franchised Business including our personnel and administrative costs, and we also will retain 15 percent of Net Sales to cover our direct and indirect expenses, including our general and administrative and our reasonable legal and accounting costs. In addition, we will have the option, but not the obligation, to pay for you any claims owed by you to any creditor, landlord, or employee of the Franchised Business and you will reimburse us upon demand.

(c) We will have no obligation to retain any of your employees, or to honor any contractual employment commitments you previously made.

(d) Upon our exercise of these rights, you agree to hold us harmless for all acts, omissions, damages, or liabilities arising during operation.

(e) Our operation of the Franchised Business will not operate as an assignment to us of any lease or sublease of franchise property.

6.6 Interim Period . If you do not sign the Successive Franchise Agreement and Successive Addendum prior to the expiration of this Agreement but you continue to accept the benefits of this Agreement after the expiration of this Agreement, then, at our option, this Agreement may be treated as either:

(a) expired as of the date of expiration with you operating without a franchise in violation of our rights; or

(b) continuing on a month-to-month basis (“ Interim Period ”) until one party provides the other with written notice of such party’s intent to terminate the Interim Period, in which case the Interim Period will terminate 30 days after receipt of the notice to terminate the Interim Period. In the event of termination of the Interim Period, all of your obligations shall remain in full force and effect during the Interim Period as if this Agreement had not expired, and all obligations and restrictions imposed on you upon expiration of this Agreement shall be deemed to take effect upon termination of the Interim Period.

7.	TRANSFER

7.1 Sale or Assignment by You .

(a) Transfer . You will not make a Transfer or make any lease or sublease of any property you are leasing in connection with the Franchised Business, without our prior written consent, which will not be unreasonably withheld, provided all prerequisites to transfer are met. Any attempted Transfer of any interest in the Franchised Business without our prior written consent will be a default under the terms of this Agreement and will be void. The following conditions must be met before a Transfer will be approved:

(i) You must submit a written request to Transfer at least 14 days prior to the close of the Transfer; and


		27		March 2014

(ii) You must submit a fully-executed and complete copy of the purchase agreement; and

(iii) The transferee must assume all of your obligations in connection with the Franchised Business; and

(iv) You must prove that you have paid all of your debts; and

(v) You must not be in default under this Agreement or any agreement between you and us or our affiliates or a third party that relates to the franchise in any way; and

(vi) The transferee must pay for any required training and successfully complete the training then required of new franchise owners; and

(vii) In the event a majority or controlling interest in the Franchised Business is transferred, you or the transferee must pay us a transfer fee (“ Transfer Fee ”). This Transfer Fee is subject to refund pursuant to Section 2.3(c). The Transfer Fee shall be calculated as follows:

(1) If it is the transferee’s first Franchised Business, the Transfer Fee will be $25,000 less $2,500 times the number of full years remaining on the initial term of this Agreement. In the event the transfer occurs during the term of a Successive Franchise Agreement, the Transfer Fee will be $25,000 less $2,500 times the number of full years remaining on the Successive Franchise Agreement, but in no event less than $12,500.

(2) If the transferee is an existing franchise owner and the Franchised Business is being purchased by the exact same person, ownership group or business entity, the Transfer Fee will be $15,000 less $1,500 times the number of full years remaining on the initial term of this Agreement. In the event the transfer occurs during the term of a Successive Franchise Agreement, the Transfer Fee will be $15,000 less $1,500 times the number of full years remaining on the Successive Franchise Agreement, but in no event less than $7,500; and

(viii) The transferee must execute all of the documents we then require of new or continuing franchise owners including a new franchise agreement with terms that may vary materially from this Agreement, but that are the same generally as those required of other new and continuing franchise owners; and

(ix) The transferee must meet our subjective and objective standards, for new or continuing franchise owners; and


		28		March 2014

(x) The Franchised Location, fixtures, and equipment will be remodeled to conform to the then-current Manual and Methods of Operation as reasonably required by us. A remodel is defined as an investment of greater than $30,000, cumulatively. Such investment does not include expenditures for repair or replacement of damaged or broken equipment or those required by health department or other legal requirements. The remodeling requirements will be generally consistent with those required of other franchises of the same age, condition, and geographic region as your franchise; and

(xi) You and your owners must execute a general release in favor of us, to the extent permitted by law. This general release will apply only to the Franchised Business which is the subject of the Transfer;

(xii) You must obtain and submit to us satisfactory evidence of transfer and/or consent of lenders, lessors, and governmental authorities for all material permits, approvals, and licenses; and

(xiii) You must complete all of your obligations under Section 3 of this Agreement and the Franchised Location must be open and operating.

(b) Right of First Refusal . If you receive an offer from a third party and you enter into a binding agreement to sell or transfer an interest in this Agreement or the Franchised Business or a controlling ownership interest in the entity holding the Franchised Business, we may elect to purchase the interest for the price and on the terms and conditions contained in the offer upon the following conditions:

(i) Within seven days after receipt of a bona fide offer acceptable to you to Transfer all or part of this Agreement or the Franchised Business, you will notify us of the offer in writing, enclosing a signed copy of the offer. To be a valid bona fide offer, the proposed purchase price must be in a fixed dollar amount and without any contingent payments of purchase price.

(ii) We will then have access to all of your books and records in order to evaluate this offer, including but not limited to your business financial statements and tax returns.

(iii) We may then purchase the same assets or interest that is the subject of the offer to Transfer at the price and on the same terms and conditions as offered to you. We may substitute cash for any other form of consideration contained in the offer and, at our option, may pay the entire purchase price at closing. We may exercise this right to purchase, by notifying you in writing within 21 days after receiving your notice.

(iv) We will close the Transfer by the later of 30 days after our notice to you of exercise of this right, or the time for closing contained in the original offer.


		29		March 2014

(v) If we do not exercise our right to purchase within the time set forth in the previous section, you may Transfer the subject interest to a third party, but not at a lower price or on more favorable terms than disclosed to us in writing. Such Transfer is subject to our prior written approval and other conditions specified in this Agreement. If you do not Transfer the subject interest to the transferee on the same terms offered to us, then you must again extend the right of first refusal to us in the manner described above, before another desired Transfer.

(d) Notwithstanding the preceding section, you may transfer your rights and obligations under this Agreement to a corporation, limited liability company, trust, family limited partnership, or other entity in which you own one hundred percent (100%) of the outstanding stock or membership interest, provided:

(i) You provide notice to us as to your intent to transfer;

(ii) You remain on the Agreement as a party and the entity is added as a co-party;

(iii) You or your operational partner or Certified Manager approved by us continues to devote full-time and best efforts to manage the daily operations of the Franchised Business;

(iv) The entity’s activities are confined exclusively to operating the Franchised Business;

(v) The entity assumes joint and several liability with you; and

(vi) Each owner must sign an Owner Agreement and Guaranty in the form attached as Attachment B.

(e) If you are a legal entity, your share certificates or other evidence of ownership will bear the following legend, printed legibly and conspicuously:

THE TRANSFER OF THIS INSTRUMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF A FRANCHISE AGREEMENT WITH PAPA MURPHY’S INTERNATIONAL LLC. REFERENCE IS MADE TO THE FRANCHISE AGREEMENT AND TO ITS RESTRICTIVE PROVISIONS. NO TRANSFER WILL DIMINISH OR MINIMIZE YOUR OBLIGATIONS UNDER THE FRANCHISE AGREEMENT.


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7.2 Your Death or Disability .

(a) If you or a majority owner of the legal entity holding the franchise dies or becomes incapacitated, the heirs, beneficiaries or legal representatives of the individual will, within 180 days, either:

(i) Apply to us for the right to continue to operate the Franchised Business for the duration of the term of this Agreement. The right to continue will be granted upon the fulfillment of all the general Transfer conditions (except that no Transfer Fee will be required); or

(ii) Transfer your interest according to the general Transfer conditions.

(b) If we reject your application to continue to operate, the 180 days within which to Transfer will be computed from the date of rejection.

8.	INDEMNITY, INSURANCE, CONDEMNATION AND CASUALTY

8.1 Indemnification . You and each owner of the Franchised Business will protect, indemnify, defend, and hold us and our officers, directors, employees, members, managers, affiliates and agents harmless against all claims, demands, actions, causes of action, losses, damages, costs, suits, judgments, investigations, formal or informal inquiry, debts, losses, fines, assessments, taxes, liens, legal fees and disbursements, penalties, expenses, and liabilities (collectively “Liabilities”) of any kind or nature arising directly or indirectly out of or in connection with the Franchised Business, any actions you take or representations you make, or your breach of this Agreement. However, you are not required to indemnify us from any Liabilities to the proportionate extent resulting from our breach of this Agreement or other wrongs we commit.

8.2 Insurance . You must, upon Commencement Date of this Agreement, purchase and at all times maintain in full force and effect:

(a) Insurance policies, in such amounts and on such terms, as prescribed by the Manual, issued by an insurance company acceptable to us at all times during the term of this Agreement. Insurance coverage must include, but is not limited to, comprehensive general liability, combined single limit, automobile, bodily injury and all-risk property damage insurance and all other occurrences against claims of any person, employee, customer, agent or otherwise in an amount per occurrence of not less than such amount set forth in the Manual and adjusted by us periodically in our sole discretion. Insurance coverage must also include, unemployment and workers compensation insurance and any other additional insurance required by the terms of any lease or lender for the Franchised Business. Insurance policies must insure you, us, our affiliates, and our and our affiliates’ respective officers, directors, shareholders, managers, members and all other parties designated by us, as additional named insureds against any liability which may accrue against them because of the ownership, maintenance or operation by you of the Franchised Business. The policies must also stipulate that we shall receive a 30-day prior written notice of cancellation and must contain endorsements by the insurance companies waiving all rights of subrogation against us. Original or duplicate copies of all insurance policies, certificates of insurance, or other proof of insurance (collectively, “ Certificates of Insurance ”) acceptable to us, including original endorsements effecting the coverage required by this Section, shall be furnished to us together with proof of payment within ten days of issuance thereof.


		31		March 2014

(b) You must also furnish us with certificates and endorsements evidencing such insurance coverage within ten days after each of the following events: (i) at all policy renewal periods, no less often than annually, and (ii) at all instances of any change to, addition to, or replacement of any insurance. The certificates and endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf.

(c) All certificates and endorsements are subject to approval by us. We reserve the right to require complete, certified copies of all required insurance policies at any time in our sole discretion. In the event you fail to obtain the required insurance and to keep the same in full force and effect, we may, but shall not be obligated to, purchase insurance on your behalf from an insurance carrier of our choice, and you must reimburse us for the full cost of such insurance, along with a reasonable service charge to compensate us for the time and effort expended to secure such insurance, within five days of the date we deliver an invoice detailing such costs and expenses to you. Notwithstanding the foregoing, your failure to obtain insurance constitutes a material breach of this Agreement entitling us to terminate this Agreement or exercise any or a combination of the other default remedies set forth in Section 6 of this Agreement.

(d) You must also procure and pay for all other insurance required by state or federal law.

(e) We reserve the right to modify minimum insurance requirements or the types of coverage required at any time in our sole discretion by updating the Manual.

(f) All public liability and property damage policies shall contain a provision that we, although named as an additional insured, shall nevertheless be entitled to recover under such policies on any loss occasioned by us or our shareholders, members, directors, managers, employees or agents.

(g) All liability insurance policies procured and maintained by you in connection with the Franchised Business will require the insurance company to provide and pay for attorneys to defend any legal actions, lawsuits or claims brought against you, us, our affiliates and our and our affiliates’ respective officers, directors, managers, shareholders, members, agents, employees, and all other entities or individuals designated by Franchisor as additional insureds.

(h) You will notify us immediately in writing of any event that could materially affect you or the Franchised Business, and no later than the date on which you notify your insurance carrier.

(i) We make no representation or warranty that compliance with these insurance requirements will insure you against all insurable risks or losses.


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(j) Your compliance with insurance requirements will not relieve you of your liability under the indemnification provisions of this Agreement.

8.3 Condemnation and Casualty .

(a) You shall give us notice of any proposed taking through the exercise of the power of eminent domain, at the earliest possible time. If the Franchised Location or a substantial part of the Franchised Location is to be taken, you may request relocation and we may or may not approve your request at our sole discretion. Any such approval must be in writing. If such relocation is approved by us, it will be within an area specified by us and the exact location shall be subject to our further written approval. If such relocation is authorized and you open at a new location in accordance with our specifications within 60 days of the closing of the old location, the new location will thereafter be deemed to be the Franchised Location franchised under this Agreement. If such a condemnation takes place and you do not open a new location, for whatever reason, under this Agreement in strict accordance with this Section within 60 days of any written approval by us of a new location, then this Agreement shall terminate immediately upon notice by us to you.

(b) If the Franchised Location is damaged by fire or other casualty, you will expeditiously repair the damage. If the damage or repair requires closing the Franchised Location, you will immediately notify us, will repair or rebuild the Franchised Location in accordance with Franchisor’s specifications, and will reopen the Franchised Location for continuous business operations as soon as reasonably practicable (but in any event within 60 days after closing of the Franchised Location), giving us advance notice of the date of reopening. If the Franchised Location is not reopened in accordance with this Section, this Agreement shall immediately terminate upon notice by us to you.

(c) The term of this Agreement shall not be extended by any interruption in the Franchised Location operations except by an act of force majeure that results in the Franchised Location being closed not less than 60 days nor more than 365 days. You must apply for any such extension within 60 days following the reopening of the Franchised Location. Except as expressly provided elsewhere in this Agreement, no event during the term of this Agreement shall excuse you from paying periodic franchise fees in accordance with the preceding requirements of this Agreement to the extent you receive benefits under business interruption insurance or similar coverage you maintain in accordance with the requirements of Section 8.2 above.

9.	NOTICE AND MISCELLANEOUS

9.1 Notices .

(a) All notices sent by one party to the other must be in writing and must be hand-delivered, sent by registered or certified mail, return receipt requested, or overnight courier; or transmitted by facsimile or sent via other electronic means, if the sender can verify receipt (with a confirmation copy mailed within three business days). Notices to you will be addressed to you at your last known business address, or at any other address you designate in writing.


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They will be addressed to us at the following address unless and until a different address has been designated by us in writing:

Papa Murphy’s International LLC

Attention: Legal Department

8000 NE Parkway Drive

Suite 350

Vancouver, WA 98662

Fax: (360) 260-0500

(b) Any notice is considered given and received when delivered, if hand-delivered; if sent by facsimile, or electronic means in which receipt can be verified, on the next business day after sent; if mailed, on the third business day following the mailing; and one business day after placement with a reputable air courier service, requesting delivery on the most expedited basis available.

9.2 Relationship of Parties . This Agreement does not constitute a designation of, or create a relationship with, Franchise Owner as an agent, legal representative, joint venturer, partner, employee, or servant of us or our parent, subsidiary, and affiliated entities for any purpose whatsoever; and it is deemed understood between the parties hereto that Franchise Owner shall be an independent contractor and is in no way authorized to make any contract, agreement, warranty, or representation on behalf of us, our parent, subsidiary, and affiliated entities or to create any obligation, express or implied, on behalf of us, our parent, subsidiary, and affiliated entities. The parties agree that this Agreement does not create a fiduciary relationship between us, our parent, subsidiary and affiliated entities and Franchise Owner.

9.3 Non-Waiver of Rights . Our waiver of any particular right will not affect or impair our rights as to any subsequent exercise of that right of the same or a different kind; nor will any delay, forbearance or omission by us to execute any rights affect or impair our rights as to any future exercise of those rights. No failure by us to exercise any power or right reserved hereunder, or to insist upon strict compliance by Franchise Owner with any obligation or condition hereunder, and no custom or practice of the parties in variance with the terms hereof, shall constitute a waiver of our right to demand strict compliance with the terms hereof. Waiver by us of any particular default by Franchise Owner shall not affect or impair our rights in respect to any subsequent default of the same or of a different nature; nor shall any delay, waiver, forbearance, or omission by us to exercise any power or rights arising out of any breach or default by Franchise Owner or any of the terms, provisions, or covenants hereof affect or impair our rights, nor shall such constitute a waiver by us of any right hereunder or of the right to declare any subsequent breach or default. Subsequent acceptance by us of the payments due under this Agreement shall not be deemed to be a waiver by us of any preceding breach by Franchise Owner of any terms, covenants, or conditions of this Agreement. We may waive or modify any obligation of other franchise owners under agreements similar to this Agreement, and no such waiver or modification shall obligate us to grant a similar waiver or modification to Franchise Owner. Acceptance by us of payments due under this Agreement from any other person or entity shall be deemed acceptance from such person or entity as an agent of Franchise Owner and not as recognition of such person or entity as an assignee of or successor to Franchise Owner.


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9.4 Risk of Operations . You recognize the uncertainties of the Franchised Business, and therefore acknowledge that, except as set forth in this Agreement, no representations or agreements have been made regarding the success, sales potential, or profitability of the Franchised Business or the suitability of any location.

9.5 Severability . If any part of this Agreement, for any reason, is declared invalid by an arbitrator or court, the declaration will not affect the validity of any remaining portion, or the validity of that portion under laws of another jurisdiction, if applicable. The remaining portion will remain in force and effect as if this Agreement was executed with the invalid portion eliminated or curtailed.

9.6 Interpretation and Execution .

(a) This Agreement is made in the State of Washington, and shall be governed by and interpreted and construed in accordance with the laws of that State without regard to conflict of laws principals, except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. §1051 et seq.). This choice of laws will not affect the scope of state franchise, business opportunity or related laws, and nothing in this Agreement will be considered to extend the scope of application of the Washington Franchise Investment Protection Act, Washington Business Opportunity Fraud Act or similar law to you if you are not a resident of the State of Washington or otherwise entitled by statute to seek the protection of such laws.

(b) Any use of the word “including,” or synonymous terms, followed by one or more examples does not in any way limit the antecedent word or phrase.

(c) This Agreement and the documents referred to herein shall be the entire, full and complete agreement between us and Franchise Owner concerning the subject matter hereof, and shall supersede all prior agreements, and there are no other representations, inducements, promises, or agreements, oral or otherwise, between the parties not embodied herein, which are of any force or effect with reference to this Agreement or otherwise. No amendment, change, or variance from this Agreement shall be binding on either party unless executed in writing by our authorized representatives. Nothing in this or any related agreement, however, is intended to disclaim the representations we made in that certain document titled “Franchise Disclosure Document” that we provided to you prior to your signing this Agreement.

(d) Titles of articles and sections are used for convenience of reference only and are not part of the text, nor are they to be construed as limiting or affecting the construction of the provisions.

(e) All references in this Agreement to the singular shall include the plural where applicable, and all references to the masculine shall include the feminine and vice versa.

(f) No right or remedy of ours in this Agreement is exclusive of any other right or remedy herein, or of any right or remedy provided or permitted by law or equity, but each shall be cumulative of every other right or remedy of ours. You agree that any claim that you may have against us, whether or not arising under this Agreement, shall not constitute a defense to our enforcement of any term of this Agreement.


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(g) The parties agree to acknowledge, sign and deliver all further documents, instruments or assurances and to perform all further acts or deeds as may be reasonably required to carry out this Agreement. You agree and hereby appoint us as your attorney-in-fact, which appointment is coupled with an interest and is irrevocable, where required to effect the purposes of this provision.

(h) The provisions of this Agreement which by their terms or by reasonable implication require performance by you after assignment, expiration or termination, remain enforceable notwithstanding the assignment, expiration or termination of this Agreement, including those pertaining to noncompetition, intellectual property protection, confidentiality and indemnity. This Agreement inures to the benefit of and is binding on the respective heirs, legal representatives, successors, and permitted assigns of the parties.

9.7 Modification . This Agreement may be modified only by mutual consent of the parties in writing and signed by an authorized person from each of the parties.

9.8 Representations and Warranties by Franchise Owner . You warrant that you have received a complete copy of this Agreement, our franchise disclosure document and applicable exhibits, and that before signing this Agreement, there was an ample opportunity to review them. NO STATEMENT WAS MADE, WHETHER ORAL, WRITTEN, OR OTHERWISE, THAT CONTRADICTS THE FRANCHISE DISCLOSURE DOCUMENT OR THIS AGREEMENT.

9.9 Negotiation and Mediation . This dispute resolution clause applies to claims by and against all parties and their affiliates, successors, owners, members, managers, officers, directors, employees, agents, and representatives, as to claims arising out of or relating to this Agreement or our relationship, except as stated below. The parties will first attempt to resolve any dispute relating to or arising out of this Agreement or our relationship by negotiation. Any dispute subject to negotiation, and not resolved within ten days, must be submitted to nonbinding mediation before commencing further dispute resolution. Mediation will be before a single skilled independent mediator mutually and reasonably agreed on by the parties. The parties will equally bear the costs of mediation. Mediation will be conducted in accordance with the procedures of United States Arbitration and Mediation Service, Inc. (USA&M) at the option of the party initiating mediation or other mediation service agreed to by you and us. The mediation will be conducted in the city in which USA&M has an office nearest our headquarters office at the time the dispute arises, unless otherwise mutually agreed. This dispute resolution clause shall survive the termination or expiration of this Agreement. This clause shall not apply to prevent the immediate filing of any suit to recover Royalty Fees or Advertising and Development Fees owed under this Agreement, or any suit seeking preliminary or permanent injunctive relief, specific performance, or other equitable relief, or any action at law for damage to our property interests or in equity to enjoin any harm to our goodwill, Marks, or our intangible property.

9.10 Waiver of Rights . THE PARTIES HERETO AND EACH OF THEM KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY AGREE AS FOLLOWS:

(a) The parties hereto and each of them EXPRESSLY WAIVE(S) THE RIGHT THAT ANY MAY HAVE TO TRIAL BY JURY.


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(b) The parties hereto and each of them EXPRESSLY WAIVE(S) ANY CLAIM FOR PUNITIVE, MULTIPLE, CONSEQUENTIAL AND/OR EXEMPLARY DAMAGES, except that we shall be free to bring an action for willful trademark infringement and, if successful, to receive an award of multiple damages as permitted by law. The parties further agree that if this waiver is unenforceable under applicable law, then any recovery by any party in any forum shall not exceed two times actual damages, except for an award of multiple damages to us for willful trademark infringement.

9.11 Injunction, Enforcement, Costs and Venue .

(a) Either party may seek to obtain in any court of competent jurisdiction specific performance and injunctive relief to restrain a violation by the other party of any term or covenant of this Agreement.

(b) You must pay all our damages, expenses, audit, investigation and experts’ costs, collection costs, attorneys’ fees, and interest on the unpaid balances as permitted by law, resulting from your default under this Agreement or from the indemnification provisions of this Agreement.

(c) In specific consideration for the use of the Marks, the exclusive venue and forum of dispute resolution will be in the applicable federal or state court for the judicial district in which Papa Murphy’s International LLC has its principal place of business at the time the action is commenced. The parties waive all issues of personal jurisdiction or venue for the purpose of enforcing this Section.

(d) Any and all claims and actions arising out of or relating to this agreement, the relationship of the parties, or Franchise Owner’s operation of the unit, brought in any forum by any party hereto against the other, must be commenced within two (2) years after the discovery of the facts giving rise to such claim or action, or such claim or action shall be barred, except for claims relating to the financial obligations of Franchise Owner.

9.12 Attorneys’ Fees . In any litigation or other mandatory dispute resolution, the prevailing party, if any, shall be entitled to an award of its damages, expenses, audit, investigation and experts’ costs, collection costs, attorneys’ fees, and interest on the unpaid balances as permitted by law.

