Freshworks Annual Report 2016

Plain-text annual report

PAPA MURPHY'S HOLDINGS, INC. FORM 10-K (Annual Report) Filed 03/16/17 for the Period Ending 01/02/17 Address Telephone CIK Symbol SIC Code 8000 NE PARKWAY DRIVE SUITE 350 VANCOUVER, WA 98662 360 260-7272 0001592379 FRSH 5812 - Eating Places Industry Restaurants & Bars Sector Consumer Cyclicals Fiscal Year 01/02 http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549––––––––––––––––––––––––––––––––––––––––––––––––––––––––FORM 10-K––––––––––––––––––––––––––––––––––––––––––––––––––––––––(Mark One)[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended January 2, 2017OR[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number 001-36432––––––––––––––––––––––––––––––––––––––––––––––––––––––––Papa Murphy’s Holdings, Inc.(Exact name of registrant as specified in its charter)––––––––––––––––––––––––––––––––––––––––––––––––––––––––Delaware 27-2349094(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)8000 NE Parkway Drive, Suite 350, Vancouver, WA 98662(Address of principal executive offices) (Zip Code)(360) 260-7272(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Common Stock, $0.01 par value NASDAQ Global Select Market(Title of Each Class) (Name of Each Exchange on Which Registered)Securities registered pursuant to Section 12(g) of the Act:NONE––––––––––––––––––––––––––––––––––––––––––––––––––––––––Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No[ ]Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]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 [X]Non-accelerated filer [ ] Smaller reporting company [ ]Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]. No [X].At June 27, 2016 , the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of voting and non-votingcommon stock of the Registrant held by non-affiliates was $77,365,142 based on the last sales price of the Registrant’s common stock as reported by the NASDAQ Global SelectMarket on that day.At March 1, 2017 , there were 16,967,303 shares of the Registrant’s common stock, $0.01 par value, outstanding.DOCUMENTS INCORPORATED BY REFERENCE:Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2017 annual meeting of shareholders, which will be filed no later than 120days after the close of the registrant’s fiscal year ended January 2, 2017 .Table of ContentsTABLE OF CONTENTS PART I Item 1.Business3Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings32Item 4.Mine Safety Disclosures33 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities34Item 6.Selected Financial Data36Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations38Item 7A.Quantitative and Qualitative Disclosures about Market Risk55Item 8.Financial Statements and Supplementary Data56Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure90Item 9A.Controls and Procedures90Item 9B.Other Information90 PART III Item 10.Directors, Executive Officers and Corporate Governance91Item 11.Executive Compensation91Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters91Item 13.Certain Relationships and Related Transactions, and Director Independence91Item 14.Principal Accountant Fees and Services91 PART IV Item 15.Exhibits and Financial Statement Schedules92 SIGNATURES1002Table of ContentsPART IITEM 1. BusinessGeneralPapa Murphy’s Holdings, Inc. is a franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States. We were founded in 1981 andhave grown our footprint to a total of 1,577 system-wide stores as of January 2, 2017 .We have defined three reportable segments for the Company: Domestic Company Stores, Domestic Franchise and International. Financial informationabout segment operations appears in Selected Financial Data , Management’s Discussion and Analysis of Financial Condition and Results of Operationsand Financial Statements and Supplementary Data in Note 20 — Segment Information of the accompanying Notes to Consolidated Financial Statements.We are a Delaware corporation that was organized and acquired a majority of the capital stock of PMI Holdings, Inc., our predecessor, in 2010. In May2014, we completed our initial public offering (the “ IPO ”) and now our common stock trades on the NASDAQ Global Select Market under the “FRSH”ticker symbol. Papa Murphy’s Holdings, Inc. and its subsidiaries are sometimes referred to as the “Company,” “Papa Murphy’s” or in the first person as“we,” “us” and “our” in this report.We make available, free of charge, the following filings on our corporate website located at www.papamurphys.com as soon as reasonably practicableafter such filings are electronically filed with, or furnished to, the Securities and Exchange Commission (“ SEC ”): our annual report on Form 10-K, ourquarterly reports on Form 10-Q, our current reports on Form 8-K, any amendments to such reports, and our annual proxy statement. Informationcontained on our corporate website located at www.papamurphys.com is not part of this annual report on Form 10-K.Our ConceptThe Papa Murphy’s experience is different from traditional pizza restaurants. Our customers:•CREATE their fresh, customized pizza with high-quality ingredients;•TAKE their fresh pizza home; and•BAKE their pizza fresh in their ovens, at their convenience, for a home-cooked meal served hot.We actively target mothers and families looking to solve the “dinnertime dilemma” of providing their family with a high-quality, home-cooked meal, withoutinvesting significant time or money. While our concept has broad appeal to all consumers, we believe this core target customer is more loyal, seeks ahigher-quality pizza and values the focus on freshness and quality that differentiates the Papa Murphy’s pizza-making process:•We make our dough fresh in each store daily, 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;•We use only high-quality meats with no added fillers; and•We use no trans-fats.Our stores feature a food-forward design, with a makeline that facilitates interactive ordering where store crew members create pizzas in front of thecustomer. Pizzas are made fresh to order and our customers can follow their pizza as it is made right in front of them.Our menu offers customers a variety of original, thin, pan and stuffed crust pizzas as well as the ability to create a customized pizza from a broadselection of crust, sauce and topping combinations. Our core menu offerings include the following:▪Signature pizzas: classic combinations plus some unique twists;▪Gourmet Delite pizzas: our artisan thin crust with 35% fewer calories and 25% less fat than our Signature pizzas;▪Stuffed pizzas: two-layer, four-pound pizzas with meats and vegetables stuffed in two layers of dough;3Table of Contents▪Fresh Pan pizzas: signature recipes with a thick, buttery crust;▪“C.Y.O.” or Create Your Own pizzas: customer selection of crust, sauce and any combination of our cheese, meat and vegetable toppings; and▪FAVES: three simple pizza classics offered at value price points.Loyal Customer BaseWe were founded on the following core values—Great Quality, Great Value, Great Customer Service—and we strive to deliver on these values everyday.▪Great Quality. We have continually focused on quality since our founding and we believe customers can taste the difference. Unlike some ofour competitors, we do not use pre-shredded, pre-packaged or frozen cheese and our dough is made from scratch daily, never frozen.▪Great Value. We offer a high-quality pizza at a value price point.▪Great Customer Service. We train our store crews to greet each customer, to promote the latest new products and to assist each customer inchoosing the combination of fresh made pizzas and side items to complete the customer's meal.We have developed a loyal and diverse customer base. We attribute our success across a national footprint to the broad appeal of our concept. Ourbusiness model resonates with families and single adults and attracts both female and male customers across all ages, demographics and incomelevels. Finally, we believe our model encourages a stronger emotional connection with our core target of families. The active role of ordering andwatching the pizza being built gives customers a feeling of ownership: “a pizza,” becomes “my pizza.”Efficient Operating Model Generates Attractive Store-Level EconomicsOur stores average just 1,400 square feet in size and do not require ovens, venting hoods, freezers or dining areas because our customers bake theirpizzas at home, unlike traditional pizza, limited service or fast casual restaurants. Our stores are designed to highlight our high-quality ingredients, toreinforce the key attributes of our brand and to maximize the customer’s interaction with our friendly team members. Our store model offers franchiseowners operating advantages that differentiate us from other restaurant concepts. Our domestic stores:•Focus on creating fresh pizzas for carry out, reducing operational complexity for franchise owners and their employees;•Maintain shorter operating hours (typically 11:00 a.m. to 9:00 p.m.) that are attractive to franchise owners and their employees;•Require fewer employees each shift compared to other restaurant concepts, resulting in lower labor costs;•Accept electronic benefit transfer (“ EBT ”) payment systems (food stamps); and•Receive strong franchisor support through training, operating standards, supply-chain management and development assistance.Our simple, low cost operations create the opportunity for higher margins and attractive returns.Our StrategyOur strategy is focused on three key components: (i) drive the business through increased awareness and innovation; (ii) development throughfranchising; and (iii) improve the convenience to our customers. We believe that successfully implementing this strategy will enable us to achieve ourgrowth and profitability targets and leverage our infrastructure.Drive the Business Through Increased Awareness and InnovationWe work to drive the business forward with increasing sales by focusing on the following tactical areas:•Increased Awareness. Starting in 2017, we have added national cable advertising on top of our current local broadcast media. This addition willhelp educate the marketplace about our concept and grow customer awareness and loyalty. Currently, 42% of our stores are in markets with noTV advertising, and of those with some TV advertising, 79% are not at optimal levels year-round. We believe the addition of national cableadvertising will4Table of Contentssignificantly help brand recognition in newer markets with lower store density and help to expedite store development and sales growth.•New Product Innovation. New product innovation is another tool we use to attract new customers and increase frequency with existingcustomers. New products have historically been effective in growing comparable store sales. After limited new product introductions in 2016, weare planning some exciting new innovations for 2017 and beyond. In addition to new core products, we work to market new add-on productoptions and meal deal promotions that bundle together multiple items for an increased value to the customer.Development Through FranchisingWe believe significant development opportunities remain in the United States and select international markets. We currently estimate our total storepotential in the United States alone is at least 4,500 stores, including approximately 2,300 new stores in our existing markets. Historically, we seestronger store performance in markets with greater store penetration and higher brand awareness. During the past five years, we have focused ourfinancial resources on accelerating the build-out of select markets. We intend to continue developing in established markets in the West and Midwest,but the majority of our expansion efforts will be focused on existing but less-penetrated markets in the South and East. Going forward, our strategicdevelopment plan will focus on: (i) new store openings; (ii) refranchising of Company-owned stores; and (iii) international development.•New Store Openings. New stores will be opened primarily from franchised unit development. Given our unit growth potential, attractive store-level economics and simplicity of store operations, we believe existing franchise owners will expand their current footprint and we will continue toattract new franchise owners. We may introduce development incentives from time to time to expedite store development in select markets.•Refranchising of Company-Owned Stores. To expedite store development in select under penetrated markets, we have built 53 Company-owned stores over the past two years. We are now entering the next phase of our strategic development plan which will involve refranchisingmore than 100 of our Company-owned stores to experienced, well-capitalized operators that can acquire the stores and continue building unitsto achieve full market penetration. We are targeting a Company-owned store base of about 50 stores by 2020.•International Development. We are still in the early stages of international expansion, which we believe represents a long-term growthopportunity. All international stores are developed under a master franchisor arrangement. We currently have two master franchise agreements,one for Canada and one for the six Gulf Cooperation Council states in the Middle East (development so far has been exclusively in the UnitedArab Emirates).Improve Convenience To Our CustomersTo improve the convenience to our customers we have made substantial foundational investments in our systems and infrastructure. We substantiallycompleted the roll-out of our POS system and online ordering platform in 2016 to all domestic stores which provides a convenient method of ordering toour customers. We also grew our digital marketing capabilities. Going forward we plan to leverage the investments we've made to improve theconvenience to our customers by focusing on the following:•E-commerce / Online Ordering. In 2016 we were able to grow our online ordering to about 8% of all transactions, with a goal of reaching 50%in the next few years. Our online ordering platform is programmed to consistently offer additional purchase options based on the customer'scurrent and past ordering patterns. Early evidence demonstrates that orders placed through our online ordering channel deliver an increasedaverage check, averaging more than 20% when compared to other ordering channels in 2016. As the percentage of orders placed through oure-commerce platform increases, this higher average check may moderate.•Increased Digital Marketing. In 2016 we continued to focus on building our digital marketing and precision marketing capabilities. We began tocommunicate more offers exclusively through digital marketing. We anticipate that this trend will continue and grow in 2017 now that almost allstores have a POS system and online ordering capabilities.•Testing of Delivery. Online ordering addressed only half of the convenience cycle. In 2017 we plan to begin testing of delivery through the useof various third-party delivery options. Our research indicates a strong demand for delivery from our customers, with more than half indicatingthey would order more often if delivery was available. We have a unique opportunity with delivery in that because our pizzas are not baked,customers receive the same high-quality fresh food when delivered as when the customer picks up their order in-store.5Table of ContentsLeverage Our InfrastructureWith 1,537 stores across the United States and 517 domestic franchise owners as of January 2, 2017 , we have an established infrastructure to supportfuture growth. Our teams located across the country provide support to our franchise owners in operations, store technology, marketing and new storedevelopment. As we execute against our strategic plan and continue to grow our store base, we have made investments in our infrastructure. We expectour selling, general and administrative expenses to increase at a lower rate than our revenues by maintaining tight cost management controls.Our Industry and CompetitionWith system-wide sales of $899 million in fiscal year 2016 , we are the fifth largest pizza chain in the United States as measured by system-wide salesand total number of stores. According to NPD Crest, the quick service restaurant (“ QSR ”) pizza market, a subset of the overall pizza category, wasabout $36 billion in 2016. The top five pizza chains accounted for approximately 49.4% of QSR pizza restaurant sales in 2016 compared to 47.8% in2015 and 43.5% in 2012. We believe the pizza restaurant market continues to be an attractive category due to its size and growth, as well as itsfragmented competitive landscape.We generally compete on the basis of product quality, variety, price, location, image and service with regional and local pizza restaurants as well asnational chains such as Domino’s Pizza®, Pizza Hut®, Papa John’s® and Little Caesars Pizza®. On a broader scale, we compete with other limitedservice restaurants (“ LSR s”), the overall food service industry, grocery and convenience stores and online meal delivery services. The food serviceindustry, particularly LSR s, are competitive with respect to product quality, price, location, service and convenience. Many of our competitors have beenin existence for longer periods of time and have developed stronger brand awareness in markets where we compete. In these markets, we compete forcustomers, employees, management personnel, franchisees and real estate sites suitable for our stores.Suppliers and DistributionWe enter into national supply or pricing agreements with certain key third-party suppliers. We negotiate pricing for our franchised and Company-ownedstores with national pricing agreements covering a term of three months to one year. We do not realize any profits from the sale of these supplies tofranchise owners. We rely on multiple third-party distributors as our primary distributors of cheese, refrigerated items, meat, canned and dry goods, paper and disposablesand janitorial supplies. Pursuant to our distribution service agreements, we have the right to designate the brands and products supplied. Supplies aredelivered to each store one to two times each week.For our beverage products, we rely on Pepsi-Cola Advertising and Marketing, Inc. (“ Pepsi ”) as our primary provider of packaged beverage products.We have maintained a national distribution relationship with Pepsi since 2004.Intellectual Property and TrademarksWe regard the Papa Murphy’s brand name and associated trademarks as valuable assets. We have a portfolio of 31 trademarks registered and severalpending trademark registrations with the United States Patent and Trademark Office. We have also secured trademark registrations for our brand namein Canada, China, Mexico, New Zealand, Norway, Australia, Saudi Arabia, Turkey and within the Community Trade Mark (CTM) system, which offers aunified system of protection throughout the European Union. We have secured six trademark registrations in several Middle Eastern countries. All of themarks we own cover store-related services and/or food products.Management Information/Technology SystemsOur point-of-sale system (“ POS system ”) has been customized specifically for Papa Murphy's stores, and we use this integrated restaurant-leveltechnology for inventory, labor management and cash handling in our domestic stores. Our POS6Table of Contentssystem allows us to track sales data and evaluate store efficiency. Through our POS system we are able to collect, utilize and disseminate data andinformation collected by each store to generate reports and evaluate sales performance on a daily basis. In addition, we collect monthly store-level profitand loss statements for internal analysis.During 2015, 2016 and continuing through 2017, we made substantial investments to further develop our e-commerce capabilities and platform,including a new Papa Murphy's website ordering system. This new ordering channel, fully integrated with our in-store POS system , enables us to gathermore information about customer ordering habits, which will enable us to further develop attractive offers and increase sales with digital marketing.We substantially completed the roll out of our POS system to all domestic stores in 2016. The POS system provides the foundation for efficient store-level operations, the gathering of advanced analytics and the online ordering platform.Franchising OverviewOur store base was 89.3% franchised as of January 2, 2017 , with our franchise owners operating a total of 1,409 Papa Murphy’s stores in 38 states,Canada and the Middle East. Through our franchise support, development infrastructure and screening process, we have successfully built a base of534 franchise owners with an average store ownership of approximately 2.5 stores per franchise owner. A majority of our franchise owners owned onestore, approximately 75% owned one or two stores, and 21% of all franchised stores were owned by our 10 largest franchise owners. We believe thishighly diversified owner base demonstrates the viability of our store concept across numerous types of owners and operators, and provides an attractivebase of owners with capacity to grow with our brand. We believe the relationships we have with our franchise system provide a solid platform for growth.We are dedicated to providing the tools our franchise owners need to succeed before, during and after a store opening, including assistance with siteselection and development, training, operations and marketing. We set forth qualification criteria and provide training programs for franchise owners toensure that every Papa Murphy’s store meets the same quality and customer service standards to preserve the consistency and reliability of the PapaMurphy’s brand.Our asset-light franchised business model offers us strategic and financial benefits. It enables us to focus Company resources on menu innovation,marketing, franchise owner training and operations support to drive the overall success of our brand. Our franchised business model also allows us togrow our store base and brand awareness with limited corporate capital investment. Further, our predominantly franchised business model reduces ourexposure to changes in commodity and other operating costs. As a result, our business model is designed to provide high operating margins and cashflows with low capital expenditures and working capital.EmployeesAs of March 1, 2017, we had 2,022 employees, including 319 salaried employees and 1,703 hourly employees. None of our employees are unionized orcovered by a collective bargaining agreement and we consider our current employee relations to be good.SeasonalitySeasonal 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 andAugust. Therefore, our revenues per store are typically higher in the first and fourth quarters and lower in the second and third quarters. Additionally, ournew store openings have historically been most heavily concentrated in the fourth quarter and we anticipate that new store openings will continue to beweighted towards the third and fourth quarters. As a result of these factors, our quarterly and annual results of operations and comparable store salesmay fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for anyyear, and comparable store sales for any particular future period may decrease and materially and adversely affect our business, financial condition orresults of operations.7Table of ContentsGovernment RegulationWe, along with our franchise owners, are subject to various federal, state, local and foreign laws affecting the operation of our respective businesses.Each store is subject to licensing and regulation by a number of governmental authorities, which include zoning, health, safety, sanitation, building andfire agencies in the jurisdiction in which the store operates. In order to maintain our stores, we may be required to expend funds to meet certain federal,state, local and foreign regulations, including regulations that require remodeled stores to be accessible to persons with disabilities. Difficulties inobtaining, or the failure to obtain, required licenses or approvals could delay or prevent the opening of a new store. Our domestic store operations aresubject to various federal and state laws governing such matters as minimum wage requirements, benefits, working conditions, citizenship requirementsand overtime. We are also subject to federal and state environmental regulations.We are subject to Federal Trade Commission (“ FTC ”) rules and to various state and foreign laws that govern the offer and sale of franchises. The FTCrequires us to furnish to prospective franchise owners a franchise disclosure document containing prescribed information. Some states and foreigncountries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship. These laws regulatevarious aspects of the franchise relationship, including terminations and the refusal to renew franchises. The failure to comply with these laws andregulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension of future franchise sales, fines orother penalties or require us to make offers of rescission or restitution, any of which could materially and adversely affect our business, financialcondition and results of operations.8Table of ContentsItem 1A. Risk FactorsAn investment in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the followingrisk factors, as well as the other information in this Annual Report on Form 10-K, in evaluating our business. If any of these risks, as well as other risksand uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, results of operations or financialcondition could be materially and adversely affected. In such an event, the trading price of our common stock could decline and you could lose part or allof your investment.Risks Relating to Our Business and IndustryThe limited service restaurant pizza category and restaurant sector overall are highly competitive and such competition could adversely affectour 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, foodquality, ambience, convenience, concept, service and location. A substantial number of restaurant operations compete with us for customer traffic. Wecompete against other major national limited service restaurant pizza chains and regional and local businesses, including other chains offering pizzaproducts. We also compete on a broader scale with other international, national, regional and local limited-service restaurants. In addition, we faceincreasing competition from pizza product and other offerings available at grocery stores and convenience stores and from online meal delivery services,which offer pre-made ready-to-bake frozen and carry-out pizzas and other foods that customers may prepare at home. Many of our competitors havesignificantly greater financial, marketing, personnel and other resources as well as greater brand recognition than we do and may have lower operatingcosts, more restaurants, better locations and more effective marketing than we do. Many of our competitors are well established in markets in which weand our franchise owners operate stores or intend to locate new stores. In addition, many of our competitors emphasize lower-cost value options or mealpackages or have loyalty programs, which provide discounts on certain menu offerings, and they may continue to do so in the future.We also compete for employees, suitable real estate sites and qualified franchise owners. If we are unable to compete successfully and maintain orenhance our competitive position, or if customers have a poor experience at a Papa Murphy’s store, whether Company-owned or franchise-owned, wecould experience decreased customer traffic, downward pressure on prices, lower demand for our products, reduced margins, diminished ability to takeadvantage of new business opportunities and the loss of market share, all of which could have a material and adverse effect on our business, financialcondition and results of operations.The food service market is affected by consumer preferences and perceptions. Changes in these preferences and perceptions may lessen thedemand 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 demographictrends. For instance, if prevailing health or dietary preferences cause consumers to avoid pizza and other products we offer in favor of foods that areperceived as more healthy, our business, financial condition and results of operations would be materially and adversely affected. In addition, ifconsumers 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 andresults of operations would be materially and adversely affected. Moreover, because we are primarily dependent on a single product, if consumerdemand for pizza in general, and take and bake pizza in particular, should decrease, our business would be adversely affected more than if we had amore 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 franchised and Company-owned stores. We and ourfranchise owners may be adversely affected by:▪declining economic conditions, including downturns in the housing market, increases in unemployment rates, reductions in consumer disposableincome, adverse credit market conditions, increases in fuel prices, drops in consumer confidence and other events or factors that adverselyaffect consumer spending in the markets that we serve;▪increased competition in the restaurant industry, particularly in the pizza, casual and fast-casual dining segments, and from grocery stores,convenience stores and online meal delivery services;9Table of Contents▪changes in consumer tastes and preferences;▪demographic trends;▪customers’ budgeting constraints;▪customers’ willingness to accept menu price increases;▪adverse weather conditions;▪our reputation and consumer perception of our concepts’ offerings in terms of quality, price, value, ambiance and service; and▪customers’ experiences in our stores.In addition, the adverse effects of any of the preceding factors may reduce the attractiveness of new franchise stores to prospective franchise owners,which could make it more difficult to recruit the qualified franchise owners needed to implement our growth strategy and refranchising initiative. OurCompany-owned stores and our franchise owners are also susceptible to increases in certain key operating expenses that are either wholly or partiallybeyond our control, including:▪food costs, particularly for mozzarella cheese and other raw materials, many of which we do not or cannot effectively hedge;▪labor costs, including wages, which are affected by minimum wage requirements, workers’ compensation, health care and other benefitsexpenses;▪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 logistics costs; and▪litigation expenses.If we fail to open new domestic and international franchise stores on a timely basis, our ability to increase our revenues could be materiallyand adversely affected.Our growth strategy includes the opening of new domestic and international franchise stores. We and our franchise owners face many challengesassociated with opening new stores, including:▪identification and availability of suitable store locations with the appropriate size, visibility, traffic patterns, local residential neighborhoods, localretail 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;▪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;▪hiring qualified contractors to build, remodel and maintain our stores;▪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;▪adverse weather during the construction period of new stores; and▪other unanticipated increases in costs or delays.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 franchiseowners have experienced, and expect to continue to experience, delays in store openings from time to time and have abandoned plans to open stores invarious markets on occasion. Any delays or failures to open new stores by our franchise owners could materially and adversely affect our growthstrategy and our results of operations.10Table of ContentsOur 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 ourcurrent plans, the delay could materially and adversely affect our business, financial condition or results of operations.The planned refranchising of a portion of our Company-owned stores could adversely affect our results of operations.We have announced plans to refranchise more than 100 of our 168 Company-owned stores (total as of March 1, 2017) by selling the stores and enteringinto franchise agreements with the buyers. We are targeting to own about 50 Company-owned stores by 2020. Company-owned store sales accountedfor 65% of our total revenues in 2016. We expect the proposed refranchising to result in a decrease in our total revenues because once the stores arerefranchised we will derive revenue from the collection of a royalty equal to a percentage of net sales rather than from the total net sales of food andbeverages to customers. In addition, refranchising Company-owned stores, and particularly Company-owned stores that have historically enjoyed highprofit margins, may reduce our operating income.We face many challenges associated with refranchising Company-owned stores, including identifying, recruiting and contracting with a sufficient numberof qualified franchise owners, retaining employees during the transition to franchise owner management, and obtaining necessary consents fromlandlords and other third-parties. These challenges may delay, limit or prevent our planned refranchising, which could materially and adversely affect ourability to improve operating margins, reduce our exposure to changes in commodity and other operating costs, and generate cash to be used to repaydebt. In addition, if we fail to manage our refranchising initiative effectively, the initiative could be time-consuming and distracting for management.If we fail to identify, recruit and contract with a sufficient number of qualified franchise owners, our ability to open new franchise stores andrefranchise Company-owned stores and increase our revenues and cash flow could be materially and adversely affected.The opening of additional franchise stores and the refranchising of Company-owned stores depends, in part, upon the attractiveness of our franchisestores to prospective franchise owners and the availability of prospective franchise owners who meet our criteria. Because most of our franchise ownersopen and operate one or two stores, our growth strategy requires us to identify, recruit and contract with a significant number of new franchise ownerseach year. Decreases in system-wide average store sales or comparable store sales in select markets may reduce the attractiveness of new franchisestores to prospective franchise owners, making it more difficult for us to recruit qualified franchise owners. We may not be able to identify, recruit orcontract 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 thefinancial or management resources that they need to open the stores contemplated by their agreements with us, or they may elect to cease storedevelopment for other reasons. If we are unable to recruit suitable franchise owners or if franchise owners are unable or unwilling to open new stores oracquire existing Company-owned stores as planned, our growth may be slower than anticipated, which could materially and adversely affect our ability toincrease our revenues and materially and adversely affect our business, financial condition and results of operations.If we fail to manage growth effectively, our business, financial condition and results of operations may be materially and adversely affected.Our growth strategy and investment associated with the development of each new store may cause our results to fluctuate and be unpredictable ormaterially and adversely affect our results of operations. Our franchise owners and our ability to successfully develop new stores in new markets may beadversely affected by a lack of awareness or acceptance of our brand and the take and bake concept as well as by a lack of existing marketing effortsand operational execution in these new markets. Stores in new markets may also face challenges related to being new to a market and having lessmarketing funds than competitors, which may be due in part to lower store density than competitors. To the extent that we are unable to foster namerecognition and affinity for our brand and concept in new markets and implement effective advertising and promotional programs, our franchise owners’and our new stores may not perform as expected and our growth may be significantly delayed or impaired. Moreover, as has happened when other storeconcepts 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 ourconcept in the markets in which we operate. New stores may also have difficulty securing adequate financing, particularly in new markets, where theremay be a lack of adequate sales history and brand familiarity. Newly opened stores, including newly opened stores in new markets, may not besuccessful and our system-wide average store sales may not increase at historical rates, which could materially and adversely affect our business,financial condition or results of operations. In addition, to the extent we open new Company-owned stores, pre-opening expenses may vary from periodto period based on the timing of when we open new Company-owned stores, which could impact our results of operations from period to period.11Table of ContentsOur existing store management systems, financial and management controls, information systems and personnel staffing levels may be inadequate tosupport our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and usand our franchise owners 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 theneeds of our operations. Among other important factors, our culture depends on our ability to attract, retain and motivate employees who share ourenthusiasm and dedication to our concept. We may not respond quickly enough to the changing demands that our expansion will impose on ourmanagement, store teams, existing infrastructure and culture, which could materially and adversely affect our business, financial condition or results ofoperations.Our indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with our financialcovenants, our liquidity and results of operations could be adversely affected.As of January 2, 2017 , we had $109.7 million of outstanding indebtedness, including $105.9 million outstanding under our senior secured credit facilities,and $19.2 million of availability under a revolving credit facility. We may, from time to time, incur additional indebtedness.The agreement governing our 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 ofour 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 made 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 senior secured credit facilities place certain limitations on our ability to incur additional indebtedness. However, subject to the qualifications andexceptions in our senior secured credit facilities, we may be permitted to incur substantial additional indebtedness and may incur obligations that do notconstitute indebtedness under the terms of the new senior secured credit facilities. The 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 ourcapital structure and to guarantee certain indebtedness and pay. 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 senior secured credit facilities could result in the accelerationof our obligations under the senior secured credit facilities, which would have an adverse effect on our liquidity, capital resources and results ofoperations.Our senior secured credit facilities also require us to comply with certain financial covenants regarding our leverage ratio, our interest coverage ratio,and, commencing with our fiscal quarter ending January 1, 2018, our fixed charge coverage ratio. Changes with respect to these financial covenantsmay increase our interest rate and failure to comply with these covenants could result in a default and an acceleration of our obligations under the newsenior secured credit facilities, which would have an adverse effect on our liquidity, capital resources and results of operations.New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits that couldadversely 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 newinformation regarding the adverse health effects of consuming certain menu offerings. These12Table of Contentschanges have resulted in, and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings, andthey have resulted, and may continue to result in, laws and regulations affecting permissible ingredients and menu offerings. For example, a number ofstates, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose to consumers certain nutritionalinformation, or have enacted legislation restricting the use of certain types of ingredients in restaurants. These requirements may be different orinconsistent with requirements under the Patient Protection and Affordable Care Act of 2010 (“ PPACA ”), which establishes a uniform, federalrequirement for certain restaurants to post nutritional information on their menus. Specifically, the PPACA generally requires chain restaurants with 20 ormore locations operating under the same name and offering substantially the same menus to publish the total number of calories of standard menu itemson menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake. These inconsistenciescould 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 theavailability of this information upon request. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritionalcontent of our menu items could negatively influence the demand for our products and materially and adversely affect our business, financial conditionand 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 discontinuecertain menu items, and we may experience higher costs associated with the implementation of those changes. We cannot predict the impact of the newnutrition labeling requirements under the PPACA until final regulations are implemented. The risks and costs associated with nutritional disclosures onour menus could also impact our operations, particularly given differences among applicable legal requirements and practices within the restaurantindustry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants, and the need to rely on the accuracyand 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 avariety of additional risks associated with our franchise owners, including litigation that has been brought against us by certain franchiseowners.A substantial portion of our revenues comes from royalties generated by our franchise stores. We anticipate that franchise royalties will represent asubstantial part of our revenues in the future. Accordingly, we are reliant on the performance of our franchise owners in successfully opening andoperating their stores and paying royalties to us on a timely basis, and our reliance on the performance of our franchise owners increases as wefranchise Company-owned stores. Our franchise system subjects us to a number of risks, any one of which may impact our ability to collect royaltypayments from our franchise owners, may harm the goodwill associated with our brands, and may materially and adversely affect our business andresults of operations.•Franchise owner independence. Franchise owners are independent operators, and their employees are not our employees. Accordingly, theiractions are outside of our control. Although we have developed criteria to evaluate and screen prospective franchise owners, we cannot becertain that our franchise owners will have the business acumen or financial resources necessary to operate successful franchises in theirlocations 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, ormay not hire and adequately train qualified managers and other store personnel. The failure of our franchise owners to operate their franchisessuccessfully and actions taken by their employees could each have a material and adverse effect on our reputation, brand, ability to attractprospective franchise owners, business, financial condition or results of operations.•Franchise agreement termination or non-renewal. Each franchise agreement is subject to termination by us as the franchisor in the event ofa default, generally after expiration of applicable cure periods, although under certain circumstances a franchise agreement may be terminatedby us upon notice without an opportunity to cure. The default provisions under the franchise agreements are drafted broadly and include, amongother 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, ormay not, elect to renew the franchise agreement. If the franchise agreement is renewed, the franchise owner will receive a successive franchiseagreement for an additional term. Such option, however, is contingent on the franchise owner’s execution of the then-current form of franchiseagreement (which may include new obligations, as well as increased franchise fees, royalty payments, advertising fees and other fees andcosts), the satisfaction of certain conditions (including modernization of the restaurant and related operations)13Table of Contentsand the payment of a renewal fee. If a franchise owner is unable or unwilling to satisfy any of the foregoing conditions, we may elect not torenew 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. Certainextraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensiverates) with respect to many other risks. Moreover, any loss incurred could exceed policy limits and any policy payments made to franchiseowners 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’sability to satisfy obligations under the franchise agreement, including the ability to make royalty payments and perform indemnity obligations.Further, the franchise owner may fail to obtain or maintain the required insurance types and levels, and we may not be aware of that failure untila loss is incurred.•Product liability exposure. We require franchise owners to maintain general liability insurance coverage to protect against the risk of productliability and other risks and demand strict franchise owner compliance with health and safety regulations. However, franchise owners mayreceive or produce defective food or beverage products, which may materially and 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 preparationand the sourcing of food from vendors, could subject the franchise owner, and possibly us, to litigation. Any litigation, including the imposition offines 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 successfullyimplement our growth strategy if our franchise owners do not actively participate in such implementation. From time to time, franchise ownershave disagreed with or resisted elements of our strategy, including new product initiatives and investments in their stores such as remodelingand implementing the POS system . Franchise owners may also fail to participate in our marketing initiatives, which could materially andadversely affect their sales trends, average weekly sales (“ AWS ”) and results of operations. In addition, the failure of our franchise owners tofocus on the fundamentals of restaurant operations, such as quality, service and cleanliness, would have a negative impact on our success. Italso may be difficult for us to monitor our international franchise owners’ implementation of our growth strategy due to our lack of personnel inthe markets served by such franchise owners.•Franchise owner litigation and conflicts with franchise owners. Franchise owners are subject to a variety of litigation risks, includingcustomer claims, personal-injury claims, environmental claims, employee claims, intellectual property claims and claims related to violations ofthe Americans with Disabilities Act, religious freedom, the Fair Labor Standards Act (“ FLSA ”), the Employee Retirement Income Security Act of1974, as amended, and advertising laws. Each of these claims may increase costs and limit the funds available to make royalty payments andreduce entries into 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, franchise owners have expressed anumber of concerns and disagreements 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, disagreementwith marketing strategy and initiatives and product launches, concern over the implementation of the Company's text-based marketing program,disagreement with the Company's expansion strategy and the availability of development incentives, dissatisfaction with food safety measuresimplemented by the Company, including required purchases and new protocols, and dissatisfaction with costs associated with, and thefunctionality of, the Company's online ordering platform. Our senior management team engages with franchise owner leadership to addressthese concerns and resolve specific issues raised by the franchise owners. Such engagement may not result in a satisfactory resolution of theissues, which, in turn, could materially and adversely affect our ability to grow our franchise system and maintain relationships with our franchiseowners, damage our reputation and our brand, and materially and adversely affect our results of operations.We currently are subject to litigation with a group of our franchise owners as described in Part I, Item 3. Legal Proceedings . We also maybecome subject to additional litigation with franchise owners in the future. Engaging in such litigation may be costly, time-consuming anddistracting to management and also may materially and adversely affect our relationships with potential franchise owners and our ability toattract new franchise owners. In addition to these and other claims that may be brought against us by franchise owners, we also may engage infuture litigation with franchise owners to enforce the terms of our franchise agreements and compliance with our brand standards14Table of Contentsas determined necessary to protect our brand, the consistency of our products and the customer experience. Such litigation may be timeconsuming, distracting and costly. Any negative outcome of these or any other claims could materially and adversely affect our results ofoperations 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.Although we believe newer restaurants meet the Americans with Disabilities Act construction standards and, further, that most franchise ownershave historically been diligent in the remodeling of older restaurants, a finding of noncompliance with the Americans with Disabilities Act couldresult in the imposition of injunctive relief, fines, awards of damages to private litigants or additional capital expenditures to remedy suchnoncompliance. In addition, the Americans with Disabilities Act may also require modifications to guest-facing technologies, including ourwebsite, to provide service to, or make reasonable accommodations for, disabled persons. Any imposition of injunctive relief, fines, damageawards or capital expenditures could adversely affect the ability of a franchise owner to make royalty payments, or could generate negativepublicity, or otherwise adversely affect us.•Pre-Sale Development Program. In 2015, we began building stores in our Domestic Company Stores segment under our pre-saledevelopment program. Under this program, from time to time we develop a new store and incur the costs of development of the store, which weultimately expect to recoup through the sale of the store to a franchise owner. If for any reason we fail to sell a store we have developed underthis program and we otherwise are unable to recoup the costs of development of the store, our financial position, results of operations and cashflows could be adversely affected.•Development Billing Agreement. In connection with development of new stores by our franchise owners, we currently require them to enterinto a development billing agreement under which we pay on the franchise owner’s behalf certain third-party vendors for the development of thenew store. Under the agreement, the franchise owner is required to place funds in a specified account and authorize us to collect the fundselectronically based on an agreed upon schedule. As a result of these agreements, we may expose our credit to risk resulting from franchiseowner defaults, acquire excess inventory and experience unintended tax consequences.•Access to credit. Our franchise owners typically finance new operations and new store openings with loans or other forms of credit. If ourfranchise owners are unable to access credit or obtain sufficient credit, if interest rates on loans that our franchise owners use to financeoperations of current stores or to open new stores increase or if franchise owners are unable to service their debt, our franchise owners mayhave difficulty operating their stores or opening new stores, which could materially and adversely affect our results of operations as well as ourability 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 undersuch franchise owner’s franchise agreement. In a franchise owner bankruptcy, the bankruptcy trustee may reject its franchise agreementspursuant to Section 365 under the United States Bankruptcy Code, in which case there would be no further royalty payments from suchfranchise owner. There is no assurance as to the proceeds, if any, that may ultimately be recovered in a bankruptcy proceeding of suchfranchise 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 beaffected 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 ornear markets in which stores already exist could adversely affect the sales of these existing stores. We and our franchise owners may selectively opennew stores in and around areas of existing stores. Competition for sales between our stores may become significant in the future as we continue toexpand our operations and could affect sales growth, which could, in turn, materially and adversely affect our business, financial condition or results ofoperations.New stores may not be profitable and the changes in AWS and comparable store sales that we have experienced in the past may not beindicative 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 maynot increase at historical rates. AWS for new domestic stores can be influenced by a number of factors, including the extent of store penetration andbrand awareness in the markets in which new stores open. Other factors that may impact AWS , comparable store sales and performance of new storesare the level of media efficiency, pricing structure, the competitive activity in any market, the concentration of our stores in any market, our overallmarketing15Table of Contentsplans, the timing of new store openings and franchise owner engagement and ability. In addition, our store grand opening plan focuses less on drivingopening day sales than it does on delivering a more sustainable sales level and extending sales momentum well into the first full fiscal year ofoperations. Although this plan may allow for steadier and more sustainable growth, it may also result in lower AWS in earlier periods. Profits and salesperformance for new stores in newer, less-penetrated markets may further be adversely affected by a lack of awareness or acceptance of our brand andconcept 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 our franchise owners or we are unable to achieve our expected AWS for the new stores, our business,financial condition or results of operations could be materially and 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 arein early stages and historically have not been profitable and have achieved lower margins than our domestic stores. We expect this financialperformance 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 maybe materially and adversely affected. Our financial condition and results of operations may be adversely affected if global markets in which our franchisestores compete are affected by changes in political, economic or other factors. These factors, over which neither our franchise owners nor we havecontrol, 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;▪restrictions on immigration and international travel;▪political and economic instability and civil unrest; and▪other external factors.Termination of area development agreements (“ ADAs ”) or master franchise agreements with certain franchise owners could adverselyimpact 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 and we haveentered into master franchise agreements with third-parties to develop and operate stores in Canada and in the Middle East. These franchise owners aregranted certain rights with respect to specified territories, and at their discretion, these franchise owners may open more stores than specified in theiragreements. The termination of ADAs or other arrangements with a master franchise owner or a lack of expansion by these franchise owners couldresult in the delay of the development of franchised restaurants or discontinuation or an interruption in the operation of our brands in a particular marketor markets. We may not be able to find another operator to resume development activities in such market or markets. Any such delay, discontinuation orinterruption would result in a delay in, or loss of, royalty income to us by way of 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.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 ouroperating expenses, and we expect to lease the real property where any of the new Company-owned stores we may open in the future will operate. Ourleases generally have an initial term of five years and generally can be extended only in five-year increments (at increased rates). All of our leasesrequire a fixed annual rent, although some require the payment of additional rent if store sales exceed a negotiated amount. Generally, our leases arenet leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additionalsites that we lease are likely to be subject to similar long-term non-cancelable leases. We also sublease or assign some of our leases to our franchisees,and will continue to do so in the future, either before or after we have16Table of Contentsdeveloped a store at the leased location. When we assign or sublease our leases to franchisees, we are in most instances required to retain ultimateliability to the landlord. If an existing or future store is not profitable, resulting in its closure (or, in the case of a lease that we have subleased or assignedto a franchisee, the franchisee defaults on the subleased or assigned lease), we could lose some or all of our development investment as well as becommitted to perform our obligations under the applicable lease. This could include, among other things, paying the base rent for the balance of thelease term. We may also be subject to a claim by a franchise owner who defaults on a lease that we knew or should have known that the leased locationwould be unprofitable.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 topay increased occupancy costs or to close stores in desirable locations. These potential increased occupancy costs and closed stores could materiallyand adversely affect our business, financial condition or results of operations.The impact of negative economic factors, including the availability of credit, on our franchise owners’ and our landlords could negativelyaffect 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 economicfactors may, in turn, adversely affect our business and results of operations. If our or our franchise owners’ landlords are unable to obtain financing orremain in good standing under their existing financing arrangements, they may be unable to provide construction funding to us or satisfy other leasecovenants. In addition, if our franchise owners or our landlords are unable to obtain sufficient credit to continue to properly manage their retail sites, wemay experience a drop in the level of quality of such retail locations. The development of new stores may also be adversely affected by the negativefinancial situations of developers and potential landlords. Landlords may try to delay or cancel development projects (as well as renovations of existingprojects) if there is instability in the credit markets or declines in consumer spending, which could reduce the number of appropriate locations availablethat 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, couldreduce 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 brandand positive relationships with our franchise owners. We may, from time to time, be faced with negative publicity relating to food quality, food safety,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 weare held to be responsible. The risks associated with such negative publicity cannot be completely eliminated or mitigated and may materially andadversely affect our business, financial condition and results of operations and result in damage to our brand. For multi-location food service businessessuch 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 franchiseowners involved to affect some or all of our other stores. The risk of negative publicity is particularly great with respect to our franchise stores becausewe 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 servicebusinesses, if consumers associate those businesses with our own operations.The use of social media platforms and similar devices, including weblogs (blogs), social media websites and other forms of Internet-basedcommunications which allow individuals to access a broad audience of consumers and other interested persons has increased markedly. Consumersvalue readily available information concerning goods and services that they purchase and may act on such information without further investigation orauthentication. The availability of information on social media platforms is virtually immediate, as is its impact. Many social media platforms immediatelypublish the content their subscribers and participants' post, often without filters or checks on accuracy of the content posted. The opportunity fordissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our Company may beposted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm ourperformance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms alsocould be used for dissemination of trade secret information, compromising valuable Company assets. In general, the dissemination of information onlinecould materially and adversely affect our business, financial condition and results of operations, regardless of the information’s accuracy.17Table of ContentsOur success depends in part upon effective advertising and marketing campaigns, which may not be successful, and franchise ownersupport of such advertising and marketing campaigns, as well as compliance with the restrictions and obligations imposed by lawsregulating certain marketing practices.We believe the Papa Murphy’s brand is critical to our business. We expend resources in our marketing efforts using a variety of media, includingtelevision advertising, social media, email and opt-in text messaging. We expect to continue to conduct brand awareness programs and customerinitiatives to attract and retain customers. Additionally, some of our competitors have greater financial resources than we do, which enables them tospend significantly more on marketing and advertising than us. Should our competitors increase spending on marketing and advertising, or should ouradvertising and promotions be less effective than our competitors, our business, financial condition and results of operations could be materially andadversely affected.The support of our franchise owners is critical for the success of our advertising and the marketing campaigns we seek to undertake, and the successfulexecution of these campaigns will depend on our ability to maintain alignment with our franchise owners. Our franchise owners are required to spend aminimum of five percent of net sales directly on local advertising or contribute to a local fund managed by franchise owners in certain market areas tofund the purchase of advertising media. Our franchise owners are also required to contribute two percent of their net sales to a fund to support thedevelopment of new products, brand development and national marketing programs. Consequently, a decline in net sales at franchise stores may resultin reduced spending on advertising and the development of new products, brand development and national marketing programs, or may require us, ourfranchise owners or other third-parties to contribute additional advertising funds, which we, our franchise owners and other third-parties have done atvarious times. Although we maintain control over advertising and marketing materials and can mandate certain strategic initiatives pursuant to ourfranchise agreements, we need the active support of our franchise owners if the implementation of these initiatives is to be successful. Additionaladvertising funds are not contractually required, and we, our franchise owners and other third-parties may choose to discontinue contributing additionalfunds in the future. Any significant decreases in our advertising and marketing funds or financial support for advertising activities could significantly curtailour marketing efforts, which may in turn materially and adversely affect our business, financial condition and results of operations.We continue to invest in television advertising in order to expand brand awareness and draw attention to our products and value-based promotions. InJanuary 2017, we launched our first national cable television advertising campaign. There is no assurance that our national cable television advertisingcampaign will resonate with consumers or be as effective as targeted local advertising in select markets. If these advertising investments do not driveincreased store sales, the expense associated with this advertising may adversely impact our financial results, and we may not generate the levels ofsame store sales we expect. In addition, because some of our competitors have greater financial resources than we do, we may be particularly sensitiveto increases in television advertising costs, which may reduce the efficiency of our advertising spending.Further, some of our marketing campaigns involve emails and opt-in text messages. In the United States, the Telephone Consumer Protection Actimposes obligations and limitations on making phone calls and sending text messages to consumers. The Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”) regulates commercial email messages and specifies penalties for thetransmission of commercial email messages that do not comply with certain requirements, such as providing an opt-out mechanism for stopping futureemails from senders. States and other countries have similar laws related to telemarketing and commercial emails. Additional or modified laws andregulations, or interpretations of existing, modified or new laws, regulations and rules, could prohibit or increase the cost of engaging with consumersand impair our ability to expand the use of our marketing techniques to more customers. Failure to comply with obligations and restrictions related to textmessage and email marketing could subject us to lawsuits, fines, statutory damages, consent decrees, injunctions, adverse publicity and other lossesthat could harm our business. We are currently subject to one such lawsuit, which is described in Part I, Item 3, Legal Proceedings .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 52 full weeks from the comparabledate (the Tuesday following the opening date), will affect our sales growth and will continue to be a critical factor affecting our profits because the profitmargin on comparable store sales is generally higher than the profit margin on new store sales. Our franchise owners’ and our ability to increasecomparable store sales depends in part on our ability to successfully implement our initiatives to build sales. It is possible such initiatives will not besuccessful, that we will not achieve our target comparable store sales growth or that the change in comparable store sales could be negative, which maycause a decrease in sales and our profits that would materially and adversely affect our business, financial condition or results of operations.18Table of ContentsWe 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 andAugust. Therefore, our revenues per store have typically been 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 tobenefit from historically stronger sales levels occurring in these periods. We believe that new store openings will continue to be weighted towards thefourth 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 comparablestore sales for any particular future period may decrease and materially and adversely affect our business, financial condition or results of operations.Changes in economic conditions, including effects from recession, adverse weather and other unforeseen conditions, could materially andadversely affect our business, financial condition and results of operations.The restaurant industry depends on consumer discretionary spending. Volatile economic conditions now or in the future may depress consumerconfidence and discretionary spending. If the economy fails to fully recover for a prolonged period of time or worsens and if our customers have lessdiscretionary income or reduce the amount they spend on quick service meals, customer traffic could be adversely impacted. We believe that if negativeeconomic conditions persist for a long period of time or become pervasive, consumers might make long-lasting changes to their discretionary spendingbehavior, including dining out less frequently. Declines in food commodity prices may accelerate these changes in consumer spending by inducingconsumers to purchase more of their meals from grocery and convenience stores. In addition, given our geographic concentrations in the West andMidwest, economic conditions in these particular areas of the country could have a disproportionate impact on our overall results of operations, andregional 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 and adversely affect our business, financial condition and results ofoperations. 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 is no assurancethat the macroeconomic environment or the regional economies in which we operate will improve significantly or that government stimulus efforts willimprove 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, we do not assure you that our franchiselocations will maintain the high levels of internal controls and training we require at our Company-owned stores. Furthermore, our franchise owners andwe rely on third-party vendors, making it difficult to monitor food safety compliance and increasing the risk that foodborne illness would affect multiplelocations 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 toclaims or allegations on a retroactive basis. One or more instances of foodborne illness in any of our stores or markets or related to types of foodproducts we sell, if publicized on national media outlets or through social media, could negatively affect our store sales nationwide. This risk exists evenif it were later determined that the illness was wrongly attributed to us or one of our stores. A number of other restaurant chains have experiencedincidents related to foodborne illnesses that have had a material and adverse effect on their operations. The occurrence of a similar incident at one ormore of our stores, or negative publicity or public speculation about an incident, could materially and adversely affect our business, financial condition orresults 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 ofmozzarella cheese and flour. We are party to national supply agreements for core ingredients with certain key third-party suppliers, including SaputoCheese Inc. and Davisco Foods, for cheese; Pizza Blends, Inc., for flour and dough mix; Neil Jones Foods Company, for tomatoes used in sauce; andseveral suppliers for meat, pursuant to which we lock in pricing for our franchise owners and Company-owned stores. We rely on Sysco Corporation asthe primary distributor of food and other products to our franchise owners and Company-owned stores. Our pricing arrangements with national supplierstypically have terms from three months to a year, after which the pricing may be renegotiated. Each store purchases food supplies directly from ourapproved distributors and produce locally through an approved produce supplier.19Table of ContentsThe 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 oursupply. For example, cheese pricing is higher in the summer months due to a drop off in milk production in higher temperatures. Our food distributorsand suppliers also may be affected by higher costs to produce and transport commodities used in our stores, higher minimum wage and benefit costsand 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 beable to anticipate and react to changing food costs through our purchasing practices and menu price adjustments in the future. As a result, any increasein the prices charged by suppliers would increase the food costs for our Company-owned stores and for our franchise owners and could adverselyimpact their profitability. In addition, because we provide moderately priced food, we may choose not to, or may be unable to, pass along commodityprice increases to consumers, and any price increases that are passed along to consumers may materially and adversely affect store sales which wouldlower revenues generated from Company-owned stores and franchise owner royalties. These potential changes in food and supply costs and availabilitycould materially and adversely affect our business, financial condition or results of operations.Decreases in food costs may also affect consumer behavior in ways adverse to us. If our competitors, including grocery stores, are better able to passalong commodity price decreases to customers than we are, then we may experience lower demand for our products and loss of market share.