9.13 Binding Effect . This Agreement benefits and is binding upon the respective heirs, executors, administrators, successors, and assigns of the parties, but subject to the requirements of this Agreement regarding our permission for your Transfer.

9.14 Independent Investigation . THE PROSPECT OF SUCCESS OF THE BUSINESS VENTURE UNDERTAKEN BY FRANCHISE OWNER BY VIRTUE OF THIS AGREEMENT IS SPECULATIVE AND DEPENDS TO A MATERIAL EXTENT UPON FRANCHISE OWNER’S CAPABILITY AS AN INDEPENDENT BUSINESS PERSON AND FRANCHISEE, AS WELL AS OTHER FACTORS. WE MAKE NO REPRESENTATIONS OR WARRANTIES AS TO THE POTENTIAL SUCCESS OF THE BUSINESS VENTURE UNDERTAKEN BY FRANCHISE OWNER HEREBY. FRANCHISE OWNER REPRESENTS AND WARRANTS THAT IT HAS ENTERED INTO THIS AGREEMENT AFTER MAKING INDEPENDENT INVESTIGATIONS OF OUR BUSINESS, AND NOT IN RELIANCE UPON ANY REPRESENTATION BY US AS TO SALES OR PROFITS WHICH FRANCHISE OWNER IN PARTICULAR MIGHT BE EXPECTED TO REALIZE. FRANCHISE OWNER FURTHER


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REPRESENTS AND WARRANTS THAT WE AND OUR REPRESENTATIVES, EMPLOYEES OR AGENTS HAVE MADE NO REPRESENTATIONS TO INDUCE FRANCHISE OWNER TO ACQUIRE THIS FRANCHISE AND EXECUTE THIS AGREEMENT WHICH ARE NOT EXPRESSLY SET FORTH HEREIN OR IN THE DISCLOSURE MATERIALS PROVIDED TO FRANCHISE OWNER PRIOR TO ENTERING INTO THIS AGREEMENT.

9.15 Our Acceptance . This Agreement will be binding upon you at the time you, and each of your owners, signs it and delivers it to us. This Agreement will not be binding upon us until we accept it in writing by one of our principal officers.

9.16 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

9.17 Time of Essence . You agree and acknowledge that time is of the essence with regard to your obligations hereunder and that all of your obligations are material to us and this Agreement.

10.	FRANCHISE OWNER INFORMATION . The following information must be completed by the Franchise Owner:

10.1 Managing Owner . The following individual is designated as the individual responsible for the operations and management of the Franchised Business:

10.2 Statement of Ownership . Franchise Owner’s form of ownership is (check one):

Individual(s)

If an individual, provide the name and percentage ownership of each individual Franchise Owner and indicate whether each such person will be active in the business:


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Legal Entity (check one and complete (a) through (c) below):

Corporation

Limited Liability Company

Partnership

Other (indicate):

If a legal entity, attach a copy of the articles of incorporation, certificate of formation or similar document and provide the following information:

(a)

State of incorporation or organization:

(b)

Date of incorporation or organization:

(c)

Name and percentage ownership of each owner, member or partner and indicate whether each such person will be active in the business:

10.3 Financial Records . Provide the address where Franchise Owner’s financial records and corporate, partnership or company records, as applicable, are maintained.

Franchised Business

Other (indicate):

If you have more than one signatory, all are jointly and severally bound to this Agreement. Owners of entity franchise owners must each also sign the Owner Agreement and Guaranty attached as Attachment B.

[SIGNATURES ON FOLLOWING PAGE]


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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date written below.


PAPA MURPHY’S INTERNATIONAL LLC

By:
		Victoria T. Blackwell
		Chief Legal Officer
Date:

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		Sign here if you are taking the franchise as a CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


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CERTIFICATION OF FRANCHISE OWNER

Describe all promises and representations made by any of our representatives to you that are not expressly contained in the Franchise Agreement or the Franchise Disclosure Document, but that influenced your decision to sign the Franchise Agreement.

If the answer is “NONE,” please write “NONE.”

Your completion of this page is a material inducement for us to grant a franchise to you. If you fail to complete and sign this page, we will not execute the Franchise Agreement or we may void the Franchise Agreement if it already has been executed.

The undersigned hereby certifies that the information provided above is true, that the undersigned had an opportunity to obtain the advice of an attorney, and that the undersigned has executed this Certification.

[SIGNATURES ON FOLLOWING PAGE]


Certification of Franchise Owner		1		March 2014

IN WITNESS WHEREOF, the Franchise Owner has signed this Agreement as of the date written below.

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		Sign here if you are taking the franchise as a CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


Certification of Franchise Owner		1		March 2014

ATTACHMENT A

FRANCHISED LOCATION AND REQUIRED OPENING DATE

[This information to be completed by us upon full execution of the Franchise Agreement.]


Franchise Fee Paid :		$

Date Paid :

Required Opening Date (pursuant to Section 3.8):

Commencement Date:

Previous Agreement Expiration Date:

1.	Term: You shall be permitted to operate the Franchised Business for the following term:

Ten years from the Commencement Date

If pursuant to a Successive Addendum, five years from the expiration of the Term of your previous Franchise Agreement

If pursuant to a Successive Addendum (Remodel), ten years from the expiration of your previous Franchise Agreement or the acceptance by us of the remodel of the Franchised Business, whichever occurs first

2. Franchised Location: This Agreement is for the establishment of one Papa Murphy’s Franchised Business as set forth in (a) or (b) below. When the exact location for the Franchised Location is determined, this Attachment will be updated by both parties to identify the Franchised Location (pursuant to Section 3 of the Franchise Agreement):

(a) If the Franchised Location is determined upon execution of the Franchise Agreement:

(b) If the Franchised Location is not determined upon execution of the Franchise Agreement, the general Site Selection Area designated is as follows:

(c) When the exact location for the franchise premises is determined, this Attachment will be updated by both parties to identify the franchise premises (pursuant to Section 3.1 of the Franchise Agreement):

[SIGNATURES ON FOLLOWING PAGE]


Attachment A		1		March 2014

IN WITNESS WHEREOF, the parties have signed this Agreement as of the date written below.


PAPA MURPHY’S INTERNATIONAL LLC

By:
		Victoria T. Blackwell
		Chief Legal Officer
Date:

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		Sign here if you are taking the franchise as a CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


Attachment A		1		March 2014

ATTACHMENT B

OWNER AGREEMENT AND GUARANTY

FOR ALL ENTITY FRANCHISE OWNERS

As a condition to the granting by Papa Murphy’s International LLC (“ Franchisor, ” “ we, ” “ us ”) of a Franchise Agreement (“ Franchise Agreement ”) granting certain rights to the entity listed as the Franchise Owner on the signature block of the Franchise Agreement (“ Franchisee ”) to develop a Papa Murphy’s Take ‘N’ Bake Pizza store (“ Franchised Business ”), each of the undersigned individuals (“ Owner ” or “ you ” or “ your ”) agrees jointly and severally to be bound by the terms and restrictions of this Owner Agreement and Guaranty for All Entity Franchise Owners (“ Agreement ”):

1. Ownership and Management. Each of you warrants to us that you, or you and your spouse, if applicable, are the holders of all equity, voting and other interests in the Franchise Owner and all options, warrants and rights to acquire an interest in the Franchise Owner. The Owner, or Owner and spouse, if applicable, who is to be responsible for on-premises operation of the Franchised Business will successfully complete training. For Area Development Agreements, depending on your experience and qualifications, we may impose requirements that include but are not limited to the experience and qualifications of the operating management of your stores. Such requirements may also include but are not limited to you providing equity ownership, or similar incentives, to your operating personnel. These requirements will become part of your Area Development Agreement.

2. Confidentiality and Noncompetition Agreements .

(a) In-Term Covenants . Each of you agrees that during the term of the Franchise Agreement, including any applicable Interim Period (as defined in the Franchise Agreement) or extension periods, you, your immediate family or household members, and persons associated with you, including owners, managers, assistant managers, or agents involved in the operation of the Franchised Business, will abide by the in-term noncompetition and confidentiality agreements of the Franchise Agreement.

(b) Post-Term Covenants . Each of you agrees that for a period of two years after the transfer, expiration or termination of the Franchise Agreement for any reason, you, your immediate family or household members, and persons associated with you, including owners, managers, assistant managers, or agents involved in the operation of the Franchised Business will abide by the post-termination covenant not to compete and confidentiality provisions of the Franchise Agreement. This post-term covenant applies within a 25-mile radius from the Franchised Business, and within a 25-mile radius from the premises of any other Papa Murphy’s business.


Attachment B		1		March 2014

3. Guaranty .

(a) Guaranty . Each of you personally and unconditionally guarantee to us the performance of all of the Franchise Owner’s obligations under the Franchise Agreement, including the punctual payment of amounts that the Franchise Owner may now or in the future owe to us or any of our affiliates (including but not limited to interest, and all attorneys’ fees, costs and expenses incurred by any of us in collection).

(b) Term of Guaranty . This guaranty and your obligations under it will continue in effect until the earlier of: (i) two years after the Franchise Owner ceases to operate the Franchised Business, or (ii) two years after you cease holding any ownership interest in the Franchise Owner.

(c) Waivers . Each of you waives notice of demand, notice of protest, nonpayment or default, and all other notices to which you may be entitled, except that we will copy you with any notice of termination. You waive any right that you may have to require that an action be brought against the Franchise Owner, and any claims for reimbursement or subrogation that you may have against us as a result of your performance of this Agreement.

4. Other Certifications, Representations, Warranties and Covenants. Each of you hereby makes all certifications, representations, warranties and covenants contemplated by the Franchise Agreement.

5. Covenant Not To Transfer Interests . The Franchise Agreement, and your rights and obligations under it, shall remain personal to you. Any proposed transfer by you (regardless of the form of transfer) shall be subject to the same terms and conditions contained in the Franchise Agreement. The term “transfer” shall have the same meaning as in the Franchise Agreement. Each of you agree that you will not at any time, directly or indirectly, voluntarily or involuntarily, make any transfer, unless you first obtain our written approval in compliance with the same transfer provisions of the Franchise Agreement. You will cause all documents evidencing an ownership interest or right to acquire an ownership interest issued by the Franchise Owner to bear a legend indicating that such ownership interest is subject to the restrictions provided for in the Franchise Agreement. You will show us any owners’ agreement ten business days before it is signed for us to review and ensure compliance with this Agreement.

6. Disputes . Disputes arising out of or relating to this Agreement shall be resolved in the same manner as provided under the Franchise Agreement, including the provisions of the Franchise Agreement pertaining to mediation, venue, applicable law, time periods and limitations that govern any disputes between us and you.

Each of you and your spouse, if your spouse has any direct or indirect interest in the Franchise Owner, have signed this Agreement on the date set forth opposite your signature.


Signature:
Name:
Address:




Date:


Attachment B		2		March 2014


Signature:
Name:
Address:




Date:

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Name:
Address:




Date:

Signature:
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Address:




Date:

Signature:
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Address:




Date:

Signature:
Name:
Address:




Date:


Attachment B		3		March 2014

ATTACHMENT C

ADDENDUM TO LEASE

(For Reference Purposes Only)

THIS ADDENDUM TO LEASE is made on the day of , 20 by and between , hereinafter referred to as “ Landlord ,” and , hereinafter referred to as “ Tenant .”

RECITALS

A. Landlord and Tenant have entered into a certain Lease Agreement dated , 20__, and pertaining to the premises located at (the “ Lease ”).

B. Landlord acknowledges that Tenant intends to operate a Papa Murphy’s Take ‘N’ Bake Pizza store in the leased premises under a Franchise Agreement (the “ Franchise Agreement ”) with Papa Murphy’s International LLC (“ Franchisor ”).

C. The parties now desire to amend the Lease in accordance with the terms and conditions contained herein.

AGREEMENT

1. Use of Premises . Notwithstanding anything to the contrary contained in the Lease, Tenant shall have the right to use the premises for any lawful uses provided that such use does not conflict with any existing exclusives granted to other users in the shopping center and provided that the use is not detrimental to the value of the existing shopping center. Landlord also agrees that no other tenant (other than the grocer) will be allowed to sell pizza.

2. Structural Repairs . Landlord shall be responsible for repairs to the roof, structural repairs to the building, concrete slab and any other expenses that would be considered a capital expense under generally accepted accounting principles.

3. Defects and CAM Pass Throughs . Landlord agrees that Tenant will not be responsible for any cost of correcting defects in design or construction of the building, remediation of any hazardous substances (as the same may be defined in the Lease), or payment of any insurance deductible, through common area maintenance (CAM) or operating charges.

4. Signage . Landlord agrees to provide Tenant with adequate space on all shopping center identification signs. Tenant is to be allowed to use the standard Papa Murphy’s sign package:

•

Exterior Signs (one of the following – Specification Sheets available)

•

Illuminated Canister Wall Sign


Attachment C		1		March 2014

•

Illuminated Individual Channel Letters flush mounted on Facia

•

Illuminated Individual Channel Letters on Aluminum Raceway (painted to blend w/Facia)

•

Illuminated Individual Channel Letters on Halo Illuminated Raceway

•

Letters – According to the then-current signage specifications

•

“Open” and “Take N Bake” window neon signs

•

Professionally prepared window vinyls

•

Shaker boards

5. Relocation . Landlord agrees there will be no right of relocation by the Landlord for the length of the Lease term to include option period without written consent of Tenant.

6. Condemnation . Tenant shall have the right to seek a separate damage award from the condemning authority that will not diminish the award to which Landlord is legally entitled.

7. Entry by Landlord . Landlord agrees not to enter premises during peak business hours from 4:00 p.m. to 8:00 p.m., except in the event of an emergency.

8. Percentage Rent . Landlord agrees there shall be no rent based on a percentage of sales or revenue. Further, Tenant shall not be required to provide sales data or Tenant financial information to Landlord.

9. Radius Clause . Landlord agrees that there shall be no radius clause whereby Tenant shall be prohibited from opening or operating another Papa Murphy’s Take ‘N’ Bake Pizza store.

10. Right to Assign .

10.1 Notwithstanding anything to the contrary contained in the Lease, Tenant may, without the consent of Landlord, sublease the premises or assign the Lease to the Franchisor or to a subsidiary, affiliate or franchisee of Franchisor. Tenant may not sublease the premises or assign the Lease to any other party without the consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. In the event of an assignment or subletting, Tenant shall remain liable for the payment of all rent and the performance of all of Tenant’s obligations under the Lease.

10.2 Any demand for increased rent or other payment or modification of the terms of the Lease by Landlord as a condition to the granting of consent, when consent is required, shall be deemed unreasonable. Landlord may withhold consent only if Landlord determines that the quality of the merchandising operation from the premises may be substantially inferior to other operations in the vicinity of the premises. If Landlord fails to respond in writing within fourteen (14) days after a request for consent by Tenant or to set forth Landlord’s reasons for denying consent, consent shall be deemed given.


Attachment C		2		March 2014

11. Landlord’s Waiver of Lien . For valuable consideration, Landlord waives all rights to maintain or enforce a statutory or contractual landlord’s lien, security interest, or any other claim against personal property located on the premises. Landlord hereby agrees that all personal property belonging to Tenant shall not be subject to any claim by Landlord as compensation for any debt, common area maintenance charge, utility bill, or other monetary claim owed to Landlord by Tenant. Landlord’s sole recourse for any moneys owed shall be against Tenant.

12. Continuous Operations . Notwithstanding anything to the contrary contained in the Lease, Tenant shall not be required to continuously operate from the premises and the failure to continuously operate shall not be deemed a default under the Lease.

13. Default and Notice Under Lease .

13.1 In the event there is a default by Tenant under the terms of the Lease, or an attempted transfer of Tenant’s interest under the Lease, Landlord shall give Franchisor written notice of such default or attempted transfer within ten days after Landlord receives knowledge of its occurrence.

13.2 If Landlord gives Tenant a default notice, Landlord must contemporaneously give Franchisor a copy of such notice. Franchisor will have the right but not the obligation to cure the default and notify Landlord whether it intends to cure the default and take an automatic assignment of Tenant’s interest as provided in this Agreement. Franchisor will have an additional fifteen (15) days from the expiration of Tenant’s cure period in which to cure the default or violation. The Franchise Agreement gives Franchisor the right of written notice, consent, and right of first refusal for any transfer.

13.3 All notices to Franchisor shall be sent by registered or certified mail, postage prepaid or by overnight mail to the following address:

Papa Murphy’s International LLC

8000 NE Parkway Drive, Suite 350

Vancouver, WA 98662

Attention: Legal Department

14. Right to Cure—Monetary Defaults . Notwithstanding anything to the contrary contained in the Lease, Tenant shall not be deemed in default of a monetary obligation under the Lease unless Tenant fails to pay any installments of rent or any other additional charges promptly on the day when they shall become due and payable, and such failure to pay shall continue for a period of ten (10) days after written notice by Landlord.


Attachment C		3		March 2014

15. Right to Cure—Non-Monetary Defaults . Notwithstanding anything to the contrary contained in the Lease, Tenant shall not be deemed in default of a non-monetary obligation under the Lease unless Tenant fails to promptly keep and perform any affirmative covenants of the Lease strictly in accordance with the terms of the Lease and shall not cure such failure for a period of thirty (30) days after written notice by Landlord of default and demand for performance. Notwithstanding anything to the contrary contained in the Lease, if any default shall occur other than in the payment of money, which cannot with due diligence be cured within a period of thirty (30) days, and Tenant, prior to the expiration of thirty (30) days from and after the giving of the notice, commences to eliminate the cause of such default and diligently pursues the cure of such default, then Tenant shall not be deemed in default under the Lease.

16. Termination, Transfer, or Expiration of Lease or Franchise Agreement .

16.1 Franchisor may at its option take an assignment of Tenant’s interest, by written notice of its exercise of the option sent within fifteen (15) days after the effective date of any termination, transfer or expiration of the Lease or Franchise Agreement. Landlord may rely on Franchisor’s written notice of termination, transfer, or expiration of the Franchise Agreement.

16.2 Franchisor may cure any default in the Lease within fifteen (15) days after exercise of its option; and must assume possession within a reasonable time thereafter. Landlord will assist Franchisor in gaining possession of premises. If Franchisor does not elect to take an assignment of the Tenant’s interest. Landlord will allow Franchisor to enter the premises to remove all signs and all other removable items containing Franchisor’s trademarks, and to make such other modifications (such as repainting) as are reasonably necessary to distinguish the trademarks and trade dress from those of Franchisor.

17. No Recapture of Excess Rent . Notwithstanding anything to the contrary contained in the Lease, Landlord shall not be entitled to any amounts paid by any subtenant or Tenant in excess of the rents provided for in the Lease.

18. Third Party Amendments . Notwithstanding anything to the contrary in the Lease, Tenant shall not be required to agree to substantive Lease modifications required by Landlord’s Lender or other third party and Tenant’s failure to so agree shall not result in termination of the Lease or be considered a default under the Lease.

19. Amendments . No amendment or variation of the terms of this Addendum to the Lease shall be valid unless made in writing and signed by the parties hereto.

20. Beneficiary . Landlord and Tenant expressly agree that Franchisor is a third party beneficiary of this Addendum. This Addendum creates no obligations of the Franchisor.

21. Conflict . In the event of any conflict between the terms of the Lease and the terms of this Addendum, the terms of this Addendum shall control.

22. Change in Building Ownership . In the event the Landlord declares bankruptcy or the ownership of the premises is otherwise transferred to someone other than the named Landlord, Tenant shall be assured that the material provisions in the Lease including, but not limited to rent, term, maintenance obligations, use, relocation, and maintenance expenses shall remain consistent with the terms herein.


Attachment C		4		March 2014

23. Contractors/Subcontractors . In the event the Landlord requires that certain contractors/subcontractors or maintenance companies be used by the Tenant, the cost for said services shall be consistent with other contractors or maintenance companies of the same trade.

24. Discovery of Hazardous Material . In the event that Tenant’s contractor discovers asbestos-containing material or any other hazardous material within the premises, Landlord shall be responsible for the abatement of said hazardous material at its sole cost and expense. In the event that Tenant’s opening is delayed as a result of the abatement, the Lease/rent commencement date will be extended one day for every day that construction is held up. For the purposes of this Addendum, hazardous material shall be defined as that which is considered hazardous material by the National Environment Protection Agency at the time of Lease execution.

25. Non-Structural Changes . Tenant shall be allowed to make non-structural changes to the premises without obtaining Landlord approval providing said changes do not exceed $25,000 per occurrence or require a building permit.

IN WITNESS THEREOF: Landlord and Tenant have signed this Addendum as of the day and year first written.


LANDLORD:

By:
Title:

TENANT:

By:
Its:


Attachment C		5		March 2014

ATTACHMENT D

NONDISCLOSURE AGREEMENT

THIS NONDISCLOSURE AGREEMENT (“ Agreement ”) governs the disclosure of information by Papa Murphy’s International LLC (“ Company ”) to the person or entity listed as the Franchise Owner(s) on the signature block of this Agreement (“ Recipient ”) as of , 20 (“ Effective Date ”).

“ Confidential Information ” means any and all technical and general information provided by Company to recipient, including but not limited to information relating to Company’s franchise system, underlying processes, recipes, mixes, techniques, know-how, ingredients, written documentation, operations manuals, methods of business, business plans, financial information, procurement requirements, purchasing, manufacturing, customer lists, investors, employees, business and contractual relationships, business forecasts, sales and merchandising, marketing plans and information the Company provides regarding third parties.

The Recipient agrees that it will hold in strict confidence and not disclose Confidential Information to any third party, except as approved in writing by the Company, and will use the confidential information for no purpose other than evaluating or pursuing a business relationship with the Company. The Recipient shall only permit access to Confidential Information to those of its employees or authorized representatives having a need to know and who have signed confidentiality agreements or are otherwise bound by confidentiality obligations at least as restrictive as those contained herein.

3.	The Recipient shall immediately notify the Company in the event of any loss or unauthorized disclosure of any confidential information.

The Recipient’s obligations under this Agreement do not apply to Confidential Information that: (a) was in the public domain before it was communicated to the Recipient through no fault of the Recipient; (b) entered the public domain after it was communicated to the Recipient through no fault of the Recipient; or (c) was in the Recipient’s possession free of any obligation of confidence at the time it was communicated to the Recipient.

5.	Upon completion of the evaluation by Recipient or upon written request of the Company, the Recipient shall promptly return to the company all documents, notes and other tangible materials representing the Confidential Information and all copies thereof.

The recipient recognizes and agrees that nothing contained in this Agreement shall be construed as granting any property rights, by license or otherwise, to any confidential Information disclosed pursuant to this Agreement, or to any invention or any patent, copyright, trademark, or other intellectual property right that has issued or that may issue, based on such Confidential Information. The Recipient shall not make, have made, use or sell for any purpose any product or other item using, incorporating or derived from and Confidential Information.


Attachment D		1		March 2014

Confidential Information shall not be reproduced in any form except as required to accomplish the intent of this Agreement. Any reproduction of any Confidential Information shall remain the property of the Company and shall contain any and all confidential or proprietary notices or legends which appear on the original, unless otherwise authorized in writing by the Company.

This Agreement shall be governed by and constructed in accordance with the laws of the State of Washington without reference to conflict of law principles. Any disputes under this Agreement may be brought in the applicable federal or state court for the judicial district in which Papa Murphy’s International has its principal place of business at the time the action is commenced. The parties waive all issues of personal jurisdiction or venue for the purpose of enforcing this Section. This Agreement may not be amended except by a writing signed by both parties hereto.

The Recipient agrees that breach of this Agreement will cause Company irreparable harm for which recovery of monetary damages would be inadequate, and that the Company shall be entitled to obtain timely injunctive relief under this Agreement, as well as such further relief as may be granted by a court of competent jurisdiction.

10.	If any provision of this Agreement is found by a proper authority to be unenforceable or invalid, such provision shall be changed and interpreted so as to best accomplish the objectives of such unenforceable or invalid provision within the limits of applicable law or applicable court decisions.

11.	The recipient will not assign or transfer any rights or obligations under this Agreement without the prior written consent of the Company.

12.

All notices or reports permitted or required under this Agreement shall be in writing and shall be delivered by personal delivery, electronic mail, facsimile transmission or by certified or registered mail, return receipt requested, and shall be deemed given upon personal delivery, five days after deposit in the mail, or upon acknowledgement of receipt of electronic transmission. Notices shall be sent to the addresses set forth at the end of this Agreement or such other addresses as either party may specify in writing.

[SIGNATURES ON FOLLOWING PAGE]


Attachment D		2		March 2014

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the Effective Date.


PAPA MURPHY’S INTERNATIONAL LLC

By:
		Victoria T. Blackwell
		Chief Legal Officer
Date:

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		Sign here if you are taking the franchise as a CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


Attachment D		3		March 2014

ATTACHMENT E

SUCCESSIVE ADDENDUM

This Successive Addendum (“ Addendum ”) is entered into this day of , 20 by and between Papa Murphy’s International LLC, a Delaware limited liability company (“ we ”) and the person(s) or entity listed as the Franchise Owner on the signature block of this Agreement (“ you ”).

RECITALS

A. You and we have entered into a Franchise Agreement, dated as of for the operation of a Papa Murphy’s Take ‘N’ Bake Pizza store located at (the “ Current Franchise Agreement ”).

B. The term of the Current Franchise Agreement is expiring and you and we are entering into a new franchise agreement (the “ Successive Franchise Agreement ”).

C. You and we desire to amend the terms of the Successive Franchise Agreement by incorporating the terms of this Addendum into the Successive Franchise Agreement.

AGREEMENT

1. Definitions . All terms capitalized but not otherwise defined herein will have the same meanings ascribed to them in the Successive Franchise Agreement.

2. Amendment . Sections 2.3(a)-(g), 2.3(j), 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 4.4(b) and 5.1 of the Successive Franchise Agreement are hereby deleted in their entirety; provided, however, that Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7 and 3.8 shall be reinstated in the event that we grant you the right to relocate the Franchised Business under Section 3.9 of the Successive Franchise Agreement.

3. Successive Franchise Fee . Section 4.1 of the Successive Franchise Agreement is deleted in its entirety and replaced with one of the following based on the version of the expiring Current Franchise Agreement:

q	“4.1 Successive Franchise Fee . There is no fee for the Successive Franchise Agreement.”

4.1 Successive Franchise Fee . You will pay the sum of $5,000 plus, if due and payable, all applicable federal, state or municipal taxes, as a non-recurring successive franchise fee (“ Successive Franchise Fee ”) at least 60 days before the expiration date of your prior Franchise Agreement. The Successive Franchise Fee shall be paid by means of check, money order or wire transfer. The Successive Franchise Fee is fully earned upon payment and is nonrefundable.”


Attachment E		1		March 2014

“4.1 Successive Franchise Fee . You shall pay the sum of $7,500 plus, if due and payable, all applicable federal, state or municipal taxes, as a non-recurring successive franchise fee (“ Successive Franchise Fee ”) at least 60 days before the expiration date of your prior Franchise Agreement. The Successive Franchise Fee shall be paid by means of check, money order or wire transfer. The Successive Franchise Fee is fully earned upon payment and is nonrefundable.”

4. Continuing to Operate Beyond this Agreement . The opening paragraph of Section 6.1 of the Successive Franchise Agreement is deleted in its entirety and replaced with the following:

“6.1 Continuing to Operate Beyond this Agreement . This Agreement grants you the right to operate using our Methods of Operation and our Marks for five years. In order for you to continue to operate beyond the five-year term, you must enter into a new Franchise Agreement and a Successive Addendum in the form attached hereto as Attachment E, the terms of which may vary substantially from this Agreement. The term of any Franchise Agreement successive to this Agreement (“Successive Franchise Agreement”) will be for five years. Your ability to enter into a Successive Franchise Agreement and continue to operate is contingent on satisfactory performance of this Agreement and any other agreements with us, and our approval of your current location and lease., and you must not be in default under this Agreement or any other agreements between you and us or our affiliates or a third party that relates to the franchise in any way. In addition, in order to receive a Successive Franchise Agreement, the following must occur:”

5. Addendum Binding . This Addendum will be binding upon and inure to the benefit of each party and to each party’s respective successors and assigns.

6. No Further Changes . Except as specifically provided in this Addendum, all of the terms, conditions and provisions of the Successive Franchise Agreement will remain in full force and effect as originally written and signed.

[SIGNATURES ON FOLLOWING PAGE]


Attachment E		2		March 2014

IN WITNESS WHEREOF, you and we have duly executed this Addendum as of the date written below.


PAPA MURPHY’S INTERNATIONAL LLC

By:
		Victoria T. Blackwell
		Chief Legal Officer
Date:

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		S IGN HERE IF YOU ARE TAKING THE FRANCHISE AS A CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
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Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


Attachment E		3		March 2014

Exhibit 10.7

PAPA MURPHY’S INTERNATIONAL LLC

AREA DEVELOPMENT AGREEMENT

THE FOLLOWING IS A BINDING CONTRACT FOR EXCLUSIVE DEVELOPMENT RIGHTS FOR PAPA MURPHY’S TAKE ‘N’ BAKE PIZZA STORES. FEES PAID PURSUANT TO THIS AGREEMENT ARE NONREFUNDABLE AND THIS AGREEMENT IS NON-TERMINABLE AT WILL.

DO NOT ENTER INTO THIS AGREEMENT IF YOUR UNDERSTANDING OR EXPECTATION IS OTHERWISE.


ACKNOWLEDGED AND AGREED:

By:						By:
Title:						Title:

By:						By:
Title:						Title:

TABLE OF CONTENTS


			Page
1.	GRANT OF AREA DEVELOPMENT FRANCHISE			2

2.	YOUR DEVELOPMENT OBLIGATION			2
	2.1	Minimum Development Schedule		2
	2.2	Force Majeure		2
	2.3	You May Exceed Minimum Development Schedule		2
	2.4	Operating Partner		2
	2.5	Organizational Structure		2
	2.6	Training		2
	2.7	Convention		2

3.	DEVELOPMENT AREA			3
	3.1	Granting and Revocation of Area Development Rights		3
	3.2	Store Locations		3

4.	TERM OF AREA DEVELOPMENT AGREEMENT; ADDITIONAL DEVELOPMENT			3
	4.1	Term		3
	4.2	Renewal		3
	4.3	Exercise of Right of Additional Development		3
	4.4	Conditions to Exercise of Right of Additional Development		4

5.	DEVELOPMENT AREA FEE			4

6.	SITE SELECTION AND EXECUTION OF INDIVIDUAL FRANCHISE AGREEMENTS			4
	6.1	Site Selection and Execution of Individual Franchise Agreements		4
	6.2	Condition Precedent to Our Obligations		5

7.	ASSIGNABILITY, SUBFRANCHISING AND TRANSFERS			5
	7.1	Assignability by Us		5
	7.2	No Subfranchising by You		5
	7.3	Assignability by You		5
	7.4	No Right to Encumber Assets		5
	7.5	Individual Franchise Agreements		5

8.	NONCOMPETITION			6
	8.1	In-Term		6
	8.2	Post-Term		6
	8.3	Limits and Modification		6
	8.4	Confidentiality		6

9.	TERMINATION			6
	9.1	Termination Pursuant to a Material Breach of this Agreement		6
	9.2	Termination by Reason of a Material Breach of Other Agreement		7
	9.3	Termination by Store Transfer		7
	9.4	Effect of Termination		7


10.	IF YOU ARE A CORPORATION, PARTNERSHIP OR LIMITED LIABILITY COMPANY		7
	10.1	Ownership	7
	10.2	Financial Records	7
	10.3	Officers, Partners and Managers	8
	10.4	Authorized Signatory	8
	10.5	Notification of Change	8
	10.6	Guarantee of Performance	8

11.	ENFORCEMENT AND LITIGATION		8
	11.1	General	8
	11.2	Enforcement	9
	11.3	Prevailing Party	9

12.	GENERAL CONDITIONS AND PROVISIONS		9
	12.1	Relationship of You to Us	9
	12.2	Your Indemnity	9
	12.3	No Consequential Damages For Legal Incapacity	10
	12.4	Waiver and Delay	10
	12.5	Survival of Covenants	10
	12.6	Successors and Assigns	10
	12.7	Joint and Several Liability	10
	12.8	Entire Agreement	10
	12.9	Titles for Convenience	11
	12.10	Gender	11
	12.11	Severability	11
	12.12	Counterparts	11
	12.13	Notices	11
	12.14	Capacity	12

13.	SUBMISSION OF AGREEMENT		12

14.	INDEPENDENT INVESTIGATION		12

15.	ACKNOWLEDGMENT		13


		ii		March 2014

AREA DEVELOPMENT AGREEMENT

This Area Development Agreement (“ Agreement ”) is made and entered into this day of , 20 (“ Effective Date ”) by and between PAPA MURPHY’S INTERNATIONAL LLC, a Delaware limited liability company (“ PMI/we/us ”) and , a (“ you ”), with reference to the following facts:

WHEREAS, you desire to be exclusive store developers of those areas described on Exhibit A attached hereto in the (“ Development Area ”) and to enter into this Agreement with PMI.

WHEREAS, we have expended time, effort and money to develop Methods of Operation for the production, merchandising and distribution, and promotion of fresh carryout pizza, calzones, pasta, cookie dough and related products (“ Methods of Operation ”). The Methods of Operation employ a recognized design, menu, uniform standards, specifications, procedures of operation, management and inventory control. The system is identified by the marks “Papa Murphy’s,” “Papa Murphy’s Take ‘N’ Bake” and “Papa Murphy’s Take ‘N’ Bake Pizza.” We are engaged in the business of granting franchises for the operation of pizza stores under the name Papa Murphy’s using the Methods of Operation.

WHEREAS, we have certain rights, title, interest, and goodwill in and to the service marks and trademarks Papa Murphy’s, Papa Murphy’s Take ‘N’ Bake, and Papa Murphy’s Take ‘N’ Bake Pizza, and any other proprietary marks, patents, logo types business décor, trade names and copyrights (“ Trademarks ”), as from time to time indicated by us.

WHEREAS, we have established a reputation, demand, and goodwill for fresh carryout pizza, calzones, pasta, cookie dough and related products under the Trademarks, which signify the high and uniform standards of management, supervision, merchandising, and quality of products sold under the Methods of Operation.

WHEREAS, we desire to expand and develop the Papa Murphy’s system and seek sophisticated and efficient multi-unit franchisees to develop numerous Papa Murphy’s stores within designated areas.

WHEREAS, you desire to build and operate Papa Murphy’s stores and we desire to grant to you the right to build and operate stores in accordance with the terms and upon the conditions contained in this Agreement and our then-current franchise agreement forms.

THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, IT IS AGREED:

1.	GRANT OF AREA DEVELOPMENT FRANCHISE

We grant to you and you accept the exclusive right during the term of this Agreement, subject to the limitations herein, to develop Papa Murphy’s Take ‘N’ Bake Pizza stores (“ Stores ”) in the Development Area described in Exhibit A annexed to and by this reference made a part of this Agreement. This grant is upon the terms and subject to the conditions of this Agreement and our then-current franchise agreement form (“ Franchise Agreement ”). Stores existing or under contract to be developed prior to the Effective Date are excluded from the exclusive Area Development Rights (as defined in Section 3.1) granted to you pursuant to this Agreement. These excluded Stores may be operated by PMI or an independent franchisee.

2.	YOUR DEVELOPMENT OBLIGATION

2.1 Minimum Development Schedule . You agree to construct, equip, open and operate within the Development Area not less than the number of Stores set forth in Exhibit B , annexed to and by this reference made a part of this Agreement. This will be done within the quarterly time periods (“ Development Period ”) specified in Exhibit B (“ Minimum Development Schedule ”).

2.2 Force Majeure . If you are unable to meet the Minimum Development Schedule solely as the result of force majeure, including, but not limited to strikes, material shortages, fires, floods, earthquakes, hurricanes, and other acts of God, or by force or law (including, but not limited to any legal disability we have to deliver a Disclosure Document pursuant to Section 6.1 of this Agreement), which results in your inability to construct or operate store(s) in the Development Area, the Development Schedule will be extended by the amount of time during which the force majeure exists.

2.3 You May Exceed Minimum Development Schedule . During the term of this Agreement and subject to the terms and conditions of this Agreement and the then-current Franchise Agreements, you may construct, equip, open and operate more Stores in the Development Area than required in the Minimum Development Schedule. You will execute a separate, then-current Franchise Agreement for each store and pay the appropriate fee.

2.4 Operating Partner . For the entirety of this Agreement, depending on your experience and qualifications, we may impose requirements that include, but are not limited to, the experience and qualifications of the operating management of your stores. These requirements will become part of this Agreement. You must provide us with your Operating Agreement, as amended from time to time, to verify compliance with this provision.

2.5 Organizational Structure . You will have a training system mutually developed with PMI, in accordance with our then-current standards and ultimately approved by PMI in its reasonable discretion. You will have a multi-unit management structure that is developed in accordance with our standards and is approved by us.

2.6 Training . Your operating partner must successfully complete all training required by PMI prior to the opening of the first Store. All supervisory personnel will be certified by PMI and we will have the option to require the training be performed by PMI.

2.7 Convention. Your attendance at all PMI franchise conventions is required.


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3.	DEVELOPMENT AREA

3.1 Granting and Revocation of Area Development Rights . Subject to Section 2, above, during the term of this Agreement PMI will not operate or grant a Store franchise to any other person or entity to operate a Store within the Development Area without your prior written approval. This grant of Area Development Rights (“ Area Development Rights ”) by PMI shall be in force for the term of this Agreement, subject to the terms and limitations herein, provided that you are in compliance with the terms of this Agreement and the Franchise Agreements. Reasons that may cause this right to be revoked include, but are not limited to:

(a) Failure to maintain the Minimum Development Schedule.

(b) Failure to maintain good standing with any PMI marketing cooperative in which you own and operate Stores.

3.2 Store Locations . All sites must be individually approved by PMI before development and all plans for Stores (tenant improvements and signage) must meet then-current PMI standards.

4.	TERM OF AREA DEVELOPMENT AGREEMENT; ADDITIONAL DEVELOPMENT

4.1 Term . The term of this Agreement (“ Term ”) will continue until unless sooner terminated in accordance with the provisions of this Agreement.

4.2 Renewal . Any renewals of this Agreement shall be premised on an agreement between us and you regarding a future development plan for the Development Area. Any agreed upon renewal or extension will be in writing and executed by the parties within 180 days before the expiration of the Term.

4.3 Exercise of Right of Additional Development . If we deliver to you a written notice allowing you to undertake additional development in the Development Area, we also will deliver to you a copy of our then-current Franchise Disclosure Document, or its equivalent, as may be required by applicable law (“ Disclosure Document ”) and two copies of our then-current Area Development Agreement. “ Then-current, ” as used in this Agreement and applied to our Disclosure Document, Area Development Agreement and Franchise Agreement, will mean the form we then currently provide to prospective franchisees or area developers. The renewal of this Agreement will reflect your new development obligation consistent with our plan for additional development set forth in our notice to you. Within thirty (30) days after you receive the Disclosure Document and the new Area Development Agreement, but no sooner than immediately after any applicable waiting periods prescribed by law (“ Disclosure Period ”) have passed, you will execute two copies of the new Area Development Agreement described in the Disclosure Document and return them to us. If you have executed and returned the copies and have satisfied the conditions set forth below, we will execute the copies and return one fully executed copy to you.


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4.4 Conditions to Exercise of Right of Additional Development . Your right to additional development described above will be subject to your fulfillment of the following conditions precedent:

(a) You will have fully performed all of your obligations and payments under this Agreement and all other agreements between you and us.

(b) You will have demonstrated to us your financial and operational capacity to perform the additional development obligations set forth in the new Area Development Agreement. In determining if you are financially capable, we will apply the same criteria to you as we apply to prospective area developers at that time.

(c) At the expiration of the Term, you will continue to operate in the Development Area not less than the aggregate number of stores required by the Minimum Development Schedule.

5.	DEVELOPMENT AREA FEE

The Development Area Fee shall be calculated as follows: $25,000 attributable for the first store and $5,000 attributable for each additional store to be opened under this Agreement (“ Development Area Fee ”). Concurrently with the execution of this Agreement, you will pay to us in cash or by certified funds the total Development Area Fee of $ . Said Development Area Fee entitles you to develop and operate ( ) Stores in the Development Area pursuant to this Agreement. There will be no Initial Franchise Fee for your first Store and the Subsequent Franchise Fee will be reduced by $5,000 for subsequent Stores. The Subsequent Franchise Fee for each Franchised Store must be paid in full and the fully-executed Franchise Agreement must be received thirty (30) days before the anticipated opening date of the Store. The entire Development Area Fee is non-refundable.

6.	SITE SELECTION AND EXECUTION OF INDIVIDUAL FRANCHISE AGREEMENTS

6.1 Site Selection and Execution of Individual Franchise Agreements .

(a) Approval of all sites will be in conformance with the terms of the applicable Franchise Agreement.

(b) Promptly after approval of any site, we may transmit to you a Disclosure Document and two execution copies of our then-current Franchise Agreement for the approved site as we determine in good faith, in accordance with our then-current policies and standards for similarly situated Stores which shall be subject to the terms hereof. The then-current Franchise Agreement may contain terms which are materially different than the Franchise Agreement in use as of the Effective Date. You acknowledge the change in terms and agree to be bound by all the terms of the then-current Franchise Agreement.


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(c) Immediately upon receipt of the Disclosure Document, you will return to us a signed copy of the Receipt of the Disclosure Document. After the passage of any applicable Disclosure Period, you will execute and deliver to us two executed copies of the Franchise Agreement. The executed Franchise Agreement and the Subsequent Franchise Fee must be received by us thirty (30) days before the anticipated opening date of the Store, but no sooner than immediately after any applicable waiting periods prescribed by law have passed. Promptly upon receipt of these documents, we will execute and return to you one copy of the Franchise Agreement.

(d) Notwithstanding the foregoing, if we are not legally able to deliver a Disclosure Document to you by reason of any lapse or expiration of our applicable state franchise registration, or because we are in the process of amending the registration, or for any reason beyond our reasonable control, we may delay approval of the site for your proposed Store until such time as we are legally able to deliver a Disclosure Document.

6.2 Condition Precedent to Our Obligations . It will be a condition precedent to our obligations that you will have performed all of your obligations under and following all agreements between you and us.

7.	ASSIGNABILITY, SUBFRANCHISING AND TRANSFERS

7.1 Assignability by Us . We may assign this Agreement, or any of our rights and privileges to any other person, firm or corporation without your prior consent; provided that, in respect to any assignment resulting in the subsequent performance by the assignee of our functions, the assignee will expressly assume and agree to perform our obligations.

7.2 No Subfranchising by You . You will not offer, sell, or negotiate the sale of PAPA MURPHY’S franchises to any third party, either in your own name or in our name and on our behalf, or otherwise subfranchise, share, divide or partition this Agreement or your right to open and operate Stores. Nothing in this Agreement will be construed as granting you the right to do so.

7.3 Assignability by You . This Agreement is not assignable by you.

7.4 No Right to Encumber Assets . Notwithstanding anything to the contrary in this Agreement, you will not in any event have the right to pledge, encumber, hypothecate or otherwise give any third party a security interest in your equity or this Agreement in any manner whatsoever which would result in the loss of voting control of the shareholders, managing members or partners, without our express prior written permission not to be unreasonably withheld. If such security interest would not result in the loss of voting control of the shareholders, managing members or partners, you will provide notification of the security interest to us.

7.5 Individual Franchise Agreements . You will not execute any Franchise Agreement, or construct or equip any Store with the intent to transfer or assign that Franchise Agreement or Store.


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8.	NONCOMPETITION

8.1 In-Term . During the term of this Agreement, neither you nor your owners, shareholders, members, partners, directors, officers, or managers, nor the immediate families or household members of those persons listed above who have access to or knowledge of our Methods of Operation, will directly or indirectly participate as an owner, shareholder, member, partner, director, officer, manager, employee, consultant, franchisor, franchisee, advisor or agent, or serve in any other capacity in any business engaged in the wholesale or retail sale of pizza or services or other products or services competitive with those offered by Papa Murphy’s stores within the Development Area, within a reasonable distance (not less than 100 miles) of the Development Area, within the immediate market area of any of our other franchisees or of any company Stores we own. We may waive this covenant only in writing.

8.2 Post-Term . This covenant will apply for two (2) years after termination or expiration of this Agreement. You will assure that you and your owners, shareholders, members, partners, directors, officers, managers, and agents, and the immediate families or household members of those persons listed above who have actual knowledge of or access to our Methods of Operation, will not directly or indirectly participate as an owner, shareholder, member, partner, director, officer, manager, employee, consultant, franchisor, franchisee, advisor or agent, or serve in any other capacity in any business engaged directly or indirectly in the wholesale or retail sale of take-and-bake pizza or services or other products or services competitive with those offered by Papa Murphy’s stores. This post-termination covenant applies within a 25-mile radius of any Papa Murphy’s location.

8.3 Limits and Modification . If, for any reason, any provision set forth in this Agreement is determined to exceed any lawful scope or limit as to duration, geographic coverage, or otherwise, it is agreed that the provision will nevertheless be binding to the full scope or limit allowed by law or by a court of law. The duration, geographic coverage and scope allowable by law or court of law will apply to this Agreement.

8.4 Confidentiality . You recognize and acknowledge that PMI’s trade secrets, confidential or proprietary information including but not limited to the terms of this Agreement or information generally considered confidential by us are valuable, special and unique assets of PMI. You will not, during or after the term of this Agreement, in whole or in part, directly or indirectly, disclose such secrets or confidential or proprietary information to any person, firm, corporation, association or other entity for any reason or purpose but for the benefit of PMI or as necessary to enable you to obtain financing pursuant to the rights and obligations contained herein. This provision shall continue in full force and effect in perpetuity.

9.	TERMINATION

9.1 Termination Pursuant to a Material Breach of this Agreement . We may terminate this Agreement for cause after a reasonable opportunity to cure in case of any material breach by you of this Agreement. Material breach specifically includes, among other things, the following:

(a) Any attempt by you to sell or encumber in whole or in part any or all rights and obligations under this Agreement, in violation of the terms of this Agreement, or without the written consents required by this Agreement.


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(b) Your failure to comply with the Minimum Development Schedule within the Development Periods set forth above. You will be given notice and a ninety (90) day period to cure a breach of the Minimum Development Schedule.

9.2 Termination by Reason of a Material Breach of Other Agreement . In the event you or an entity controlled by you are in default beyond the applicable notice and cure periods of one or more Franchise Agreements, you shall cease all development activities except for those locations under active construction as of the date you receive the notice of default and we may, at our election, terminate this Agreement, reduce the number of franchises included in this Agreement, or reduce the Development Area of this Agreement.

9.3 Termination by Store Transfer . This Agreement will terminate immediately if you no longer own and operate at least one Store in the Development Area prior to your completion of all Stores set forth in Exhibit B .