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 anydisruption to this distribution due to work stoppages, strikes or other business interruption may materially and adversely affect our franchise owners andus. The initial term of our Distribution Service Agreement with Sysco expired in August 2007, and now the agreement automatically renews for one-yearterms until terminated by either party with written notice one year before the termination date in such notice. 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 atimely 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-partydistributors or suppliers, or interruptions in service by common carriers that ship goods within our distribution channels, may result in significant costincreases and reduce store sales. We may not be able to find alternative distributors or suppliers on a timely basis or at all. Our franchise and Company-owned 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, civilunrest and other events beyond our control. Insolvency of key suppliers could also negatively impact our business. Our focus on a limited menu wouldmake the consequences of a shortage of a key ingredient, such as cheese or flour, more severe, and affected stores could experience significantreductions in sales during the shortage.Changes in laws related to electronic benefit transfer (“ EBT ”) systems, could adversely impact our results of 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 UnitedStates. 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 suchpayments and could significantly reduce sales. Reductions in food stamp benefits occurred in November 2013, and further additional reductions in foodstamp benefits are periodically proposed by lawmakers in the U.S. Senate or House of Representatives. The recent reductions and potential futurereductions in food stamp benefits may reduce sales, which could materially and adversely affect our business, financial condition and results ofoperations.Changes in employment laws may adversely affect our business.Various federal and state labor laws govern our relationships with our employees and the relationships of our franchise owners with their employees,which may impact our and our franchise owners’ operating costs. These laws include employee classification as exempt/non-exempt for overtime andother purposes, minimum wage requirements, unemployment tax rates, mandatory health benefits, workers’ compensation rates, immigration status, taxreporting and other wage and benefit requirements. A substantial number of employees at our franchise and Company-owned stores are paid at ratesrelated to the U.S. federal minimum wage, and increases in the U.S. federal minimum wage, or higher minimum wage rates imposed by states ormunicipalities, 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.20Table of ContentsThe U.S. federal government and various states are considering or have already adopted new immigration laws and enforcement programs. Some ofthese changes may increase obligations for compliance and oversight, which could subject us to additional costs and make the hiring process for us andour franchise owners more cumbersome, or reduce the availability of potential employees. Although we require all of our employees, including at ourCompany-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 UnitedStates government to verify employment eligibility, in states in which participation is required and we have implemented 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 franchiseowners are responsible for screening any employees they hire. Unauthorized workers are subject to deportation and may subject us or our franchiseowners 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 hireand keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt store operations andcause temporary increases in our or our franchise owners’ labor costs as we train new employees. We could also become subject to fines, penalties andother costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. Thesefactors could materially and adversely affect our business, financial condition or results of operations.In what may signal a trend and change in employment law, franchisors are increasingly subject to claims that they are joint employers with theirfranchisees, and there seems to be support for such claims within the National Labor Relations Board (“ NLRB ”), based on recent NLRB decisions. Thiscould expose franchisors, including us, to liability for claims by, or based on the acts of, franchisees’ employees. Although we carry insurance policies fora significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, employer’s liability, health benefits andother insurable risks, a claim not covered by that insurance, or a judgment in excess of our insurance coverage, could materially and adversely affect ourbusiness, financial condition and results of operations. Regardless of whether any claims that may be brought against us are valid or whether we areultimately 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.If our franchise owners or we face labor shortages, labor disputes or increased labor costs, our growth and operating results could beadversely affected.Labor is a primary component in the cost of operating our Company-owned stores and for franchise owners. If we or our franchise owners face laborshortages or increased labor costs because of increased competition for employees, higher employee turnover rates, increases in the federal, state orlocal minimum wage or other employee benefits costs (including costs associated with health insurance coverage), our operating expenses couldincrease 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 qualifiedemployees, 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 significantproblems in recruiting or retaining employees, our franchise owners’ and our ability to recruit and retain such individuals may delay the planned openingsof new stores or result in higher employee turnover in existing stores, which could have a material and adverse effect on our business, financial conditionor results of operations.Additionally, while we do not currently have any unionized employees and are not currently subject to any unionization efforts, there is a potential forunion organizers to engage in efforts to organize our employees or those of our franchise owners. The recent NLRB joint employer decisions referred toabove may also create some possibility that employees of our franchise owners could have the right to collectively bargain directly with us. Potentialunion representation and collective bargaining agreements may result in increased labor costs that can have an impact on competitiveness, as well asimpact our ability to retain well-qualified employees. Labor disputes, as well, may precipitate strikes and picketing that may have an impact on business,including guest patronage. Further, potential changes in labor laws could increase the likelihood of some or all of our employees being subjected togreater organized labor influence, and could have a material and adverse effect on our business, financial condition or results of operations by imposingrequirements that could potentially increase our costs, reduce our flexibility and impact our employee culture.Any increase in the cost of labor could adversely affect our business and our growth. Competition for employees could require us or our franchiseowners to pay higher wages, which could result in higher labor costs. In addition increases in the minimum wage, of which several have been mandatedby governing bodies in some localities in which we or our franchise owners operate stores, would increase our labor costs. Moreover, costs associatedwith 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 topass these21Table of Contentsincreased labor costs on to consumers, in which case our margins would be negatively affected, which could materially and adversely affect ourbusiness, 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 the marketing and advertising of our new products. Our new productofferings may not be well-received by consumers and may not be successful, which could materially and 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 POS system that we continue toimplement across our franchise base in order to better manage our business. Our failure to capitalize on investments may materially and adversely affectour financial condition.The effect of changes to healthcare laws in the United States may increase the number of employees who choose to participate in ourhealthcare plans, which may significantly increase our healthcare costs and negatively impact our results of operations and our franchiseowners.In 2010, the PPACA was signed into law in the United States to require health care coverage for many uninsured individuals and expand coverage forthose already insured. We offer and subsidize comprehensive healthcare coverage, primarily for our salaried employees. The healthcare reform lawrequires us to offer healthcare benefits to all full-time employees (including full-time hourly employees) that meet certain minimum requirements ofcoverage and affordability, or face penalties. We offer hourly employees who qualify as full-time employees under the PPACA the option of enrolling inour health care coverage during our annual open enrollment period, but the number of such employees electing to so enroll is low. If the number of full-time hourly employees electing to enroll in our health care coverage increases significantly, we may incur substantial additional expense, or, if thebenefits we offer do not meet applicable requirements, we may incur penalties. It is also possible that by making changes or failing to make changes inthe healthcare plans offered by us, we will become less competitive in the market for our labor. Finally, implementing the requirements of healthcarereform is likely to impose additional administrative costs. The U.S. Congress may also consider repealing all or a portion of the PPACA and it is uncertainwhat, if any, new laws and regulations would replace the repealed portions of the PPACA . The costs and other effects of these new healthcarerequirements, and any proposed repeal or modifications of such requirements, are still being determined, but they may significantly increase ourhealthcare coverage costs and could materially and 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 statelaw. We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us tomaterial 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 ofrestaurant 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 theTelephone Consumer Protection Act) and other operational issues common to the foodservice industry. A number of these lawsuits have resulted in thepayment of substantial damages by the defendants. For example, on May 8, 2015, we were named as a defendant in a putative class action lawsuitclaiming a violation of the Telephone Consumer Protection Act, which prohibits companies from making telemarketing calls to numbers listed in theFederal Do-Not-Call Registry and imposes other obligations and limitation on making phone calls and sending text messages to consumers. Specificinformation regarding the lawsuit is included in Part 1, Item 3, Legal Proceedings . An adverse judgment or settlement, related to this or any otherlitigation claim, that is not insured or is in excess of insurance coverage could have an adverse impact on our profitability and could cause variability inour 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 anyclaims could materially and adversely affect our business, financial condition and results of operations. Regardless of whether any claims that may bebrought against us are valid or whether we are ultimately determined to be liable, our business, financial condition and results of operations could also beadversely affected by negative publicity, litigation costs resulting from the defense of these claims, and the diversion of time and resources from ouroperations.Although we have historically experienced very few customer lawsuits, our customers occasionally allege we caused an illness or injury they suffered ator 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 theordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regardingworkplace and employment matters, equal opportunity, discrimination and similar matters and may become subject to class action or other lawsuitsrelated to these or22Table of Contentsdifferent matters in the future. We may also be named as a defendant in any such claims brought against any of our franchise owners. Regardless ofwhether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and moneyaway from our operations and hurt our performance. A judgment in excess or outside of our insurance coverage for any claims could materially andadversely 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 disclosureand 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 and adversely affect ourbusiness, financial condition or results of operations.If changes in our senior management and the employee reductions made as part of our strategic realignment disrupt our business operationsor impede our ability to attract and retain highly skilled personnel, our future development and operating results could be adversely affected.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. On December 29, 2016, Ken Calwell tendered his resignation from his position as our President and Chief ExecutiveOfficer and as a member of our Board, effective immediately. Jean Birch, the Chair of our Board, has been named our interim President and ChiefExecutive Officer, while we search for a new President and Chief Executive Officer, but we do not assure you that we will find a qualified replacement ina timely manner. We cannot be certain that this change in management, operating with an interim President and Chief Executive Officer or any additionalchange that may come as we select a new President and Chief Executive Officer, will not negatively affect our business and operations.In addition, in February 2017 we announced a strategic realignment resulting in the elimination of eleven positions at the Company, including two seniorofficers. These reductions and turnover will result in reallocations of duties and may increase employee uncertainty and cause unintended attrition. Inaddition, these actions may make it more difficult for us to attract and recruit highly skilled employees. Our future performance will be substantiallydependent in particular on our ability to retain and motivate our employees, particularly our senior officers and key employees, and replace thecapabilities and talent lost in the recent reduction in force. The loss of any additional senior officers and key employees could have negative effects onour business and operations.Although we have employment agreements in place with certain senior officers and key employees, we cannot prevent them from terminating theiremployment with us. The loss of the services of our Chief Financial Officer, other senior officers or key employees could have negative effects on ourbusiness and operations and could materially and adversely affect our business and plans for future development. We do not believe that we will lose theservices of any of our current senior officers and key employees in the foreseeable future; however, we currently have no effective replacement for anyof these individuals due to their experience, reputation in the industry and special role in our operations. We do not maintain any key man life insurancepolicies for any of our employees.We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would adversely affect ourfinancial condition and results of operations.Our ability to make principal and interest payments on and refinance our indebtedness will depend on our ability to generate cash in the future and issubject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If our business does notgenerate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us in amounts sufficient tofund our other liquidity needs, our business, financial condition and results of operations could be materially and adversely affected. If we cannotgenerate sufficient cash flow from operations to make scheduled principal and interest payments in the future, we may need to refinance all or a portionof our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity. If we are unable to refinance any of ourindebtedness on commercially reasonable terms or at all, or to effect any other action relating to our indebtedness on satisfactory terms or at all, ourbusiness, financial condition and results of operations could be materially and adversely affected.Interest rate fluctuations may increase our debt service obligations, which would adversely affect our financial condition and results ofoperations.We are subject to interest rate risk on our senior secured credit facility. Interest rates on our senior secured credit facility are based on LIBOR, and underspecified circumstances we may be required by our lenders to enter into interest rate swap arrangements. A hypothetical 1.0% increase or decrease inthe interest rate associated with our senior secured credit facility would have resulted in a $1.1 million change to interest expense on an annualizedbasis.23Table of ContentsAny 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 jointventures with third-parties, including potential franchisors, to facilitate our growth, particularly our international expansion. We may not be successful inidentifying acquisition, partnership and joint venture candidates. In addition, we may not be able to continue the operational success of any stores weacquire or successfully finance or integrate any businesses that we acquire or with which we form a partnership or joint venture. We may have potentialwrite-offs of acquired assets and an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition maydivert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business.Any acquisition, partnership or joint venture may not be successful, may reduce our cash reserves, may negatively affect our earnings and financialperformance and, to the extent financed with stock or the proceeds of debt, may be dilutive to our stockholders or increase our already high levels ofindebtedness. We do not ensure that any acquisition, partnership or joint venture we make will not have a material and 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 transactionsmay 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 debitcard information of their customers has been stolen. We may in the future become subject to lawsuits or other proceedings for purportedly fraudulenttransactions arising out of the actual or alleged theft of our customers’ credit or debit card information. In addition, most states have enacted legislationrequiring notification of security breaches involving personal information, including credit and debit card information. Any such claim, proceeding, ormandatory notification could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition andresults of operations. Further, adverse publicity resulting from these allegations could harm our reputation and could materially and adversely affect ourbusiness, financial condition and results of operations.System security risks, data breaches and cyber attacks could disrupt our operations.We manage and store various proprietary information and sensitive or confidential data relating to our business, including sensitive and personallyidentifiable information related to our suppliers, customers and franchise owners. Breaches of our security measures through hacking, fraud or otherforms of deception, or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential dataabout us, our suppliers, our customers, our employees, or our franchise owners, could expose us, our customers, our suppliers and our franchise ownersto a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm ourbusiness. In addition, our current data protection measures might not protect us against increasingly sophisticated and aggressive threats and the costand operational consequences of implementing further data protection measures could be significant.We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brand and adversely affect ourbusiness.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 usingour trademarks and other proprietary intellectual property, including our brand names and logos. Because of the differences in foreign laws concerningproprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States.We have registered or applied to register a number of our trademarks. We do not 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. If our trademarks are successfully challenged, wecould be forced to rebrand our goods and services, which could result in loss of brand recognition, and could require us to devote resources toadvertising 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 theissuance of cease-and-desist letters. If it becomes necessary, we may make infringement claims in federal court. However, we do not assure you that wewill have adequate resources to enforce our trademarks and other intellectual property rights. If our efforts to register, maintain and protect ourtrademarks or other intellectual property are inadequate, or if any third-party misappropriates, dilutes, infringes or otherwise violates our intellectualproperty, the value of our brand may be harmed, which could have a material and adverse effect on our business and might prevent our brand fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third-parties’ intellectual property rights. Asuccessful claim of infringement against us could result in our being required to pay significant damages, or enter into costly licensing or royaltyagreements 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 operationsand harm our future prospects. If such24Table of Contentsroyalty or licensing agreements are not available to us on acceptable terms or at all, we may be forced to cease selling certain products or services. Anyclaims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend, require us to rebrand ourproducts or 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 a third-party’s rights that could interfere with our use of this information. Defendingthese claims may be costly and, if unsuccessful, may prevent us from continuing to use this proprietary information in the future and may require us topay monetary damages. We do not maintain confidentiality agreements with all of our team members. Even with respect to the confidentialityagreements we have, we do not assure you that those agreements will not be breached, that they will provide meaningful protection, or that adequateremedies will be available in the event of an unauthorized use or disclosure of our proprietary information. If competitors independently develop orotherwise 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 POS system processing at our stores. Our ability toeffectively and efficiently manage our operations depends upon our ability to protect our computer equipment and systems against damage from physicaltheft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, wormsand other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operationscould materially and adversely affect our business, reputation, financial condition and results of operations and subject us to litigation or actions byregulatory 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 our online ordering platform, POS system and our credit card processing systems. Our information technology, communication systems andelectronic 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 alsosubject to break-ins, sabotage and intentional acts of vandalism that could cause disruptions in our ability to serve our customers and protect customerdata. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a naturaldisaster, intentional sabotage or other unanticipated problems could result in lengthy interruptions in our service. Any errors or vulnerabilities in oursystems, or damage to or failure of our systems, could result in interruptions in our services and non-compliance with certain regulations, which couldmaterially and adversely affect our business, reputation, 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 orincreased 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 thosedescribed elsewhere in this section and those relating to:▪the preparation, sale and labeling of food;▪building and zoning requirements;▪environmental laws;▪compliance with the FLSA , which governs such matters as minimum wage, overtime and other working conditions, family leave mandates and avariety of other laws enacted by states that govern these and other employment matters;▪compliance with securities laws and NASDAQ listed company rules;▪compliance with the Americans with Disabilities Act;▪working and safety conditions;▪sales taxes or other transaction taxes;▪compliance with the Payment Card Industry Data Security Standards and similar requirements; and25Table of Contents▪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 foodsotherwise deemed to be “unhealthy.” If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial finesor sanctions. In addition, our capital expenditures could increase due to remediation measures that may be required if we are found to be noncompliantwith any of these laws or regulations.We are also subject to Federal Trade Commission rules 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 withthese laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on futurefranchise sales, fines or other penalties, or require us to make offers of rescission or restitution, any of which could materially and adversely affect ourbusiness, financial condition and results of operations.Some of the jurisdictions where we have franchise and Company-owned stores do not assess sales tax on our pizzas. Accordingly, we may benefit froma pricing advantage over some pizza chain competitors in these jurisdictions. If these jurisdictions were to impose sales tax on our products, these storesmay experience a decline in sales due to the loss of this pricing advantage. In addition, our stores may be subject to unanticipated sales taxassessments. These sales tax assessments could result in losses to our franchise owners or franchise stores going out of business, which couldadversely affect our number of franchise stores and our results of operations. Changes in sales tax assessments of this type at the franchise owner levelcould lead to undercapitalized franchise owners going out of business and loss of royalties at the Company level. Similarly, such tax assessments couldimpact the profitability of our Company-owned stores. As a result, changes in sales tax assessments could have a material and adverse effect on ourbusiness, 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 ofoperations. Typically, licenses must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmentalauthorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses and approvalscould adversely affect our existing stores and delay or result in our decision to cancel the opening of new stores, which would adversely affect ourbusiness, financial condition and results of operations.Our current insurance coverage may not be adequate, insurance premiums for such coverage may increase and we may not be able to obtaininsurance 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 maynot 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 maynot be able to obtain similar levels of insurance on reasonable terms, or at all. Any substantial inadequacy of, or inability to obtain insurance coveragecould materially and 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 affect our future results of operations or cause the perception that we are more highlyleveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and mayoccur in the future. For instance, accounting regulatory authorities have indicated that they will require lessees to capitalize all but short-term leases intheir financial statements by 2019. This change, when implemented, will require us to record significant lease obligations and related right of use assetson our consolidated balance sheet and make other changes to our financial statements. This and other future changes to accounting rules or regulationscould materially and adversely affect our business, financial condition or results of operations.Risks Relating to Our Company and Our Ownership StructureThe requirements of being a public company may strain our resources and divert resources and management’s attention.As a publicly traded company, we incur, and will continue to incur, significant legal, accounting and other expenses that we were not required to incurprior to our initial public offering in May 2014. This will be particularly so after we are no longer an26Table of Contents“emerging growth company” as defined under the Jumpstart our Business Startups Act (“ JOBS Act ”). We are required to file with the SEC annual andquarterly information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). Weare also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on atimely basis. We are also subject to other reporting and corporate governance requirements, including the requirements of NASDAQ, and certainprovisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which impose significant compliance obligations upon us. As a publiccompany, we, among other things, must prepare and distribute periodic public reports and other stockholder communications in compliance with ourobligations under the federal securities laws and applicable NASDAQ rules.These additional obligations as a public company require a significant commitment of additional resources and many of our competitors already complywith these obligations. The significant commitment of resources required for implementing them could adversely affect our business, financial conditionand results of operations. In addition, if we fail to comply with the requirements with respect to our internal accounting and audit functions, our ability toreport our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violateNASDAQ 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 ofour financial statements.The demands of being a public company, including engagement and communications with stockholders, require a significant commitment of resourcesand management oversight that has increased and may continue to increase our costs and might place a strain on our systems and resources. As aresult, 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 variousreporting requirements that are applicable to other public companies that are not “emerging growth companies.” These exceptions provide for, but arenot limited to, relief from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regardingexecutive compensation in our periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote on executivecompensation and stockholder approval of any golden parachute payments not previously approved and an extended transition period for complying withnew or revised accounting standards. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Wemay remain an “emerging growth company” for up to five years following our initial public offering. To the extent we do not use exemptions from variousreporting 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-OxleyAct could have a material adverse effect on our business and share price.We have implemented internal controls over financial reporting and processes to evaluate their design and test their effectiveness so that managementcan provide the required management assessments under Section 404 of the Sarbanes-Oxley Act (“ Section 404 ”). Section 404 requires annualmanagement assessments of the effectiveness of our internal control over financial reporting. Section 404 also generally requires a report by ourindependent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act , ourindependent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant toSection 404 until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to five years following our initialpublic offering.The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and requiresignificant documentation, testing and possible remediation. If we fail to maintain an effective internal control environment or to comply with thenumerous legal and regulatory requirements imposed on public companies, we could make material errors in, and be required to restate, our financialstatements.We may encounter problems or delays in implementing improvements in connection with receiving a favorable attestation from our independentregistered public accounting firm. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financialinformation on a timely basis, may suffer adverse regulatory consequences or violate applicable stock exchange listing rules. Any restatement of ourfinancial statements due to a lack of adequate internal controls or otherwise could result in a loss of public confidence in the reliability of our financialstatements and sanctions imposed on us by the SEC . Failure to maintain effective internal control over financial reporting could have a material adverseeffect on our business and share price.27Table of ContentsLee Equity may acquire interests and positions that could present potential conflicts with our and our stockholders’ interests.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. LeeEquity is a middle-market private equity investment firm managing more than $1 billion of equity capital. Lee Equity invests in a variety of industriesincluding consumer/retail, business services, distribution/logistics, financial services, healthcare services and media. Immediately following theconsummation of our initial public offering, Lee Equity and its affiliates owned approximately 41% of our outstanding capital stock, and as of March 1,2017 , owns 26% of our outstanding capital stock. Lee Equity makes investments in companies and may, from time to time, acquire and hold interests inbusinesses that compete directly or indirectly with us. Lee Equity may also pursue, for its own accounts, acquisition opportunities that may becomplementary to our business, and as a result, those acquisition opportunities may not be available to us. Our amended and restated certificate ofincorporation contains 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, forwhich 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. Under a stockholder’s agreement that we entered into with Lee Equity in connection with our initial publicoffering, 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 ofthe voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate two director nominees or (ii) 10% ormore of the voting power of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director nominee, ineach case to serve on the Board of Directors (the “ Board ”) at any meeting of stockholders at which directors are to be elected to the extent that LeeEquity does not have a director designee then serving on the Board . We will take all necessary actions, including, among other things, calling a specialmeeting of the stockholders, to ensure that Lee Equity has at least one or two nominee designees, as the case may be. Lee Equity could invest inentities that directly or indirectly compete with us. As a result of these relationships, when conflicts arise between the interests of Lee Equity and theinterests of our stockholders, these directors may not be disinterested.Anti-takeover provisions in our organizational documents could make an acquisition of us more difficult, limit attempts by our stockholdersto replace or remove our current management and adversely affect the market price of our common stock.Provisions in our certificate of incorporation and bylaws may have the effect of discouraging or preventing a change of control or changes in ourmanagement. Our certificate of incorporation and bylaws include provisions that:▪authorize our Board to issue, without further action by the stockholders, up to 15,000,000 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 by or at the direction of our Board or, at the request of Lee Equity or itstransferee that has privately acquired from Lee Equity at least 10% of our outstanding common stock, so long as Lee Equity or its transfereeowns at least 10% of our outstanding common stock;▪establish an advance notice procedure for stockholder proposals to be brought before an annual or special meeting, including proposednominations of persons for election to our Board ;▪establish that our Board is divided into three classes, with each class serving three-year staggered terms;▪prohibit cumulative voting in the election of directors;▪provide that our directors may be removed only for cause by a majority of the remaining members of our Board or the holders of at least 66 2/3%of our outstanding voting stock▪empower our Board to cancel, postpone or reschedule an annual meeting of stockholders, at any time before the holding of the annual meetingand for any reason; and▪require comprehensive disclosures and affirmations from any individual who has been proposed by a stockholder as a nominee for election toour Board .These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult forstockholders to replace members of our Board , which is responsible for appointing the members of our management, and may discourage, delay orprevent 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 atakeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed asdiscouraging future takeover attempts. In addition, we have opted out of Section 203 of the Delaware General Corporation Law, which28Table of Contentswould otherwise prohibit us from engaging in any of a broad range of business combinations with any “interested stockholder” (any stockholder with 15%or more of our outstanding voting stock) for a period of three years following the time that the stockholder became an “interested stockholder”, subject tocertain exceptions. Our certificate of incorporation contains provisions that have similar effect as Section 203 of the Delaware General Corporations Law,except that they exclude from the definition of “interested stockholder” Lee Equity , and any person that has acquired from Lee Equity or any Lee Equitytransferee 5% or more of our outstanding voting stock.Lee Equity and its affiliates will continue to be able to significantly influence our decisions and their interests may conflict with our or yoursin the future.Lee Equity and its affiliates beneficially own approximately 26% of our outstanding common stock as of March 1, 2017 . Under the terms of our amendedand restated certificate of incorporation and bylaws, Lee Equity has consent rights with respect to certain significant matters so long as Lee Equity owns25% or more of the outstanding shares of our common stock, including among others, certain change of control transactions, issuances of equitysecurities, the incurrence of significant indebtedness, declaration or payments of non-pro rata dividends, significant investments in, or acquisitions ordispositions of assets, adoption of any new equity-based incentive plan, any material increase in the salary of our Chief Executive Officer, certainamendments to our organizational documents, any material change to our business, or any change to the number of directors serving on our Board . Solong as Lee Equity owns 10% or more of our issued and outstanding common stock, Lee Equity will be granted access to our customary non-publicinformation and members of our management team and shall have the ability to share our material non-public information with any potential purchaser ofus that executes an acceptable confidentiality agreement with us which will include a prohibition on trading on material non-public information. Lee Equityhas 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% ormore of the issued and outstanding shares of our common stock. Under the terms of a stockholder’s agreement between us and Lee Equity , for so longas 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 ofthe issued and outstanding shares of our common stock, Lee Equity will be entitled to designate two director nominees or (ii) 10% or more of the votingpower of the issued and outstanding shares of our common stock, Lee Equity will be entitled to designate one director nominee, in each case to serve onthe Board at any meeting of stockholders at which directors are to be elected to the extent that Lee Equity does not have a director designee thenserving on the Board . We will take all necessary actions, including, among other things, calling a special meeting of the stockholders, to ensure that LeeEquity has at least one or two nominee designees, as the case may be. As such, Lee Equity will continue to have substantial influence over us. Suchconcentration of ownership may also have the effect of delaying or preventing a change in control, which may be to the benefit of Lee Equity and otherstockholders affiliated with Lee Equity but not in the interest of the Company or other stockholders not affiliated with Lee Equity .Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesOur corporate headquarters, located in Vancouver, Washington, houses substantially all of our executive management and employees who provide ourprimary corporate support functions: legal, marketing, technology, human resources, finance, and research and development. We lease the property forthe corporate headquarters and all of our 168 Company-owned stores.Our system-wide stores are typically located in neighborhood shopping centers and the average store size is approximately 1,400 square feet. As ofJanuary 2, 2017 , we and our franchise owners operated 1,577 stores with 1,537 of these stores located in 38 states (consisting of 1,369 franchised and168 Company-owned stores) plus 19 stores in Canada and 21 stores in the Middle East. Our franchised stores are situated on real property owned byfranchise owners or leased directly by franchise owners from third-party landlords.29Table of ContentsThe map and chart below show the locations of our franchised and Company-owned stores in the United States as of January 2, 2017 .30Table of Contents DomesticFranchisedStores Company-OwnedStores TotalAlabama29 — 29Alaska12 — 12Arizona59 — 59Arkansas5 7 12California170 — 170Colorado62 28 90Florida17 16 33Georgia6 — 6Idaho25 9 34Illinois25 — 25Indiana39 — 39Iowa38 — 38Kansas39 — 39Kentucky17 — 17Louisiana5 — 5Maryland2 — 2Michigan8 13 21Minnesota76 25 101Mississippi2 2 4Missouri53 4 57Montana14 — 14Nebraska19 — 19Nevada27 — 27New Mexico12 6 18North Carolina19 — 19North Dakota13 — 13Ohio3 — 3Oklahoma26 — 26Oregon98 7 105South Carolina2 — 2South Dakota15 — 15Texas95 8 103Tennessee32 24 56Utah59 — 59Virginia5 — 5Washington132 17 149Wisconsin99 2 101Wyoming10 — 10Total1,369 168 1,537Lease ArrangementsWe lease the property for our corporate headquarters and our Company-owned stores and have no involvement in the leased property of the franchiselocations except for three locations that operate under a sublease and a few leases assigned to franchisees wherein we remain secondarily liable. Thetypical store is located in a neighborhood-oriented shopping center. Lease terms for these stores are generally five years with one or more five-yearrenewal options and generally require us to pay a proportionate share of real estate taxes, insurance, common area and other operating costs in additionto base or fixed rent.31Table of ContentsItem 3. Legal ProceedingsWe currently are subject to litigation with a group of our franchise owners. In January 2014, six franchise owner groups claimed that we misrepresentedour sales volumes, made false representations to them and charged excess advertising fees, among other things. We engaged in mediation with thesefranchise owners, which is required under the terms of their franchise agreements, in order to address and resolve their claims, but we were unable toreach a settlement agreement. On April 4, 2014, a total of 12 franchise owner groups, including those franchise owners that previously made theallegations described above, filed a lawsuit against us in the Superior Court in Clark County, Washington, making essentially the same allegations forviolation of the Washington Franchise Investment Protection Act, fraud, negligent misrepresentation and breach of contract and seeking declaratory andinjunctive relief, as well as monetary damages. Based on motions filed by us in that lawsuit, the court ruled on July 9, 2014, that certain of the plaintiffs’claims under the anti-fraud and nondisclosure provisions of the Washington Franchise Investment Protection Act should be dismissed and that certainother claims in the case would need to be more specifically alleged. The court also ruled that the six franchise owner groups who had not mediated withus prior to filing the lawsuit must mediate with us in good faith, and that their claims shall be stayed until they have done so.On June 18, 2014, an additional 16 franchise owner groups, represented by the same counsel as the plaintiffs described above, filed a lawsuit in theSuperior Court in Clark County, Washington making essentially the same allegations as made in the lawsuit described above and seeking declaratoryand injunctive relief, as well as monetary damages. The court consolidated the two lawsuits into a single case and ordered that the plaintiffs in the newlawsuit, none of whom had mediated with us prior to filing the lawsuit, must do so, and that their claims be stayed until they have completed mediatingwith us in good faith.In October 2014, we engaged in mediation with the 22 franchise owner groups who had not previously done so. As a result of that mediation and otherefforts, we have now reached resolution with 13 of the franchise owner groups involved in the consolidated lawsuits, and their claims have either beendismissed or dismissal is pending.In February 2015, the remaining plaintiffs in the consolidated lawsuits filed an amended complaint, removing some claims, amending some claims,adding claims and naming some of our former and current franchise sales staff as additional individual defendants. In September 2016, the remainingplaintiffs in the consolidated lawsuits filed an amended complaint to add a claim under the Washington Consumer Protection Act based on substantiallythe same allegations as the prior claims, to re-plead claims under the Washington Franchise Investment Protection Act that had previously beendismissed, and to dismiss Dan Harmon as a defendant. As before, we believe the allegations in this litigation lack merit and, for those plaintiffs withwhom we are unable to reach resolution, we will continue to vigorously defend our interests, including by asserting a number of affirmative defenses and,where appropriate, counterclaims. We provide no assurance that we will be successful in our defense of these lawsuits; however, we do not currentlyexpect the cost of resolving them to have a material adverse effect on our consolidated financial position, results of operations, or cash flows.We are also currently named as a defendant in a putative class action lawsuit filed by plaintiff John Lennartson on May 8, 2015, in the United StatesDistrict Court for the Western District of Washington. The lawsuit alleges we failed to comply with the requirements of the Telephone ConsumerProtection Act (TCPA) when we sent SMS text messages to consumers. Mr. Lennartson asks that the court certify the putative class and that statutorydamages under the TCPA be awarded to plaintiff and each class member. On October 14, 2016, the Federal Communications Commission (FCC)granted us a limited waiver from the TCPA’s written consent requirements for certain text messages that we sent up through October 16, 2013 toindividuals who, like Mr. Lennartson, provided written consent prior to October 16, 2013. We believe that the FCC’s waiver eliminates the legal basis forMr. Lennartson’s claim and have filed a motion for summary judgment seeking dismissal. Mr. Lennartson has filed a motion seeking to extend the time torespond to the summary judgment motion on the basis that he intends to appeal the FCC's waiver. While we believe Mr. Lennartson’s interpretation oflaw is incorrect and the claim should be dismissed and will continue to vigorously defend ourselves in the lawsuit, we provide no assurance that we willbe successful in this action. In addition, plaintiff has recently been granted leave to file, and has filed, an amended complaint adding additional plaintiffs,some of whom provided consent after October 16, 2013, and who are therefore differently-situated from Mr. Lennartson. An adverse judgment orsettlement related to this lawsuit could have a material adverse effect on our consolidated financial position, results of operations, or cash flows.In addition to the foregoing, we are subject to routine legal proceedings, claims and litigation in the ordinary course of our business. We also may engagein future litigation with franchise owners to enforce the terms of our franchise agreements and compliance with our brand standards as determinednecessary to protect our brand, the consistency of our products and the customer experience. Lawsuits require significant management attention andfinancial resources and the outcome of any litigation is inherently uncertain. We do not, however, expect that the costs to resolve these routine matterswill have a material adverse effect on our consolidated financial position, results of operations, or cash flows.32Table of ContentsItem 4. Mine Safety DisclosuresNot applicable.33Table of ContentsPART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and IssuerPurchases of Equity SecuritiesOur common stock has traded on the NASDAQ Global Select Market under the symbol FRSH since it began trading on May 2, 2014. Our initial publicoffering was priced at $11.00 per share on May 1, 2014. The following table sets forth, for the periods indicated, the highest and lowest intraday salesprices per share of our common stock as reported on the NASDAQ Global Select Market. High LowFiscal Year 2015 First quarter (December 30, 2014 - March 30, 2015)$20.00 $10.60Second quarter (March 31, 2015 - June 29, 2015)$22.72 $16.05Third quarter (June 30, 2015 - September 28, 2015)$21.66 $12.53Fourth quarter (September 29, 2015 - December 28, 2015)$15.19 $10.41Fiscal Year 2016 First quarter (December 29, 2015 - March 28, 2016)$12.15 $8.45Second quarter (March 29, 2016 - June 27, 2016)$12.96 $6.48Third quarter (June 28, 2016 - September 26, 2016)$7.80 $5.15Fourth quarter (September 27, 2016 - January 2, 2017)$6.88 $3.56On March 1, 2017, we had approximately 38 stockholders of record of our common stock. These figures do not include beneficial owners who holdshares in nominee name.During the fourth quarter ended January 2, 2017 , the Company did not repurchase any shares.DividendsNo dividends have been declared or paid on our shares of common stock and we do not intend to pay dividends on our common stock in the foreseeablefuture. We currently expect to retain all available funds and future earnings, if any, for use in the operation, development and expansion of our business.However, in the future, we may change this policy and choose to pay dividends. Any future determination to pay cash dividends will be at the discretionof our Board of Directors and will depend on then-existing conditions, including our financial condition, operating results, business prospects, capitalrequirements, results of operations and other factors that our Board of Directors considers relevant.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 stockis dependent upon cash dividends and distributions and other transfers from our subsidiaries. The ability of our subsidiaries to pay dividends is restrictedby the terms of our senior secured credit facility. For additional information regarding our financial condition and restrictions on the ability of oursubsidiaries to pay dividends, see Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 10 — FinancingArrangements of the accompanying Notes to Consolidated Financial Statements , respectively.34Table of ContentsPerformance GraphThe following graph demonstrates a comparison of cumulative total returns for Papa Murphy’s common stock, the Standard & Poor’s 500 Stock Index,the NASDAQ Composite Index, and the Standard & Poor’s 400 Restaurants Index over the period from May 1, 2014, (using the price of which ourshares of common stock were initially sold to the public) to January 2, 2017 . The comparison assumes $100 was invested in Papa Murphy’s commonstock on May 1, 2014, and in each of the aforementioned indices. Cumulative total returns for each of the indices assumes that all dividends werereinvested on the day of issuance.Historical stock price performance should not be relied on as indicative of future stock price performance.35Table of ContentsItem 6. Selected Financial DataWe derived the selected consolidated statements of operations and cash flows data for fiscal years 2016 , 2015 and 2014 and the selected consolidatedbalance sheet data as of January 2, 2017 , and December 28, 2015 , from our audited consolidated financial statements and related notes theretoincluded in Financial Statements and Supplementary Data . We derived the selected consolidated statements of operations and cash flows data for fiscalyears 2013 and 2012 and the selected consolidated balance sheet data as of December 29, 2014 , December 30, 2013 , and December 31, 2012 , fromour audited consolidated financial statements and related notes thereto not included in this report. Fiscal year 2016 was a 53-week period while all otherfiscal years reported were 52-week periods.Our historical results are not necessarily indicative of future operating results. You should read the information set forth below together withManagement’s Discussion and Analysis of Financial Condition and Results of Operations and Financial Statements and Supplementary Data and therelated Notes to Consolidated Financial Statements . FISCAL YEAR(in thousands, except share and per share data)2016 2015 2014 2013 2012Consolidated Statement of Operations Data: Revenues Franchise royalties$39,851 $40,243 $39,305 $36,897 $35,113Franchise and development fees2,912 4,222 4,531 4,330 2,826Company-owned store sales82,080 74,300 50,598 39,148 28,813Other2,040 1,444 2,965 120 164Total revenues126,883 120,209 97,399 80,495 66,916Costs and Expenses Store operating costs: Cost of food and packaging28,347 26,603 19,686 14,700 10,741Compensation and benefits23,746 19,858 12,673 10,687 8,160Advertising8,203 7,888 5,041 3,820 2,711Occupancy6,226 4,750 2,873 2,365 1,980Other store operating costs10,268 7,517 4,434 3,988 2,961Selling, general and administrative28,108 28,207 29,263 24,180 21,225Depreciation and amortization12,236 10,002 8,052 6,973 6,187Loss (gain) on disposal or impairment of property and equipment101 (251) 72 847 193Total costs and expenses117,235 104,574 82,094 67,560 54,158Operating Income9,648 15,635 15,305 12,935 12,758Interest expense, net4,868 4,523 8,025 10,429 10,368Loss on early retirement of debt— — 4,619 4,029 5,138Loss on impairment of investments— 4,500 — — —Other expense, net188 133 178 44 248Income (Loss) Before Income Taxes4,592 6,479 2,483 (1,567) (2,996)Provision for (benefit from) income taxes1,943 2,068 1,235 1,024 (882)Net Income (Loss)2,649 4,411 1,248 (2,591) (2,114)Net loss attributable to noncontrolling interests— 500 — 19 —Net Income (Loss) Attributable to Papa Murphy’s$2,649 $4,911 $1,248 $(2,572) $(2,114) Earnings (loss) per common share: Basic (1)$0.16 $0.29 $(0.07) $(2.34) $(2.33)Diluted (1)0.16 0.29 (0.07) (2.34) (2.33)Weighted average common stock outstanding: Basic16,743,285 16,653,127 12,101,236 3,847,861 3,673,185Diluted16,773,493 16,870,693 12,101,236 3,847,861 3,673,185 36Table of Contents FISCAL YEAR(in thousands, except share and per share data)2016 2015 2014 2013 2012Consolidated Statement of Cash Flows: Net cash provided by operating activities$16,804 $23,743 $15,509 $9,874 $9,356Net cash used in investing activities(19,390) (19,554) (9,527) (15,249) (5,904)Net cash (used in) provided by financing activities(2,212) (2,378) (4,631) 6,613 (5,864) AS OF(in thousands)January 2, 2017 December 28, 2015 December 29, 2014 December 30, 2013 December 31, 2012Consolidated Balance Sheet Data: Cash and cash equivalents$2,069 $6,867 $5,056 $3,705 $2,428Total current assets13,116 18,896 14,991 14,521 6,663Total assets273,872 275,471 264,127 258,712 241,277Total current liabilities22,900 24,149 18,558 17,965 12,568Total debt (2)109,679 112,200 115,000 170,000 125,280Total Papa Murphy's Holdings, Inc. shareholders’ equity101,496 97,656 91,298 33,925 63,930Net working capital (3)(9,784) (5,253) (3,567) (3,444) (5,905)(in thousands, except selected operating data, unless otherwise noted)FISCAL YEAR2016 2015 2014 2013 2012Other Financial Data: Capital expenditures (4)18,010 10,430 4,067 3,037 1,343Selected Operating Data: Number of stores at end of period Domestic franchised1,369 1,369 1,342 1,327 1,270Domestic Company-owned168 127 91 69 59International40 40 28 22 18Total1,577 1,536 1,461 1,418 1,347 Number of comparable stores at end of period (5) Domestic franchised1,298 1,279 1,247 1,226 1,194Domestic Company-owned136 110 88 68 57International35 28 20 17 15Total1,469 1,417 1,355 1,311 1,266AWS per store (whole dollars) (6)$10,958 $11,651 $11,480 $11,099 $10,923Comparable store sales growth (decline) (7)(5.2)% 1.9% 4.5% 2.8% 2.9%System-wide sales (8)$898,709 $892,249 $849,682 $785,630 $739,091System-wide sales growth (9)0.7 % 5.0% 8.2% 6.3% 5.3%(1)Basic and Diluted EPS is a loss for 2014 as a result of cumulative dividends to preferred stockholders prior to our IPO. More information can be found in Financial Statementsand Supplementary Data in Note 16 — Earnings per Share (EPS) of the accompanying Notes to Consolidated Financial Statements .(2)Represents total outstanding indebtedness, including current portion and excluding unamortized, deferred financing costs.(3)Represents total current assets less total current liabilities.(4)Represents cash paid for long-lived asset capital expenditures related to the acquisition of property and equipment and excludes expenditures relating to acquisitions ofbusinesses and the acquisition of property and equipment in accounts payable.(5)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.(6)AWS consists of the average weekly sales of domestic franchised and Company-owned stores over a specified period of time. AWS is calculated by dividing the total net salesof our system-wide stores for the relevant time period by the number of weeks these same stores were open in such time period.(7)System-wide comparable store sales growth (decline) represents year-over-year sales comparisons for comparable domestic stores.(8)System-wide sales include net sales by all of our system-wide stores.(9)System-wide sales growth represents year-over-year sales comparisons for system-wide sales.37Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with Selected Financial Data andFinancial Statements and Supplementary Data and the related Notes to Consolidated Financial Statements . To match our operating cycle, we use a 52-or 53-week fiscal year, ending on the Monday nearest to December 31. Our fiscal quarters each contain 13 operating weeks, with the exception of thefourth quarter of a 53-week fiscal year, which contains 14 operating weeks. Fiscal year 2016 was a 53-week period ended on January 2, 2017 whilefiscal years 2015 and 2014 were 52-week periods ended on December 28, 2015 and December 29, 2014 , respectively.Cautionary Note Regarding Forward-Looking StatementsIn addition to historical information, this discussion and analysis contains “forward-looking statements” within the meaning of the U.S. Private SecuritiesLitigation Reform Act of 1995 that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-lookingstatements as a result of certain factors including, but not limited to, those discussed in the section entitled “Risk Factors” in this Annual Report on Form10-K. All statements other than statements of historical fact or relating to present facts or current conditions included in this discussion and analysis areforward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results ofoperations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly tohistorical or current facts. Examples of forward-looking statements include those regarding our future financial or operating results, cash flows,sufficiency of liquidity, operating margins, capital expenditures and working capital needs, refranchising initiative and the intended use of proceeds fromrefranchising, effects of refranchising initiative on operating results, reduction in Company-owned stores, franchise store growth, expansion efforts byregion, initiatives to improve customer convenience, trends in average check size for online orders, trends in online-only promotional offers, growth inonline ordering, plans for delivery, effects of national television advertising, franchise store growth, opportunities for international expansion, rate ofincrease of selling, general and administrative expenses compared to increases in revenue, business strategies and priorities, market opportunities,future government policies and regulatory changes, resolution of litigation and claims, expansion and growth opportunities, economies of scale achievedby growth, effects on earnings from acquisitions, expected implementation of POS system , seasonal fluctuations, adoption of new accounting standards,exposure to foreign currency and interest rate risk, as well as industry trends and outlooks. 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 connectionwith any discussion of the timing or nature of future operating or financial performance or other events .The forward-looking statements contained in this discussion and analysis are based on assumptions that we have made in light of our industryexperience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate underthe circumstances. As you read and consider this discussion and analysis, you should understand that these statements are not guarantees ofperformance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that theseforward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financialperformance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe thesefactors include, but are not limited to, those described under the section entitled “Risk Factors” in this Annual Report on Form 10-K. Should one or moreof these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may varyin material respects from expectations based on these forward-looking statements.Any forward-looking statement made by us in this discussion and analysis speaks only as of the date on which we make it. Factors or events that couldcause 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. Weundertake 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.OverviewPapa Murphy’s is a franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States and the fifth largest pizza chain overall. Weoperate through a footprint of 1,577 stores, of which 89.3% are franchised, located in 38 states plus Canada and the Middle East.38Table of ContentsWe have been rated the #1 pizza chain in the United States by multiple third-party consumer studies. For example, we were rated the #1 Pizza chain inTechnomic's Chain Restaurant Consumers' Choice Awards in 2017, topping the charts for our customers' Intent to Return, and in 2016, securing the topspot for Value and Convenience. We were also rated the #1 pizza chain overall by Nation’s Restaurant New s Consumer Picks each year from 2011 to2015, and the pizza chain with the highest score for Likely to Return in the 2016 survey. When compared to broader restaurant chain competition, wewere also recognized by Technomic in 2015, 2014 and 2013 as the #1 chain overall among all restaurants and all food categories.Our financial results are driven largely by system-wide sales at our franchised and Company-owned stores. System-wide sales are driven by changes incomparable store sales and store counts, which translate into royalty payments from franchise owners, as well as Company-owned store revenues. Westrive to increase both comparable store sales and our store counts. Total revenues can be impacted by our acquisition of franchised stores or therefranchising of Company-owned stores.Our model offers operating advantages that differentiate us from other restaurant concepts. Our domestic stores (i) do not require ovens, venting hoods,freezers or dining areas because our customers bake their pizzas at home; (ii) maintain shorter operating hours (typically 11:00 a.m. to 9:00 p.m.) thatare attractive to franchise owners and their employees; (iii) require fewer employees during each shift compared to other restaurant concepts, resulting inlower labor costs; and (iv) accept EBT payment systems (food stamps).The relatively moderate initial investments and low operating costs required to own and operate a Papa Murphy's store create the opportunity for highmargins and attractive returns. We believe the low cost structure, simple operations, a strong brand message supported by high levels of advertisingspending and high-quality menu offerings drive attractive store-level economics, which, in turn, drive demand for new stores.2016 HighlightsRevenue GrowthTotal revenues grew 5.6% from $120 million in 2015 to $127 million in 2016 due primarily to the strategic acquisition of some franchised stores and theopening of new Company-owned stores, partially offset by a decline in comparable store sales. System-wide sales increased 0.7% from $892 million in2015 to $899 million in 2016 as a result of 41 net new stores added during the year, partially offset by a decline in comparable store sales growth. Theinclusion of a 53rd week of operations for 2016 contributed an additional $2.7 million in revenue. Comparable store sales growth (decline) for selectedsegments during the periods reported was as follows: Fiscal Year 2016 2015 2014Domestic Franchise(5.0)% 1.9% 4.3%Domestic Company Stores(7.3)% 1.8% 8.1%Total domestic stores(5.2)% 1.9% 4.5%The decline in comparable store sales in 2016 resulted from reduced transactions. Comparable store sales growth in 2015 and 2014 primarily resultedfrom an increased average check due to targeted price increases and the launch of our Gourmet Delite product category in the fourth quarter of 2014.Store DevelopmentDuring 2016 , we and our franchise owners opened 109 stores, including 104 in the United States. While we operate a small percentage of stores asCompany-owned stores, we expect the majority of our new store expansion to continue to come from new franchised store openings. We also intend torefranchise selected Company-owned stores as opportunities arise, with a targeted Company-owned store base of about 50 stores by 2020.AcquisitionsWe acquired and are now operating 10 Papa Murphy’s stores during 2016 in three different markets. Five stores were acquired in the Fort Smith,Arkansas, market, four additional stores in the Joplin, Missouri, market, and one store in the Grand Rapids, Michigan market. These transactions are notexpected to affect earnings significantly in the near-term.39Table of ContentsTechnology InvestmentsOur POS system is an important technology platform for our future growth. Future precision marketing tools and mobile coupon capabilities necessitatePOS system terminals in our stores. POS system s have been installed system-wide as of January 2, 2017 . We believe that an opportunity remains formany of our franchise owners to reduce their operating costs by increased utilization of the POS system . We have also implemented an online orderingplatform integrated with the latest version of our POS system software.RefranchisingDuring the past five years, we have focused our financial resources on accelerating the build out of several markets with Company-owned stores. Wesee materially stronger store performance in markets with greater penetration and higher brand awareness. In the past two years, we have built 53stores in connection with this strategy. We are now entering the next phase of our strategic development plan which entails refranchising more than 100of our Company-owned stores to experienced franchisees that are well-capitalized and can further grow these markets. Our target is to reduce thenumber of Company-owned stores to about 50 stores by 2020, which will be used to focus on operational excellence, innovation and testing.Our SegmentsWe operate in three business segments: Domestic Franchise, Domestic Company Stores and International. Our Domestic Franchise segment consistsof our domestic franchised stores, which represent the majority of our system-wide stores. Our Domestic Company Stores segment consists of ourCompany-owned stores in the United States. Our International segment consists of our stores outside of the United States, all of which are franchised.The following table presents our Revenues , Operating Income and Depreciation and amortization for each of our segments for the periods presented: Fiscal Year(in thousands)2016 2015 2014Revenues Domestic Franchise$44,434 $45,579 $46,233Domestic Company Stores82,080 74,300 50,598International369 330 568Total$126,883 $120,209 $97,399Segment Operating Income (Loss) Domestic Franchise$17,186 $20,750 $21,939Domestic Company Stores(2,803) 1,359 1,307International269 238 20Corporate and unallocated(5,004) (6,712) (7,961)Total$9,648 $15,635 $15,305Depreciation and amortization Domestic Franchise$6,606 $5,392 $5,046Domestic Company Stores5,599 4,579 2,975International31 31 31Total$12,236 $10,002 $8,05240Table of ContentsKey Operating MetricsWe evaluate the performance of our business using a variety of operating and performance metrics. Set forth below is a summary and description of ourkey operating metrics. 2016 2015 2014Domestic store average weekly sales (AWS)$10,958 $11,651 $11,480Domestic comparable store sales growth (decline)(5.2)% 1.9% 4.5%Domestic comparable stores1,434 1,389 1,335System-wide sales (in thousands)$898,709 $892,249 $849,682Number of system-wide stores at period end1,577 1,536 1,461Adjusted EBITDA (in thousands)$24,796 $28,118 $27,678 Average Weekly Sales ( AWS )AWS consists of the average weekly sales of domestic franchised and Company-owned stores over a specified period of time. AWS is calculated bydividing the total net sales of our domestic system-wide stores for the relevant time period by the number of weeks these stores were open in such timeperiod. This measure allows management to assess changes in customer traffic and spending patterns in our domestic stores.Comparable Store Sales GrowthComparable store sales growth represents the change in year-over-year sales for comparable stores. A comparable store is a store that has been openfor at least 52 full weeks from the comparable date (the Tuesday following the opening date). Comparable store sales growth reflects changes in thenumber of transactions and in customer spend per transaction at existing stores. Customer spend per transaction is affected by changes in menu prices,sales mix and the number of items sold per customer.System-Wide SalesSystem-wide sales include net sales by all of our system-wide stores. This measure allows management to assess the health of our brand, our relativeposition to competitors and assess changes in our royalty revenues.Store Openings, Closures, Acquisitions and DivestituresWe review the number of new stores, the number of closed stores, and the number of acquired and divested stores to assess growth in system-widesales, royalty revenues and Company-owned store sales.41Table of ContentsThe following table presents the changes in the number of stores in our system for fiscal 2016 , 2015 and 2014 . DomesticCompany Stores DomesticFranchise Total Domestic International TotalStore count at December 30, 201369 1,327 1,396 22 1,418Openings2 85 87 8 95Closings(1) (49) (50) (2) (52)Net transfers21 (21) — — —Store count at December 29, 201491 1,342 1,433 28 1,461Openings18 81 99 12 111Closings(1) (35) (36) — (36)Net transfers19 (19) — — —Store count at December 28, 2015127 1,369 1,496 40 1,536Openings35 69 104 5 109Closings(1) (62) (63) (5) (68)Net transfers7 (7) — — —Store count at January 2, 2017168 1,369 1,537 40 1,577EBITDA and Adjusted EBITDATo supplement our consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. (“ GAAP ”), weconsider certain financial measures that are not prepared in accordance with GAAP . These non- GAAP financial measures are not based on anystandardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.