9.4 Effect of Termination . Upon the expiration of the Term, or upon the prior termination of this Agreement, you will have no further right to construct, equip, own, open or operate additional Stores which are not, at the time of such termination or expiration, the subject of a then existing Franchise Agreement between you and us which is in full force and effect. We then may construct, equip, open, own or operate, or license others to construct, equip, open, own or operate stores in the Development Area, except as provided above and as provided in any Franchise Agreement executed pursuant to this Agreement. Upon termination, any remaining Development Area Fee shall be forfeited.

10.	IF YOU ARE A CORPORATION, PARTNERSHIP OR LIMITED LIABILITY COMPANY

10.1 Ownership . If you are a corporation, partnership, or limited liability company, the following is the name and address of each shareholder, partner, or member in you:


NAME	ADDRESS	NUMBER OF SHARES OR PERCENTAGE INTEREST

You acknowledge and understand that there shall be no changes in ownership without PMI’s prior written consent.


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10.2 Financial Records . The address where your financial records and company records are maintained is:

10.3 Officers, Partners and Managers . If you are a corporation, partnership, or limited liability company, set forth below are the names, and addresses and titles of your principal officers, partners, or managers who will be devoting their full time to your Papa Murphy’s franchise business:


NAME	ADDRESS	TITLE

10.4 Authorized Signatory . You hereby appoint as the authorized signatory for all Franchise Agreements signed pursuant to this Agreement. Any change to the authorized signatory must be delivered to PMI in writing signed by all shareholders, partners, or members, as applicable.

10.5 Notification of Change . You will notify us in writing within ten days of any change in the information set forth in the above subparagraphs. You promptly will provide additional information as we may from time to time request concerning all persons who may have any direct or indirect financial interest in you.

10.6 Guarantee of Performance . If you are a corporation, partnership, or limited liability company, each of the shareholders, partners, or members, as applicable, of you will, by executing this Agreement, fully, unconditionally and irrevocably guarantee your performance of all of your obligations under this Agreement. In addition, upon our request you will cause valid execution of this Agreement, the Franchise Agreement and our standard form of Guarantee.

11.	ENFORCEMENT AND LITIGATION

11.1 General . You acknowledge that we have appointed and intend to appoint many franchisees on terms and conditions similar to those set forth in this Agreement and the Franchise Agreement. It mutually benefits those franchisees, you and us if the terms and conditions of these franchise agreements are uniformly interpreted. This Agreement is made in the State of Washington, and shall be governed by and interpreted and construed in accordance with the laws of that State without regard to conflict of laws principles, except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. § 1051, et seq .). This choice of laws will not include and does not extend, outside of Washington, the scope of application of the Washington franchise or business opportunity laws, including the Washington Franchise Investment Protection Act and the Washington Business Opportunity Fraud Act or similar law to you if you are not a resident of the State of Washington or otherwise entitled by


		8		March 2014

statute to seek the protection of such laws. Any portion of this Agreement that requires enforcement in any other state, and is enforceable under the laws of that state but not of Washington, will be construed and enforced according to the laws of that state. All issues or disagreements relating to this Agreement will be tried, heard, and decided in the applicable federal or state court for the judicial district in which PMI has its principal place of business at the time the action is commenced. The parties waive all issues of personal jurisdiction or venue for the purpose of enforcing this Section. You acknowledge and agree that this location for venue is reasonable and the most beneficial to the needs of and best meets the interest of all of the members of the Papa Murphy’s franchise system.

11.2 Enforcement . Either party may seek to obtain in any court of competent jurisdiction specific performance and injunctive relief to restrain a violation by the other party of any term or covenant of this Agreement. No right or remedy conferred upon us is exclusive of any other right or remedy in this Agreement or provided by law or equity. Each will be cumulative of every other right or remedy. We may employ legal counsel or incur other expense to collect or enforce your obligations or to defend against any claim, demand, action or proceeding because of your failure to perform your obligations. Legal action may be filed by or against us and that action or the settlement of it may establish your default under this Agreement.

11.3 Prevailing Party . The prevailing party will recover the amount of its reasonable attorney fees and all other expenses it incurs in collecting or enforcing any obligation or in defending against any claim, demand, action or proceeding under this Agreement. These will be set by the arbitrator or court, including costs and attorney fees on appeal from any lawsuit or other suit, or action.

12.	GENERAL CONDITIONS AND PROVISIONS

12.1 Relationship of You to Us . The parties intend by this Agreement to establish the relationship of franchisor and franchisee. You have no authority to create or assume in our name or on our behalf, any obligation, express or implied, or to act or purport to act as agent or representative on behalf of us for any purpose whatsoever. Neither party is the employer, employee, agent, partner or co-venturer of or with the other, each being independent. You agree that you will not hold yourself out as our agent, employee, partner or co-venturer. All employees hired by or working for you will be your employees and will not, for any purpose, be deemed our employees or subject to our control. Each of the parties agrees to file its own tax, regulatory and payroll reports with respect to its respective employees and operations, saving and indemnifying the other party of and from any liability of any nature whatsoever by virtue thereof.

12.2 Your Indemnity . You agree to protect, defend and indemnify us, and all of our direct and indirect parent companies, subsidiaries, affiliates, and the past, present and future shareholders, members, officers, directors, managers, employees, attorneys and designees of each and hold them harmless from and against any and all costs and expenses, including attorneys’ fees, court costs, losses, liabilities, damages, claims and demands of every kind or nature on account of any actual or alleged loss, injury or damage to any person, firm, corporation or other entity or to any property arising out of or in connection with your actions, inactions and/or operations pursuant to this Agreement. We agree to protect, defend and indemnify you, and all of your direct and indirect parent companies, subsidiaries, affiliates, and your and their


		9		March 2014

past, present and future shareholders, members, officers, directors, managers, employees, attorneys and designees and hold them harmless from and against any and all costs and expenses, including attorneys’ fees, court costs, losses, liabilities, damages, claims and demands of every kind or nature on account of any actual or alleged loss, injury or damage to any person, firm, corporation or other entity or to any property arising out of or in connection with our activities pursuant to this Agreement.

12.3 No Consequential Damages For Legal Incapacity . We will not be liable to you for any consequential damages, including but not limited to lost profits, interest expense, increased construction or occupancy costs, or other costs and expenses you incur by reason of any delay in the delivery of our Disclosure Document caused by legal incapacity during the Term, or other conduct not due to our gross negligence or misfeasance.

12.4 Waiver and Delay . The following will not constitute a waiver of the provisions of this Agreement with respect to any subsequent breach or a waiver by us of our right at any time to require exact and strict compliance with the provisions of this Agreement or of the Franchise Agreements:

(a) Waiver by us of any breach or series of breaches or defaults in your performance;

(b) Our failure, refusal or neglect to exercise any right, power or option given to us under this Agreement or under any Franchise Agreement between us and you; or

(c) Our failure, refusal or neglect to insist upon strict compliance with or performance of your obligations under this Agreement or any other Franchise Agreement between you and us.

This applies to this Agreement and to any Franchise Agreement between the parties whether entered into before, after or contemporaneously with the execution of this Agreement and whether or not related to the Stores.

12.5 Survival of Covenants . The covenants contained in this Agreement which, by their terms, require performance by the parties after the expiration or termination of this Agreement, will be enforceable notwithstanding said expiration or other termination of this Agreement for any reason whatsoever.

12.6 Successors and Assigns . This Agreement will be binding upon and inure to the benefit of our successors and assigns and will be binding upon and inure to your benefit and your heirs, executors, administrators, successors and assigns, subject to the prohibitions against assignment contained above.

12.7 Joint and Several Liability . If you consist of more than one person or entity, or a combination thereof, the obligations and liabilities of each such person or entity to us are joint and several.


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12.8 Entire Agreement . This Agreement and the attached Exhibits contain all of the terms and conditions agreed upon by the parties concerning the subject matter of this Agreement. No other agreements concerning the subject matter, written or oral, will be deemed to exist or to bind the parties, unless such agreements are in writing and specifically contemplated hereunder. All prior agreements, understandings and representations, are merged into this Agreement and superseded by it. We each represent that there are no contemporaneous agreements or understandings between the parties relating to the subject matter of this Agreement that are not contained in this Agreement. No officer, employee, or agent of us has any authority to make any representation or promise not contained in this Agreement, the Franchise Agreement or our Disclosure Document for prospective franchisees required by applicable law. We each agree that we have executed this Agreement without reliance upon any such representation or promise. This Agreement cannot be modified or changed except by written instrument signed by all of the parties.

12.9 Titles for Convenience . Article and paragraph titles used in this Agreement are for convenience only and will not affect the meaning or construction of any of the terms, provisions, covenants, or conditions of this Agreement.

12.10 Gender . All terms used in any number or gender will extend to mean and include any other number and gender as the facts, context, or sense of this Agreement or any article or paragraph may require.

12.11 Severability . Nothing contained in this Agreement will require the commission of any act contrary to law. Whenever there is any conflict between any provisions of this Agreement and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter will prevail. In such event, the provisions of this Agreement thus affected will be curtailed and limited only to the extent necessary to bring it within the requirements of the law. If any part, article, paragraph, sentence or clause of this Agreement is held to be indefinite, invalid or otherwise unenforceable, the indefinite, invalid or unenforceable provision will be deemed deleted, and the remaining part of this Agreement will continue in full force and effect.

12.12 Counterparts . This Agreement may be executed in any number of counterparts; each of which will be deemed an original and all of which together will be deemed the same instrument.

12.13 Notices .

(a) All notices required by this Agreement must be in writing and must be hand-delivered, sent by certified or registered mail, postage prepaid and return receipt requested, or reputable overnight courier, or transmitted by facsimile or sent via other electronic means, if the sender can verify receipt (with a confirmation copy mailed within three business days). They will be addressed to you at the following address, or at any other address you designate in writing:


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(b) Notices will be addressed to us at the following address unless and until a different address has been designated by us in writing:

Papa Murphy’s International LLC

Attention: Legal Department

8000 NE Parkway Drive

Suite 350

Vancouver, WA 98662

Fax: (360) 260-0500

(c) Any notice is considered given and received, when delivered, if hand-delivered; if sent by facsimile, or electronic means in which receipt can be verified, on the next business day after sent; if mailed, on the third business day following the mailing; and one business day after placement with a reputable air courier service, requesting delivery on the most expedited basis available.

12.14 Capacity . You represent and warrant that you have full and legal capacity to enter into this Agreement and into the Franchise Agreements and that they will not violate any provision or restriction in any contractual relationship you or your owners have with any third party.

13.	SUBMISSION OF AGREEMENT

The submission of this Agreement does not constitute an offer and this Agreement will become effective only upon the execution by you and us. THIS AGREEMENT WILL NOT BE BINDING ON US UNLESS AND UNTIL IT WILL HAVE BEEN ACCEPTED AND SIGNED BY OUR CHIEF EXECUTIVE OFFICER. THIS AGREEMENT WILL NOT BECOME EFFECTIVE UNTIL AND UNLESS YOU HAVE BEEN FURNISHED BY US WITH ALL DISCLOSURE DOCUMENTS, IN WRITTEN FORM, AS MAY BE REQUIRED UNDER OR PURSUANT TO APPLICABLE LAW, FOR THE DISCLOSURE PERIOD.

14.	INDEPENDENT INVESTIGATION.

THE PROSPECT OF SUCCESS OF THE BUSINESS VENTURE UNDERTAKEN BY YOU BY VIRTUE OF THIS AGREEMENT IS SPECULATIVE AND DEPENDS TO A MATERIAL EXTENT UPON YOUR CAPABILITY AS AN INDEPENDENT BUSINESS PERSON AND FRANCHISEE, AS WELL AS OTHER FACTORS. WE MAKE NO REPRESENTATIONS OR WARRANTIES AS TO THE POTENTIAL SUCCESS OF THE BUSINESS VENTURE UNDERTAKEN BY YOU. YOU REPRESENT AND WARRANT THAT YOU HAVE ENTERED INTO THIS AGREEMENT AFTER MAKING INDEPENDENT INVESTIGATIONS OF OUR BUSINESS, AND NOT IN RELIANCE UPON ANY REPRESENTATION BY US AS TO SALES OR PROFITS WHICH YOU IN PARTICULAR MIGHT BE EXPECTED TO REALIZE. YOU FURTHER REPRESENT AND WARRANT THAT WE AND OUR REPRESENTATIVES, EMPLOYEES OR AGENTS HAVE MADE NO REPRESENTATIONS TO INDUCE YOU TO ACQUIRE THIS FRANCHISE AND EXECUTE THIS AGREEMENT WHICH ARE NOT EXPRESSLY SET FORTH HEREIN OR IN THE DISCLOSURE DOCUMENT PROVIDED TO YOU PRIOR TO ENTERING INTO THIS AGREEMENT.


		12		March 2014

15.	ACKNOWLEDGMENT

You, and your shareholders, members and partners, as applicable, jointly and severally acknowledge that you and they have carefully read this Agreement and all other related documents to be executed concurrently or in conjunction with the execution of this Agreement. You and they have obtained the advice of counsel concerning entering this Agreement. You and they understand the nature of this Agreement and intend to comply with and to be bound by it.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the first date set forth above.


PAPA MURPHY’S INTERNATIONAL LLC

By:		By:

	Ken Calwell, Chief Executive Officer	Title:

		By:

		Title:


		13		March 2014

EXHIBIT A

DEVELOPMENT AREA

At the Effective Date of this Agreement, we mutually agree that the counties described in Exhibit A fall into the DMA. It is also understood that counties may shift from one DMA to another over time but if that occurs, the county will still remain in the Development Area of this Agreement.

You will open ( ) Stores according to the Development Schedule set forth in Exhibit B . The Stores will be placed in the following described area:

DEVELOPMENT AREA :

That portion of real property which is currently delineated using the following common descriptors, landmarks and boundaries. In the event such boundaries are altered, the real property described herein shall remain the same. A map delineating the boundaries of the Development Area is attached and is to be considered supplemental to the visual representation of the below description.

PRE-EXISTING PAPA MURPHY’S STORES:

INSERT MAP OF DEVELOPMENT AREA

EXHIBIT B

DEVELOPMENT SCHEDULE

The Development Period and Term of this Agreement is until and will commence on the Effective Date. The Development Schedule by calendar year and quarter is:


Year	Calendar Quarter				Total
Year	1	2	3	4	Total
2014
2015
2016
2017
2018
Total Stores

IN WITNESS WHEREOF, the parties have executed this Agreement as of the first date set forth above.

ACCEPTED on this day of , 20 .


PAPA MURPHY’S INTERNATIONAL LLC

By:		By:

	Ken Calwell, Chief Executive Officer	Title:

		By:

		Title:

Exhibit 10.8

PAPA MURPHY’S INTERNATIONAL LLC

FORM OF MULTIPLE STORE

COMMITMENT LETTER

AND

AMENDMENT TO FRANCHISE AGREEMENTS


^© 2013 Papa Murphy’s International LLC				March 2013

Date

RE:

Multiple Store Commitment

Dear :

Thank you for your commitment to develop, open and operate Papa Murphy’s Take ‘N’ Bake Pizza Stores (“ Franchised Businesses ”) in the designated market area. This multiple store commitment letter (“ Multiple Store Commitment Letter ”) has been prepared to outline your development commitment and to memorialize certain terms and conditions associated with your commitment. Capitalized terms not defined herein have the meanings assigned to them in the Franchise Agreements.

1. You have committed to developing Franchised Businesses at the following prospective locations (“ Targets ”):

2. You will sign a Franchise Agreement for each Franchised Business. At the time of signing, you agree to deliver the Franchise Fee payment of $ to Papa Murphy’s International LLC, which represents payment for one Initial Franchise Fee and Subsequent Franchise Fees. By signing this Multiple Store Commitment Letter you acknowledge and agree that the Franchise Fees, once paid, are fully earned by Papa Murphy’s International LLC and are non-refundable except as set forth in each individual Franchise Agreement.

3. You agree to construct, equip, open and operate one Franchised Business at one of the above-described Targets in accordance with the time frames described in Section 3 of the Franchise Agreement signed for that location.

4. [If more than 2 stores] You agree to construct, equip, open and operate an additional Franchised Business at one of the remaining Targets at least every six months thereafter until all Franchised Businesses are open and operating. [If only 2 stores] You agree to construct, equip, open and operate the second Franchised Business at the remaining Target at least six months thereafter.

5. At least one month prior to beginning development of the next Franchised Business to be opened under the terms of this Multiple Store Commitment Letter, you and we will complete Attachment A to the Franchise Agreement designated for that Franchised Business.


				March 2013
Page 1

6. All Targets will be open and operating no later than months after the Effective Date of the Franchise Agreements.

7. If you fail to open and continuously operate one or more Franchised Businesses in accordance with the terms of, and in the time frame required by, this Multiple Store Commitment Letter, you agree that you forfeit the right to open all other unopened Franchised Businesses contemplated by this Multiple Store Commitment Letter and that Papa Murphy’s International LLC shall be entitled to retain all Initial and Subsequent Franchise Fees without any further obligation to you under this Multiple Store Commitment Letter.

8. All other aspects of the relationship between you and Papa Murphy’s International LLC shall be governed by the terms of the individual Franchise Agreement for each Franchised Business. All disputes between the parties shall be resolved in accordance with the terms of each Franchise Agreement. In the case of a conflict between the terms of a Franchise Agreement and this Multiple Store Commitment Letter, the provisions of this Multiple Store Commitment Letter shall prevail.

9. This Multiple Store Commitment Letter may be assigned by Papa Murphy’s International LLC at any time without your consent. You may not transfer or assign this Multiple Store Commitment Letter without the advanced written permission of Papa Murphy’s International LLC, which may be granted or denied in the sole discretion of Papa Murphy’s International LLC.

The terms of this Multiple Store Commitment Letter will be incorporated into each Franchise Agreement by reference in the Amendment to Franchise Agreement that you will sign at the same time you sign each Franchise Agreement. By signing below, you agree to the terms of this Multiple Store Commitment Letter and you acknowledge and agree that the terms of this Multiple Store Commitment Letter will become a part of the terms of the business relationship between you and Papa Murphy’s International LLC.

Sincerely,

Victoria T. Blackwell

Chief Legal Officer

We have read the terms of this Multiple Store Commitment Letter and acknowledge and agree to be bound by its terms.




Date:						Date:



Date:						Date:


				March 2013
Page 2

AMENDMENT TO FRANCHISE AGREEMENTS

This Amendment to Franchise Agreements (“ Amendment ”) is made and entered into this day of , 201 , and amends each of the Franchise Agreements (“ Franchise Agreements ”) entered into pursuant to the Multiple Store Commitment Letter dated and attached hereto and by this reference incorporated herein (“ Multiple Store Commitment ” ) , by and between Papa Murphy’s International LLC (“ Franchisor ”) and the person(s) listed as the Franchise Owner on the signature block of this Agreement (“ Franchise Owner ”). All capitalized terms not defined herein shall have the meanings assigned to them in the Franchise Agreements.

A. WHEREAS, the parties wish to enter into a Multiple Store Commitment to develop Papa Murphy’s Take ‘N’ Bake Pizza stores (“ Franchised Businesses ”) in the designated market area at the following prospective locations (the “ Targets ”):

City State – Intersection

B. WHEREAS, the parties agree that Franchise Owner will sign Franchise Agreements for each of the Targets.

C. WHEREAS, the parties agree that the Franchise Agreements for the Targets shall be modified so that Franchise Owner shall commence full and continuous operations according to the following schedule (the “ Development Schedule ”). The Targets may be opened in any order for purposes of compliance with the Development Schedule:

Target 1: 12 months from the Effective Date of the Franchise Agreement

Target 2: 18 months from the Effective Date of the Franchise Agreement

Target 3: 24 months from the Effective Date of the Franchise Agreement

NOW, THEREFORE, for and in consideration of the mutual covenants and promises herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows:

1. Incorporation of Recitals . The foregoing recitals are incorporated into and made a part of this Amendment as if each were specifically recited herein.

2. Franchise Agreements Amended . This Amendment amends the Franchise Agreement for each Target set forth herein.

3. Grant of Franchise; Our Duties; Training . Franchise Owner agrees that it will comply with all of the provisions of Section 2.3 of the Franchise Agreement for Target 1 and that Sections 2.3(a) through (e) will be waived for the other Targets. Sections 2.3(f) and 2.3(g) will apply only to the manager of each Franchised Business.

4. Your Duties . The deadline set forth in Section 5.1 of the Franchise Agreements will be amended in accordance with the Development Schedule.


				March 2013
Page 3

5. Continuation of Ability to Operate, Termination and Step-In Rights . The deadline set forth in Section 6.3(a)(i) of the Franchise Agreements will be amended in accordance with the Development Schedule.

6. Amendment Binding . This Amendment will be binding upon and inure to the benefit of each party and to each party’s respective successors and assigns.

7. No Further Changes . Except as specifically provided in this Amendment, all of the terms, conditions and provisions of the Franchise Agreements will remain in full force and effect as originally written and signed.

[SIGNATURES ON FOLLOWING PAGE]


				March 2013
Page 4

IN WITNESS WHEREOF, the parties have signed this Amendment as of the date first above written.


PAPA MURPHY’S INTERNATIONAL LLC

By:
		Victoria T. Blackwell
		Chief Legal Officer


Date:

FRANCHISE OWNER:


	Sign here if you are taking the franchise as an INDIVIDUAL(S) (Note: use these blocks if you marked in Section 10.2 of the Franchise Agreement that you are an individual or a partnership but the partnership is not a separate legal entity)	OR		Sign here if you are taking the franchise as a CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP
				Print Name of Legal Entity

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:

Signature:			By:
Print Name:			Print Name:
Date:			Title:
			Date:


				March 2013
Page 5

Exhibit 10.9

STOCK REPURCHASE AND PUT OPTION AGREEMENT

T HIS S TOCK R EPURCHASE AND P UT O PTION A GREEMENT (the “ Agreement ”) is made and entered into as of July 29, 2011, by and among P APA M URPHY ’ S H OLDINGS , I NC . , a Delaware corporation (the “ Holdings ”) and John Barr (the “ Executive ”).