“ Adjusted EBITDA ” is calculated as net income before interest expense, income taxes, depreciation and amortization (“ EBITDA ”) as adjusted for:▪All non-cash losses or expenses (including non-cash share-based compensation expenses and the non-cash portion of rent expenses relating tothe difference between GAAP and cash rent expenses), excluding any non-cash loss or expense that is an accrual of a reserve for a cashexpenditure 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;▪Pre-opening costs with respect to new stores;▪Historical management fees and expenses incurred under our advisory services and monitoring agreement with Lee Equity , which terminated inconnection with the IPO ; and▪Fees and expenses incurred in connection with the issuance of debt.Adjusted EBITDA eliminates the effects of items that we do not consider indicative of our operating performance. Adjusted EBITDA is a supplementalmeasure of operating performance that does not represent and should not be considered as an alternative to net income , as determined by GAAP . Ourcalculation of Adjusted EBITDA may not be comparable to that reported by other companies.Adjusted EBITDA is a non- GAAP financial measure. Management believes that Adjusted EBITDA , when viewed with our results of operations inaccordance with GAAP and our reconciliation of Adjusted EBITDA to net income , provides additional information to investors about certain material non-cash items and unusual items. We provide this non- GAAP financial measure to enhance investors’ understanding of our business and our results ofoperations, and to assist investors in evaluating how well we are executing strategic initiatives. We believe Adjusted EBITDA is used by investors as asupplemental 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; and▪To evaluate the performance and effectiveness of our operational strategies.42Table of ContentsAdjusted 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 reportedunder 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 excludes pre-opening costs and non-cash GAAP rent expense with respect to new stores;▪Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in thefuture, 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 GAAPmeasures and evaluate individual measures that are not included in Adjusted EBITDA .43Table of ContentsThe following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented: Fiscal Year(in thousands)2016 2015 2014Net Income$2,649 $4,411 $1,248Net loss attributable to noncontrolling interests— 500 —Net Income Attributable to Papa Murphy’s2,649 4,911 1,248Depreciation and amortization12,236 10,002 8,052Income tax provision1,943 2,068 1,235Interest expense, net4,868 4,523 8,025EBITDA21,696 21,504 18,560Loss (gain) on disposal or impairment of property and equipment (1)101 (251) 72Expenses not indicative of future operations: Secondary offering and IPO preparation costs (2)— 345 622Loss on Project Pie impairment and disposal (3)— 4,325 —Management fees and related expenses (4)— — 1,678Transaction costs (5)— 65 78New store pre-opening expenses (6)1,331 696 32Non-cash expenses and non-income based state taxes (7)1,668 1,434 2,017Loss on settlement of liabilities (8)— — 4,619Adjusted EBITDA$24,796 $28,118 $27,678(1)Represents non-cash losses resulting from disposal or impairment of property and equipment, including divested Company stores.(2)Represents costs related to the secondary offering of the Company's common stock, non-recurring advisory expenses in connection with our IPO and non-recurringmanagement transition and restructuring costs, consisting of severance, recruitment, relocation and other costs in connection with recruiting a new chief financial officerand strategic restructuring activities.(3)Represents a $4 million loss recognized upon impairment of Project Pie , a cost-method investment, and its subsequent disposal, and the write-off as bad debt receivablestotaling $325,000.(4)Represents the elimination of management fees and related costs paid to Lee Equity for advisory services provided pursuant to an advisory services and monitoringagreement and the termination fee incurred with the IPO . More information can be found in Financial Statements and Supplementary Data in Note 19 — Related PartyTransactions of the accompanying Notes to Consolidated Financial Statements .(5)Represents transaction costs relating to the acquisition of multiple franchised stores and the investments in and divestiture of Project Pie .(6)Represents expenses directly associated with the opening of new stores and incurred primarily in advance of the store opening, including wages, benefits and travel fortraining of opening teams, grand opening marketing costs and other store operating costs.(7)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 gains from settlement of asset retirement obligations; and (iv) state revenue taxes levied in lieu of an income tax.(8)Represents losses resulting from refinancing of long-term debt.Key Financial DefinitionsRevenuesSubstantially all of our revenues are derived from sales of pizza and other food and beverage products to the general public by Company-owned storesand the collection of franchise royalties and fees associated with franchise and development rights. Franchise and development fees include initialfranchise fees charged for opening a new franchised store, successive fees for the renewal of expiring franchise agreements, transfer fees fortransferring ownership of a franchise and deposit forfeitures. “Other revenue,” as used in this report, includes (i) revenues earned from the sublease ofreal estate under a master lease agreement with a national retailer, (ii) transaction fees from the Company's online ordering platform, (iii) fees forcustomer support services provided to franchisees, and (iv) revenues derived from the resale of POS system licenses to franchise owners at cost. Leaseincome is recognized in the period earned, which coincides with the period the expense is due to the master leaseholder. See Selling, General andAdministrative Costs below for the related offsetting expense to the POS system licenses resold to franchise owners.Store Operating CostsStore operating costs relate to our Domestic Company Stores segment and consist of cost of food and packaging, compensation and benefits,advertising, occupancy costs and other store operating costs, including new store pre-opening44Table of Contentscosts. We expect all of our store operating costs to vary as our store count changes from building, acquiring, closing and refranchising Company-ownedstores. Cost of food and packaging and advertising can be expected to fluctuate with commodity price changes, and increases or decreases in therevenues of our Domestic Company Stores segment.Selling, General and Administrative CostsSelling, general and administrative costs consist of wages, benefits and other compensation, franchise development expenses, travel, marketing,accounting fees, legal fees, the costs of POS system software licenses sold to franchise owners at cost, and other expenses related to the infrastructurerequired to support our franchised and Company-owned stores. See Revenues above for the related offsetting revenue from the POS system softwarelicenses resold to franchise owners. Selling, general and administrative costs also include net advertising expenses of an advertising fund we manage onbehalf of all domestic stores.Depreciation and AmortizationDepreciation and amortization constitute non-cash charges related to the depreciation of fixed assets, including leasehold improvements and equipment,and the amortization of franchise relationships and reacquired franchise rights relating to our acquisition of certain franchised stores.Results of OperationsThe following table presents our results of operations in dollars and as a percentage of total revenues for the periods reported. Fiscal Year 2016 2015 2014(in thousands)$ Total % of Revenues $ Total % of Revenues $ Total % of RevenuesRevenues Franchise royalties$39,851 31.4% $40,243 33.5 % $39,305 40.4%Franchise and development fees2,912 2.3% 4,222 3.5 % 4,531 4.7%Company-owned store sales82,080 64.7% 74,300 61.8 % 50,598 51.9%Other (1)2,040 1.6% 1,444 1.2 % 2,965 3.0%Total revenues (1)126,883 100.0% 120,209 100.0 % 97,399 100.0%Costs and Expenses Store operating costs: Cost of food and packaging (2)28,347 22.3% 26,603 22.0 % 19,686 20.2%Compensation and benefits (2)23,746 18.7% 19,858 16.5 % 12,673 13.0%Advertising (2)8,203 6.5% 7,888 6.6 % 5,041 5.2%Occupancy (2)6,226 4.9% 4,750 4.0 % 2,873 2.9%Other store operating costs (2)10,268 8.1% 7,517 6.3 % 4,434 4.6%Selling, general and administrative (1)28,108 22.2% 28,207 23.5 % 29,263 30.0%Depreciation and amortization12,236 9.6% 10,002 8.3 % 8,052 8.3%Loss (gain) on disposal or impairment of property and equipment101 0.1% (251) (0.2)% 72 0.1%Total costs and expenses117,235 92.4% 104,574 87.0 % 82,094 84.3%Operating Income (1)9,648 7.6% 15,635 13.0 % 15,305 15.7%Interest expense, net4,868 3.9% 4,523 3.8 % 8,025 8.3%Loss on early retirement of debt— —% — — % 4,619 4.7%Loss on impairment of investments— —% 4,500 3.7 % — —%Other expense, net188 0.1% 133 0.1 % 178 0.2%Income Before Income Taxes4,592 3.6% 6,479 5.4 % 2,483 2.5%Provision for income taxes1,943 1.5% 2,068 1.7 % 1,235 1.3%Net Income$2,649 2.1% $4,411 3.7 % 1,248 1.3%Net loss attributable to noncontrolling interests— —% 500 0.4 % — —%Net Income Attributable to Papa Murphy’s$2,649 2.1% $4,911 4.1 % $1,248 1.3%(1)During 2016 , 2015 and 2014 , we incurred $0.7 million , $1.0 million and $2.7 million , respectively, in expenses related to POS system software licenses resold to franchiseowners at cost. The revenue and expense from these transactions are included in other revenues and selling, general45Table of Contentsand administrative expense, respectively. We originally acquired $4.5 million in POS system software licenses in 2013 in a lump sum purchase to obtain more favorable pricingand expedite the roll-out of the POS system .(2)Please see the table presented in Costs and Expenses below, which presents Company store expenses as a percentage of Company store revenue for 2016 , 2015 and 2014 .RevenuesFranchise royalties. The following table presents franchise royalties for the periods reported:(in thousands)2016 Change 2015 Change 2014Franchise royalties$39,851 (1.0)% $40,243 2.4% $39,305Percentage of total revenues31.4% 33.5% 40.4%Franchise royalties decreased in 2016 due primarily to a decrease in Domestic Franchise comparable store sales of 5.0% .Franchise royalties increased in 2015 due primarily to Domestic Franchise store counts increasing from 1,342 at the end of fiscal 2014 to 1,369 at theend of fiscal 2015 and Domestic Franchise comparable store sales growth of 1.9% .The decreases in franchise royalties as a percentage of total revenues were the result of Company-owned store sales increases of 10.5% and 46.8% in2016 and 2015 , respectively.Franchise and development fees. The following table presents franchise and development fees for the periods reported:(in thousands)2016 Change 2015 Change 2014Franchise and development fees$2,912 (31.0)% $4,222 (6.8)% $4,531Percentage of total revenues2.3% 3.5% 4.7%Franchise and development fees decreased in 2016 due to reductions in deposit forfeitures, initial franchise fees and transfer fees. For 2015 , franchiseand development fees decreased due to fewer franchise agreements renewing in 2015 compared to 2014.Company-owned store sales. The following table presents Company-owned store sales for the periods reported:(in thousands)2016 Change 2015 Change 2014Company-owned store sales$82,080 10.5% $74,300 46.8% $50,598Percentage of total revenues64.7% 61.8% 51.9%Company-owned store sales increased in 2016 due to the acquisition of 10 stores from franchise owners and the opening of 35 new Company-ownedstores, partially offset by a decline in comparable store sales of 7.3% in the Domestic Company Stores segment.For 2015 , Company-owned store sales increased due to the acquisition of 23 stores from franchise owners, the opening of 18 new Company-ownedstores and comparable store sales growth of 1.8% in the Domestic Company Stores segment.Other Revenue The following table presents other revenue for the periods reported:(in thousands)2016 Change 2015 Change 2014Other revenue$2,040 41.3% $1,444 (51.3)% $2,965Percentage of total revenues1.6% 1.2% 3.0%Other revenue increased in 2016 primarily from an increase in transaction fees paid by franchise owners for the use of our online ordering platform andhelp desk support for our POS system .Other revenue decreased in 2015 primarily from a reduction in the number of POS system software licenses resold to franchise owners at cost. Revenuefrom POS system software licenses was $1.0 million and $2.7 million in 2015 and 2014 , respectively. An equal and offsetting cost related to the resaleof the POS system software licenses is included in selling, general and administrative expenses as discussed below.46Table of ContentsCosts and ExpensesStore operating costs. The following table presents store operating costs for the periods reported:(in thousands)2016 Change 2015 Change 2014Store operating costs$76,790 15.3% $66,616 49.0% $44,707Percentage of total revenues60.5% 55.4% 45.9%Store operating costs and the corresponding percentage of total revenues increased in both 2016 and 2015 primarily as a result of the opening of newCompany-owned stores and the acquisition of stores from franchise owners during each of those periods.The following table presents store operating costs as a percentage of Company-owned store sales for the periods reported: Fiscal Year 2016 2015 2014As a % of Company-owned store sales: Cost of food and packaging34.5% 35.8% 38.9%Compensation and benefits28.9% 26.7% 25.0%Advertising10.0% 10.6% 10.0%Occupancy7.6% 6.4% 5.7%Other store operating costs12.6% 10.2% 8.8%Total store operating costs93.6% 89.7% 88.4%Total store operating costs. Total store operating costs as a percentage of Company-owned store sales increased by 390 basis points in 2016compared to 2015 and increased 130 basis points in 2015 compared to 2014 , in each case, due primarily to the effect of store portfolio changes as weincreased our Company-owned store ownership in less-developed markets.▪Effect of store portfolio changes. We acquired 10 stores and refranchised three in 2016 , and acquired 23 stores and refranchised four in2015 . We also built 35 new stores in 2016 and 18 stores in 2015 . Additionally, one store was closed in both 2016 and 2015 . All of the newstores built or acquired in 2016 had average unit sales volumes lower than the average of stores we owned in 2015 . Similarly, all the new storesbuilt in 2015 and 13 of the stores acquired in 2015 had average unit sales volumes lower than the stores we owned in 2014 . Costs as apercentage of Company-owned store sales that are primarily fixed at the individual store level, such as Occupancy and Other store operatingcosts, increased overall because of the addition of these lower sales volume stores. Compensation and benefits also increased as we sawinefficiencies in labor utilization due to the rapid increase of Company-owned stores.▪Cost of food and packaging . Fluctuations in cheese prices affected our cost of food and packaging as a percentage of Company-owned storesales. Our average cheese price in 2016 decreased 1.2% compared to 2015 and the average cheese price in 2015 decreased 17.6% over 2014.▪Advertising. The decrease in advertising as a percentage of Company-owned store sales in 2016 compared to 2015 was driven by a reductionin spending on print advertising. Advertising as a percentage of Company-owned store sales increased for 2015 compared to 2014 primarily dueto the de-leveraging impact of advertising spending in stores with lower sales volume.Selling, general and administrative. The following table presents selling, general and administrative costs for the periods reported:(in thousands)2016 Change 2015 Change 2014Selling, general and administrative$28,108 (0.4)% $28,207 (3.6)% $29,263Percentage of total revenues22.2% 23.5% 30.0%Selling, general and administrative costs decreased in 2016 compared to 2015 due to less deficit spending in the advertising fund and a reduction inemployee costs, partially offset by increased costs for our online ordering system. Selling, general and administrative costs decreased in 2015 comparedto 2014 primarily due to the elimination of fees47Table of Contentspaid to Lee Equity in 2014 under the advisory services and monitoring agreement terminated at the IPO and lower POS system software licenses resoldto franchise owners at cost, offset by increased marketing costs recognized due to deficit spending in the marketing fund in 2015 compared to a recoveryof a deficit in 2014.As a percentage of total revenues, selling, general and administrative costs decreased 130 basis points in 2016 compared to 2015 as the previouslymentioned costs were offset by efficiencies gained by leveraging our infrastructure to grow costs at a slower rate than revenues.Excluding the costs incurred in preparation for the IPO and the revenues and expenses related to the resale of POS system software licenses at cost,selling, general and administrative costs as a percentage of total revenues would have been 21.7% in 2016 , 22.9% in 2015 , and 26.0% in 2014 .Depreciation and amortization . The following table presents depreciation and amortization for the periods reported:(in thousands)2016 Change 2015 Change 2014Depreciation and amortization$12,236 22.3% $10,002 24.2% $8,052Percentage of total revenues9.6% 8.3% 8.3%Depreciation and amortization increased in both 2016 and 2015 primarily due to an increase in the number of Company-owned stores and increasedcapital expenditures on property and equipment for business technology projects. As a percentage of total revenues, depreciation and amortizationincreased in 2016 and remained constant in 2015 as the growth in total revenues from the opening of new Company-owned stores and acquisition offranchised stores was outpaced by the incremental depreciation and amortization associated with the new and acquired stores.Loss (gain) on disposal or impairment of property and equipment . The following table presents the Loss (gain) on disposal or impairment ofproperty and equipment for the periods reported:(in thousands)2016 Change 2015 Change 2014Loss (gain) on disposal or impairment of property andequipment$101 N/M $(251) N/M $72Percentage of total revenues0.1% (0.2)% 0.1%N/M = Not MeaningfulThe loss recorded in 2016 primarily resulted from an asset impairment charge of $0.2 million on assets held for sale, partially offset from the gain on thesale of Company-owned stores. The gain recorded in 2015 primarily resulted from the sale of Company-owned stores.Interest expense, net . The following table presents net interest expense for the periods reported:(in thousands)2016 Change 2015 Change 2014Interest expense, net$4,868 7.6% $4,523 (43.6)% $8,025Percentage of total revenues3.9% 3.8% 8.3%Interest expense, net increased in 2016 as a result of a higher weighted average interest rate of 3.77% during 2016 compared to 3.45% in 2015, partiallyoffset by a reduction in the balance of outstanding debt throughout 2016.Interest expense, net decreased in 2015 as a result of a reduction in outstanding debt through the application of net proceeds from the IPO in May 2014and interest rate reductions achieved concurrently with the IPO and an August 2014 refinancing. Additional information on the August 2014 refinancingcan be found under Financial Statements and Supplementary Data in Note 10 — Financing Arrangements of the accompanying Notes to ConsolidatedFinancial Statements .Income Taxes. The following table presents income taxes for the periods reported:(in thousands)2016 Change 2015 Change 2014Provision for income taxes$1,943 (6.0)% $2,068 67.4% $1,235Percentage of total revenues1.5% 1.7% 1.3%Effective tax rate42.3% 31.9% 49.7%N/M = Not Meaningful48Table of ContentsProvision for income taxes decreased in 2016 due to a decline in Income Before Income Taxes , partially offset by an increase in the tax effect of certainpermanent tax differences. The effective tax rate for 2016 was higher due to a prior year benefit created by a decline in the blended state tax rate andthe revaluation of deferred taxes created by that change. For 2015 , our provision for income taxes increased , primarily due to a change in IncomeBefore Income Taxes , partially offset by a decline in the effective tax rate.Segment ResultsDomestic Franchise. The following table presents Domestic Franchise total revenues and Operating Income for the periods reported:(in thousands)2016 Change 2015 Change 2014Total revenues$44,434 (2.5)% $45,579 (1.4)% $46,233Percentage of total revenues35.0% 37.9% 47.5%Operating Income17,186 (17.2)% 20,750 (5.4)% 21,939Total revenues for the Domestic Franchise segment decreased in 2016 due primarily to a decline in segment comparable store sales of 5.0% and areduction in the resale of POS system software licenses from $1.0 million in 2015 to $0.7 million in 2016. Total revenues for the Domestic Franchisesegment decreased in 2015 due primarily to a reduction in the resale of POS system software licenses from $2.7 million in 2014 to $1.0 million in 2015,partially offset by the net addition of 27 domestic franchised stores over the comparable period and segment comparable store sales growth of 1.9% .Operating Income for the Domestic Franchise segment decreased in 2016 and 2015 due primarily to increased marketing costs as advertising fundexpenditures exceeded contributions.Domestic Company Stores. The following table presents Domestic Company Stores total revenues and Operating (Loss) Income for the periodsreported:(in thousands)2016 Change 2015 Change 2014Total revenues$82,080 10.5% $74,300 46.8% $50,598Percentage of total revenues64.7% 61.8% 51.9%Operating (Loss) Income(2,803) N/M 1,359 4.0% 1,307N/M = Not MeaningfulTotal revenues for the Domestic Company Stores segment increased in 2016 as a result of the opening of 35 new Company-owned stores and theacquisition of 10 stores from franchise owners, partially offset by a decline in segment comparable store sales of 7.3% and the closure of one store. For2015 , Total revenues for the Domestic Company Stores segment increased due primarily to the acquisition of 23 stores from franchise owners, theopening of 18 new Company-owned stores and segment comparable store sales growth of 1.8% , partially offset by the effects of the closure of onestore.Operating (Loss) Income for the Domestic Company Stores segment decreased in 2016 as a result of a decline in comparable store sales of 7.3% ,increased depreciation and amortization as a result of adding 41 total Company-owned stores, increased pre-opening costs due to more new storeopenings, and all stores built or acquired in 2016 had lower average unit sales volumes than the average store owned in 2015. For 2015 , Operating(Loss) Income for the Domestic Company Stores segment increased due to comparable store sales growth of 1.8% , partially offset by an increase indepreciation and amortization related to Company-owned stores portfolio changes and decreased operating margins.International. The following table presents International total revenues and Operating Income for the periods reported:(in thousands)2016 Change 2015 Change 2014Total revenues$369 11.8% $330 (41.9)% $568Percentage of total revenues0.3% 0.3% 0.6%Operating Income269 13.0% 238 N/M 20N/M = Not Meaningful49Table of ContentsTotal revenues for the International segment for 2016 increased compared to 2015 due to increased royalties. Total revenues for the Internationalsegment for 2015 decreased compared to 2014 largely as a result of the recognition of $0.2 million less in development fees related to our expansion inthe Middle East.Operating Income for the International segment for 2016 increased primarily due to increased royalties. Operating Income for the International segmentfor 2015 increased due to a reduction in selling, general and administrative costs, partially offset by decreased revenues of $0.2 million.Liquidity and Capital ResourcesOur primary sources of liquidity are cash flows from operating activities and proceeds from the incurrence of debt, which together are sufficient to fundour operations, tax payments, capital expenditures, interest, fees and principal payments on our debt as well as to support our growth strategy. As apublic company, we may also raise additional capital through the sale of equity. Our ability to obtain additional financing will depend on many factors,including prevailing market conditions, our financial condition and our ability to negotiate favorable terms and conditions. Financing may not be availableon terms that are acceptable or favorable to us, if at all. We have also initiated a refranchising initiative to sell more than 100 of our Company-ownedstores, reducing our Company-owned stores to about 50 by 2020. We intend to use the net cash proceeds from refranchising to reduce debt.As of January 2, 2017 , we had cash and cash equivalents of $2.1 million and a $20.0 million revolving credit facility, of which $0.8 million was drawn. Asof January 2, 2017 , we had $109.7 million of outstanding indebtedness and principal payments of $2.1 million are due quarterly. We believe that ourcash flows from operations, available cash and cash equivalents and available borrowings under our revolving credit facility will be sufficient to meet ourliquidity needs for at least the next 12 months.As of January 2, 2017 , we were in compliance with all of our covenants and other obligations under our senior secured credit facility.Cash FlowsThe following table presents a summary of cash flows from operating, investing and financing activities for the periods presented: Twelve Months Ended(in thousands)2016 2015 2014Net cash provided by operating activities$16,804 $23,743 $15,509Net cash used in investing activities(19,390) (19,554) (9,527)Net cash used in financing activities(2,212) (2,378) (4,631)Total cash flows$(4,798) $1,811 $1,351Operating ActivitiesNet cash provided by operating activities decrease d by $6.9 million in 2016 compared to 2015 primarily due to a $4.1 million decrease in net incomeadjusted for non-cash items and a $2.8 million reduction in net operating assets. Net cash provided by operating activities increase d by $8.2 million in2015 compared to 2014 primarily due to a $3.8 million reduction in interest paid and a $4.3 million decrease in net operating assets.Investing ActivitiesIn 2016 , net cash used in investing activities decrease d by $0.2 million because we did not make additional investments in Project Pie, a cost-methodinvestee, and we did not issue any new notes receivable, the combination of which reduced cash used in investing activities by $0.8 million. This savingswas offset in part by a $7.6 million increase in capital spending primarily on the construction of new stores and our new e-commerce online orderingplatform, offset by a $7.1 million decrease in cash paid for store acquisitions. In 2015 , net cash used in investing activities increase d by $10.0 millionover 2014 primarily due to a $6.4 million increase in capital spending, primarily for the construction of new stores, and a $5.1 million increase in cashpaid for store acquisitions.50Table of ContentsFinancing ActivitiesNet cash used in financing activities increased in 2016 by $ 0.2 million primarily due to a reduction in net long-term debt payments of $0.3 million. Netcash used in financing activities decreased in 2015 by $2.3 million primarily due to a $3.5 million decrease in IPO-related costs, partially offset by long-term debt payments of $2.8 million .Contractual ObligationsAs of January 2, 2017 , our contractual obligations and other commitments were as follows: Payments Due by Period(in millions)Total Less than 1year 1-3 years 3-5 years More than 5yearsLong-term debt obligations$109.7 $7.9 $101.8 $— $—Operating lease obligations24.8 5.5 9.6 5.4 4.3Total (1)$134.5 $13.4 $111.4 $5.4 $4.3(1)We have a technology license contract that provides for a purchase commitment which results in our being contingently liable for licenses not purchased by us or ourfranchise owners. We are contingently liable under this agreement for approximately $0.5 million annually through 2018, and considering various factors including internalforecasts, prior history, and the ability to use or resell any licenses purchased under this commitment in future periods, no accrual was required related to this commitment.This amount is not included in the table above because timing of payment, if any, is uncertain.Off-Balance Sheet ArrangementsWe have guaranteed certain operating lease payments related to specified franchised stores in connection with the divestiture and refranchising ofCompany-owned stores. The maximum aggregate potential liability associated with the guaranteed lease payments is $1.9 million . We believe that noneof these guarantees has or is likely to have a material effect on our results of operations, financial condition or liquidity. Additional information onguaranteed lease payments can be found in the “Lease guarantees” section of Financial Statements and Supplementary Data in Note 17 —Commitments and Contingencies of the accompanying Notes to Consolidated Financial Statements .Critical Accounting PoliciesOur discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have beenprepared in accordance with GAAP . The preparation of these consolidated financial statements requires us to make estimates and judgments that affectthe reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our judgments and estimates, including thoserelated to revenue recognition, accounts and notes receivable, goodwill and other intangible assets, impairment of long-lived assets, income taxes,advertising and marketing costs and share-based compensation. We base our estimates on historical experience and on various other assumptions thatwe believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Webelieve that our most critical accounting policies and estimates are:Revenue recognitionSales from Company-owned stores are recognized as revenue when the products are provided to customers. We report revenues net of sales taxescollected from customers and remitted to government taxing authorities. Royalty fees are based on a percentage of sales and are recorded as revenuesas the fees are earned and become receivable from the franchise owner. Lease income is recognized in the period earned, which generally coincideswith the period the expense is due to the master leaseholder, if a sublease.51Table of ContentsConsideration for franchise and development fees that are received in advance of being earned are included as unearned franchise and developmentfees in our Consolidated Balance Sheets. For fees paid on an installment basis that have otherwise been earned, recognition of revenue is deferred untilcollectability is certain.Franchise fees are recognized as revenue when all material services or conditions relating to the store have been substantially performed or satisfied byus, 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 relatingto the sale have been substantially performed, which is typically when the first franchised store begins operations in the development area. Developmentfees determined based on the number of stores to open in an area are deferred and recognized on a pro rata basis after individual franchise agreementsare executed for the stores subject to the development agreements and the stores begin operations.Revenue from gift cards is recognized when the gift card is redeemed by a customer in one of our stores. Revenue is not recognized for gift cardsredeemed in franchised stores. When the likelihood of a gift card being redeemed by a customer is determined to be remote, and the Company expectsto be entitled to the breakage, then the value of the unredeemed gift card is recognized by us as a contribution (“ gift card breakage ”) to the advertisingfund described below. We determine the gift card breakage rate based upon Company-specific historical redemption patterns.Accounts and notes receivableAccounts receivable consist primarily of (a) amounts due from franchise owners for continuing fees that are collected weekly, (b) receivables for supplychain vendor rebates, (c) subleased retail rents, and (d) other miscellaneous receivables. Accounts receivable are stated net of an allowance for doubtfulaccounts determined by management through an evaluation of specific accounts, considering historical losses and existing economic conditions whererelevant.Notes receivable consist primarily of amounts due from sales of Company-owned stores. Management reviews the notes receivable on a periodic basisand evaluates the creditworthiness and financial condition of the counterparty to determine the appropriate allowance, if any. In certain cases, we willchoose to modify the terms of a note to help a store owner achieve certain profitability targets or to accommodate a store owner while the store ownerobtains third-party financing. If the store owner does not repay the note, we have the contractual right to take back ownership of the store based on theunderlying franchise agreement, which therefore minimizes the credit risk to us.Goodwill and other intangible assetsGoodwill arises from business combinations and represents the excess of the purchase consideration transferred over the fair value of the net assetsacquired, including identifiable intangible assets and liabilities assumed. The majority of our goodwill was generated in May 2010 when Lee Equityacquired all of the equity interests of PMI Holdings, Inc. (“ Lee Equity Acquisition ”), though we have also recognized goodwill upon the acquisition ofstores from franchise owners. Goodwill is assigned to reporting units for purposes of impairment testing.We consider our trade name and trademarks to be indefinite-lived intangible assets. These assets were initially recognized in May 2010 upon the LeeEquity Acquisition . 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 eventoccurs or circumstances change that indicate an impairment might exist. Management evaluates indefinite-lived assets each reporting period todetermine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives are amortized over theirestimated useful lives on a straight-line basis and tested for impairment together with long-lived assets.In performing our annual goodwill impairment test, we have the option to first assess qualitative factors to determine whether the existence of events orcircumstances 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 wedetermine that it is more likely than not, we perform the two-step quantitative goodwill impairment test. Under the two-step quantitative goodwillimpairment test, the fair value of the reporting unit is compared to its respective carrying amount, including goodwill. If the fair value exceeds the carryingamount, then no impairment exists. If the carrying amount exceeds the fair value, further analysis is performed to determine the amount of theimpairment. Both the qualitative and quantitative assessments are completed separately with respect to the goodwill of each of our reporting units. Wereview goodwill for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist. We can bypassthe qualitative assessment and move directly to the quantitative assessment for any reporting unit in any period and can elect to resume performing thequalitative assessment in any subsequent period.52Table of ContentsMost of our goodwill is attributed to and tested for impairment at the Domestic Franchise segment, which is considered one reporting unit, as thesegment does not have any components of a business for which discrete financial information is available and is regularly reviewed by segmentmanagement.In performing our annual impairment test for indefinite-lived intangible assets, we have the option to first assess qualitatively whether it is more likely thannot that the indefinite-lived intangible asset is impaired, thus necessitating a quantitative impairment test. We do not calculate the fair value of anindefinite-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 canbypass the qualitative assessment and move directly to the quantitative assessment for any indefinite-lived intangible asset in any period and can electto resume performing the qualitative assessment in any subsequent period.Impairment of long-lived assetsLong-lived assets are evaluated for recoverability of the carrying amount whenever events and circumstances indicate the carrying amount of an assetmay 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 ofnegative operating cash flows), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property atamounts 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 thecash flows of other assets. Typically, long-lived assets relating to Company-owned stores are tested for impairment at the level of the retail market areain which they are located and long-lived assets relating to franchised operations are tested for impairment at the segment level. If the carrying amount ofan asset group exceeds the estimated, undiscounted future cash flows expected to be generated by the asset, then an impairment charge is recognizedto the extent the carrying amount exceeds the asset group’s fair value. In determining fair value, management considers current results, trends, futureprospects and other economic factors.Income taxesWe account for income taxes using the asset and liability approach. This requires the recognition of deferred tax assets and liabilities for the expectedfuture tax consequences of temporary differences between the financial statement and the tax basis of assets and liabilities at the applicable tax rates. Avaluation 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 taxassets will not be realized.The effect of uncertain tax positions would be recorded in the consolidated financial statements only after determining a more likely than not probabilitythat the uncertain tax positions would withstand an examination by tax authorities based on the technical merits of the position. The tax benefit to berecognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As facts andcircumstances change, management reassesses these probabilities and would record any changes in the financial statements as appropriate.Advertising and marketing costsWe expense media development costs when the advertisement is first aired. All other advertising costs, including contributions to other local andregional advertising programs are expensed when incurred. These costs are included in store operating costs or selling, general and administrativeexpenses based on the nature of the advertising and marketing costs incurred.Franchised 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. The advertising fund also operates a gift card program for the Papa Murphy's system.Any gift card breakage from this program is recognized as a contribution 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 resultin no profit recognized. The expenditures are primarily amounts paid to third-parties, but may also include personnel expenses and allocated costs. Inaccordance with GAAP , contributions to the advertising fund are netted against the related expense.At each reporting date, to the extent contributions exceed expenditures on a cumulative basis, the excess contributions to the advertising fund areaccounted for as a deferred liability and are recorded in accrued expenses in our Consolidated Balance Sheets . If expenditures exceed contributions ona cumulative basis, the excess is recorded as an expense within selling, general and administrative expenses. Previously recognized expenses may berecovered if subsequent contributions exceed expenditures.53Table of ContentsShare-based CompensationWe maintain two equity compensation plans, our 2010 Amended Management Incentive Plan and our 2014 Management Incentive Plan, under which wehave granted awards of stock options and restricted stock awards that typically vest based on the achievement of a time-vesting or a market condition.Compensation expense relating to restricted stock awards is recognized for the portion of the grant date fair value that exceeds any purchase price paidfor the stock. This expense is recognized over the requisite service period, typically the vesting period, utilizing the straight-line attribution method.The fair value of stock option awards is estimated on the grant date using a Black-Scholes-Merton option-pricing model. Compensation expense relatingto stock option awards is recognized for the grant date fair value. This expense is recognized over the requisite service period, typically the vestingperiod, utilizing the straight-line attribution method.In addition, prior to the IPO we sold unrestricted common and preferred stock to certain employees and recognized as compensation expense theportion of the fair value that exceeded the purchase price on the issue date.JOBS ActWe qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act . For as long as we are an “emerging growth company,” wemay take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerginggrowth companies,” including 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 tothe presentation of financial statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations , exemptions fromthe requirements of holding advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.We have availed ourselves of the reduced reporting obligations and executive compensation disclosure in this annual report on Form 10-K, and expectto continue to avail ourselves of the reduced reporting obligations available to emerging growth companies in future filings. We could be an “emerginggrowth company” until the end of our 2019 fiscal year.In addition, an emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to privatecompanies. However, we are choosing to “opt out” of this extended transition period, and as a result, we plan to comply with any new or revisedaccounting standards on the relevant dates on which non-emerging growth companies must adopt the standards. Section 107 of the JOBS Act providesthat our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.Recent Accounting PronouncementsFor a description of recent accounting pronouncements, see the “Recent Accounting Pronouncements” section in Financial Statements andSupplementary Data in Note 2 — Summary of Significant Accounting Policies of the accompanying Notes to Consolidated Financial Statements .54Table of ContentsItem 7A. Quantitative and Qualitative Disclosures about Market RiskCommodity Price RiskWe are exposed to market risks from changes in commodity prices. During the normal course of the year, we enter into national pricing commitments forcheese and other food products that are affected by changes in commodity prices and, as a result, our franchised and Company-owned stores aresubject to volatility in food costs. We also maintain relationships with multiple suppliers for certain key products, such as cheese. We do not engage inspeculative transactions nor do we hold or issue financial instruments for trading purposes. In instances when we use fixed pricing agreements with oursuppliers, these agreements cover our physical commodity needs, are not net-settled and are accounted for as normal purchases.Interest Rate RiskWe are subject to interest rate risk on our senior secured credit facility. Interest rates on our senior secured credit facility are based on LIBOR, and underspecified circumstances we may be required by our lenders to enter into interest rate swap arrangements. A hypothetical 1.0% increase or decrease inthe interest rate associated with our senior secured credit facility would have resulted in a $1.1 million change to interest expense on an annualizedbasis.Foreign Currency Exchange Rate RiskOur international franchise owners use the local currency as their functional currency. Royalty payments from our franchise owners in the Middle Eastare 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.55Table of ContentsItem 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income for the Fiscal Years ended January 2, 2017, December 28, 2015, and December 29, 201457Consolidated Balance Sheets as of January 2, 2017 and December 28, 201558Consolidated Statements of Shareholders’ Equity for the Fiscal Years ended January 2, 2017, December 28, 2015 and December 29, 201459Consolidated Statements of Cash Flows for the Fiscal Years ended January 2, 2017, December 28, 2015 and December 29, 201460Notes to Consolidated Financial Statements61Report of Independent Registered Public Accounting Firm8956Table of ContentsPapa Murphy’s Holdings, Inc. and SubsidiariesConsolidated Statements of Income Fiscal Year Ended(In thousands, except share and per share data)January 2, 2017 December 28,2015 December 29,2014Revenues Franchise royalties$39,851 $40,243 $39,305Franchise and development fees2,912 4,222 4,531Company-owned store sales82,080 74,300 50,598Other2,040 1,444 2,965Total revenues126,883 120,209 97,399 Costs and Expenses Store operating costs: Cost of food and packaging28,347 26,603 19,686Compensation and benefits23,746 19,858 12,673Advertising8,203 7,888 5,041Occupancy6,226 4,750 2,873Other store operating costs10,268 7,517 4,434Selling, general and administrative28,108 28,207 29,263Depreciation and amortization12,236 10,002 8,052Loss (gain) on disposal or impairment of property and equipment101 (251) 72Total costs and expenses117,235 104,574 82,094Operating Income9,648 15,635 15,305 Interest expense, net4,868 4,523 8,025Loss on early retirement of debt— — 4,619Loss on impairment of investments— 4,500 —Other expense, net188 133 178Income Before Income Taxes4,592 6,479 2,483 Provision for income taxes1,943 2,068 1,235Net Income2,649 4,411 1,248 Net loss attributable to noncontrolling interests— 500 —Net Income Attributable to Papa Murphy’s$2,649 $4,911 $1,248 Earnings (loss) per share of common stock Basic$0.16 $0.29 $(0.07)Diluted$0.16 $0.29 $(0.07)Weighted average common stock outstanding Basic16,743,285 16,653,127 12,101,236Diluted16,773,493 16,870,693 12,101,236See accompanying notes.57Table of ContentsPapa Murphy’s Holdings, Inc. and SubsidiariesConsolidated Balance Sheets(In thousands, except par value and share data)January 2, 2017 December 28,2015ASSETS Current Assets Cash and cash equivalents$2,069 $6,867Accounts receivable, net5,330 4,944Current portion of notes receivable92 78Inventories917 868Prepaid expenses and other current assets4,708 6,139Total current assets13,116 18,896Property and equipment, net28,516 21,261Notes receivable, net of current portion57 143Goodwill108,470 106,506Trade name and trademarks87,002 87,002Definite-life intangibles, net36,313 41,366Other assets398 297Total assets$273,872 $275,471 LIABILITIES AND EQUITY Current Liabilities Accounts payable$6,160 $9,798Accrued expenses and other current liabilities7,503 9,756Current portion of unearned franchise and development fees1,358 1,795Current portion of long-term debt7,879 2,800Total current liabilities22,900 24,149Long-term debt, net of current portion100,965 108,237Unearned franchise and development fees, net of current portion410 540Deferred tax liability, net44,179 42,439Other liabilities3,922 2,450Total liabilities172,376 177,815Commitments and contingencies (Note 17) Equity Preferred stock ($0.01 par value; 15,000,000 shares authorized; no shares issued or outstanding)— —Common stock ($0.01 par value; 200,000,000 shares authorized; 16,955,970 and 16,949,720 shares issued andoutstanding, respectively)170 169Additional paid-in capital119,932 118,801Stock subscriptions receivable— (100)Accumulated deficit(18,606) (21,214)Total equity101,496 97,656Total liabilities and equity$273,872 $275,471See accompanying notes.58Table of ContentsPapa Murphy’s Holdings, Inc. and SubsidiariesConsolidated Statements of Shareholders’ Equity CumulativeSeries APreferred Stock Cumulative Series B Preferred Stock Common Stock AdditionalPaid-InCapital StockSubscriptionReceivable AccumulatedDeficit Total PapaMurphy’sHoldings, Inc.Shareholders’Equity Non-ControllingInterests TotalEquity (In thousands)Shares Amount Shares Amount Shares Amount BALANCE,December 30, 20132,854 $60,156 27 $741 4,348 $43 $1,555 $(1,197) $(27,373) $33,925 $222 $34,147Common stockissued, net oftransaction costs— — — — 5,840 58 54,590 — — 54,648 — 54,648Common stockrepurchases— — — — (156) (1) (1,517) — — (1,518) — (1,518)Conversion ofpreferred stock tocommon stock(2,854) (60,156) (27) (741) 6,912 69 60,828 — — — — —Repayment of notereceivable issued tofund the purchaseof stock— — — — — — — 1,097 — 1,097 — 1,097Stock basedcompensationexpense— — — — — — 1,898 — — 1,898 — 1,898Noncontrollinginterest transactions— — — — — — — — — — 222 222Net income— — — — — — — — 1,248 1,248 — 1,248BALANCE,December 29, 2014— $— — $— 16,944 $169 $117,354 $(100) $(26,125) $91,298 $444 $91,742Common stockissued— — — — 42 — 376 — — 376 — 376Common stockrepurchases— — — — (36) — (10) — — (10) — (10)Stock basedcompensationexpense— — — — — — 1,081 — — 1,081 — 1,081Noncontrollinginterest transactions— — — — — — — — — — 56 56Net income (loss)— — — — — — — — 4,911 4,911 (500) 4,411BALANCE,December 28, 2015— $— — $— 16,950 $169 $118,801 $(100) $(21,214) $97,656 $— $97,656Cumulative effectadjustment— — — — — — 41 — (41) — — —Common stockissued— — — — 45 1 292 — — 293 — 293Common stockrepurchases— — — — (38) — (84) — — (84) — (84)Stock basedcompensationexpense— — — — — — 882 — — 882 — 882Repayment of notereceivable issued tofund the purchaseof stock— — — — — — — 100 — 100 — 100Net income— — — — — — — — 2,649 2,649 — 2,649BALANCE,January 2, 2017— $— — $— 16,956 $170 $119,932 $— $(18,606) $101,496 $— $101,496See accompanying notes.59Table of ContentsPapa Murphy’s Holdings, Inc. and SubsidiariesConsolidated Statements of Cash Flows Fiscal Year Ended (In thousands)January 2, 2017 December 28, 2015 December 29, 2014Operating Activities Net Income$2,649 $4,411 $1,248Net loss attributable to noncontrolling interests— 500 —Net Income Attributable to Papa Murphy’s2,649 4,911 1,248Adjustments to reconcile to cash from operating activities Depreciation and amortization12,236 10,002 8,052Loss (gain) on disposal or impairment of property and equipment101 (251) 72Deferred taxes1,724 1,707 1,123Loss on early retirement of debt— — 4,619Non-cash employee equity compensation898 1,081 1,898Loss on impairment of cost-method investment— 4,000 —Other non-cash items329 646 563Change in operating assets and liabilities Accounts receivable(522) 641 (3,302)Prepaid expenses and other assets2,197 (1,988) 2,265Unearned franchise and development fees(567) (1,213) (507)Accounts payable(1,103) 3,628 (766)Accrued expenses and other liabilities(1,138) 579 244Net cash provided by operating activities16,804 23,743 15,509 Investing Activities Acquisition of property and equipment(18,010) (10,430) (4,067)Acquisition of stores, less cash acquired(2,562) (9,691) (4,608)Proceeds from sale of stores1,110 1,250 179Issuance of notes receivable— (250) —Payments received on notes receivable72 67 969Investment in cost-method investee— (500) (2,000)Net cash used in investing activities(19,390) (19,554) (9,527) Financing Activities Proceeds from issuance of long-term debt— — 112,000Payments on long-term debt(3,321) (2,800) (169,900)Advances on revolver, net800 — —Issuance of common stock, net of underwriting fees— — 59,675Repurchases of common stock(84) (10) (1,518)Proceeds from exercise of stock options293 376 —Debt issuance and modification costs, including prepayment penalties— — (2,717)Payments received on subscription receivables100 — 1,097Costs associated with initial public offering— — (3,490)Investment by noncontrolling interest holders— 56 222Net cash used in financing activities(2,212) (2,378) (4,631) Net change in cash and cash equivalents(4,798) 1,811 1,351Cash and Cash Equivalents, beginning of year6,867 5,056 3,705Cash and Cash Equivalents, end of period$2,069 $6,867 $5,056 Supplemental Disclosures of Cash Flow Information Cash paid during the period for interest$4,894 $3,624 $7,385Cash paid during the period for income taxes$169 $3,078 $134Deferred offering costs paid in 2013 reclassified to equity$— $— $1,537Noncash Supplemental Disclosures of Investing and Financing Activities Issuance of note payable for acquisition of stores$— $— $2,900Acquisition of property and equipment in accounts payable$607 $3,098 $97See accompanying notes.60Table of ContentsPapa Murphy’s Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsNote 1Description of Business62Note 2Summary of Significant Accounting Policies62Note 3Acquisitions69Note 4Prepaid Expenses and Other Current Assets73Note 5Property and Equipment73Note 6Divestitures74Note 7Goodwill74Note 8Intangible Assets75Note 9Notes Receivable76Note 10Financing Arrangements76Note 11Fair Value Measurement78Note 12Accrued and Other Liabilities78Note 13Income Taxes79Note 14Shareholders’ Equity80Note 15Share-based Compensation80Note 16Earnings per Share (EPS)83Note 17Commitments and Contingencies83Note 18Retirement Plans85Note 19Related Party Transactions85Note 20Segment Information86Note 21Selected Quarterly Financial Data (unaudited)88Note 22Subsequent Events8861Table of ContentsNote 1 — Description of BusinessDescription of businessPapa Murphy’s Holdings, Inc. (“Papa Murphy’s” or the “Company”), together with its subsidiaries, is a franchisor and operator of a Take ‘N’ Bake pizzachain. The Company franchises the right to operate Take ‘N’ Bake pizza franchises and operates Take ‘N’ Bake pizza stores owned by the Company. Asof January 2, 2017 , the Company had 1,577 stores consisting of 1,537 domestic stores ( 1,369 franchised stores and 168 Company-owned stores)across 38 states, plus 40 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 storesand the collection of franchise royalties and fees associated with franchise and development rights.Public offeringOn May 7, 2014 , the Company completed an initial public offering (“ IPO ”) of 5,833,333 shares of common stock at a price to the public of $11.00 pershare. The Company received net proceeds from the offering of $54.6 million after offering fees and expenses. The net proceeds, along with additionalcash on hand, were used to repay $55.5 million of the Company’s loans outstanding under the Company’s senior secured credit facility.Note 2 — Summary of Significant Accounting PoliciesPrinciples of consolidation and basis of presentationThese consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP”) and include the accounts of Papa Murphy’s Holdings, Inc., its subsidiaries and certain entities which the Company consolidates as variable interestentities (“ VIEs ”). The Company reports noncontrolling interests in consolidated entities as a component of equity separate from shareholders’ equity. Allsignificant intercompany transactions and balances have been eliminated.The Company participates in various advertising cooperatives with its franchise owners established to collect and administer funds contributed for use inadvertising and promotional programs in a specific market designed to increase sales and promote the Papa Murphy’s brand. Contributions to theadvertising cooperatives are required for both Company-owned and franchised stores and are generally based on a percentage of a store’s sales. TheCompany maintains certain variable interests in these cooperatives. As the cooperatives are required to spend all funds collected on advertising andpromotional programs, total equity at risk is not sufficient to permit the cooperatives to finance their activities without additional subordinated financialsupport. Therefore, these cooperatives are VIEs . As a result of the Company's voting rights exercised through Company-owned stores, the Companyconsolidates certain of these cooperatives for which it is the primary beneficiary. Advertising cooperative assets, consisting primarily of cash andreceivables, can only be used to settle the obligations of the respective cooperative. Advertising cooperative liabilities represent the correspondingobligation arising from the receipt of the contributions to purchase advertising and promotional programs for which creditors do not have recourse to thegeneral credit of a primary beneficiary. Therefore, the Company reports all assets and liabilities of the advertising cooperatives that it consolidates as prepaid expenses and other current assets and accrued expenses and other current liabilities , respectively, in the Consolidated Balance Sheets .Because the contributions to these advertising and marketing cooperatives are specifically designated and segregated for advertising, the Companydoes not reflect franchise owner contributions to these cooperatives in its Consolidated Statements of Income or Consolidated Statements of Cash Flows.Fiscal yearThe Company uses a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal year 2016 was a 53-week year. Fiscal years2015 and 2014 were 52-week years. All references to years relate to fiscal periods rather than calendar periods. References to fiscal 2016 , 2015 and2014 are references to fiscal years ended January 2, 2017 , December 28, 2015 and December 29, 2014 , respectively.62Table of ContentsUse of estimatesPreparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported inthe Company’s consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions includethe estimation of the fair value of acquired assets and liabilities, including goodwill and intangible assets and the related subsequent impairment analysis,fair value of stock based compensation, asset retirement obligations, lease guarantees, and deferred tax asset valuation allowance. Althoughmanagement bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual resultsmay differ from those estimates.Cash and cash equivalentsThe Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. TheCompany maintains cash and cash equivalent balances with financial institutions that periodically exceed federally insured limits. The Company alsoholds limited funds, to the extent necessary, on deposit outside the United States. The Company makes such deposits with entities it believes are of highcredit quality and has not incurred any losses related to these balances. Management believes its credit risk to be minimal.All credit card, debit card and electronic benefits transfer transactions that process in less than seven days are classified as cash and cash equivalents.The amounts due from banks for these transactions classified as cash and cash equivalents totaled $1.0 million and $0.4 million for fiscal 2016 and 2015, respectively .Accounts receivableAccounts receivable consist primarily of (a) amounts due from franchise owners for continuing fees that are collected weekly, (b) receivables for vendorrebates and (c) other miscellaneous receivables. Accounts receivable are stated net of an allowance for doubtful accounts determined by managementthrough an evaluation of specific accounts, considering historical losses and existing economic conditions where relevant. Allowance for doubtfulaccounts amounted to $37,000 and $31,000 for fiscal 2016 and 2015 , respectively.Notes receivableNotes receivable consist primarily of amounts due from sales of Company-owned stores. Management reviews the notes receivable on a periodic basisand evaluates the creditworthiness and financial condition of the counterparty to determine the appropriate allowance, if any. If the store owner does notrepay the note, the Company has the contractual right to take back ownership of the store based on the underlying franchise agreement, which thereforeminimizes the credit risk to the Company.Stock subscriptions receivablePrior to its IPO , the Company issued common stock to certain employees for stock subscriptions receivable, which are not collateralized by the stockand were classified as a reduction of equity. During fiscal 2016, the stock subscriptions receivable outstanding of $100,000 was collected.InventoriesInventories 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 equipmentProperty and equipment are recorded at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives ofthe assets. Leasehold improvements are amortized using the straight-line method over the shorter of the useful lives of the assets or the related leaseterm, including renewal options to the extent renewals are reasonably assured, not to exceed 10 years.63Table of ContentsThe estimated useful lives for property and equipment are: Property and EquipmentEstimated Useful LifeLeasehold improvementsShorter of lease term or estimated useful life, not to exceed 10 yearsRestaurant equipment and fixtures5 to 7 yearsOffice furniture and equipment3 to 7 yearsSoftware3 to 5 yearsVehicles5 yearsDeferred financing costsCosts incurred to obtain long-term financing are accounted for as a deferred charge and amortized to interest expense over the terms of the respectivedebt agreements using the effective interest method. Unamortized deferred charges are recorded as a reduction from the carrying amount of the relateddebt liability in the Company’s Consolidated Balance Sheets .Stock issuance costsCosts of obtaining new capital by issuing common or preferred stock 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 theCompany’s Consolidated Balance Sheets .Goodwill and other intangible assetsGoodwill arises from business combinations and represents the excess of the purchase consideration transferred over the fair value of the net assetsacquired, including identifiable intangible assets and liabilities assumed. The majority of the Company’s goodwill was generated in May 2010 whenaffiliates of Lee Equity Partners, LLC (“ Lee Equity ”) acquired all of the equity interests of PMI Holdings, Inc. (“ Lee Equity Acquisition ”), though theCompany has also recognized goodwill upon the acquisition of stores from franchise owners. Goodwill is assigned to reporting units for purposes ofimpairment testing.The Company considers its trade name and trademarks to be indefinite-lived intangible assets. These assets were initially recognized in May 2010 uponthe 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 eventoccurs or circumstances change that indicate an impairment might exist. Management evaluates indefinite-lived assets each reporting period todetermine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives are amortized over theirestimated 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 first assesses qualitative factors to determine whether the existence of events orcircumstances 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 theCompany determines that it is more likely than not, it performs the two-step quantitative goodwill impairment test. Under the two-step quantitativegoodwill impairment test, the fair value of the reporting unit is compared to its respective carrying amount, including goodwill. If the fair value exceeds thecarrying amount, then no impairment exists. If the carrying amount exceeds the fair value, further analysis is performed to determine the amount of theimpairment. Both the qualitative and quantitative assessments are completed separately with respect to the goodwill of each of the Company’s reportingunits. The Company reviews goodwill for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairmentexist. The Company can bypass the qualitative assessment and move directly to the quantitative assessment for any reporting unit in any period and canelect to resume performing the qualitative assessment in any subsequent period.Most of the Company’s goodwill is attributed to and tested for impairment at the Domestic Franchise segment, which is considered one reporting unit, asthe segment does not have any components of a business for which discrete financial information is available and is regularly reviewed by segmentmanagement.In performing its annual impairment test for indefinite-lived intangible assets, the Company first assesses qualitatively whether it is more likely than notthat the indefinite-lived intangible asset is impaired, thus necessitating a quantitative impairment test. The Company does not calculate the fair value ofan indefinite-lived asset and perform the quantitative test unless it determines that it is more likely than not that the asset is impaired. The Companyreviews indefinite-lived intangible64Table of Contentsassets for impairment annually, as of the first day of its fourth fiscal quarter, or more frequently if indicators of impairment exist. The Company canbypass the qualitative assessment and move directly to the quantitative assessment for any indefinite-lived intangible asset in any period and can electto resume performing the qualitative assessment in any subsequent period.Impairment of long-lived assetsLong-lived assets are evaluated for recoverability of the carrying amount whenever events and circumstances indicate the carrying amount of an assetmay 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 ofnegative operating cash flows), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property atamounts 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 thecash flows of other assets. Typically, long-lived assets relating to Company-owned stores are tested for impairment at the level of the retail market inwhich they are located and long-lived assets relating to franchised operations are tested for impairment at each segment level. If the carrying amount ofan asset group exceeds the estimated, undiscounted future cash flows expected to be generated by the asset, then an impairment charge is recognizedto the extent the carrying amount exceeds the asset group’s fair value. In determining fair value, management considers current results, trends, futureprospects and other economic factors.Assets held for saleAssets are classified as held for sale when management with the appropriate authority commits to a plan to sell the assets, the assets are available forimmediate sale, the assets are actively marketed at a reasonable price, the sale is probable within a year, and certain other criteria are met. Assets heldfor sale consist primarily of Company-owned stores where the Company has committed to a plan to sell specific stores. Assets designated as held forsale are held at the lower of the net book value or fair value less costs to sell and reported in Prepaid expenses and other current assets on theConsolidated Balance Sheets (see Note 4 — Prepaid Expenses and Other Current Assets ). Depreciation is not charged against property and equipmentclassified as assets held for sale.Asset retirement obligations (“ ARO s”)ARO s are primarily associated with leasehold improvements which, at the end of a lease, the Company is obligated to remove in order to comply withcertain lease agreements. At the inception of a lease with such conditions, the Company records an ARO and a corresponding capital asset in anamount 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 itsprojected future value and, upon satisfaction of the ARO conditions, any difference between the recorded liability and the actual retirement costs incurredis recognized as an operating gain or loss in the Consolidated Statements of Income . The Company recorded ARO s of $1.8 million and $1.5 million asof fiscal 2016 and 2015 , respectively, as a component of other liabilities.Revenue recognitionCompany-owned store sales are recognized when products are provided to customers. Franchise royalties are based on a percentage of sales and arerecognized as the fees are earned and become receivable from the franchise owner.Franchise fees are recognized as revenue when all material services or conditions relating to a store have been substantially performed or satisfied bythe 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 relatingto the sale have been substantially performed, which is typically when the first franchised store begins operations in the development area. Developmentfees determined based on the number of stores to open in an area are deferred and recognized on a pro rata basis after individual franchise agreementsare executed for the stores subject to the development agreements and the stores begin operations.Consideration for franchise and development fees received in advance of being earned are included as unearned franchise and development fees in theCompany’s Consolidated Balance Sheets . For fees paid on an installment basis that have otherwise been earned, recognition of revenue is deferreduntil collectability is certain.65Table of ContentsOther revenues consist primarily of (a) software license revenue from the resale of point-of-sale (“ POS ”) software licenses to franchise owners at cost;(b) transaction fees from the Company's online ordering platform; (c) customer support services provided to franchisees; and (d) lease incomerecognized in the period earned, which generally coincides with the period the expense is due to the master leaseholder, if a sublease.The Company operates a system-wide gift card program and recognizes revenue from gift cards when a gift card is redeemed in a Company-ownedstore. When the likelihood of a gift card being redeemed by a customer is determined to be remote (“ gift card breakage ”), the value of the unredeemedgift card is recognized by the Company as a contribution to the advertising fund described under Advertising and marketing costs below. The Companydetermines the gift card breakage rate based upon Company-specific historical redemption patterns.Software revenue recognitionThe Company recognizes revenues for the resale of software licenses upon delivery to franchise owners to the extent collectability is probable. In aneffort to obtain more favorable pricing and expedite the roll-out of POS systems, the Company acquired $4.5 million of POS software licenses in a lumpsum purchase in fiscal 2013 and sold them to franchise owners at cost. As of the end of fiscal 2016, all of the POS software licenses were sold.Advertising and marketing costsAdvertising costs, including contributions to local advertising cooperatives which are based on a percentage of sales, are expensed when incurredexcept for media development costs which are expensed when the advertisement is first aired. These costs are included in store operating costs orselling, general and administrative expenses based on the nature of the advertising and marketing costs incurred.Franchised and Company-owned stores in the United States contribute to an advertising fund that the Company manages on behalf of these stores. Inaddition, certain suppliers contribute to the advertising fund. Under our franchise agreements and other agreements, contributions received by theadvertising fund must be spent on marketing, creative efforts, media support, or other related purposes specified in the agreements and result in no profitrecognized. Contributions to the advertising fund are netted against the related expense. Expenditures of the advertising fund are primarily amounts paidto third-parties, but may also include personnel expenses and allocated costs. At each reporting date, to the extent contributions to the advertising fundexceed expenditures on a cumulative basis, the excess contributions are accounted for as a deferred liability and are recorded in accrued