R ECITALS

A. As of May 5, 2010, Executive was granted (i) 96,521 shares of common stock, par value $0.01 per share (the “ Common Stock ”), of Holdings that are subject to time vesting restrictions (the “ Time Vesting Shares ”) pursuant to that certain Time Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “ Time Vesting RSA ”), by and between Executive and Holdings and (ii) 48,261 shares of Common Stock that are subject to performance vesting restrictions (the “ Performance Vesting Shares ”, together with the Time Vesting Shares, the “ Restricted Shares ”) pursuant to that certain Performance Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “ Performance Vesting RSA ”), by and between Executive and Holdings;

B . As of the date hereof, (i) 19,304 of the Time Vesting Shares have vested in accordance with the terms of the Time Vesting RSA and (ii) 0 of the Performance Vesting Shares have vested in accordance with the terms of the Performance Vesting RSA;

C . Executive desires to sell to Holdings, and Holdings desires to repurchase from Executive, (i) 64,348 of the unvested Time Vesting Shares (the “ Repurchased Time Vesting Shares ”) and (ii) 41,826 of the Performance Vesting Shares (the “ Repurchased Performance Vesting Shares ”, together with the Repurchased Time Vesting Shares, the “ Repurchased Restricted Shares ”) (such transactions, the “ Restricted Shares Repurchase ”);

D . In connection with the Restricted Shares Repurchase, Holdings wishes to amend and restate the Time Vesting RSA as of the date hereof in the form set forth in E XHIBIT A hereto (the “ Amended and Restated Time Vesting RSA ”) and the Performance Vesting RSA as of the date hereof in the form set forth in E XHIBIT B hereto (the “ Amended and Restated Performance Vesting RSA ”);

E. As of May 5, 2010, Executive was issued (i) 41,075 shares of Common Stock (the “ Unrestricted Common Stock ”) and (ii) 74,491 shares of participating preferred stock, par value $0.01 per share (the “ Participating Preferred Stock ”) of Holdings (the “ Unrestricted Participating Preferred Stock ” and, together with the Unrestricted Common Stock, the “ Unrestricted Shares ”), pursuant to that certain Contribution Agreement, dated as of May 5, 2010, by and between Executive and Holdings; and

F. In connection with the Restricted Shares Repurchase, Holdings wishes to grant, subject to the terms and conditions herein, Executive the right and option on December 31st of any given calendar year following December 31, 2011 (an “ Unrestricted Shares Repurchase Date ”) to have Holdings or its assigns repurchase all or any portion of the Unrestricted Shares

held by Executive or any Permitted Transferee (as defined in that certain Stockholders’ Agreement, dated as of May 5, 2010, by and among Holdings and certain stockholders of Holdings (the “ Stockholders Agreement ”) as of the date of such Unrestricted Shares Repurchase Date (such transactions, the “ Unrestricted Shares Repurchase ”).

A GREEMENT

In consideration of the foregoing and of the mutual promises and covenants set forth below, the parties agree as follows:

1. Restricted Shares Repurchase. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), Holdings hereby agrees to repurchase from Executive and Executive hereby agrees to sell to Holdings, the Repurchased Shares at a price of $0.94 per Repurchased Share for an aggregate purchase price equal to $99,803.56 (the “ Purchase Price ”).

2. Repurchased Shares Closing . The closing of the Restricted Shares Repurchase under this Agreement (the “ Closing ”) shall take place as of the date hereof.

3. Delivery . On the date of the Closing, Holdings will deliver the Purchase Price to Executive upon surrender to Holdings of the certificate(s) representing the Repurchased Restricted Shares, duly endorsed for transfer to Holdings pursuant to a stock power in the form substantially attached hereto as E XHIBIT C .

4. Unrestricted Shares Repurchase.

(a) Subject to the terms and conditions of this Agreement, Executive shall have the right and option on any Unrestricted Shares Repurchase Date after the date that Executive ceases to be employed as Chairman or Chief Executive Officer of Holdings to have Holdings or its assigns repurchase all or any portion of the Unrestricted Shares held by Executive or any Permitted Transferee (as defined in the Stockholders’ Agreement) as of the date of such Repurchase Date.

(b) The purchase price for the Unrestricted Shares subject to the Unrestricted Shares Repurchase (the “ Unrestricted Shares Repurchase Price ”) shall be the greater of (i) the fair market value (which, for the avoidance of doubt, shall include the amount of the Accrued Dividends on the shares of Unrestricted Participating Preferred Stock) of the Unrestricted Shares as of the Unrestricted Shares Repurchase Date as determined by the Board of Directors of Holdings (the “ Board ”) or (ii) $2,750,083.14 plus the Accrued Dividends on the shares of Unrestricted Participating Preferred Stock as of the Unrestricted Shares Repurchase Date. In the event that Executive no longer serves on the Board as of the Unrestricted Shares Repurchase Notice Date, the Unrestricted Shares Repurchase Price shall be the greatest of (i) the fair market value (which, for the avoidance of doubt, shall include the amount of the Accrued Dividends on the shares of Unrestricted Participating Preferred Stock) of the Unrestricted Shares as of the Unrestricted Shares Repurchase Date as determined by the Board, (ii) the value (which, for the avoidance of doubt, shall include the amount of the Accrued Dividends on the shares of Unrestricted Participating Preferred Stock) of the Unrestricted Shares as determined in

connection with the most recent quarterly valuation performed for Holdings, or (iii) $2,750,083.14 plus the Accrued Dividends on the shares of Unrestricted Participating Preferred Stock as of the Unrestricted Shares Repurchase Date. For all purposes herein, the “Accrued Dividends” with respect to the Unrestricted Participating Preferred Stock shall be calculated in accordance with the provisions of the Amended and Restated Certificate of Incorporation of Holdings (the “ Charter ”), which, for the sake of clarity, shall mean that the Accrued Dividends on each share of Unrestricted Participating Preferred Stock shall accrue on a daily basis at the rate of six percent (6%) per annum of the sum of the Liquidation Value (as defined in the Charter) thereof plus all accumulated and unpaid dividends thereon from and including May 5, 2010 to and including the Unrestricted Shares Repurchase Date.

(c) Executive or, in the event that Executive dies or has a Permanent Disability (as defined in Executive’s Amended and Restated Executive Employment and Non-Competition Agreement), his legal representatives shall effect the Unrestricted Shares Repurchase (if so elected by Executive or his legal representatives as the case may be) by delivering or mailing to Holdings (and/or, if applicable, any Permitted Transferees) written notice at least sixty (60) days prior to the Unrestricted Shares Repurchase Date (the “ Unrestricted Shares Repurchase Notice Date ”). Upon such notification, Executive and any Permitted Transferees shall promptly surrender to Holdings any certificates representing the Unrestricted Shares being purchased, together with a duly executed stock power for the transfer of such Unrestricted Shares to Holdings or Holdings’ assignee or assignees in the form substantially attached hereto as E XHIBIT D . Subject to the payment of the Unrestricted Shares Repurchase Price being permissible as of such date under any credit or other financing document binding on Holdings or its subsidiaries and Holdings having sufficient liquidity to fund the Unrestricted Shares Repurchase and its other operating needs, upon Holdings’ or its assignee’s receipt of the certificates from Executive or any Permitted Transferees, Holdings or its assignee or assignees shall deliver to him a check for the Unrestricted Shares Repurchase Price; provided, however, that Holdings may pay all or any portion of the Unrestricted Shares Repurchase Price for such shares by offsetting and canceling any indebtedness then owed by Executive to Holdings.

(d) In the event that (i) Executive no longer serves on the Board as of the Unrestricted Shares Repurchase Notice Date and (ii) there is a Sale Event (as defined in the Amended and Restated Time and Performance Vesting RSAs) within six (6) months following the Unrestricted Shares Repurchase Date, Holdings hereby agrees that, in addition to the check for the Unrestricted Shares Repurchase Price, Holdings or its assignee or assignees shall deliver a check to Executive for an amount equal to (i) the consideration Executive would have received for the Unrestricted Shares in connection with the Sale Event had Executive held the Unrestricted Shares as of the consummation of such Sale Event minus (ii) the Unrestricted Shares Repurchase Price.

5. Representations and Warranties of Holdings . Holdings hereby represents and warrants to Executive as follows both as of the date hereof and as of the date of any Unrestricted Shares Repurchase:

(a) Holdings is duly organized, validly existing and in good standing under the laws of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.

(b) Holdings has full corporate power and authority to execute and deliver this Agreement and all other agreements and instruments contemplated hereby to which Holdings is a party and to perform its obligations hereunder and thereunder, and this Agreement and all such other agreements and instruments have been duly authorized, executed and delivered by Holdings and, assuming the due execution and delivery of this Agreement and all other agreements and instruments contemplated hereby to which Holdings is a party by the other parties hereto and thereto, are valid, binding and enforceable against Holdings in accordance with their terms.

(c) The execution, delivery and performance of this Agreement by Holdings, and the fulfillment of and compliance with the terms hereof by Holdings, do not and will not (i) violate or conflict with any requirements of any material contract or obligation of Holdings, including the Charter (as defined in the Stockholders Agreement) or the Stockholders Agreement, (ii) result in or constitute (with or without the giving of notice, lapse of time or both) any default or event of default under any such material obligation of Holdings, or give rise to a right of termination of, or accelerate the performance required by, any terms of any such material obligation, or (iii) violate any statute, law, ordinance, rule, regulation or order of any court or governmental authority or any judgment, order or decree (U.S. federal, state or local or foreign) applicable to Holdings.

(d) There are no suits, actions, claims, demands, hearings, indictments, proceedings or investigations pending against Holdings, or, to the knowledge of Holdings, threatened against or involving Holdings, the stockholders of Holdings or the officers or directors of Holdings in connection with the business and affairs of Holdings before any court, arbitrator or administrative or governmental body (U.S. federal, state or local or foreign). Holdings is not subject to any judgment, decree, injunction or order of any court.

6. Representation and Warranties of Executive. Executive hereby represents and warrants to Holdings as follows both as of the date hereof and as of the date of any Unrestricted Shares Repurchase:

(a) Authorization. Executive has full power and authority to execute and deliver this Agreement, to perform his obligations hereunder, and to consummate the transactions contemplated hereby. This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, subject to applicable laws affecting creditors’ rights and to equitable principles.

(b) No Breach. The execution and delivery of this Agreement by Executive, the consummation of the transactions contemplated in this Agreement, and the compliance with the terms of this Agreement will not conflict with, result in the breach of, or constitute a material default under, or require any consent or approval under, any agreement or instrument to which Executive is a party or by which they may be bound.

(c) Title to Shares. Except as set forth in the Stockholders Agreement , Executive owns and holds the Repurchased Restricted Shares beneficially and of record, free and clear of any suit, proceeding, call, voting trust, proxy, restriction, security interest, lien or other encumbrance of any kind or nature whatsoever (collectively, a “ Lien ”) and has full power and authority to transfer and dispose of the Repurchased Restricted Shares, free and clear of any Lien. Upon the payment for and the delivery of the Repurchased Restricted Shares as herein provided, Holdings will acquire good and valid title to the Repurchased Restricted Shares, free and clear of any Lien other than any Lien which may be imposed as a result of any act of Holdings or by the Stockholders Agreement.

(d) Business Experience. Executive is capable of evaluating the merits and risks of the repurchase by Holdings of the Repurchased Restricted Shares.

(e) Access to Information. Executive has had the opportunity to ask questions of, and to receive answers from, appropriate executive officers of Holdings with respect to the terms and conditions of this Agreement and with respect to the business, affairs, financial condition, and results of operations of Holdings. Executive has had access to such financial and other information as is necessary in order for Executive to make a fully-informed decision as to this Agreement.

(f) Tax Advice. Neither Holdings nor its officers, directors, stockholders, agents, representatives, counsel or affiliates has made warranties or representations to Executive with respect to the income tax consequences of the transactions contemplated by this Agreement. Executive has had the opportunity to review with their own tax advisors the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. Executive is relying solely on such advisors and not on any statements or representations of Holdings or any of its agents for the federal, state, local and foreign tax consequences to it that may result from the transactions contemplated by this Agreement.

7. Assignment; Binding Effect. Subject to the limitations set forth in this Agreement, this Agreement will be binding upon and inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs or representatives.

8. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware.

9. Notices. All notices and other communications under this Agreement will be in writing. Unless and until the parties are notified in writing to the contrary, all notices, communications and documents, if not delivered by hand, will be mailed, addressed to the addresses on file with Holdings. Notices and communications will be sent via electronic mail (e-mail) or mailed by first class mail, postage prepaid; documents will be mailed by registered mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement will be deemed received only when actually received.

10. Remedies. In case any one or more of the obligations set forth in this Agreement will have been breached by Executive, then Holdings may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including an action for damages as a result of any such breach and/or an action for specific performance of any such obligation contained in this Agreement, and in case any one or more of the obligations set forth in this Agreement will have been breached by Holdings, then Executive may proceed to protect and enforce his rights either by suit in equity and/or by action at law, including an action for damages as a result of any such breach and/or an action for specific performance of any such obligation contained in this Agreement.

[S IGNATURE P AGE F OLLOWS ]

I N W ITNESS W HEREOF , the parties have executed this Stock Repurchase Agreement as of the date first above written.


HOLDINGS:

PAPA MURPHY’S HOLDINGS, INC.

By:		/s/ Yoo Jin Kim
Name:		Yoo Jin Kim
Title:

EXECUTIVE:

JOHN BARR

/s/ John D. Barr
Name:		John D. Barr
Title:		Chief Executive Officer

E XHIBIT A

AMENDED AND RESTATED TIME VESTING RSA

(S EE A TTACHED )

A MENDED AND R ESTATED R ESTRICTED S TOCK A GREEMENT

UNDER THE P APA M URPHY ’ S H OLDINGS , I NC .

A MENDED 2010 M ANAGEMENT I NCENTIVE P LAN

T IME V ESTING


Name of Grantee:	John Barr	(the “Grantee”)

No. of Shares:	32,173	Shares of Common Stock

Grant Date:	May 5, 2010	(the “Grant Date”)

Effective Date:	July , 2011	(as defined in Section 1 below)

Whereas pursuant to that certain Time Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “Original Time Vesting RSA”), by and between Grantee and Papa Murphy’s Holdings, Inc., a Delaware corporation (together with its successors, the “Company”), the Company had previously sold to Grantee 96,521 shares of Common Stock that are subject to time vesting restrictions (the “Original Time Vesting Shares”) for an aggregate purchase price equal to $42,073.50;

Whereas, as of the date hereof, 19,304 of the Original Time Vesting Shares have vested in accordance with the terms of the Original Time Vesting RSA;

Whereas Grantee desires to sell to the Company, and the Company desires to repurchase from Grantee, 64,348 of the unvested Original Time Vesting Shares (such transaction, the “Restricted Shares Repurchase”);

Whereas in connection with the Restricted Shares Repurchase, the Company and Grantee now desire to amend and restate the Original Time Vesting RSA in its entirety as set forth herein in order to amend the time vesting restrictions attached to the remaining 12,869 unvested Original Time Vesting Shares;

Now, therefore, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

1. Definitions . For the purposes of this Agreement, the following terms shall have the following respective meanings. All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Plan.

“ Bankruptcy ” shall mean (i) the filing of a voluntary petition under any bankruptcy or insolvency law, or a petition for the appointment of a receiver or the

making of an assignment for the benefit of creditors, with respect to the Grantee or any Permitted Transferee, or (ii) the Grantee or any Permitted Transferee being subjected involuntarily to such a petition or assignment or to an attachment or other legal or equitable interest with respect to the Grantee’s or the Permitted Transferee’s assets, which involuntary petition or assignment or attachment is not discharged within 60 days after its date, and (iii) the Grantee or any Permitted Transferee being subject to a transfer of Shares by operation of law (including by divorce, even if not insolvent), except by reason of death.

“ Common Stock ” shall mean the Company’s Common Stock, par value $0.01 per share, together with any shares into which Common Stock may be converted or exchanged, as provided above and herein.

“ Effective Date ” shall mean the date upon which the Company receives from Grantee a signed original of this Agreement.

“ For Cause Termination Event ” shall mean the termination of the Grantee’s employment with the Company and its subsidiaries for Cause (as such term is defined in the Plan).

“ Initial Public Offering ” means any underwritten initial public offering of securities of the Company, any corporate successor to the Company by way of conversion, PMI Holdings, Inc. or any of their respective Subsidiaries pursuant to an effective registration statement filed under the Act.

“ Performance-Related Termination Event ” shall mean the termination of the Grantee’s employment with the Company and its subsidiaries as a result of the Grantee failing to meet commercially reasonable performance objectives as determined in good faith by the Board and fails to cure such failure within 30 days following written notice to that effect.

“ Permitted Transferee ” has the meaning set forth in the Stockholders Agreement.

“ Person ” shall mean any individual, corporation, partnership (limited or general), limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization or any similar entity.

“ Restricted Shares ” shall initially mean 12,869 of the Shares; provided that (i) 6,435 of the Shares shall vest on May 31, 2012 and (ii) 6,434 of the Shares shall vest on May 31, 2013; provided further , that the Restricted Shares shall automatically and without further action cease to vest upon the occurrence of any Termination Event.

Notwithstanding anything herein to the contrary, in the event that this Agreement is assumed or continued by the Company or its successor entity in the sole discretion of the parties to a Sale Event and thereafter remains in effect following such Sale Event, the

Shares shall remain subject to the terms of this Agreement; provided, however, all Shares shall become Vested Shares on the date which the Grantee’s employment with the Company and its Subsidiaries or successor entity terminates if (i) such termination occurs within 18 months of such Sale Event and (ii) such termination is either by the Company without Cause or by the Grantee for Good Reason. In the event that this Agreement is not assumed or continued by the Company or its successor entity in connection with a Sale Event, the remaining Unrestricted Shares shall become Vested Shares immediately prior to the Sale Event.

“ Sale Event ” shall mean, regardless of form thereof, consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation (other than in connection with an Initial Public Offering) in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own, directly or indirectly, a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, (iv) the sale of all or a majority of the outstanding capital stock of the Company to an unrelated person or entity or (v) any other transaction (other than an Initial Public Offering) in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own, directly or indirectly, at least a majority of the outstanding voting power of the successor entity immediately upon completion of the transaction.

“ Shares ” shall mean 32,173 of the shares of Common Stock that were purchased by the Grantee on the date of the Original Time Vesting RSA and any additional shares of Common Stock or other securities received in respect of the Shares, as a dividend on, or otherwise on account of, the Shares.

“ Stockholders Agreement ” means that certain Stockholders Agreement, dated as of the date hereof, among the Company and the Stockholders party thereto.

“ Termination Event ” shall mean a For Cause Termination Event, a Performance-Related Termination Event or a Without Cause Termination Event.

“ Vested Shares ” shall mean all Shares which are not Restricted Shares; provided, however, that notwithstanding any other provision of this Agreement to the contrary, if the Grantee’s employment with the Company and its subsidiaries is terminated due to Grantee’s death or Permanent Disability (as defined in the Amended and Restated Employment Agreement, dated as of the date hereof, by and between the Grantee and PMI Holdings, Inc.), the Grantee will continue to vest in Restricted Shares for twelve (12) months following the Grantee’s termination of employment.

“ Without Cause Termination Event ” shall mean the termination of the Grantee’s employment with the Company and its subsidiaries for any reason other than pursuant to a For Cause Termination Event or a Performance-Related Termination Event.

All references to share prices and amounts herein shall be equitably adjusted to reflect stock splits, stock dividends, recapitalizations, mergers, reorganizations and similar changes affecting the capital stock of the Company, and any shares of capital stock of the Company received on or in respect of Shares in connection with any such event (including any shares of capital stock or any right, option or warrant to receive the same or any security convertible into or exchangeable for any such shares or received upon conversion of any such shares) shall be subject to this Agreement on the same basis and extent at the relevant time as the Shares in respect of which they were issued, and shall be deemed Shares as if and to the same extent they were issued at the Effective Date hereof.

2. Repurchase Right .

(a) Repurchase . Upon the occurrence of a Termination Event or the Bankruptcy of the Grantee, the Company or its assigns shall have the right and option to repurchase all or any portion of the Shares held by the Grantee or any Permitted Transferee as of the date of such Termination Event or Bankruptcy. In addition, upon the Bankruptcy of any of the Grantee’s Permitted Transferees, the Company or its assigns shall have the right and option to repurchase all or any portion of the Shares held by such Permitted Transferee as of the date of such Bankruptcy. The purchase and sale arrangements contemplated by the preceding sentences of this Section 3(a) are referred to herein as the “Repurchase.”

(b) Repurchase Price . The per share purchase price of the Shares subject to the Repurchase (the “Repurchase Price”) shall be, subject to adjustment as provided above, (i) in the case of Shares which are Vested Shares as of the date of the event giving rise to the Repurchase, (x) the fair market value of such Vested Shares as of such date as determined by the Board if such event giving rise to the Repurchase is a Without Cause Termination Event or (y) the Per Share Purchase Price if such event giving rise to the Repurchase is a For Cause Termination Event, a Performance-Related Termination Event or a Bankruptcy, and (ii) in the case of Restricted Shares, the Per Share Purchase Price. The Repurchase Right with respect to Vested Shares shall terminate in accordance with Section 10(b).

Permanent Disability of Grantee) shall promptly surrender to the Company any certificates representing the Shares being purchased, together with a duly executed stock power for the transfer of such Shares to the Company or the Company’s assignee or assignees. Upon the Company’s or its assignee’s receipt of the certificates from the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability of Grantee), the Company or its assignee or assignees shall deliver to him, her or them a check for the Repurchase Price of the Shares being purchased, provided , however , that the Company may pay the Repurchase Price for such shares by offsetting and canceling any indebtedness then owed by the Grantee to the Company. At such time, the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability of Grantee) shall deliver to the Company the certificate or certificates representing the Shares so repurchased, duly endorsed for transfer, free and clear of any liens or encumbrances. The Repurchase right specified herein shall survive and remain in effect as to Restricted Shares following and notwithstanding any public offering by or merger or other transaction involving the Company and certificates representing such Restricted Shares shall bear legends to such effect, subject to Section 10(b) below.

3. Legend . Any certificate(s) representing the Shares shall carry substantially the same legend as set forth in Section 3.02(a) of the Stockholders’ Agreement.

4. Escrow Arrangement .

(a) Escrow . In order to carry out the provisions of Section 3 of this Agreement more effectively, the Company shall hold the Shares in escrow together with separate stock powers executed by the Grantee in blank for transfer, and any Permitted Transferee shall, as an additional condition to any transfer of Shares, execute a like stock power as to such Shares. The Company shall not dispose of the Shares except as otherwise provided in this Agreement. In the event of any repurchase by the Company (or any of its assigns), the Company is hereby authorized by the Grantee and any Permitted Transferee, as the Grantee’s and each such Permitted Transferee’s attorney-in-fact, to date and complete the stock powers necessary for the transfer of the Shares being purchased and to transfer such Shares in accordance with the terms hereof. At such time as any Shares are no longer subject to the Company’s repurchase, first refusal and drag along rights, the Company shall, at the written request of the Grantee, deliver to the Grantee (or the relevant Permitted Transferee) a certificate representing such Shares with the balance of the Shares (if any) to be held in escrow pursuant to this Section 6.

purchase price for such Shares with a bank designated by the Company, or with the Company’s independent public accounting firm, as agent or trustee, or in escrow, for the Grantee, any Permitted Transferees or other person or entity, to be held by such bank or accounting firm for the benefit of and for delivery to him, her, them or it, and/or, in its discretion, pay such purchase price by offsetting any indebtedness then owed by the Grantee as provided above. Upon any such deposit and/or offset by the designated purchaser of such amount and upon notice to the person or entity who was required to sell the Shares to be sold pursuant to the provisions of Section 3, such Shares shall at such time be deemed to have been sold, assigned, transferred and conveyed to such purchaser, the holder thereof shall have no further rights thereto (other than the right to withdraw the payment thereof held in escrow, if applicable), and the Company shall record such transfer in its stock transfer book or in any appropriate manner.

5. Withholding Taxes . The Grantee acknowledges and agrees that the Company or any of its Subsidiaries have the right to deduct from payments of any kind otherwise due to the Grantee, or from the Shares held pursuant to Section 6 hereof, the minimum federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Shares by the Grantee. In furtherance of the foregoing the Grantee agrees to elect, in accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended, to recognize ordinary income in the year of acquisition of the Shares, and to pay to the Company all withholding taxes determined to be due with respect to such election, based on the excess, if any, of the fair market value of such Shares as of the Effective Date over the purchase price for such Shares.

6. Assignment . At the discretion of the Board, the Company shall have the right to assign the right to exercise its rights with respect to the Repurchase to any Person or Persons, in whole or in part in any particular instance, upon the same terms and conditions applicable to the exercise thereof by the Company, and such assignee or assignees of the Company shall then take and hold any Shares so acquired subject to such terms as may be specified by the Company in connection with any such assignment.

7. Miscellaneous Provisions .

(a) Lockup provision . The Grantee and each Permitted Transferee shall agree, if requested by the Company and any underwriter engaged by the Company, not to sell or otherwise transfer or dispose of any securities of the Company (including, without limitation pursuant to Rule 144 under the Act (or any successor or similar exemptive rule hereafter in effect)) held by them for such period following the effective date of any registration statement of the Company filed under the Act as set forth in Section 5.03 of the Stockholders Agreement.

on NASDAQ/NMS or any national security exchange; provided , however , that all other provisions shall remain in effect following the same until all of the Shares have become Vested Shares.

(c) Record Owner; Dividends . The Grantee and any Permitted Transferees, during the duration of this Agreement, shall be considered the record owners of and shall be entitled to vote the Shares if and to the extent the Shares are entitled to voting rights. The Grantee and any Permitted Transferees shall be entitled to receive all dividends and any other distributions declared on the Shares; provided , however , that the Company is under no duty to declare any such dividends or to make any such distribution.

(d) Equitable Relief . The parties hereto agree and declare that legal remedies are inadequate to enforce the provisions of this Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement.

(e) Change and Modifications . This Agreement may not be orally changed, modified or terminated, nor shall any oral waiver of any of its terms be effective. This Agreement may be changed, modified or terminated only by an agreement in writing signed by the Company and the Grantee.

(f) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of Delaware without regard to conflict of law principles.

(g) Headings . The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Agreement and shall not be considered in the interpretation of this Agreement.

(h) Saving Clause . If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.

(i) Notices . All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid. Notices to the Company or the Grantee shall be addressed as set forth underneath their signatures below, or to such other address or addresses as may have been furnished by such party in writing to the other. Notices to any holder of the Shares other than the Grantee shall be addressed to the address furnished by such holder to the Company.

stock-for-stock merger in which the Company is not the surviving entity, shares of the Company’s successor issued in respect of the Shares shall remain subject to vesting and the Repurchase right of first refusal hereunder. The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

(k) Dispute Resolution . Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the “J.A.M.S. Rules”). The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be New York, New York, in the borough of Manhattan. The parties covenant and agree that the arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto. In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses. In addition, each party may take up to three depositions as of right, and the arbitrator may in his or her discretion allow additional depositions upon good cause shown by the moving party. However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission. In connection with any arbitration, each party shall provide to the other, no later than seven (7) business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert. The arbitrator’s decision and award shall be made and delivered within six (6) months of the selection of the arbitrator. The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability. The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages or any other damages that are specifically excluded under this Agreement, and each party hereby irrevocably waives any claim to such damages.

The parties covenant and agree that they will participate in the arbitration in good faith. This Section 9(k) applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm.

that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court. Each of the parties hereto hereby consents to service of process by registered mail at the address to which notices are to be given. Each of the parties hereto agrees that its, his or her submission to jurisdiction and its, his or her consent to service of process by mail is made for the express benefit of the other parties hereto. Final judgment against any party hereto in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

(l) Counterparts . For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

(m) Conflict with Other Agreements . For so long as the Stockholders Agreement is in full force and effect, this Agreement shall be subject to the provisions of the Stockholders Agreement. To the extent any of the provisions of this Agreement or the Plan conflict or are inconsistent with any of the provisions of the Stockholders Agreement, the Stockholders Agreement shall control.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company and the Grantee have executed this Restricted Stock Agreement as of the Effective Date.


COMPANY:

By:

Name:

Title:

Date:

GRANTEE:



John Barr

Date:

Address:


SPOUSE’S CONSENT:

I acknowledge that I have read the foregoing Restricted Stock Agreement and understand the contents thereof.



Print Name:

Date:

E XHIBIT B

AMENDED AND RESTATED PERFORMANCE VESTING RSA

(S EE A TTACHED )

A MENDED AND R ESTATED R ESTRICTED S TOCK A GREEMENT

UNDER THE P APA M URPHY ’ S H OLDINGS , I NC .

A MENDED 2010 M ANAGEMENT I NCENTIVE P LAN

P ERFORMANCE V ESTING


Name of Grantee:	John Barr	(the “Grantee”)

No. of Shares:	6,435	Shares of Common Stock

Grant Date:	May 5, 2010	(the “Grant Date”)

Effective Date:	July , 2011	(as defined in Section 1 below)

Whereas pursuant to that certain Performance Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “Original Performance Vesting RSA”), by and between Grantee and Papa Murphy’s Holdings, Inc., a Delaware corporation (together with its successors, the “Company”), the Company had previously sold to Grantee 48,261 shares of Common Stock that are subject to performance vesting restrictions (the “Original Performance Vesting Shares”) for an aggregate purchase price equal to $21,036.97;

Whereas, as of the date hereof, 0 of the Original Performance Vesting Shares have vested in accordance with the terms of the Original Performance Vesting RSA;

Whereas Grantee desires to sell to the Company, and the Company desires to repurchase from Grantee, 41,826 of the unvested Original Performance Vesting Shares (such transaction, the “Restricted Shares Repurchase”);

Whereas in connection with the Restricted Shares Repurchase, the Company and Grantee now desire to amend and restate the Original Performance Vesting RSA in its entirety as set forth herein in order to amend the performance vesting restrictions attached to the remaining 6,435 unvested Original Performance Vesting Shares;

“ Bankruptcy ” shall mean (i) the filing of a voluntary petition under any bankruptcy or insolvency law, or a petition for the appointment of a receiver or the making of an assignment for the benefit of creditors, with respect to the Grantee or any Permitted Transferee, or (ii) the Grantee or any Permitted Transferee being subjected involuntarily to such a petition or

assignment or to an attachment or other legal or equitable interest with respect to the Grantee’s or the Permitted Transferee’s assets, which involuntary petition or assignment or attachment is not discharged within 60 days after its date, and (iii) the Grantee or any Permitted Transferee being subject to a transfer of Shares by operation of law (including by divorce, even if not insolvent), except by reason of death.

“ Common Stock ” shall mean the Company’s Common Stock, par value $0.01 per share, together with any shares into which Common Stock may be converted or exchanged, as provided above and herein.

“ Effective Date ” shall mean the date upon which the Company receives from Grantee a signed original of this Agreement.

“ For Cause Termination Event ” shall mean the termination of the Grantee’s employment with the Company and its subsidiaries for Cause (as such term is defined in the Plan).

“ Lee Equity ” shall mean Lee Equity Partners Fund, L.P. and its Affiliates.

“ Lee Equity Qualified Liquidation Event ” shall mean the point in time at which any event occurs (including but not limited to any distribution, dividend, Sale Event, or other liquidity event) as a result of which Lee Equity has received from the Company or its subsidiaries an aggregate amount of cash and/or Liquid Securities with a value equal to or in excess of 250% of the aggregate amount of capital invested or otherwise contributed by Lee Equity to the Company and its subsidiaries with respect to the purchase or acquisition of equity securities. For purposes of determining whether a Lee Equity Qualified Liquidation Event shall have occurred, no payments or amounts received by Lee Equity from the Company and its subsidiaries which are not directly in respect of equity securities of the Company or its subsidiaries owned by Lee Equity (such as management fees, consulting fees or expenses reimbursements) shall be included in the calculation.

“ Liquid Securities ” shall mean freely tradable securities of a company listed on the Nasdaq National Market or the New York Stock Exchange having a public float with a market value in excess of $2,000,000.

“ Permitted Transferee ” has the meaning set forth in the Stockholders Agreement.

“ Restricted Shares ” shall initially mean all of the Shares being purchased by the Grantee on the Effective Date; provided that as of the Lee Equity Qualified Liquidation Event, all of the Restricted Shares shall become Vested Shares if (i) Grantee remains an employee on such date or (ii), in the event of a termination of Grantee’s employment with the Company and its subsidiaries due to Grantee’s death or Permanent Disability (as defined in the Amended and Restated Employment Agreement, dated as of the date hereof, by and between the Grantee and PMI Holdings, Inc.), such Lee Equity Qualified Liquidation Event is consummated prior to the one year anniversary of the date of Grantee’s termination of employment; provided further that, subject to (ii) above, the Restricted Shares shall automatically and without further action cease to vest upon the occurrence of any Termination Event.

“ Sale Event ” shall mean, regardless of form thereof, consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation (other than in connection with an IPO) in which the outstanding shares of capital stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own, directly or indirectly, a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, (iv) the sale of all or a majority of the outstanding capital stock of the Company to an unrelated person or entity or (v) any other transaction (other than an IPO) in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own, directly or indirectly, at least a majority of the outstanding voting power of the successor entity immediately upon completion of the transaction.

“ Shares ” shall mean the number of shares of Common Stock being purchased by the Grantee on the Effective Date and any additional shares of Common Stock or other securities received in respect of the Shares, as a dividend on, or otherwise on account of, the Shares.

“ Stockholders Agreement ” means that certain Stockholders Agreement, dated as of the date hereof, among the Company and the Stockholders party thereto.

“ Termination Event ” shall mean a For Cause Termination Event, a Performance-Related Termination Event or a Without Cause Termination Event.

“ Vested Shares ” shall mean all Shares which are not Restricted Shares.

received on or in respect of Shares in connection with any such event (including any shares of capital stock or any right, option or warrant to receive the same or any security convertible into or exchangeable for any such shares or received upon conversion of any such shares) shall be subject to this Agreement on the same basis and extent at the relevant time as the Shares in respect of which they were issued, and shall be deemed Shares as if and to the same extent they were issued at the Effective Date hereof.

2. Repurchase Right .

(a) Repurchase . Immediately prior to the earliest to occur of (i) a Termination Event, (ii) a Sale Event that does not constitute a Lee Equity Qualified Liquidation Event (a “Non Qualifying Sale Event”), or (iii) the Bankruptcy of the Grantee, the Company or its assigns shall have the right and option to repurchase all or any portion of the Shares held by the Grantee or any Permitted Transferee as of the date of such Termination Event, Non Qualifying Sale Event, or Bankruptcy. In addition, upon the Bankruptcy of any of the Grantee’s Permitted Transferees, the Company or its assigns shall have the right and option to repurchase all or any portion of the Shares held by such Permitted Transferee as of the date of such Bankruptcy. The purchase and sale arrangements contemplated by the preceding sentences of this Section 3(a) are referred to herein as the “Repurchase.”

(c) Closing Procedure . The Company or its assigns shall effect the Repurchase (if so elected) by delivering or mailing to the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability (as defined in Grantee’s Amended and Restated Executive Employment and Non-Competition Agreement) of Grantee) written notice either immediately prior to or within six (6) months after the Termination Event, the Non Qualifying Sale Event or Bankruptcy, specifying a date within such six-month period in which the Repurchase shall be effected. Upon such notification, the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability of Grantee) shall promptly surrender to the Company any certificates representing the Shares being purchased, together with a duly executed stock power for the transfer of such Shares to the Company or the Company’s assignee or assignees. Upon the Company’s or its assignee’s receipt of the certificates from the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability of Grantee), the Company or its assignee or assignees shall deliver to him, her or them a check for the Repurchase Price of the Shares being purchased, provided , however , that the Company may pay the Repurchase Price for such shares by offsetting and canceling any indebtedness then

owed by the Grantee to the Company. At such time, the Grantee (and/or, if applicable, any Permitted Transferees or his personal representative in the event of the Permanent Disability of Grantee) shall deliver to the Company the certificate or certificates representing the Shares so repurchased, duly endorsed for transfer, free and clear of any liens or encumbrances. The Repurchase right specified herein shall survive and remain in effect as to Restricted Shares following and notwithstanding any public offering by or merger or other transaction involving the Company and certificates representing such Restricted Shares shall bear legends to such effect, subject to Section 10(b) below.

3. Legend . Any certificate(s) representing the Shares shall carry substantially the same legend as set forth in Section 3.02(a) of the Stockholders’ Agreement.

4. Escrow Arrangement .

(b) Remedy . Without limitation of any other provision of this Agreement or other rights, in the event that the Grantee, any Permitted Transferees or any other person or entity is required to sell the Grantee’s Shares pursuant to the provisions of Section 3 of this Agreement and in the further event that he or she refuses or for any reason fails to deliver to the designated purchaser of such Shares the certificate or certificates evidencing such Shares together with a related stock power, such designated purchaser may deposit the applicable purchase price for such Shares with a bank designated by the Company, or with the Company’s independent public accounting firm, as agent or trustee, or in escrow, for the Grantee, any Permitted Transferees or other person or entity, to be held by such bank or accounting firm for the benefit of and for delivery to him, her, them or it, and/or, in its discretion, pay such purchase price by offsetting any indebtedness then owed by the Grantee as provided above. Upon any such deposit and/or offset by the designated purchaser of such amount and upon notice to the person or entity who was required to sell the Shares to be sold pursuant to the provisions of Section 3, such Shares shall at such time be deemed to have been sold, assigned, transferred and conveyed to such purchaser, the holder thereof shall have no further rights thereto (other than the right to withdraw the payment thereof held in escrow, if applicable), and the Company shall record such transfer in its stock transfer book or in any appropriate manner.

5. Withholding Taxes . The Grantee acknowledges and agrees that the Company or any of its Subsidiaries have the right to deduct from payments of any kind otherwise due to the Grantee, or from the Shares held pursuant to Section 7 hereof, the minimum federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Shares by the Grantee. In furtherance of the foregoing the Grantee agrees to elect, in accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended, to recognize ordinary income in the year of acquisition of the Shares, and to pay to the Company all withholding taxes shown as due on his or her Section 83(b) election form, or otherwise ultimately determined to be due with respect to such election, based on the excess, if any, of the fair market value of such Shares as of the Effective Date over the purchase price for such Shares.

6. Assignment . At the discretion of the Board, the Company shall have the right to assign the right to exercise its rights with respect to the Repurchase, in whole or in part in any particular instance, upon the same terms and conditions applicable to the exercise thereof by the Company, and such assignee or assignees of the Company shall then take and hold any Shares so acquired subject to such terms as may be specified by the Company in connection with any such assignment.

7. Miscellaneous Provisions .

(b) Termination . The Company’s Repurchase right with respect to Vested Shares under Section 3 shall terminate upon the closing of the Company’s Initial Public Offering or upon consummation of any Sale Event, in either case as a result of which shares of the Company (or successor entity) of the same class as the Shares are registered under Section 12 of the Exchange Act of 1934 and publicly traded on NASDAQ/NMS or any national security exchange; provided , however , that all other provisions shall remain in effect following the same until all of the Shares have become Vested Shares.

(f) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of Delaware without regard to conflict of law principles.

(j) Benefit and Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to Grantee hereunder shall be paid, in the event of Grantee’s death, to Grantee’s estate, heirs or representatives. Without limitation of the foregoing, upon any stock-for-stock merger in which the Company is not the surviving entity, shares of the Company’s successor issued in respect of the Shares shall remain subject to vesting and the Repurchase right of first refusal hereunder. The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

Dispute Resolution . Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the “J.A.M.S. Rules”). The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be New York, New York, in the borough of Manhattan.

The parties covenant and agree that the arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto. In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses. In addition, each party may take up to three depositions as of right, and the arbitrator may in his or her discretion allow additional

depositions upon good cause shown by the moving party. However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission. In connection with any arbitration, each party shall provide to the other, no later than seven (7) business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert. The arbitrator’s decision and award shall be made and delivered within six (6) months of the selection of the arbitrator. The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability. The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages or any other damages that are specifically excluded under this Agreement, and each party hereby irrevocably waives any claim to such damages.

Each of the parties hereto (i) hereby irrevocably submits to the jurisdiction of any United States District Court of competent jurisdiction for the purpose of enforcing the award or decision in any such proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution (except as protected by applicable law), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court. Each of the parties hereto hereby consents to service of process by registered mail at the address to which notices are to be given. Each of the parties hereto agrees that its, his or her submission to jurisdiction and its, his or her consent to service of process by mail is made for the express benefit of the other parties hereto. Final judgment against any party hereto in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

(k) Counterparts . For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

(l) Conflict with Other Agreements . For so long as the Stockholders Agreement is in full force and effect, this Agreement shall be subject to the provisions of the Stockholders Agreement. To the extent any of the provisions of this Agreement conflict or are inconsistent with any of the provisions of the Stockholders Agreement or the Plan, the Stockholders Agreement shall control.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company and the Grantee have executed this Restricted Stock Agreement as of the Effective Date.


COMPANY:

By:

Name:

Title:

Date:

GRANTEE:


John Barr

Date:

Address:


SPOUSE’S CONSENT:

I acknowledge that I have read the foregoing Restricted Stock Agreement and understand the contents thereof.



Print Name:

Date:

E XHIBIT C

STOCK POWER

(Stock Assignment Separate From Certificate)

FOR VALUE RECEIVED , John Barr hereby sells, assigns and transfers unto P APA M URPHY ’ S H OLDINGS , I NC . , a Delaware corporation (the “ Holdings ”), shares of Common Stock, standing in his name on the books of Holdings, as represented by the stock certificate(s) noted below, and does hereby irrevocably constitute and appoint Holdings’ Secretary or attorney-in-fact, to transfer such stock on the books of Holdings with full power of substitution in the premises.

John Barr


Certificate No.		Number and Type of Shares

DATED:

NOTE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatsoever.

E XHIBIT D

STOCK POWER

(Stock Assignment Separate From Certificate)

FOR VALUE RECEIVED , John Barr hereby sells, assigns and transfers unto P APA M URPHY ’ S H OLDINGS , I NC . , a Delaware corporation (the “ Holdings ”), shares of Common Stock and/or shares of Participating Preferred Stock, standing in his name on the books of Holdings, as represented by the stock certificate(s) noted below, and does hereby irrevocably constitute and appoint Holdings’ Secretary or attorney-in-fact, to transfer such stock on the books of Holdings with full power of substitution in the premises.

John Barr


Certificate No.		Number and Type of Shares

DATED:

NOTE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatsoever.

Exhibit 10.10

EXECUTION COPY

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT

This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “ Agreement ”), dated as of the 24 day of July, 2011, by and between PMI Holdings, Inc., a Delaware corporation (the “ Company ”), and John Barr, a resident of Vancouver, Washington (the “ Executive ”).

WHEREAS, the Company and Executive entered into that certain Executive Employment and Non-Competition Agreement dated as of May 5, 2010 (the “ Employment Agreement ”);

WHEREAS, the parties now desire to amend and restate the Employment Agreement in its entirety as set forth herein;

WHEREAS, the Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company;

WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available to the Company, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth; and

NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:

1. Employment . Executive’s employment with the Company shall continue, subject to earlier termination of such employment pursuant to the terms hereof, until December 31, 2013 (the “ Employment Period ”). Upon mutual agreement of the Executive and the Company, the Employment Period may extend beyond December 31, 2013. For each calendar year during the Employment Period, Executive shall undergo a physical to be performed by a doctor to be mutually agreed upon by Executive and the Company.

2. Duties . During the Employment Period, Executive shall serve on a full-time basis and perform services in a managerial capacity in a manner consistent with Executive’s position as Chairman and Chief Executive Officer of the Company until December 31, 2011 and as Chairman of the Company from and after January 1, 2012 and Executive’s duties and responsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Board of Directors (the “ Board ”). Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods of disability) and use his best efforts in his employment with the Company; provided , however , that this Agreement shall not be interpreted as prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to another business or enterprise (whether engaged in for profit or not; provided , however , with respect to for profit businesses, the Executive shall be limited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder.

3. Compensation .

3.1 Base Salary .

(a) In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the “ Base Salary ”) at the rate of (i) $495,000 for the calendar year 2011, (ii) $300,000 for the calendar year 2012, (iii) $250,000 for the calendar year 2013, and (iv) $200,000 for any calendar year in which Executive’s employment with the Company continues following the calendar year 2013.

(b) The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried executives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with the Company’s customary payroll procedures.

3.2 Bonus . For calendar years 2011, 2012 and 2013, the Executive shall be eligible to receive an annual bonus (the “ Annual Bonus ”), in an amount up to 60%, 30%, and 30% of the Base Salary, respectively, payable in accordance with the Company’s incentive compensation policy; provided , that , such Annual Bonus shall in no event be paid later than March 15 of the calendar year following the fiscal year to which such Annual Bonus relates. In the event that the Company and Executive mutually agree to extend the Employment Period beyond December 31, 2013, Executive shall not be eligible to receive an Annual Bonus. The Annual Bonus shall be based upon the attainment of certain targets as agreed upon by the Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during the Employment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.

3.3 Guaranteed Retention Bonus . The parties hereby acknowledge and agree that the Company shall pay Executive a guaranteed retention bonus in an aggregate amount equal to $1,110,774.25 (the “ Guaranteed Retention Bonus ”) and (i) $5,774.25 of the Guaranteed Retention Bonus shall be payable on the closing date for the Restricted Shares Repurchase (as defined below) pursuant to the Repurchase Agreement (as defined below); (ii) $344,000 of the Guaranteed Retention Bonus shall be payable on December 31, 2011, (iii) $368,000 of the Guaranteed Retention Bonus shall be payable on December 31, 2012, and (iv) $393,000 of the Guaranteed Retention Bonus shall be payable on December 31, 2013.

3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend for such periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive’s duties hereunder.

3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participate in any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Company as in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other senior executives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executive understands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.

3.6 Winter Travel Reimbursement . During the term of Executive’s employment under this Agreement, Executive shall be entitled to receive an annual winter travel reimbursement of $25,000 for out-of-pocket expenses incurred upon presentation of proper receipts or other proof of expenditure.

3.7 Holdings Restricted Stock . The parties hereto hereby acknowledge and agree as follows:

(a) As of May 5, 2010, Executive was granted (i) 96,521 shares of common stock, par value $0.01 per share (the “ Common Stock ”), of Papa Murphy’s Holdings, Inc., a Delaware corporation (“ Holdings ”) that are subject to time vesting restrictions (the “ Time Vesting Shares ”) pursuant to that certain Time Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “ Time Vesting RSA ”), by and between Executive and Holdings and (ii) 48,261 shares of Common Stock that are subject to performance vesting restrictions (the “ Performance Vesting Shares ”, together with the Time Vesting Shares, the “ Restricted Shares ”) pursuant to that certain Performance Vesting Restricted Stock Agreement, dated as of May 5, 2010 (the “ Performance Vesting RSA ”), by and between Executive and Holdings;

(b) As of the date hereof, (i) 19,304 of the Time Vesting Shares have vested in accordance with the terms of the Time Vesting RSA and (ii) 0 of the Performance Vesting Shares have vested in accordance with the terms of the Performance Vesting RSA; and

(c) Pursuant to that certain Stock Repurchase and Put Option Agreement, dated as of the date hereof (“ Repurchase Agreement ”) and subject to the terms set forth therein, by and between Executive and Holdings, Executive shall sell to Holdings, and Holdings shall repurchase from Executive, (i) 64,348 of the unvested Time Vesting Shares (the “ Repurchased Time Vesting Shares ”) and (ii) 41,826 of the Performance Vesting Shares (the “ Repurchased Performance Vesting Shares ”, together with the Repurchased Time Vesting Shares, the “ Repurchased Restricted Shares ”) (such transactions, the “ Restricted Shares Repurchase ”).