expenses inthe Company’s Consolidated Balance Sheets . However, if expenditures exceed contributions on a cumulative basis, the excess is recorded as anexpense within selling, general and administrative expenses. In subsequent periods, previously recognized expenses may be recovered if subsequentcontributions exceed expenditures. Excess (recovered) advertising expense included in selling, general and administrative, net of contributions, was $0.4million , $1.2 million and $(1.1) million as of fiscal 2016 , 2015 and 2014 , respectively.As of the end of fiscal 2016 , previously recognized expenses of $1.6 million may be recovered in future periods if subsequent advertising fundcontributions exceed expenditures.Store pre-opening costsPre-opening costs, including wages, benefits, and travel for the training and opening teams, cost of food and packaging, and other store operating costsare expensed as incurred prior to a store opening for business.Rent expenseRent expense for the Company’s leases, which generally have escalating rental payments over the term of the lease, is recorded on a straight-line basisover the lease term. The lease term includes renewal options that are reasonably expected to be exercised and begins when the Company has controland possession of the leased property, which is typically before rental payments are due under the lease. The difference between the rent expense andrent paid is recorded as deferred rent as a component of accrued expenses. Tenant allowances are recorded in deferred rent and amortized asreductions 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.When a store is closed before the end of its lease, the Company accrues a loss provision for lease termination costs based on the net present value ofthe 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 provision for lease losses. The Companycurrently has no provision for lease losses from closed stores. The initial charge and any subsequent adjustment to the accrual are included in storeoccupancy costs.66Table of ContentsLease guaranteesOn occasion, the Company becomes a guarantor for certain operating leases when it sells a Company-owned store or a store under construction by theCompany. The guarantee obligation is initially measured as the fair value of the guarantee, which is recorded as a liability. The Company recognizes itsrelease from risk as a guarantor as the lease obligation is settled over the remaining lease term. In addition, throughout the guarantee period, theCompany records a reserve when any loss becomes probable in connection with such lease guarantee. As of fiscal 2016 and 2015 , the Company’sliability in connection with the unamortized value of these lease guarantees was $55,000 and $32,000 , respectively, and no additional liability has beenrecorded in connection with a probable loss from these guarantees.Income taxesThe Company accounts for income taxes using the asset and liability approach. This requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of temporary differences between the financial statement and the tax basis of assets and liabilities at the applicabletax 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 thedeferred tax assets will not be realized.The effect of uncertain tax positions would be recorded in the consolidated financial statements only after determining a more likely than not probabilitythat the uncertain tax positions would withstand an examination by tax authorities based on the technical merits of the position. The tax benefit to berecognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As facts andcircumstances change, management reassesses these probabilities and would record any changes in the financial statements as appropriate.As of fiscal 2016 and 2015 , the Company has recorded reserves for uncertain tax positions totaling $72,000 and $0 , respectively.Share-based compensationThe Company awards equity compensation under the Company's 2010 Amended Management Incentive Plan (“ 2010 Plan ”) and 2014 ManagementIncentive Plan (“ 2014 Plan ”), consisting of stock option and restricted stock awards. Restricted stock and stock option awards typically vest based onthe achievement of a time-vesting or a market condition. Compensation expense relating to restricted stock with time-vesting conditions is recognized forthe portion of the grant date fair value that exceeds any purchase price paid for the stock. This expense is recognized over the requisite service period,typically the vesting period, utilizing the straight-line attribution method.The fair value of stock option awards is estimated on the grant date using a Black-Scholes-Merton option-pricing model. The risk-free interest rate isbased on the estimated effective life and is estimated based on U.S. Treasury Yield Curve rates. Since the Company has limited relevant option exerciseexperience, the expected term is based on a simplified method calculation and the expected volatility is based on the historical volatility of the shareprice of a group of peer companies. Compensation expense relating to stock option awards is recognized for the the grant date fair value. This expenseis recognized over the requisite service period, typically the vesting period, utilizing the straight-line attribution method.Business CombinationsThe Company accounts for business combinations under the acquisition method of accounting, recording any assets acquired and liabilities assumedbased upon their respective fair values. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilitiesassumed is recorded as goodwill. The Company uses management estimates based on historically similar transactions to assist in establishing theacquisition date fair values of assets acquired, liabilities assumed, and contingent consideration granted, if any. These estimates and valuations requirethe Company to make significant assumptions, including projections of future events and operating performance.Internal use softwareExpenditures for major software purchases and software developed for internal use are capitalized and amortized over the useful life of the software (three to five years) on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and servicesassociated with developing or obtaining internal-use computer software. Costs associated with preliminary project stage activities, training, maintenanceand all other post-implementation stage activities are expensed as incurred.67Table of ContentsReclassificationCertain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications hadno effect on the Company's consolidated financial position, shareholders' equity or net cash flows for any of the periods presented.Accounting pronouncements recently adoptedIn March 2016, the Financial Accounting Standards Board (“ FASB ”) issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718) (“ ASU2016-09 ”), which simplifies several aspects of the accounting for share-based payment awards to employees, including the accounting for income taxes,forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. The effective date for ASU 2016-09 is for fiscal years,and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted in any annual or interim period for whichfinancial statements have not yet been issued. All amendments in ASU 2016-09 that apply must be adopted in the same period. The Company early-adopted ASU 2016-09 at the beginning of fiscal year 2016. As permitted under ASU 2016-09 , the Company has elected to account for forfeitures incompensation cost when they occur in order to ease the administrative burden of estimating forfeitures. The effect of adopting ASU 2016-09 is reflectedin stockholders’ equity in the Consolidated Balance Sheets on a modified retrospective basis through a cumulative-effect adjustment. This cumulative-effect adjustment reclassified $41,000 from accumulated deficit to additional paid-in capital at the beginning of fiscal year 2016.Recent accounting pronouncementsIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASU 2014-09 ”), a new standard to achieve aconsistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under GAAP . Theoriginal effective date for ASU 2014-09 would have required adoption by the Company in the first quarter of fiscal 2017 with early adoption prohibited. InAugust 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date (“ ASU 2015-14”), which defers the effective date of ASU 2014-09 for one year and permits early adoption in accordance with the original effective date of ASU 2014-09.The new revenue standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effectof initially applying the standard recognized at the date of initial application. The Company anticipates adopting the standard in the first quarter of fiscal2018 using the full retrospective method to restate each prior reporting period presented.The Company anticipates this standard will have a material impact on its consolidated financial statements. While the Company continues to assess allpotential impacts of the standard, it currently believes the most significant impacts will relate to its: (i) accounting for franchise and development fees,and (ii) accounting for its advertising funds. The Company expects revenue related to its franchise royalties, which are based on a percentage offranchise sales, and revenue from Company-owned restaurants to remain substantially unchanged. Specifically, under the new standard the Companyexpects to recognize franchise fees ratably over the life of the contract rather than at the time the store is opened or a successive contract commences.In addition, the Company expects to account for advertising fund revenues on a gross basis, instead of net, as the Company is the principal thatdetermines how the funds collected will be spent. The Company continues to evaluate the impact the adoption of this standard will have on therecognition of other revenue transactions such as the refranchising of Company-owned restaurants.In February 2016, the FASB issued ASU 2016-02, Leases (“ ASU 2016-02 ”). This update requires that lessees recognize assets and liabilities on thebalance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also will require disclosures designedto give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include bothqualitative and quantitative information. The effective date for ASU 2016-02 is for fiscal years, and interim periods within those fiscal years, beginningafter December 15, 2018 with earlier adoption permitted. The Company is still evaluating the impact of ASU 2016-02 on its financial position and resultsof operations.68Table of ContentsNote 3 — AcquisitionsAcquisitions in 2016On April 11, 2016, Papa Murphy’s Company Stores, Inc. (" PMCSI "), a wholly owned subsidiary of the Company, acquired certain assets used in theoperation of nine Papa Murphy’s stores in the Joplin, Missouri, and Fort Smith, Arkansas, areas from a franchise owner. On November 15, 2016, PMCSIacquired certain assets used in the operation of one store in the Grand Rapids, Michigan area from a franchise owner. The total consideration paid ofapproximately $3.1 million was funded through existing cash, $0.5 million in insurance proceeds and advances on the Company's Senior Credit Facility(see Note 10 — Financing Arrangements ). The Company incurred transaction costs of $10,000 associated with the acquisitions that were recognized asother store operating costs in the Consolidated Statements of Income .The fair values of the assets acquired are summarized below (in thousands):Cash and cash equivalents$5Inventory26Prepaid expenses and other current assets27Property and equipment604Asset retirement obligations(67)Total identifiable net assets acquired595Goodwill1,964Total net assets acquired2,559Dispute settlement500Total consideration$3,059Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is expected to be fully deductible forincome tax purposes. This goodwill is primarily attributable to the acquired customer bases and, to a lesser extent, economies of scale expected fromcombining the operations of the acquired stores with the existing operations of the Company.The pro forma effects of this acquisition and the operating results of the acquired stores are not presented because the effects were not material toreported results.Acquisitions in 2015On March 9, 2015, PMCSI acquired certain assets used in the operation of six Papa Murphy’s stores in the Seattle, Washington, area from M2ADManagement Inc., the previous operator of the six Papa Murphy’s stores (the “ M2AD Acquisition ”). Transaction costs of $30,000 associated with theM2AD Acquisition were recognized as other store operating costs in the Consolidated Statements of Income . The total purchase price of $4.1 millionwas funded through existing cash.The fair value of the net assets acquired are summarized below (in thousands):Cash and cash equivalents$5Inventories39Prepaid expenses and other current assets38Property and equipment406Reacquired franchise rights1,139Asset retirement obligations(75)Total identifiable net assets acquired1,552Goodwill2,554Total consideration$4,106Reacquired franchise rights have weighted average useful lives of 6.6 years . Goodwill represents the excess of the purchase price over the net tangibleand intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquiredcustomer bases and, to a lesser extent, economies of scale expected from combining the operations of the acquired entities with that of the Company.69Table of ContentsUnaudited pro forma information —The unaudited pro forma consolidated revenues and net income of the Company as though the acquisition datehad been as of the beginning of 2014 are as follows:(in thousands)2015 2014Pro forma revenues$121,287 $102,592Pro forma net income4,958 1,331 The pro forma information presented in this note includes adjustments for amortization of acquired intangible assets, depreciation of acquired propertyand equipment, interest expense on borrowings used to fund the consideration paid and income tax expense. The pro forma information is presented forinformational purposes and may not be indicative of the results that would have been obtained had the acquisitions actually occurred at the beginning of2014, nor is it intended to be indicative of future operating performance.Revenues and net income from the acquired stores from the closing date of the acquisition included in the Company’s Consolidated Statements ofIncome for 2015 are as follows (in thousands):Revenues$4,220Net income307PMCSI also acquired all of the assets of 17 stores through eight individually immaterial acquisitions during 2015: eight stores in Tennessee, three inWashington, two in Texas, one in Idaho, one in Oregon, one in Colorado, and one in New Mexico. The Tennessee stores were acquired on January 26,2015, the Washington stores on May 11, 2015, the Texas stores on March 9, 2015 and July 27, 2015, respectively, the Idaho store on January 12, 2015,the Oregon store on March 2, 2015, the Colorado store on May 4, 2015, and the New Mexico store on November 2, 2015. The Company incurredtransaction costs of $33,000 associated with the acquisitions that were recognized as other store operating costs in the Consolidated Statements ofIncome . The total purchase price for the acquired stores of $5.5 million was funded through existing cash.The fair value of the net assets acquired are summarized below (in thousands):Cash and cash equivalents$10Inventories85Prepaid expenses and other current assets69Property and equipment1,360Reacquired franchise rights1,041Asset retirement obligations(185)Total identifiable net assets acquired2,380Goodwill3,134Total consideration$5,514Reacquired franchise rights have weighted average useful lives of 3.4 years . Goodwill represents the excess of the purchase price over the net tangibleand intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquiredcustomer bases and, to a lesser extent, economies 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 income of the Company as though the acquisition dateshad been as of the beginning of 2014 are as follows:(in thousands)2015 2014Pro forma revenues$122,183 $105,222Pro forma net income4,932 1,244 The pro forma information presented in this note includes adjustments for amortization of acquired intangible assets, depreciation of acquired propertyand equipment, interest expense on borrowings used to fund the consideration paid and income tax expense. The pro forma information is presented forinformational purposes and may not be indicative of the70Table of Contentsresults that would have been obtained had the acquisitions actually occurred at the beginning of 2014, nor is it intended to be indicative of futureoperating performance.Revenues and net loss from the acquired stores from the closing dates of the acquisitions that are included in the Company’s Consolidated Statementsof Income for 2015 are as follows (in thousands):Revenues$6,594Net loss(322) Acquisitions in 2014On August 18, 2014, PMCSI acquired certain assets used in the operation of nine Papa Murphy’s stores in the Minneapolis, Minnesota area from DrakeEnterprises, the previous operator of the nine Papa Murphy’s stores. Transaction costs of $59,000 associated with the acquisition were recognized asother store operating costs in the Consolidated Statements of Income . The total purchase price of $3.5 million was funded through cash and theissuance of a $2.9 million note payable to the seller (see Note 10 — Financing Arrangements ).The fair value of the net assets acquired are summarized below (in thousands):Cash and cash equivalents$4Inventories46Prepaid expenses and other current assets33Property and equipment546Reacquired franchise rights516Asset retirement obligations(61)Total identifiable net assets acquired1,084Goodwill2,369Total consideration$3,453Reacquired franchise rights have weighted average useful lives of 3.3 years . Goodwill represents the excess of the purchase price over the net tangibleand intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquiredcustomer bases and, to a lesser extent, economies 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 income (loss) of the Company as though the acquisitiondate had been as of the beginning of 2014 are as follows:(in thousands)2014Pro forma revenues$100,307Pro forma net income1,208 The pro forma information presented in this note includes adjustments for amortization of acquired intangible assets, depreciation of acquired propertyand equipment, interest expense on borrowings used to fund the consideration paid and income tax expense. The pro forma information is presented forinformational purposes and may not be indicative of the results that would have been obtained had the acquisitions actually occurred at the beginning of2014, nor is it intended to be indicative of future operating performance.Revenues and net loss from the acquired stores from the closing date of the acquisition included in the Company’s Consolidated Statements of Incomefor 2014 are as follows (in thousands):Revenues$2,039Net loss(56)PMCSI also acquired all of the assets of thirteen stores through six individually immaterial acquisitions during 2015 : five stores in Florida, four in Texas,three in Oregon, and one in Washington. The Florida stores were acquired on71Table of ContentsDecember 1, 2014, the Texas stores were acquired on December 4, 2014, the Oregon stores were acquired on December 8, 2014, and the Washingtonstore was acquired on November 25, 2014. The Company incurred transaction costs of $6,000 associated with the acquisitions that were recognized asother store operating costs in the Consolidated Statements of Income . The total purchase price for the acquired stores of $4.1 million was fundedthrough cash.The fair value of the net assets acquired are summarized below (in thousands):Cash and cash equivalents$5Inventories67Prepaid expenses and other current assets58Property and equipment1,191Reacquired franchise rights292Asset retirement obligations(111)Total identifiable net assets acquired1,502Goodwill2,633Total consideration$4,135Reacquired franchise rights have weighted average useful lives of 2.7 years . Goodwill represents the excess of the purchase price over the net tangibleand intangible assets acquired and is expected to be fully deductible for income tax purposes. This goodwill is primarily attributable to the acquiredcustomer bases and, to a lesser extent, economies 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 income (loss) of the Company as though the acquisitiondates had been as of the beginning of 2014 are as follows:(in thousands)2014Pro forma revenues$102,975Pro forma net income1,087 The pro forma information presented in this note includes adjustments for amortization of acquired intangible assets, depreciation of acquired propertyand equipment, interest expense on borrowings used to fund the consideration paid and income tax expense. The pro forma information is presented forinformational purposes and may not be indicative of the results that would have been obtained had the acquisitions actually occurred at the beginning of2014, nor is it intended to be indicative of future operating performance.Revenues and net loss from the acquired stores from the closing dates of the acquisitions that are included in the Company’s Consolidated Statementsof Income for 2014 are as follows (in thousands):Revenues$538Net loss(16) InvestmentsThe Company, through a non-wholly owned subsidiary, Project Pie Holdings, LLC (“ PPH ”), made investments in Project Pie, LLC (“ Project Pie ”) in theform of Series A Convertible Preferred Units (the “ Preferred Units ”). Project Pie is a fast casual custom-pizza restaurant chain with stores locatedthroughout the United States, the Philippines and Scotland.The Company disposed of its ownership interests in PPH on June 29, 2015. Prior to the Company’s disposal of its ownership interests in PPH , itrecorded a pre-tax impairment of $4.5 million to its investment in Project Pie .Earlier in 2015, the Company determined that Project Pie was a variable interest entity as a result of Project Pie having insufficient equity at risk, but thatthe Company did not have a variable interest in Project Pie and did not have control. The Company did not account for its investment in Project Pie as anequity method investment since the Company’s investment was in preferred units with subordination characteristics substantially different from thecommon units and were determined not to be in-substance common stock. The Company’s investment was classified as a cost method investment inother assets.72Table of ContentsNote 4 — Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consist of the following:(in thousands)2016 2015Prepaid media development costs$606 $352Prepaid software and support985 464Prepaid rent622 477Prepaid insurance453 602Taxes receivable547 2,872POS software licenses for resale— 660Assets held for sale1,406 605Advertising cooperative assets, restricted48 26Other41 81Total prepaid expenses and other current assets$4,708 $6,139Prepaid media development costs represent costs incurred for advertisements that have not aired.Assets held for sale include stores under construction or opened in the past twelve months that the Company is actively marketing to new or existingfranchisees. It also includes stores that the Company has committed to a plan to sell and the sale of these stores is considered probable in the nexttwelve months.The Company recognizes software license revenue upon the resale of Point of Sale (“ POS ”) software licenses to franchise owners at cost. The incomefrom the sale is included in other revenues and the related expense is recorded in selling, general and administrative costs on the ConsolidatedStatements of Income . POS software license revenue was $0.7 million and $1.0 million for fiscal 2016 and 2015 respectively.Note 5 — Property and EquipmentProperty and equipment, net, consists of the following:(in thousands)2016 2015Leasehold improvements$11,726 $7,099Restaurant equipment and fixtures15,361 10,803Office furniture and equipment2,535 5,575Software14,929 5,291Vehicles92 92Construction in progress987 6,193 45,630 35,053Accumulated depreciation and amortization(17,114) (13,792)Property and equipment, net$28,516 $21,261Depreciation expense amounted to $7.2 million , $4.7 million and $3.0 million during fiscal 2016 , 2015 and 2014 , respectively.The Company recognized an impairment loss of $0.2 million in fiscal 2016 related to certain underperforming Company-owned stores. No impairmentloss was recognized during fiscal 2015 or 2014.73Table of ContentsNote 6 — DivestituresDivestitures in 2016On October 18, 2016 , the Company completed the sale and refranchise of one Company-owned store in Colorado and one Company-owned store inMinnesota. On October 24, 2016 , the Company completed the sale and refranchise of one Company-owned store in Washington. The aggregate saleprice for the three stores was $1.0 million , paid in cash, and the Company recognized a pre-tax gain of $69,000 . In connection with the sale, the buyerspaid $75,000 in franchise fees. These dispositions did not meet the criteria for accounting as a discontinued operation.The following is a summary of the assets sold (in thousands):Leasehold improvements$386Restaurant equipment and fixtures438Property and equipment824Prepaid expenses and other current assets19Total assets sold$843Divestitures in 2015On December 28, 2015 , the Company completed the sale and refranchise of four Company-owned stores in Colorado for $1.3 million in cash, andrecognized a pre-tax gain of $0.4 million . In connection with the sale, the buyer paid $60,000 in franchise fees. This disposition did not meet the criteriafor accounting as a discontinued operation.The following is a summary of the assets sold (in thousands):Leasehold improvements$341Restaurant equipment and fixtures367Property and equipment708Prepaid expenses and other current assets22Intangible assets8Goodwill263Total assets sold$1,001Note 7 — GoodwillThe following summarizes changes to the Company’s goodwill, by reportable segment:(in thousands)Domestic CompanyStores DomesticFranchise TotalBalance at December 29, 2014$19,536 $81,546 $101,082Acquisitions5,687 — 5,687Disposition(263) — (263)Balance at December 28, 201524,960 81,546 106,506Acquisitions1,964 — 1,964Balance at January 2, 2017$26,924 $81,546 $108,470There is no goodwill associated with the International segment. Based on the results of the Company's impairment testing, the Company did notrecognize any impairment of goodwill during fiscal 2016 , 2015 or 2014 . The Company recorded Goodwill disposals in fiscal 2015 and 2014 from thesale of Company-owned stores to franchise owners.74Table of ContentsNote 8 — Intangible AssetsIntangible assets consist of the following: 2016 (in thousands)Gross CarryingAmount AccumulatedAmortization Net Weighted AverageAmortizationPeriodIntangible assets subject to amortization: Franchise relationships$56,000 $(23,355) $32,645 16.0Reacquired franchise rights6,914 (3,246) 3,668 6.3Net intangible assets subject to amortization$62,914 $(26,601) $36,313 14.5Intangible assets not subject to amortization Trade name and trademarks $87,002 2015 (in thousands)Gross CarryingAmount AccumulatedAmortization Net Weighted AverageAmortizationPeriodIntangible assets subject to amortization: Franchise relationships$56,000 $(19,788) $36,212 16.0Reacquired franchise rights8,366 (3,212) 5,154 6.0Net intangible assets subject to amortization$64,366 $(23,000) $41,366 14.5Intangible 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 . Tradename and trademarks are intangible assets determined to have indefinite lives and are not subject to amortization. Management has concluded thatnone of its reporting units with a material amount of intangible assets not subject to amortization are at risk for failing step one of the quantitativeassessment.Amortization expense amounted to $5.1 million , $5.3 million $5.0 million for fiscal 2016 , 2015 and 2014 , respectively.The estimated future amortization expense of amortizable intangible assets as of fiscal 2016 is as follows (in thousands):Fiscal year2017$4,656 20184,331 20194,068 20203,945 20213,878 Thereafter15,435 $36,31375Table of ContentsNote 9 — Notes ReceivableNotes receivable consist of the following:(in thousands)2016 2015Note maturing in 2020 bearing interest at 9.0% and collateralized by store assets$149 $221Total notes receivable149 221Less current portion(92) (78)Notes receivable, net of current portion$57 $143Note 10 — Financing ArrangementsLong-term debt consists of the following:(in thousands)2016 2015Term loan under 2014 credit facility$105,879 $109,200Revolving line of credit under 2014 credit facility800 —Notes payable3,000 3,000Total principal amount of long-term debt109,679 112,200Less unamortized debt issuance costs(835) (1,163)Total long-term debt108,844 111,037Less current portion(7,879) (2,800)Total long-term debt, net of current portion$100,965 $108,237Maturities on long-term debt consist of the following:(in thousands)Senior Secured CreditFacility Notes Payable TotalFiscal Years2017$7,879 $— $7,879 201810,500 3,000 13,500 201988,300 — 88,300 $106,679 $3,000 $109,679The weighted average interest rate across all senior secured credit facilities for fiscal 2016 , 2015 and 2014 was 3.77% , 3.45% and 5.45% ,respectively.2014 senior secured credit facilityOn August 28, 2014, PMI Holdings, Inc., a wholly-owned subsidiary of the Company, entered into a $132.0 million senior secured credit facility (the “2014 Credit Facility ”) consisting of a $112.0 million term loan and a $20.0 million revolving credit facility, which includes a $2.5 million letter of credit sub-facility and a $1.0 million swing-line loan sub-facility. Closing and structuring fees of $1.6 million were incurred as a result of this transaction which will beamortized over the duration of the loan. The term loan and any loans made under the revolving credit facility mature in August 2019 .Borrowings under the 2014 Credit Facility bear interest at a rate per annum equal to an applicable margin based on the Company’s consolidatedleverage ratio, plus, at the Company’s option, either (a) a base rate determined by reference to the highest of (i) the “Prime Rate” publicly quoted by TheWall Street Journal, (ii) the federal funds rate plus 50 basis points, or (iii) the LIBOR rate with a one-month interest period plus 100 basis points, or (b) aLIBOR rate determined for the specified interest period. The applicable margin for borrowings under the 2014 Credit Facility ranges from 150 to 225basis points for base rate borrowings and 250 to 325 basis points for LIBOR rate borrowings. The 2014 Credit Facility includes customary fees for loanfacilities of this type, including a commitment fee on the revolving credit facility. As of January 2, 2017 , $104.3 million of the term loan was subject to theLIBOR rate option at 4.02% , and the remaining $1.6 million was subject to the base rate option at 6.00% . As of January 2, 2017 the revolving creditfacility was subject to the base rate option at 6.00% .76Table of ContentsThe obligations under the 2014 Credit Facility are guaranteed by certain domestic subsidiaries of the Company (the “ subsidiary guarantors ”) and aresecured by substantially all assets of the Company and the subsidiary guarantors . The 2014 Credit Facility also contains customary affirmative andnegative covenants that are typical for loan facilities of this type, including covenants that, among other things, restrict our ability and the ability of oursubsidiaries to incur indebtedness, issue certain types of equity, incur liens, enter into fundamental changes, including mergers and consolidations, sellassets, make dividends, distributions and investments, and prepay subordinated indebtedness, subject to customary exceptions. The 2014 Credit Facilityalso includes certain financial covenants with respect to a maximum consolidated leverage ratio, a minimum interest coverage ratio, and, commencingwith the Company's fiscal quarter ending January 1, 2018, a fixed charge coverage ratio.With a maturity date of over one year from January 2, 2017 , balances outstanding under the 2014 Credit Facility are classified as non-current on theConsolidated Balance Sheets , except for mandatory, minimum term loan amortization payments of $2.1 million due on the last day of each fiscalquarter.2013 senior secured credit facilityIn August 2014, the borrowings under the 2014 Credit Facility refinanced the $177.0 million senior secured credit facility entered into in October 2013(the “ 2013 Credit Facility ”), which included a $167.0 million senior secured term loan and a $10.0 million revolving credit facility, including a $2.5 millionletter of credit sub-facility. The terms of the 2013 Credit Facility were substantially similar to those of the 2014 Credit Facility , except that the applicablemargin for borrowings ranged from 300 basis points to 475 basis points for base rate borrowings and 450 to 575 basis points for LIBOR borrowings.On May 7, 2014 , the Company prepaid $55.5 million of its long-term debt under the 2013 Credit Facility in connection with the IPO . A proportionateshare of deferred financing costs of $1.2 million were expensed as a Loss on early retirement of debt on the Company’s Consolidated Statements ofIncome at the time of this debt prepayment.Notes payablePMCSI has a note payable for $3.0 million which bears interest at 5% and matures in December 2018 . This note is subordinated to the senior securedcredit facility.As part of the Drake Enterprises store acquisition, PMCSI issued a note payable for $2.9 million to Drake Enterprises in August 2014. The note boreinterest at 7% and was scheduled to mature in April 2019 with an acceleration clause in the event of a refinancing of the 2013 Credit Facility . The notewas paid in full during September 2014 .Deferred financing costs and prepayment penaltiesIn conjunction with the 2014 Credit Facility , the Company evaluated the refinancing of the 2013 Credit Facility and determined that the borrowing wasextinguished and not modified. Accordingly, unamortized deferred financing costs of $2.3 million from the 2013 Credit Facility and a prepayment penaltyof $1.1 million were expensed as a Loss on early retirement of debt in 2014. The Company incurred $1.6 million in financing costs, which was capitalizedand is being amortized using an effective interest rate method.Deferred financing costs amortized to interest expense in the Consolidated Statements of Income amounted to $0.3 million , $0.3 million and $0.6 millionas of fiscal year 2016 , 2015 and 2014 , respectively.Amortization of deferred financing costs in the future is expected to be as follows (in thousands):Fiscal Years2017$328 2018312 2019195 $83577Table of ContentsNote 11 — Fair Value MeasurementThe 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 liabilityto a market participant. GAAP defines a fair value hierarchy that prioritizes the assumptions used to measure fair value. The three levels of the fair valuehierarchy are defined as follows:▪Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.