4. Termination . Executive’s employment hereunder may be terminated as follows:

4.1 Automatically in the event of the death of Executive;

4.2 At the option of the Company, by written notice to Executive or his personal representative in the event of the Permanent Disability of Executive. As used herein, the term “ Permanent Disability ” shall mean a physical or mental incapacity or disability which renders Executive unable to render the services required hereunder (A) for one hundred eighty (180) days in any twelve (12) month period or (B) for a period of ninety (90) consecutive days;

4.3 At the option of the Company for Cause (as defined in Section 5.4 );

4.4 At the option of the Company at any time without Cause;

4.5 At the option of Executive, at any time, for any reason, on one-hundred eighty (180) days prior written notice to the Company;

4.6 Immediately in the event of a breach by the Executive of Section 7 of this Agreement; or

4.7 At the option of Executive for Good Reason (as defined in Section 5.5 ), on ninety (90) days prior written notice to the Company.

5. Payments .

5.1 Death or Permanent Disability . Upon the termination of Executive’s employment due to death or Permanent Disability, Executive or his legal representatives shall be entitled to receive (i) an amount equal to Base Salary payable through the date of termination, (ii) Base Salary through the first anniversary of such date of termination payable in accordance with the Company’s payroll policies, (iii) the sum of (A) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year for which Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the year in which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time as such payment would have been made if not for Executive’s death or Permanent Disability plus (B) Executive’s Annual Bonus, if any, for the period from the date of termination of employment through the first anniversary of such date of termination of employment (which Annual Bonus shall be reasonably determined by the Board in accordance with the Board’s bonus determination policies then in effect), and (iv) the remaining portion of the unpaid Guaranteed Retention Bonus payable in a lump sum on the 60th day following the termination of Executive’s employment. Executive or his legal representatives shall also be entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.

starting on Executive’s termination of employment, with the cost of the regular premium for such benefits shared in the same relative proportion by the Company and the Executive as in effect immediately prior to the date of termination, through the earlier of (I) the two year anniversary of such date of termination or (II) the expiration of the Employment Period; provided , that , if Executive does not execute a fully effective non-revocable release within sixty (60) days of the termination of employment, then, beginning on the sixtieth (60th) day following the termination of employment, the Company shall cease to provide to Executive any such coverages and/or benefits under any of the applicable plans, except to the extent required by law. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.

5.3 Termination for Cause, by Executive without Good Reason . Except for Base Salary through the day on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any other compensation or benefits after the last date of employment with the Company upon the termination of Executive’s employment hereunder by the Company for Cause pursuant to Section 4.3 , or by Executive without Good Reason pursuant to Section 4.5 ; provided, however, in the event that Executive’s employment hereunder is terminated by Executive without Good Reason pursuant to Section 4.5 , Executive shall also be entitled to receive the remaining portion of the unpaid Guaranteed Retention Bonus in a lump sum on the 60th day following the termination of Executive’s employment.

5.4 Cause Defined . For purposes of this Agreement, the following shall constitute “ Cause ” for termination:

(a) dishonest statements or acts of the Executive with respect to the Company or any affiliate of the Company;

(b) the commission by or indictment of the Executive for (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any other procedure pursuant to which an initial determination of probable or reasonable cause with respect to such offense is made);

(c) gross negligence, willful misconduct or insubordination of the Executive with respect to the Company or any affiliate of the Company; or

(d) material breach by the Executive of any of the Executive’s obligations to the Company.

provided , that , in the case of clause (d), in the event that the Company provides written notice of termination for Cause in reliance upon this Section 5.4 , the Executive shall have the opportunity to cure such circumstances within thirty (30) days of receipt of such notice.

5.5 Good Reason Defined . For purposes of this Agreement, the term “ Good Reason ” shall mean, without Executive’s consent:

(a) the Company materially breached its obligations under this Agreement;

(b) any material diminution of significant duties of the Executive;

(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to all senior executives or employees generally; or

(d) the Company’s corporate headquarters is moved a distance of at least fifty (50) miles from its current corporate headquarters in Vancouver, Washington;

provided , that , in each case, in the event that Executive provides written notice of termination for Good Reason in reliance upon this Section 5.5 , the Company shall have the opportunity to cure such circumstances within thirty (30) days of receipt of such notice.

5.6 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwise required by law shall be contingent upon (i) execution by Executive (or Executive’s beneficiary or estate) of a fully effective and non-revocable general release of all claims to the maximum extent permitted by law against the Company, its affiliates and its current and former stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its sole discretion within sixty (60) days of Executive’s termination of employment and (ii) compliance by Executive with his obligations under this Agreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders or other agreement to which the Company and Executive are a party.

5.7 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described in Section 5.2 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan or severance policy generally available to the Company’s employees or otherwise.

5.8 Board Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries and affiliates.

5.9 Survival . This Section 5 shall survive any termination or expiration of this Agreement.

6. Reimbursement of Expenses . The Company shall reimburse the Executive for all reasonable and necessary expenses actually incurred by the Executive directly in connection with the business and affairs of the Company and the performance of his duties hereunder, upon presentation of proper receipts or other proof of expenditure and in accordance with such reasonable guidelines or limitations established by the Board from time to time.

7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .

7.1 The Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is two years following the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), the Executive will not, without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country in which the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity), any business, organization or person other than the Company (or any subsidiary or affiliate of the Company), and including any such business, organization or person involving, or which is, a family member of the Executive, whose business, activities, products or services are competitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offered by the Company or its subsidiaries or affiliates; provided , however , nothing herein shall prohibit the Executive from being employed by any business, organization or person that operates in the quick service restaurant or franchising industries and derives less than 10% of its total revenue from the sale of pizza or from royalties associated therewith. Without implied limitation, the foregoing covenant shall be deemed to prohibit (i) hiring or engaging or attempting to hire or engage for or on behalf of the Executive or any such competitor any officer or employee of the Company or any of its direct and/or indirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries and affiliates who was employed during the six (6) month period immediately preceding the date of such attempt to hire or engage, (ii) encouraging for or on behalf of the Executive or any such competitor any such officer or employee to terminate his or her relationship or employment with the Company or any of its direct or indirect subsidiaries and affiliates, (iii) soliciting for or on behalf of Executive or any such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, or any former client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the six (6) month period immediately preceding the date of such solicitation and (iv) diverting to any person (as hereinafter defined) any client (including all franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.

Notwithstanding anything herein to the contrary, the Executive may make passive investments in any enterprise the shares of which are publicly traded if such investment constitutes less than two percent (2%) of the equity of such enterprise. Neither the Executive nor any business entity controlled by the Executive is a party to any contract, commitment, arrangement or agreement which could, following the date hereof, restrain or restrict the Company or any subsidiary or affiliate of the Company from carrying on its business or restrain or restrict the Executive from performing his employment obligations, and as of the date of this Agreement the Executive has no business interests whatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passive investments in the shares of public companies of less than two percent (2%).

7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including all predecessors of the Company) and its affiliates, Executive has had and from time to time will have access to Confidential Information (as defined below). Executive agrees (i) to hold the Confidential Information in strict confidence, (ii) not to disclose the Confidential Information to any person (other than in the regular business of the Company or its affiliates), and (iii) not to use, directly or indirectly, any of the Confidential Information for any purpose other than on behalf of the Company and its affiliates. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to Executive by the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of the Company. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested by the Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and other papers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediately returned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the Confidential Information and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive or Executive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment, or involving the use of the time, materials or other resources of the Company or any of its affiliates, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.

7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company that relate to events or occurrences that transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocket expenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3 .

sales and financial reports and forecasts, customer lists, studies, reports, records, books, contracts, instruments, surveys, computer disks, diskettes, tapes, computer programs and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Company. Confidential Information includes information developed by Executive in the course of Executive’s employment by the Company, as well as other information to which Executive may have access in connection with Executive’s employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of Executive’s duties under Section 7.2 .

8. Remedies . It is specifically understood and agreed that any breach of the provisions of Section 7 of this Agreement is likely to result in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that in addition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement by the Executive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liability should such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required by this Agreement, including, without limitation, any severance payment required under Section 5.2 , in each case in addition to any other remedy to which the Company may be entitled at law or in equity.

9. Severable Provisions . The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law.

10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:

If to the Company:

PMI Holdings, Inc.

c/o Papa Murphy’s International, Inc.

8000 N.E. Parkway Drive, Suite 350

Vancouver, WA 98662

With copies to (which shall not constitute notice):

Papa Murphy’s Holdings, Inc.

c/o Lee Equity Partners, LLC

650 Madison Avenue, 21 st Floor

New York, NY 10022

Attn: Ben Hochberg

Yoo Jin Kim

Facsimile: (646) 781-3700

with a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attn: Douglas P. Warner, Esq.

Facsimile: (212) 310-8007

If to the Executive:

John Barr

8718 S.E. Porter Circle

Vancouver, WA 98664

or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 10 .

11. Miscellaneous .

11.1 Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

11.2 Entire Agreement; Amendment . This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties.

11.3 Assignment and Transfer . The provisions of this Agreement shall be binding on and shall inure to the benefit of the Company and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of the Executive under this Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs or representatives.

11.4 Waiver of Breach . A waiver by either party of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other or subsequent breach by the other party.

11.5 Withholding . The Company shall be entitled to withhold from any amounts to be paid or benefits provided to the Executive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it is from time to time required to withhold. The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shall arise.

11.6 Set Off. The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates; provided , however , this set-off right is limited to actual amounts owed by Executive to the Company (which, for the avoidance of doubt, shall exclude any consequential or indirect damages).

11.7 Section 409A .

(a) If any payment, compensation or other benefit provided to Executive in connection with his employment termination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“ Section 409A ”) and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i), then no portion of such “nonqualified deferred compensation” shall be paid before the day that is six (6) months plus one (1) day after the date of termination (the “ New Payment Date ”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiums therefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period and the Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month period promptly after its conclusion.

renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so that either (i) Section 409A will not apply or (ii) compliance with Section 409A will be achieved; provided , that , neither the Company nor its employees or representatives shall have liability to Executive with respect hereto.

(c) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, provided , however , that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Internal Revenue Code of 1986, as amended, solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

(e) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasury final regulations, including the default presumptions, and for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “terminate,” “termination of employment” or like terms shall mean separation from service.

11.8 Governing Law . This Agreement shall be construed under and enforced in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions thereof.

11.9 Arbitration of Disputes . Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the termination of the Executive’s employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association (“ AAA ”) in the city of New York, NY, in the borough of Manhattan in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the

foregoing, this Section 11.9 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided , that , any other relief shall be pursued through an arbitration proceeding pursuant to this Section 11.9 .

11.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and shall have the same effect as if the signatures hereto and thereto were on the same instrument.

[Remainder of page left intentionally blank]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.


COMPANY: PMI HOLDINGS, INC.

By:		/s/ Yoo Jin Kim
Name:		Yoo Jin Kim
Title:

EXECUTIVE:

/s/ John D. Barr
John D. Barr

[SIGNATURE PAGE TO BARR A&R EMPLOYMENT AGMT]

Exhibit 10.11

FIRST AMENDMENT TO AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AND NONCOMPETITION AGREEMENT

The Amended and Restated Executive Employment and Noncompetition Agreement dated July 24, 2011 (“ Agreement ”), between PMI Holdings, Inc. (“ Company ”) and John Barr (the “ Executive ”) is hereby further amended as follows, effective as of December 30, 2013:

WHEREAS, the Company and Executive entered into that certain Executive Employment and Non-Competition Agreement dated as of May 5, 2010, as amended by the Agreement;

WHEREAS, the parties now desire to amend the Agreement as set forth herein;

WHEREAS, the Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company;

1. The Employment Period, as defined in Section 1 of the Agreement, is hereby extended to December 31, 2016.

2. Section 2 of the Agreement is hereby deleted in its entirety and replaced with the following:

“2.

Duties . During the Employment Period, Executive shall devote adequate time and perform services in a managerial capacity in a manner consistent with Executive’s position as Chairman of the Company from and after January 1, 2012, as set forth in the Appendix attached hereto, and Executive’s duties and responsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Board of Directors (the “ Board ”). Executive shall devote his business time, attention and energies (excepting vacation time, holidays, sick days and periods of disability) and use his best efforts in his employment with the Company; provided , however , that this Agreement shall not be interpreted as prohibiting Executive from acting as the Manager, Member of the Board and/or Chief Executive Officer of a company in which the Company or a subsidiary or affiliate of the Company is an investor, managing his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to another business or enterprise (whether engaged in for profit or not; provided , however , with respect to for profit businesses other than a company in which the Company or a subsidiary or affiliate of the Company is an investor, the Executive shall be limited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder.”

3. Section 3.1(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(a) In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the “ Base Salary ”) at the rate of (i) $200,000 for the calendar year 2014, (ii) $150,000 for the calendar year 2015, and (iii) $100,000 for the calendar year 2016.”

4. Section 3.2 of the Agreement is hereby deleted in its entirety.

5. Section 3.3 is hereby deleted in its entirety and replaced with the following:

“3.2

Guaranteed Retention Bonus . The parties hereby acknowledge and agree that the Company shall pay Executive a guaranteed retention bonus $393,000, payable on December 31, 2013.”

6. Section 3.7 is hereby deleted in its entirety and replaced with the following:

“In consideration of the promises and obligations of the First Amendment to the Agreement, the parties hereby agree that the Stock Repurchase and Put Option Agreement between the parties dated July 29, 2011, is hereby null and void, of no further effect, neither party shall have any further obligation to the other thereunder, and it shall be of no further value to Executive.”

7. Section 7.1 is hereby amended by adding the following to end of the first paragraph of that section:

“None of the foregoing shall be interpreted as prohibiting Executive from being a Member or acting as the Manager, Chairman of the Board and/or Chief Executive Officer of a company in which the Company or a subsidiary or affiliate of the Company is an investor.”

Except as modified, all terms of the Agreement remain in effect. In the event of a conflict between the terms of the Agreement and this First Amendment, the First Amendment shall control.

[SIGNATURE ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.


COMPANY:

PMI HOLDINGS, INC.

By:		/s/ Ken Calwell
		Ken Calwell, Chief Executive Officer

EXECUTIVE:

/s/ John Barr
John Barr

APPENDIX TO

FIRST AMENDMENT TO AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AND NONCOMPETITION AGREEMENT


ROLES & RESPONSIBILITIES:	2014	2015	2016

1. Chairman of the Board • Represent the Company as its Chairman • Act as liaison between Management and the Board • Chair the Board Meetings • Prepare with the CEO quarterly Board Agendas & Key Follow-ups • Special projects as directed by the CEO and/or Board	Yes	Yes	Yes
2. Mentor/Coach CEO • Daily/weekly meetings with the CEO • Consult on Annual Budget, Strategic Planning, Succession & Compensation • Act as consultant with senior management on key issues	Yes	Yes	Yes
3. Help manage relationship with the franchisee community • Attend all Franchise Advisory Board meetings • Attend Franchise Convention	Yes	No	No
4. Oversee International development • Play an active role in the future direction in Canada • Senior manager role in the Middle East • Help in the formulation of an International development strategy	Yes	No	No
5. Lead role in Project Pie investment • Chairman of Board of Managers • Mentor/Coach CEO • Help direct development strategy	Yes	Yes	Yes

Exhibit 10.12

EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT

This EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “ Agreement ”), dated as of the 25th day of May, 2011, by and between PMI Holdings, Inc., a Delaware corporation (the “ Company ”), and Ken C. Calwell, a resident of Dublin, Ohio (the “ Executive ”).

WHEREAS, the purpose and business of the Company will be to operate a ‘take and bake’ pizza franchising business (the “ Business ”);

WHEREAS, the Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company;

1. Employment . The Company hereby agrees to employ Executive, and Executive hereby agrees to accept employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on June 6, 2011 (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of such employment pursuant to the terms hereof, until the third anniversary of the Effective Date (the “ Employment Period ”). On the third anniversary of the Effective Date and on each anniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period; provided, however, the Company or the Executive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not less than ninety (90) days prior to the end of the then current Employment Period.

2. Duties . During the Employment Period, Executive shall serve on a full-time basis and perform services in a managerial capacity in a manner consistent with Executive’s position as President of the Company and Executive’s duties and responsibilities shall include those duties consistent with such position reasonably assigned to him from time to time by the Company’s Board of Directors (the “ Board ”); provided, however, the parties hereby agree that the Executive shall be promoted to the position of Chief Executive Officer of the Company by no later than December 31, 2011. Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods of disability) and use his best efforts in his employment with the Company; provided , however , that this Agreement shall not be interpreted as prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to another business or enterprise (whether engaged in for profit or not) or being a member of, and participating in

meetings and other events held by, the Young Presidents Organization, so long as such activities do not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder.

3. Compensation .

3.1 Base Salary .

(a) In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the “ Base Salary ”) at the rate of $395,000 per calendar year during his employment; provided, however, upon the earlier of (i) January 1, 2012 and (ii) the Executive’s promotion to Chief Executive Officer of the Company, the Base Salary shall increase to the rate of $465,000 per calendar year during his employment.

(b) The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried executives, but no less frequently than monthly, and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions required by law or otherwise authorized in writing by the Executive in accordance with the Company’s customary payroll procedures.

(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individual performance and/or the performance of the Company.

3.2 Bonus . During the Employment Period, the Executive shall be eligible to receive an annual bonus (the “ Annual Bonus ”), in an amount up to (a) $360,000 for 2011, which shall be pro-rated based on the time period from the Effective Date through December 31, 2011, and (b) 60% of the Base Salary for any other year during the Employment Period, payable in accordance with the Company’s incentive compensation policy; provided , that , such Annual Bonus shall in no event be paid later than March 15 of the calendar year following the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain financial and operating metrics, including, but not limited to, targets with respect to (i) EBITDA, (ii) store openings, (iii) new store average weekly sales and number of weeks, and (iv) same store sales growth, as mutually agreed upon in good faith by the Executive and the Board with respect to the Company’s financial and operating performance for any fiscal year ending during the Employment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions referenced in Section 3.1(b) .

3.3 Vacation . Executive shall be entitled to take four (4) weeks vacation in any given year during the Employment Period, such vacation to extend for such periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive’s duties hereunder; provided , however , the Executive may not carryover more than four (4) weeks of vacation in any given year during the Employment Period. Upon termination of employment, the Company shall pay the Executive for vacation time that the Executive accrued but did not use.

3.4 Benefits . During the term of Executive’s employment under this Agreement, Executive, and his spouse and eligible children shall be entitled to participate in any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement), including, without limitation, any health, hospitalization and medical insurance programs, offered by the Company as in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other senior executives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executive understands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.

3.5 Relocation and Moving Expenses . In addition to the Benefits Plans, the Company or its affiliates shall provide the Executive with the following additional benefits: (i) an unsecured, subordinated loan from the Company or its affiliates in such amount as requested by the Executive, not to exceed $500,000, bearing interest at the then applicable federal rate for loans with a one-year maturity date published by the Internal Revenue Service from time to time under Section 1274(d) of the Internal Revenue Code to enable the Executive to purchase a new home, (ii) transitional housing expenses for the period from the Effective Date until the Executive purchases a new home in an amount not to exceed $4,300 per a month, (iii) relocation and moving expenses paid by the Executive within twelve months from the Effective Date, which shall include the fees, if any, required to be paid by the Executive to realtors in Dublin, Ohio and Vancouver, Washington, and household moving fees and closing costs, in an amount not to exceed $45,000), and (iv) the costs incurred in connection with (a) three round trips to Portland, Oregon for the Executive’s immediate family and (b) five round trips to Portland, Oregon for the Executive.

4. Termination . Executive’s employment hereunder may be terminated as follows:

4.1 Automatically in the event of the death of Executive;

4.2 At the option of the Company, upon ten (10) days prior written notice to Executive or his personal representative in the event of the Permanent Disability of Executive, unless the Executive resumes his normal and customary duties hereunder prior to the expiration of such notice period in which case no termination of the Executive’s employment shall occur. As used herein, the term “ Permanent Disability ” shall mean a physical or mental incapacity or disability which renders Executive unable to render the services required hereunder (A) for one hundred eighty (180) days in any twelve (12) month period or (B) for a period of ninety (90) consecutive days;

4.3 At the option of the Company for Cause (as defined in Section 5.4 );

4.4 At the option of the Company at any time without Cause;

4.5 At the option of Executive, at any time, for any reason, on sixty (60) days prior written notice to the Company;

4.6 Immediately in the event of a breach by the Executive of Section 7 of this Agreement; or

4.7 At the option of Executive for Good Reason (as defined in Section 5.5 ), on thirty (30) days prior written notice to the Company.

5. Payments .

(a) the Company shall, commencing on the date of such termination of employment, pay to the Executive an amount (the “ First Year Payment ”) equal to the sum of (A) the Base Salary in effect as of the effective date of such termination and (B) an amount equal to his Annual Bonus, if any, for the calendar year prior to the calendar year in which his employment is terminated, payable in semi-monthly installments for a period of twelve (12) months;

(b) the Company shall, at the same time bonuses are paid to its executives, pay to the Executive a lump sum amount equal to the Annual Bonus which would be payable to the Executive in respect of the calendar year in which his employment is terminated based on actual performance multiplied by a fraction, the numerator of which is the number of days from January 1 of the calendar year in which his employment terminated through the date of such termination and the denominator of which is 365;

(c) at the Executive’s election the Executive will be entitled to continue your coverage under all health and medical insurance policies maintained by the Company for twelve (12) months following the termination of his employment, in fulfillment of the Company’s obligations to him under Section 4980B of the Code or under Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended, the cost of such coverage to be paid by the Executive.

(d) the Executive will automatically become vested in that number of unvested shares of common stock of the Company granted to the Executive by the Company pursuant to that certain Time Vesting Restricted Stock Agreement by and between Papa Murphy’s Holdings, Inc. and the Executive, dated as of the date hereof, in which the Executive would have been vested if he had remained employed by the Company for eighteen (18) months following the Executive’s termination, and any shares of common stock of the Company that would have remained unvested as of such date after giving effect to the foregoing provision shall be automatically forfeited as of the date of the Executive’s termination;

(e) if such termination is due to the failure of the Company to make the Executive the Chief Executive Officer of the Company by December 31, 2011, in lieu of any payment made pursuant to Section 5.2(a) or (b), the Company shall pay to the Executive, as liquidated damages and not as a penalty, an amount equal to the product of $38,750 multiplied by the number of calendar months from and including the month in which this Agreement is terminated due to such failure through and including the month in which the Employment Period, but for such termination, would have ended (the “ Liquidated Damages Amount ”) and such Liquidated Damages Amount shall be paid by the Company to Executive in equal monthly installments in accordance with the Company’s customary payroll procedures; provided , however , should the Company fail to make any such monthly payment within ten (10) days following the last calendar day of the month in which any such payment is due the entire balance of the Liquidated Damages Amount shall become immediately due and payable; and

(f) the Company shall pay to the Executive (i) any unpaid Annual Bonus in respect of any calendar year prior to the year in which this Agreement is terminated, (ii) any then unreimbursed business expenses of the Executive, and (iii) any accrued and unused vacation pay or other benefits which may be owing in accordance with the Company’s policies or applicable laws;

provided , that , if Executive does not execute a fully effective non-revocable release, the form of which is attached hereto as Exhibit A (the “ Release ”) within sixty (60) days of the termination of employment, then, beginning on the sixtieth (60th) day following the termination of employment, the Company shall cease to provide to Executive any such coverages and/or benefits under any of the applicable plans, except to the extent required by law.

5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through the day on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any other compensation or benefits after the last date of employment with the Company upon the termination of Executive’s employment hereunder by the Company for Cause pursuant to Section 4.3 , by Executive without Good Reason pursuant to Section 4.5 or as a result of non-renewal by the Company or Executive pursuant to Section 1 .

5.4 Cause Defined . For purposes of this Agreement, the following shall constitute “ Cause ” for termination:

(a) indictment of the Executive for (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any other procedure pursuant to which an initial determination of probable or reasonable cause with respect to such offense is made);

(b) gross negligence or willful misconduct of the Executive in the performance of his duties with respect to the Company or any affiliate of the Company; or

(c) (i) material breach by the Executive of any of the Executive’s obligations to the Company or (ii) failure to comply with (A) the reasonable directives of the Board or (B) the written policies of the Company and its subsidiaries.

provided , that , in the case of clause (c), in the event that the Company provides written notice of termination for Cause in reliance upon this Section 5.4 , the Executive shall have the opportunity to cure such circumstances within thirty (30) days of receipt of such notice specifying in reasonable detail the facts forming the basis for such termination.

5.5 Good Reason Defined . For purposes of this Agreement, the term “ Good Reason ” shall mean, without Executive’s consent:

(a) the Company materially breached its obligations under this Agreement;

(b) any material diminution of significant duties of the Executive;

(c) a reduction in Executive’s Base Salary of 5% or more either individually or pursuant to a reduction applicable to all senior executives or employees generally, unless otherwise mutually agreed to by Executive and the Company;

(d) the Company fails to appoint the Executive as Chief Executive Officer of the Company effective by no later than December 31, 2011; and

(e) the Company’s corporate headquarters is moved a distance of at least fifty (50) miles from its current corporate headquarters in Vancouver, Washington;

5.6 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwise required by law shall be contingent upon (i) execution by Executive (or Executive’s beneficiary or estate) of the Release and (ii) compliance by Executive with his obligations under this Agreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders or other agreement to which the Company and Executive are a party.

5.7 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described in this Section 5 , upon termination, Executive shall not be

entitled to any other severance under any Company benefit plan or severance policy generally available to the Company’s employees or otherwise. Notwithstanding any other provision of this Agreement to the contrary, the obligations of the Company under this Section 5 that expressly or by implication survive the termination of (ii) the Employment Period and (i) this Agreement shall survive such terminations.

5.9 Survival . This Section 5 shall survive any termination or expiration of this Agreement.

7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .

7.1 The Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is two years following the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), the Executive will not, without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country in which the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity), any business, organization or person other than the Company (or any subsidiary or affiliate of the Company), and including any such business, organization or person involving, or which is, a spouse, parent or sibling of the Executive, whose business, activities, products or services are competitive with any of the principal business, activities, products or services conducted, offered or then contemplated to be conducted or offered by the Company or its subsidiaries or affiliates; provided , however , nothing herein shall prohibit the Executive from being employed by any business, organization or person that operates (i) in the quick service or fast casual (e.g., Panera) restaurant or franchising industries and derives less than 10% of its total revenue from the sale of pizza or from royalties associated therewith or (ii) independent or chain/franchise full-service restaurants providing table service (e.g. California Pizza Kitchen) regardless of what percentage of such restaurant(s)’ total revenue come from the sale of pizza or from royalties associated therewith. Without implied limitation, the foregoing covenant shall be deemed to prohibit (i) hiring or engaging or attempting to hire or engage for or on behalf of the Executive or any such competitor any officer or employee of the Company or any of its direct and/or indirect subsidiaries and affiliates (other than a store employee of the Company or any of its direct and/or indirect subsidiaries and affiliates), or any former employee of the Company and any of its direct and/or indirect

subsidiaries and affiliates (other than a former store employee of the Company or any of its direct and/or indirect subsidiaries and affiliates) who was employed during the six (6) month period immediately preceding the date of such attempt to hire or engage, (ii) encouraging for or on behalf of the Executive or any such competitor any such officer or employee (other than a store employee of the Company or any of its direct and/or indirect subsidiaries and affiliates) to terminate his or her relationship or employment with the Company or any of its direct or indirect subsidiaries and affiliates, and (iii) soliciting for or on behalf of Executive or any such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, or any former client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the six (6) month period immediately preceding the date of such solicitation for the purpose of causing such client to cease doing business with or reduce the amount of business such clients does with the Company or any of its direct or indirect subsidiaries or affiliates. The foregoing provisions of this Section 7.1 shall not be deemed breached or violated by any general advertisement or other solicitation that is not specifically targeted for members of any of the groups enumerated in this Section 7.1 .

Notwithstanding anything herein to the contrary, the Executive may make passive investments in any enterprise the shares of which are publicly traded if such investment constitutes less than five percent (5%) of the equity of such enterprise. As of the date of this Agreement the Executive has no business interests whatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passive investments in the shares of public companies of less than five percent (5%).

agrees that any and all products, inventions, discoveries or improvements developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment, or involving the use of the time, materials or other resources of the Company or any of its affiliates, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing. The foregoing provisions of this Section 7.2 shall not preclude the Executive from using, or be deemed breached if Executive uses, information which is generally known and used by persons with training and experience comparable to his own or which is common knowledge in the industry or otherwise legally in the public domain.

7.4 The term “Confidential Information” shall mean information belonging to the Company which is of value to the Company or with respect to which Company has right in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example and without limitation, trade secrets, ideas, concepts, designs, configurations, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts processes, techniques, formulas, software, improvements, inventions, data, know-how, discoveries, copyrightable materials, marketing plans and strategies, sales and financial reports and forecasts, customer lists, studies, reports, records, books, contracts, instruments, surveys, computer disks, diskettes, tapes, computer programs and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Company. Confidential Information includes information developed by Executive in the course of Executive’s employment by the Company, as well as other information to which Executive may have access in connection with Executive’s employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of Executive’s duties under Section 7.2 .

8. Remedies . It is specifically understood and agreed that any breach of the provisions of Section 7 of this Agreement is likely to result in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that in addition to any other remedy it may have, the Company shall be entitled (a) to seek to enforce the specific performance of this Agreement by the Executive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liability should such relief be denied, modified or violated and (b) to cease making any payments or providing any

benefit otherwise required by this Agreement, including, without limitation, any severance payment required under Section 5.2 , in each case in addition to any other remedy to which the Company may be entitled at law or in equity.

9. Severable Provisions . The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to, and shall, reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law.

10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (a) certified mail, return receipt requested, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:

If to the Company:

PMI Holdings, Inc.

c/o Papa Murphy’s International, Inc.

8000 N.E. Parkway Drive, Suite 350

Vancouver, WA 98662

With copies to (which shall not constitute notice):

Papa Murphy’s Holdings, Inc.

c/o Lee Equity Partners, LLC

650 Madison Avenue, 21st Floor

New York, NY 10022

Attn: Ben Hochberg

Yoo Jin Kim

Facsimile: (646) 781-3700

with a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attn: Douglas P. Warner, Esq.

Facsimile: (212) 310-8007

If to the Executive:

Ken C. Calwell

7496 Harriott Road

Dublin, Ohio 43017

with a copy (which shall not constitute notice) to:

Golenbock Eiseman Assor Bell & Peskoe LLP

437 Madison Avenue

New York, NY 10022

Attn: Andrew C. Peskoe, Esq.

Facsimile: (212) 754-0330

or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 10 .

11. Miscellaneous .

11.1 Executive Representation. Executive hereby represents to the Company that he has provided the Company with true and correct copies of any non-competition, non-solicitation, or confidentiality agreement binding on Executive with any other person, including, but not limited to, Wendy’s/Arby’s Group, Inc. or its subsidiaries. Executive hereby represents to the Company that he is not in breach of any such non-competition, non-solicitation, or confidentiality agreement and the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any such non-competition, non-solicitation, or confidentiality agreement.

11.7 Section 409A .

(b) The parties hereto acknowledge and agree that the interpretation of Section 409A and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations become available. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that would be deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A are intended to comply with Section 409A. If, however, any such benefit or payment is deemed to not comply with Section 409A, the Company and Executive agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so that either (i) Section 409A will not apply or (ii) compliance with Section 409A will be achieved; provided , that , neither the Company nor its employees or representatives shall have liability to Executive with respect hereto.

(c) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs and expenses under this Agreement shall be paid in no event later than

the end of the taxable year following the taxable year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, provided , however , that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Internal Revenue Code of 1986, as amended, solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

11.8 Governing Law . This Agreement shall be construed under and enforced in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions thereof.

11.10 Counterparts . This Agreement may be executed by the parties hereto in counterparts, with the same effect as if they had signed the same document. Any such

counterpart may be executed and delivered by telecopier, facsimile transmission or other electronically recorded copy (including a .pdf file), all with the same force and effect as if the same were a manually executed and delivered original counterpart. Each counterpart shall be deemed to be an original, and it shall not be necessary in making proof of the contents of this Agreement to produce or account for more than one counterpart. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete agreement.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.


COMPANY:

PMI HOLDINGS, INC.

By:		/s/ John D. Barr
Name:		John D. Barr
Title:		Chief Executive Officer

EXECUTIVE:

/s/ Ken C. Calwell

Ken C. Calwell

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT OF KEN CALWELL]

EXHIBIT A

FORM OF RELEASE

This RELEASE (“Release”) dated as of , 2011 by and among Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company”) and Ken C. Calwell (the “Executive”).

WHEREAS, the Company and the Executive previously entered into an employment agreement dated , 2011 (the “Employment Agreement”); and

WHEREAS, the Executive’s employment with the Company has terminated effective , 20 (“Termination Date”);

NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Employment Agreement, the Company and the Executive agree as follows:

1. Capitalized terms not defined herein shall have the meaning as defined under the Employment Agreement.

2. In consideration of the Executive’s release under Paragraph 3 hereof, the Company shall pay to the Executive or provide benefits to the Executive as set forth in Section 5 of the Employment Agreement.

3. The Executive, on his own behalf and on behalf of his heirs, estate and beneficiaries, does hereby release the Company and any of its subsidiaries or affiliates, and each past or present officer, director, agent, employee, shareholder, and insurer of any such entities, from any and all claims made, to be made, or which might have been made of whatever nature, whether known or unknown, from the beginning of time, including those that arose as a consequence of his employment with the Company, or arising out of the severance of such employment relationship, or arising out of any act committed or omitted during or after the existence of such employment relationship, all up through and including the date on which this Release is executed, including, but not limited to, those which were, could have been or could be the subject of an administrative or judicial proceeding filed by the Executive or on his behalf under federal, state or local law, whether by statute, regulation, in contract or tort, and including, but not limited to, wrongful discharge, breach of contract, tort, fraud, defamation, the Civil Rights Acts, Age Discrimination in Employment Act, Americans with Disabilities Act, Employee Retirement Income Security Act, Family Medical Leave Act, Washington Law Against Discrimination, or any other federal, state or local law relating to employment, discrimination in employment, termination of employment, wages, benefits or otherwise. If any arbitrator or court rules that such waiver of rights to file, or have filed on his behalf, any administrative or judicial charges or complaints is ineffective, the Executive agrees not to seek or accept any money damages or any other relief upon the filing of any such administrative or judicial charges or complaints. The Executive relinquishes any right to future employment with the Company and the Company shall have the right to refuse to re-employ the Executive, in each case without liability of the Executive or the Company. The Executive acknowledges and agrees that even though claims and facts in addition to those now known or believed by him to exist may subsequently be discovered, it is his intention to fully settle and release all claims he may have against the Company and the persons and entities described above, whether known, unknown or suspected.

4. The Company and the Executive acknowledge and agree that the release contained in Paragraph 3 does not, and shall not be construed to, release or limit the scope of any existing obligation of the Company and/or any of its subsidiaries or affiliates (i) with respect to the rights of the Executive to indemnification and contribution, whether in accordance the Company’s Certification of Incorporation, the Employment Agreement or otherwise, in respect of claims asserted against the Executive or the Company for his acts as an employee, officer or director of Company, (ii) to pay any amounts or benefits pursuant to Section 5 of the Employment Agreement, (iii) with respect to the Executive’s rights as a shareholder or equity-award holder of the Company, whether arising under or out of the Performance Vesting Restricted Stock Agreement dated May , 2011 between the Executive and the Company, the Time Vesting Restricted Stock Agreement dated May , 2011 between the Executive and the Company or otherwise, or (iv) to the Executive and his eligible, participating dependents or beneficiaries under any existing group health, medical, welfare (excluding severance), equity, or retirement plan of the Company in which the Executive and/or such dependents are participants or COBRA.

5. The Executive acknowledges that he has been provided at least 21 days to review the Release and has been advised to review it with an attorney of his choice, and has had the opportunity to do so. In the event the Executive elects to sign this Release prior to this 21 day period, he agrees that it is a knowing and voluntary waiver of his right to wait the full 21 days. The Executive further understands that he has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by the Secretary of the Company within the 7 day period. The Executive further acknowledges that he has carefully read this Release, knows and understands its contents and its binding legal effect. The Executive acknowledges that by signing this Release, he does so of his own free will and act and that it is his intention that he be legally bound by its terms.

It is the intention of the parties in executing this Release that this Release shall be effective as a full and final accord and satisfaction and mutual release of and from all liabilities, disputes, claims and matters covered under this Release, known or unknown, suspected or unsuspected.

This Release shall become effective on the seventh (7th) day following the day that this Release becomes irrevocable under Paragraph 5. All payments due to the Executive shall be payable in accordance with Section 5 of the Employment Agreement.

Exhibit 10.13

EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT

This EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “ Agreement ”), dated as of the 4th day of May, 2010, by and between PMI Holdings, Inc., a Delaware corporation (the “ Company ”), and Kevin King, a resident of Camas, Washington (the “ Executive ”).

WHEREAS, the Company has entered into that certain Agreement and Plan of Merger, dated as of March 30, 2010, by and among Papa Murphy’s Holdings, Inc., a Delaware corporation, the Company and Papa Murphy’s Merger Co. (the “ Merger Agreement ”);

WHEREAS, this Agreement shall only become effective as of the closing of the transactions contemplated by the Merger Agreement, and if the Merger Agreement is terminated, this Agreement shall be deemed void ab initio;

WHEREAS, after the consummation of the transactions contemplated by the Merger Agreement, the purpose and business of the Company will be to operate a ‘take and bake’ pizza franchising business (the “ Business ”);

WHEREAS, the Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company;

1. Employment . The Company hereby agrees to employ Executive, and Executive hereby agrees to accept employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the Closing Date (as defined in the Merger Agreement) (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of such employment pursuant to the terms hereof, until the first anniversary of the Effective Date (the “ Employment Period ”). Notwithstanding anything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date and shall automatically terminate upon any termination of the Merger Agreement. On the first anniversary of the Effective Date and on each anniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company or the Executive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not less than ninety (90) days prior to the end of the then current Employment Period.

2. Duties . During the Employment Period, Executive shall serve on a full-time basis and perform services in a managerial capacity in a manner consistent with Executive’s position as Senior Vice President of Operations of the Company and Executive’s duties and responsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Board of Directors (the “ Board ”). Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods of disability) and use his best efforts in his employment with the Company; provided , however , that this Agreement shall not be interpreted as prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to another business or enterprise (whether engaged in for profit or not; provided, however, with respect to for profit businesses, the Executive shall be limited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder.

3. Compensation .

3.1 Base Salary .

(a) In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the “ Base Salary ”) at the rate of $205,000 per calendar year during his employment.

(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individual performance and/or the performance of the Company.

3.2 Bonus . During the Employment Period, the Executive shall be eligible to receive an annual bonus (the “ Annual Bonus ”), in an amount up to 40% of the Base Salary, payable in accordance with the Company’s incentive compensation policy; provided , that , such Annual Bonus shall in no event be paid later than March 15 of the calendar year following the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets as agreed upon by the Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during the Employment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.

3.3 Incentive Shares . On the Effective Date, Executive shall purchase 20,000 shares of the Company’s common stock, par value $0.01, that may be issued pursuant to the Company’s Management Incentive Plan (the “ Management Incentive Shares ”). The Management Incentive Shares shall be split 13,333 shares time vesting and 6,667 shares performance vesting.

4. Termination . Executive’s employment hereunder may be terminated as follows:

4.1 Automatically in the event of the death of Executive;

4.3 At the option of the Company for Cause (as defined in Section 5.4 );

4.4 At the option of the Company at any time without Cause;

4.5 At the option of Executive, at any time, for any reason, on one-hundred eighty (180) days prior written notice to the Company;

4.6 Immediately in the event of a breach by the Executive of Section 7 of this Agreement; or

4.7 At the option of Executive for Good Reason (as defined in Section 5.5 ), on ninety (90) days prior written notice to the Company.

5. Payments .

5.2 Termination Without Cause or by Executive for Good Reason . If Executive’s employment is terminated by the Company at any time during the Employment Period without Cause or by the Executive at any time during the Employment Period for Good Reason, Executive shall be entitled to receive (i) any accrued but unpaid Base Salary through the date of termination, (ii) Base Salary through the one year anniversary of such date of termination, payable at the time such payments would have otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of such severance pay shall be paid to the Executive prior to the first regular payroll following the sixtieth (60th) day of the date of the Executive’s termination of employment with the Company (the “ First Payroll Date” ); (iii) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year for which Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the year in which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time as such payment would have been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof, and (iv) continuation of group health plan benefits to the extent authorized by and consistent with 29 U.S.C: § 1161 et seq. (commonly known as (“ COBRA ”)) starting on Executive’s termination of employment, with the cost of the regular premium for such benefits shared in the same relative proportion by the Company and the Executive as in effect immediately prior to the date of termination, for a period of one year after the date of termination; provided , that , if Executive does not execute a fully effective non-revocable release within sixty (60) days of the termination of employment, then, beginning on the sixtieth (60th) day following the termination of employment, the Company shall cease to provide to Executive any such coverages and/or benefits under any of the applicable plans, except to the extent required by law. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies. In the case of clause (ii) in this Section 5.2, the portion of the severance pay that would have been paid to the Executive during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date shall be paid to the Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portion of the severance pay shall be paid without delay over the time period originally scheduled in this Section 5.2.

5.4 Cause Defined . For purposes of this Agreement, the following shall constitute “ Cause ” for termination:

(a) dishonest statements or acts of the Executive with respect to the Company or any affiliate of the Company;

(c) gross negligence, willful misconduct or insubordination of the Executive with respect to the Company or any affiliate of the Company; or

(d) material breach by the Executive of any of the Executive’s obligations to the Company;

5.5 Good Reason Defined . For purposes of this Agreement, the term “ Good Reason ” shall mean, without Executive’s consent:

(a) the Company materially breached its obligations under this Agreement;

(b) any material diminution of significant duties of the Executive; or

(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to all senior executives or employees generally;

5.6 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwise required by law shall be contingent upon (i) execution by Executive (or Executive’s beneficiary or estate) of a fully effective and non-revocable general release of all claims to the maximum extent permitted by law against the Company, its affiliates and its current and former stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its sole discretion within sixty (60) days of the Executive’s termination of employment and (ii) compliance by Executive with his obligations under this Agreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders or other agreement to which the Company and Executive are a party.

5.7 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described in Sections 5.2 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan or severance policy generally available to the Company’s employees or otherwise.

5.9 Survival . This Section 5 shall survive any termination or expiration of this Agreement.

7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .

7.1 The Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one year following the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), the Executive will not, without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country in which the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity), any business, organization or person other than the Company (or any subsidiary or affiliate of the Company), and including any such business, organization or person involving, or which is, a family member of the Executive, whose business, activities, products or services are competitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offered by the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit the Executive from being employed by any business, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue from the sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (i) hiring or engaging or attempting to hire or engage for or on behalf of the Executive or any such competitor any officer or employee of the Company or any of its direct and/or indirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries and affiliates who was employed during the six (6) month period immediately preceding the date of such attempt to hire or engage, (ii) encouraging for or on behalf of the Executive or any such competitor any such officer or employee to terminate his or her relationship or employment with the Company or any of its direct or indirect subsidiaries and affiliates, (iii) soliciting for or on behalf of Executive or any such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, or any former client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the six (6) month period immediately preceding the date of such solicitation and (iv) diverting to any person (as hereinafter defined) any client (including all franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.

If to the Company:

PMI Holdings, Inc.

c/o Papa Murphy’s International, Inc.

8000 N.E. Parkway Drive, Suite 350

Vancouver, WA 98662

With copies to (which shall not constitute notice):

Papa Murphy’s Holdings, Inc.

c/o Lee Equity Partners, LLC

650 Madison Avenue, 21 st Floor

New York, NY 10022

Attn: Ben Hochberg

Yoo Jin Kim

Facsimile: (646) 781-3700

with a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attn: Douglas P. Warner, Esq.

Facsimile: (212) 310-8007

If to the Executive:

Kevin King

1544 NE 36 ^th Avenue

Camas, WA 98607

or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 10 .

11. Miscellaneous .

11.6 Set Off. The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates; provided, however, this set-off right is limited to actual amounts owed by Executive to the Company (which, for the avoidance of doubt, shall exclude any consequential or indirect damages).

11.7 Section 409A .

defined in Section 409A(a)(2)(B)(i), then no portion of such “nonqualified deferred compensation” shall be paid before the day that is six (6) months plus one (1) day after the date of termination (the “ New Payment Date ”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiums therefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period and the Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month period promptly after its conclusion.

(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

11.8 Governing Law . This Agreement shall be construed under and enforced in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions thereof.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.


COMPANY:

PMI HOLDINGS, INC.

By:		/s/ Janet Pirus
Name: Janet Pirus
Title: Chief Financial Officer

EXECUTIVE:

/s/ Kevin King
Kevin King

Exhibit 10.14

EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT

This EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “ Agreement ”), dated as of the 4th day of May, 2010, by and between PMI Holdings, Inc., a Delaware corporation (the “ Company ”), and Victoria T. Blackwell, a resident of Vancouver, Washington (the “ Executive ”).

WHEREAS, the Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company;

1. Employment . The Company hereby agrees to employ Executive, and Executive hereby agrees to accept employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the Closing Date (as defined in the Merger Agreement) (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of such employment pursuant to the terms hereof, until the first anniversary of the Effective Date (the “ Employment Period ”). Notwithstanding anything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date and shall automatically terminate upon any termination of the Merger Agreement. On the first anniversary of the Effective Date and on each anniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company or the Executive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not less than ninety (90) days prior to the end of the then current Employment Period.

2. Duties . During the Employment Period, Executive shall serve on a full-time basis and perform services in a managerial capacity in a manner consistent with Executive’s position as Senior Vice President and General Counsel of the Company and Executive’s duties and responsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Board of Directors (the “ Board ”). Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods of disability) and use his best efforts in his employment with the Company; provided , however , that this Agreement shall not be interpreted as prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to another business or enterprise (whether engaged in for profit or not; provided, however, with respect to for profit businesses, the Executive shall be limited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder.

3. Compensation .

3.1 Base Salary .

(a) In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the “ Base Salary ”) at the rate of $157,455.36 per calendar year during his employment.

(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individual performance and/or the performance of the Company.

3.2 Bonus . During the Employment Period, the Executive shall be eligible to receive an annual bonus (the “ Annual Bonus ”), in an amount up to 30% of the Base Salary, payable in accordance with the Company’s incentive compensation policy; provided , that , such Annual Bonus shall in no event be paid later than March 15 of the calendar year following the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets as agreed upon by the Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during the Employment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.

3.3 Incentive Shares . On the Effective Date, Executive shall purchase 10,000 shares of the Company’s common stock, par value $0.01, that may be issued pursuant to the Company’s Management Incentive Plan (the “ Management Incentive Shares ”). The Management Incentive Shares shall be split 6,667 shares time vesting and 3,333 shares performance vesting.