▪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 canbe corroborated with observable market data▪Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets andliabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significantunobservable inputs.The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: 2016 2015 (in thousands)Carrying Value Fair Value Carrying Value Fair Value Fair ValueMeasurementsFinancial assets Notes receivable (1)$149 $150 $221 $224 Level 3(1)The fair value of notes receivable was estimated primarily using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread.Financial instruments not included in the table above consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt.The fair value of cash and cash equivalents, accounts receivable and accounts payable approximates carrying value because of the short-term nature ofthe accounts. The fair value of long-term debt approximates carrying value because the borrowings are made with variable market rates and negotiatedterms and conditions that are consistent with current market rates.Note 12 — Accrued and Other LiabilitiesAccrued expenses and other current liabilities consist of the following:(in thousands)2016 2015Accrued compensation and related costs$2,192 $3,699Gift cards and certificates payable3,033 2,902Accrued interest and non-income taxes payable524 855Convention fund balance1,025 626Unearned product rebates— 922Advertising cooperative liabilities204 137Other525 615 $7,503 $9,75678Table of ContentsNote 13 — Income TaxesThe components of the provision for income taxes are as follows:(in thousands)2016 2015 2014Current tax provision Federal$5 $83 $9State214 278 103 219 361 112Deferred tax provision (benefit) Federal1,508 2,211 958State216 (504) 165 1,724 1,707 1,123Total provision for income taxes$1,943 $2,068 $1,235The components of the non-current deferred tax liability are as follows:(in thousands)2016 2015Deferred income tax assets: Unearned franchise and development fees$379 $858Convention and Advertising funds balance380 232Compensation accruals102 422Gift card accruals458 414Asset retirement obligation201 172Deferred rent434 206Share-based compensation1,082 901Net operating loss1,598 —Other387 619Total deferred tax assets5,021 3,824Valuation allowance(61) —Total deferred tax assets after valuation allowance4,960 3,824Deferred income tax liabilities: Fixed asset, goodwill, and intangible asset basis differences(46,836) (44,491)Other(2,303) (1,772)Total deferred tax liabilities(49,139) (46,263)Net deferred tax liability$(44,179) $(42,439)As of fiscal 2016 , the Company had federal and state net operating loss carry forwards of $4.2 million and $3.9 million , respectively. As of fiscal 2015 ,the Company had federal and state net operating loss carry forwards of $0.2 million and $2.8 million , respectively. The federal and state net operatingloss carry forwards begin to expire in 2032 and 2020 , respectively. As of fiscal 2016 , the Company has federal credit carryovers of $0.6 million that area combination of credits that begin to expire in 2035 .Tax benefits for federal and state net operating loss carry forwards are recorded as an asset to the extent that management assesses the utilization ofsuch assets to be “more likely than not”; otherwise, a valuation allowance is required to be recorded. The Company has looked to future reversals ofexisting taxable temporary differences in determining that its federal and a majority of its state net operating loss carry forwards are more likely than notto be utilized prior to their expiration dates. Consequently, no valuation allowance has been recorded for these deferred tax assets. Several separatefiling states where the Company operates have facts that indicate it is more likely that the Company will not utilize the separate filing state carryoversprior to their expiration dates. As of fiscal 2016 , the Company has recorded a $61,000 valuation allowance for these particular carryovers. The Companywill continue to evaluate the need for a valuation79Table of Contentsallowance in the future. Changes in estimated future taxable income and other underlying factors may lead to adjustments to the valuation allowance inthe future.As of fiscal 2016 , the Company had $72,000 of unrecognized tax benefits that, if recognized, would affect the effective tax rate. A reconciliation of thebeginning and ending liability for unrecognized tax benefits excluding interest and penalties is as follows (in thousands):Balance at fiscal 2015$—Additions for tax positions of the current year19Additions for tax positions of prior years53Balance at fiscal 2016$72A reconciliation of income tax at the United States federal statutory tax rate (using a statutory tax rate of 34% ) to income tax expense for the periodsreported is as follows:(in thousands)2016 2015 2014Federal income tax provision based on statutory rate$1,561 $2,203 $844State and local income tax effect284 314 177Effect of change in blended state rate— (464) —Non-deductible expenses255 133 254Tax credits and other(157) (118) (40)Provision for income taxes$1,943 $2,068 $1,235Note 14 — Shareholders’ EquityPreferred stockPrior to the IPO , the Company’s Series A Preferred Stock and Series B Preferred Stock (together, the “ Preferred Shares ”) had a cumulative preferreddividend of 6.00% per year. Upon liquidation of the Company, the holders of the Preferred Shares were entitled to receive the unpaid liquidation valueplus accreted dividends before any distribution could be made to the holders of common stock. In addition, the Preferred Shares participated in 20% ofall remaining earnings if distributed to common stockholders. At the IPO , the Preferred Shares were converted into 3,054,318 shares of common stock.Noncontrolling interestsHistorically, the Company received investments by noncontrolling interest holders in PPH . The Company received investments of $0.1 million and$0.2 million in fiscal 2015 and 2014, respectively.Note 15 — Share-based CompensationIn May 2010, the Company’s Board of Directors approved the 2010 Plan . In May 2014, the Company’s Board of Directors adopted the 2014 Plan(together with the 2010 Plan , the “ Incentive Plans ”). The Incentive Plans reserve 2,116,747 common shares for equity incentive awards consisting ofincentive stock options, non-qualified stock options, restricted stock awards and unrestricted stock awards. Equity incentive awards may be issued fromeither the 2010 Plan or the 2014 Plan .Restricted common sharesUnder the Incentive Plans , restricted common stock awards are subject to either time-vesting or market conditions. Time-vesting restricted commonstock awards issued under the 2010 Plan have generally vested 20% on each of the five anniversaries of the sale date. Time-vesting restricted commonstock awards granted under the 2014 Plan have generally vested 100% on the one -year anniversary of the grant date. Market condition restrictedcommon stock awards vest when the volume-weighted average closing price per share of Papa Murphy’s common stock equals or exceeds $22.00 pershare for 90 consecutive trading days. To the extent the fair value of an award on the date of the sale or grant exceeds the sale price, if any, the excessis recognized as compensation expense as a component of selling, general and administrative80Table of Contentsexpenses. Compensation expense for time-vesting restricted common stock awards is recognized over the requisite service period on a straight linebasis.The Company has a right to repurchase shares sold to employees under the 2010 Plan in the case of a qualifying sale, bankruptcy event, or atermination of employment or service of the employee who purchased shares, including a voluntary termination. Unvested shares as of the date of theseevents are repurchased at the original sale price. Since the IPO , the Company generally does not repurchase vested shares from terminatedemployees.Information with respect to restricted stock awards is as follows: Number of Shares ofRestricted Common Stock TimeVesting MarketCondition Weighted AverageAward DateFair Value per ShareUnvested, 201549,513 186,515 $3.11Granted18,000 — 7.66Vested(21,456) — 10.26Forfeited/Repurchased(15,387) (37,569) 1.48Unvested, 201630,670 148,946 $2.70Fair value information for restricted stock awards during the periods reported is as follows:(in thousands, except per share amounts)2016 2015 2014Weighted average grant date fair value per share$7.66 $19.05 $8.80Total fair value of shares issued$138 $150 $60Total fair value of shares vested$220 $171 $509Stock optionsUnder the Incentive Plans , stock options are subject to either time-vesting or market conditions. Time-vesting stock options generally vest 25% on eachof the four anniversaries of the grant date. Market condition stock options vest when the volume-weighted average closing price per share of PapaMurphy’s common stock equals or exceeds $22.00 per share for 90 consecutive trading days. The grant date fair value is recognized as compensationexpense as a component of selling, general and administrative expenses. The compensation expense is recognized over the requisite service period,typically the vesting period, on a straight line basis.Information with respect to stock option activity is as follows: Number of SharesSubject to Stock Options Time Vesting Market Condition Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands)Outstanding, 2015841,956 200,481 $11.55 Granted177,450 — 10.94 Exercised(26,644) — 11.00 Forfeited(41,074) (28,986) 11.40 Outstanding, 2016951,688 171,495 $11.48 7.7 years $—Exercisable, 2016522,543 — $11.39 7.4 years $—81Table of ContentsFair value information for stock options granted and vested and the intrinsic value of stock options exercised during the periods reported are as follows:(in thousands, except per share amounts)2016 2015 2014Weighted average grant date fair value per share$3.67 $5.41 $4.27Total fair value of awards granted$651 $1,039 $4,151Total fair value of awards vested$594 $431 $1,635Total intrinsic value of stock options exercised$25 $189 N/ACompensation cost and valuationTotal compensation costs recognized in connection with the Incentive Plans for fiscal 2016 , 2015 and 2014 amounted to $0.9 million , $1.1 million and$1.9 million , respectively. Additionally, the associated income tax benefits for fiscal 2016 , 2015 and 2014 amounted to $0.3 million , $0.4 million and$0.6 million , respectively.As of fiscal 2016 , the total unrecognized share-based compensation expense was $2.1 million , with $1.5 million associated with time-vesting awardsand $0.6 million associated with market condition awards. The remaining weighted average contractual life for unrecognized share-based compensationexpense was 2.6 years as of fiscal 2016 .The fair value of the stock option awards granted since the IPO during the periods reported was estimated with the following weighted-averageassumptions. 2016 2015 2014Risk free rate1.74% 1.94% 2.05%Expected volatility30.4% 37.9% 35.0%Expected term6.3 years 6.3 years 6.3 yearsExpected dividend yield0.0% 0.0% 0.0% Prior to the IPO , the valuation of the Company’s common stock and Preferred Shares was based on the principles of option-pricing theory. Thisapproach 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 expectedfrom 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 calloption on the aggregate value of the Company with an exercise price equal to the liquidation preferences of the more senior securities. In estimating thefair 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 prior to the IPO included the risk free rate, the volatilityof the underlying assets, and the estimated time until a liquidation event. The Company applied a marketability discount to the value of common stockbased on facts and circumstances at each valuation date.During the reported periods prior to the IPO , the Company assumed the following: 2014 (1)Risk free rate0.36%Volatility of the underlying assets45%Estimated time until a liquidation event(2)Marketability discount—common stock(2)Marketability discount—preferred stock(2)(1)The last valuation of the Company was performed as of March 31, 2014.(2)The Company applied a probability weighted expected return method, where equity values were calculated using an option pricing model under IPO and non- IPOscenarios and each value was weighted based on estimated probability of occurrence. During the period, 0.58 ~ 1.75 years were used as estimated time until a liquidationevent and 10 ~ 25% and 8 ~ 15% of marketability discount were used for common and preferred stock, respectively, depending on IPO or non- IPO scenarios. As ofMarch 31, 2014, the date of the last valuation performed by the Company, a 95% weight was given to the IPO scenario.82Table of ContentsNote 16 — Earnings per Share (EPS)The number of shares and earnings per share (“ EPS ”) data for all periods presented are based on the historical weighted-average shares of commonstock outstanding. Prior to the IPO , the Company’s cumulative preferred stockholders were entitled to participate in 20% of all remaining earnings ordividends if distributed to common stockholders. As such, the Company has calculated EPS using the two-class method. The two-class methoddetermines EPS for common stock and participating securities according to dividends and dividend equivalents and their respective participation rights inundistributed earnings.Basic EPS is calculated by dividing income available to common stockholders by the weighted-average number of shares of common stock outstandingduring each period. Diluted EPS is calculated using income available to common stockholders divided by diluted weighted-average shares of commonstock outstanding during each period, which includes unvested restricted common stock and outstanding stock options. Diluted EPS considers the effectof 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 diluted EPS :(in thousands, except per share data)2016 2015 2014Earnings: Net income$2,649 $4,411 $1,248Net loss attributable to noncontrolling interests— 500 —Net income attributable to Papa Murphy’s2,649 4,911 1,248Cumulative Series A and B Preferred dividends— — (2,150)Net income (loss) available to common shareholders$2,649 $4,911 $(902)Shares: Basic weighted average common shares outstanding16,743 16,653 12,101Dilutive effect of restricted equity awards (1)30 218 —Diluted weighted average number of shares outstanding16,773 16,871 12,101Earnings (loss) per share: Basic earnings (loss) per share$0.16 $0.29 $(0.07)Diluted earnings (loss) per share$0.16 $0.29 $(0.07)(1)The Company’s potential common stock instruments such as stock options and restricted stock awards were not included in the computation of diluted EPS for 2014 asthe effect of including these shares in the calculation would have been anti-dilutive. An aggregated total of 746,000 , 78,000 and 344,000 potential common shares havebeen excluded from the diluted EPS calculation for 2016 , 2015 and 2014 , respectively, because their effect would have been anti-dilutive.Note 17 — Commitments and ContingenciesOperating lease commitmentsThe Company leases facilities and various office equipment under non-cancelable operating leases which expire through December 2025 . Lease termsfor 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 operating leases that it has subleased to three franchised stores. These operating leases have minimum base rent termsand contingent rent terms if individual franchised store sales exceed certain levels and have terms expiring on various dates from May 2020 to October2020 .83Table of ContentsAs of fiscal 2016 , future minimum payments under the non-cancelable operating leases, excluding contingent rent obligations, are as follows:(in thousands)Total leaseminimumpayments Sublease income Net leaseminimumpaymentsFiscal years2017$5,534 $72 $5,462 20185,139 72 5,067 20194,440 72 4,368 20203,460 45 3,415 20211,988 — 1,988 Thereafter4,255 — 4,255 $24,816 $261 $24,555Rent expense for fiscal 2016 , 2015 and 2014 was $7.2 million , $5.6 million and $3.6 million , respectively.Lease guaranteesThe Company is the guarantor for operating leases of 20 franchised stores that have terms expiring on various dates from September 2017 toSeptember 2021 . These obligations were recorded at fair value at the time the guarantee was entered into, typically in connection with the refranchisingof a Company-owned store. The obligations from these leases will generally continue to decrease over time as the leases expire. As of fiscal 2016 , theCompany does not believe it is probable it would be required to perform under the outstanding guarantees. The applicable franchise owners continue tohave primary liability for these operating leases.As of fiscal 2016 , future commitments under these leases are as follows (in thousands):Fiscal Years2017$532 2018466 2019445 2020317 2021104 $1,864Legal proceedingsThe Company is currently subject to litigation with a group of franchise owners. In January 2014, six franchise owner groups claimed that the Companymisrepresented sales volumes, made false representations to them and charged excess advertising fees, among other things. The Company engaged inmediation with these franchise owners, which is required under the terms of their franchise agreements, in order to address and resolve their claims, butwas unable to reach a settlement agreement. On April 4, 2014, a total of twelve franchise owner groups, including those franchise owners that previouslymade the allegations described above, filed a lawsuit against the Company in the Superior Court in Clark County, Washington, making essentially thesame allegations for violation of the Washington Franchise Investment Protection Act, fraud, negligent misrepresentation and breach of contract andseeking declaratory and injunctive relief, as well as monetary damages. Based on motions filed by the Company in that lawsuit, the court ruled on July 9,2014 that certain of the plaintiffs’ claims under the anti-fraud and nondisclosure provisions of the Washington Franchise Investment Protection Act shouldbe dismissed and that certain other claims in the case would need to be more specifically alleged. The court also ruled that the six franchise ownergroups who had not mediated with the Company prior to filing the lawsuit must mediate with the Company in good faith, and that their claims shall bestayed until they have done so.On June 18, 2014, an additional 16 franchise owner groups, represented by the same counsel as the plaintiffs described above, filed a lawsuit in theSuperior Court in Clark County, Washington making essentially the same allegations as made in the lawsuit described above and seeking declaratoryand injunctive relief, as well as monetary damages. The court consolidated the two lawsuits into a single case and ordered that the plaintiffs in the newlawsuit, none of whom had mediated with the Company prior to filing the lawsuit, must do so, and that their claims be stayed until they completedmediating with the Company in good faith.84Table of ContentsIn October 2014, the Company engaged in mediation with the 22 franchise owner groups who had not previously done so. As a result of that mediationand other efforts, the Company has now reached resolution with 13 of the franchise owner groups involved in the consolidated lawsuits, and their claimshave either been dismissed or dismissal is pending.In February 2015, the remaining plaintiffs in the consolidated lawsuits filed an amended complaint, removing some claims, amending some claims,adding claims and naming some of the Company’s former and current franchise sales staff as additional individual defendants. In September 2016, theremaining plaintiffs in the consolidated lawsuits filed an amended complaint to add a claim under the Washington Consumer Protection Act based onsubstantially the same allegations as the prior claims, to re-plead claims under the Washington Franchise Investment Protection Act that had previouslybeen dismissed, and to dismiss Dan Harmon as a defendant. As before, the Company believes the allegations in this litigation lack merit and, for thoseplaintiffs with whom the Company is unable to reach resolution, the Company will continue to vigorously defend its interests, including by asserting anumber of affirmative defenses and, where appropriate, counterclaims. The Company provides no assurance that it will be successful in its defense ofthese lawsuits; however, it does not currently expect the cost of resolving them to have a material adverse effect on its consolidated financial position,results of operations, or cash flows.The Company is also currently named as a defendant in a putative class action lawsuit filed by plaintiff John Lennartson on May 8, 2015, in the UnitedStates District Court for the Western District of Washington. The lawsuit alleges the Company failed to comply with the requirements of the TelephoneConsumer Protection Act (TCPA) when it sent SMS text messages to consumers. Mr. Lennartson asks that the court certify the putative class and thatstatutory damages under the TCPA be awarded to plaintiff and each class member. On October 14, 2016, the Federal Communications Commission(FCC) granted the Company a limited waiver from the TCPA's written consent requirements for certain text messages that we sent up through October16, 2013 to individuals who, like Mr. Lennartson, provided written consent prior to October 16, 2013. The Company believes that the FCC's waivereliminates the legal basis for Mr. Lennartson's claim and has filed a motion for summary judgment seeking dismissal. Mr. Lennartson has filed a motionseeking to extend the time to respond to the summary judgment motion on the basis that he intends to appeal the FCC's waiver. The Company believesMr. Lennartson’s interpretation of the applicable law is incorrect and it will continue to vigorously defend itself in the lawsuit, but provides no assurancethat it will be successful. In addition, plaintiff has recently been granted leave to file, and has filed, an amended complaint adding additional plaintiffs,some of whom provided consent after October 16, 2013, and who are therefore differently-situated from Mr. Lennartson. An adverse judgment orsettlement related to this lawsuit could have a material adverse effect on the Company's consolidated financial position, results of operations, or cashflows.In addition to the foregoing, the Company is subject to routine legal proceedings, claims and litigation in the ordinary course of its business. TheCompany may also engage in future litigation with franchise owners to enforce the terms of franchise agreements and compliance with brand standardsas determined necessary to protect the Company’s brand, the consistency of products and the customer experience. Lawsuits require significantmanagement attention and financial resources and the outcome of any litigation is inherently uncertain. The Company does not, however, currentlyexpect that the costs to resolve these routine matters will have a material adverse effect on its consolidated financial position, results of operations, orcash flows.Note 18 — Retirement PlansThe Company has a defined contribution benefit plan, qualified under Section 401(k) of the Internal Revenue Code (the “ 401(k) Plan ”), covering alleligible employees. 401(k) Plan participants may receive up to a 4.00% matching contribution up to the limits established by the plan and by the InternalRevenue Service and are vested immediately. Contributions to the 401(k) Plan by the Company during fiscal 2016 , 2015 and 2014 amounted to$0.4 million , $0.4 million and $0.3 million , respectively.Note 19 — Related Party TransactionsAdvisory services and monitoring agreementPrior to the IPO , the Company was a party to an advisory services and monitoring agreement with affiliates of Lee Equity . In accordance with the termsof the agreement, the Company paid Lee Equity for ongoing advisory and monitoring services, such as management consulting, financial analysis, andother related services. As compensation, the Company paid an annual fee of $0.5 million in four equal quarterly installments, plus direct expensesincurred which are included in selling,85Table of Contentsgeneral and administrative costs. The agreement did not call for a minimum level of services to be furnished and provided that fees paid to Lee Equitycould be deferred at the discretion of Lee Equity or by the Company’s senior secured credit facility, if required.On May 7, 2014, the Company completed the IPO and paid Lee Equity $1.5 million in accordance with the terms of the agreement. With the completionof the IPO , the advisory services and monitoring agreement between the Company and Lee Equity was terminated.Employee loans related to share purchasesIn connection with share-based compensation, the Company has made several loans to certain officers and non-officer employees of the Company (seeNote 15 — Share-based Compensation ). Loans made in connection with the issuance of the Company’s equity have been recognized in Stocksubscriptions receivable as a reduction of total equity.In March 2014, the Company entered into agreements with certain executive officers to repurchase an aggregate of 109,779 shares of common stock ata price of $11.85 per share, for a total purchase price of $1.3 million . Included among the repurchased shares were 31,707 shares of common stock, forwhich vesting terms were accelerated in connection with the repurchase. The Company received a payment of $1.0 million from the same executiveofficers to repay their outstanding stock subscription receivables. Concurrent with the share repurchase, the Company entered into agreements with thesame executive officers to issue 109,779 stock options to purchase shares at an exercise price of $11.85 per share, including 78,072 fully vested optionsand 31,707 options subject to time-based or market condition-based vesting provisions. In connection with the acceleration of vesting and the issuanceof the fully vested options, the Company recorded stock-based compensation expense of $0.5 million in 2014.All loans made to officers of the Company were repaid prior to the IPO . Some loans made to non-officer employees of the Company were stilloutstanding at the time of the IPO . As of January 2, 2017 , the Company had no Stock subscriptions receivable . As of December 28, 2015 , theCompany had Stock subscriptions receivable of $0.1 million .Related party revenueThe Company was party to transactions to sell services to Project Pie during the period Project Pie was a cost-method investee. The Company recordedrevenues of $4,000 in 2015 and $109,000 in 2014, which are recorded as Other revenues on the Consolidated Statements of Income .Note 20 — Segment InformationThe Company has the following reportable segments: (i) Domestic Company Stores; (ii) Domestic Franchise; and (iii) International. The DomesticCompany Stores segment includes operations with respect to Company-owned stores in the United States and derives its revenues from retail sales ofpizza and side items to the general public. The Domestic Franchise segment includes operations with respect to franchised stores in the United Statesand derives its revenues from franchise and development fees and the collection of franchise royalties from the Company’s franchise owners located inthe United States. The International segment includes operations related to the Company’s operations outside the United States and derives itsrevenues from franchise and development fees and the collection of franchise royalties from franchises located outside the United States.86Table of ContentsThe following tables summarize information on profit or loss and assets for each of the Company’s reportable segments:(in thousands)2016 2015 2014Revenues Domestic Franchise$44,434 $45,579 $46,233Domestic Company Stores82,080 74,300 50,598International369 330 568Total$126,883 $120,209 $97,399Segment Operating Income (Loss) Domestic Franchise$17,186 $20,750 $21,939Domestic Company Stores(2,803) 1,359 1,307International269 238 20Corporate and unallocated(5,004) (6,712) (7,961)Total$9,648 $15,635 $15,305Depreciation and amortization Domestic Franchise$6,606 $5,392 $5,046Domestic Company Stores5,599 4,579 2,975International31 31 31Total$12,236 $10,002 $8,052Interest expense (income), net Domestic Franchise$(1) $— $(2)Domestic Company Stores136 2,301 2,547International— (3) (27)Other4,733 2,225 5,507Total$4,868 $4,523 $8,025Provision for income taxes Domestic Franchise$— $— $—Domestic Company Stores— — —International7 9 9Other1,936 2,059 1,226Total$1,943 $2,068 $1,235 2016 2015 2014Total Assets Domestic Franchise$133,466 $139,705 $137,417Domestic Company Stores52,531 45,217 34,953International318 438 447Other (1)87,557 90,111 91,310Total$273,872 $275,471 $264,127(1) Other assets which are not allocated to the individual segments primarily include trade names & trademarks.All long-lived assets are held within the United States. The following table summarizes revenues by geographic area:(in thousands)2016 2015 2014Revenues United States$126,514 $119,879 $96,831International369 330 568Total$126,883 $120,209 $97,39987Table of ContentsNote 21 — Selected Quarterly Financial Data (unaudited)The following table presents selected unaudited quarterly financial data for the periods indicated:(in thousands, except per share data)Q1 Q2 Q3 Q42016 Revenue$32,985 $29,894 $28,519 $35,485Operating Income2,323 2,813 691 3,821Net Income (Loss)642 952 (421) 1,476Basic earnings (loss) per share$0.04 $0.06 $(0.03) $0.09Diluted earnings (loss) per share$0.04 $0.06 $(0.03) $0.09 2015 Revenue$29,168 $29,121 $28,132 $33,788Operating Income5,348 2,588 3,045 4,654Net Income (Loss)2,596 (1,939) 1,122 2,632Net Income (Loss) Attributable to Papa Murphy's2,596 (1,439) 1,122 2,632Basic earnings (loss) per share$0.16 $(0.09) $0.07 $0.16Diluted earnings (loss) per share$0.15 $(0.09) $0.07 $0.16The sum of the quarterly earnings per share does not always equal the annual earnings per share as a result of the computation of quarterly versusannual average shares outstanding.Note 22 — Subsequent EventsIn connection with the departure of Ken Calwell, the Company's former President and CEO, the Company entered into an executive separationagreement, which became effective on January 9, 2017.On February 15, 2017, the Company announced a strategic realignment resulting in the elimination of eleven positions at the Company, including twosenior officers, effective as of February 15, 2017.The Company estimates that its liability as a result of the executive separation agreement and strategic realignment is $1.8 million , consisting ofseverance and other one-time termination benefits and other associated costs.88Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and ShareholdersPapa Murphy’s Holdings, Inc.We have audited the accompanying consolidated balance sheets of Papa Murphy’s Holdings, Inc. and subsidiaries (the “Company”) as of January2, 2017 and December 28, 2015 , and the related consolidated statements of income , shareholders’ equity, and cash flows for each of the three yearsin the period ended January 2, 2017 . Our audits also included the accompanying financial statement schedules listed in the index at Item 15(a). Theseconsolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is toexpress 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our auditsincluded consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financialstatements , assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidatedfinancial 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 PapaMurphy’s Holdings, Inc. and subsidiaries as of January 2, 2017 and December 28, 2015 , and the consolidated results of their operations and their cashflows for each of the three years in the period ended January 2, 2017 , in conformity with accounting principles generally accepted in the United States ofAmerica. Also, in our opinion, the financial statement schedules, when considered in relation to the basic financial statements taken as a whole, presentfairly, in all material respects, the information set forth therein./s/ Moss Adams LLPPortland, OregonMarch 15, 201789Table of ContentsItem 9. Changes in and Disagreements With Accountants on Accounting and FinancialDisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosurecontrols and procedures as of the end of the period covered by this report, pursuant to Rules 13a-15 and 15d-15 under the Exchange Act . Based on thatevaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosurecontrols and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit underthe Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such informationis accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure.Management's Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act). With the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of ourinternal control over financial reporting based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(“COSO”) in Internal Control—Integrated Framework (2013) . Based on our evaluation under the framework in Internal Control—Integrated Framework(2013) , our management concluded that our internal control over financial reporting was effective as of January 2, 2017 .We have not engaged an independent registered accounting firm to perform an audit of our internal control over financial reporting as of any balancesheet date or for any period reported in our financial statements. Our independent public registered accounting firm will first be required to attest to theeffectiveness of our internal control over financial reporting for our Annual Report on Form 10-K for the first year we are no longer an “emerging growthcompany.”Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act ) that occurred during ourlast fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationNone.90Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our 2017 Annual Meeting of Stockholders. TheDefinitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our 2016 fiscal year.Item 11. Executive CompensationThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our 2017 Annual Meeting of Stockholders. TheDefinitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our 2016 fiscal year.Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder MattersThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our 2017 Annual Meeting of Stockholders. TheDefinitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our 2016 fiscal year.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our 2017 Annual Meeting of Stockholders. TheDefinitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our 2016 fiscal year.Item 14. Principal Accountant Fees and ServicesThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our 2017 Annual Meeting of Stockholders. TheDefinitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of our 2016 fiscal year.91Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a)The following documents are filed as part of this report: Form 10-K PageNo.1.Financial Statements: The following financial statements are included in Item 8.“Financial Statements and Supplementary Data”: Consolidated Statements of Income for the Fiscal Years ended January 2, 2017, December 28, 2015, andDecember 29, 201457 Consolidated Balance Sheets as of January 2, 2017 and December 28, 201558 Consolidated Statements of Shareholders’ Equity for the Fiscal Years ended January 2, 2017, December 28, 2015 andDecember 29, 201459 Consolidated Statements of Cash Flows for the Fiscal Years ended January 2, 2017, December 28, 2015 andDecember 29, 201460 Notes to Consolidated Financial Statements61 Report of Independent Registered Public Accounting Firm892.Financial Statement Schedule: Schedule I - Condensed Financial Information of the Registrant95 Schedule II - Valuation and Qualifying Accounts99 All other schedules are omitted because they are not applicable, not required or the required information is shown in thefinancial statements or the notes thereto. 3.Exhibits: Incorporated By ReferenceExhibit File FilingNumberDescription Of ExhibitsFormNumberExhibitDate3.1Fifth Amended and Restated Certificate of Incorporation of Papa Murphy’s Holdings, Inc.8-K001-364323.1May 13, 20143.2Amended and Restated Bylaws of Papa Murphy’s Holdings, Inc.8-K001-364323.1December 22, 20164.1Form of Common Stock Certificate.S-1/A333-1944884.1April 28, 20144.2Second Amended and Restated Stockholders’ Agreement.8-K001-364324.1May 13, 201410.1‡Amended 2010 Management Incentive Plan.S-1/A333-19448810.1April 4, 201410.2Stockholder’s Agreement8-K001-3643210.1May 13, 201410.3Credit agreement, dated as of August 28, 2014 among PMI Holdings, Inc., GeneralElectric Capital Corporation and the other financial institutions party thereto.10-Q001-3643210.1November 13, 201410.4‡Form of 2014 Equity Incentive Plan.S-1/A333-19448810.5April 28, 201410.5Form of Franchise Agreement.S-1/A333-19448810.6April 4, 201410.6Form of Area Development Agreement.S-1/A333-19448810.7April 4, 201410.7Form of Multiple Store Commitment Letter and Amendment to Franchise Agreement.S-1/A333-19448810.8April 4, 201410.8‡Executive Employment and Non-Competition Agreement dated as of May 25, 2011between PMI Holdings, Inc. and Ken C. Calwell.S-1/A333-19448810.12April 4, 201410.9*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Ken C. Calwell. 10.10*‡Executive Severance Agreement and Release dated as of January 9, 2017 betweenPapa Murphy's Holdings, Inc. and Ken C. Calwell. 92Table of Contents Incorporated By ReferenceExhibit File FilingNumberDescription Of ExhibitsFormNumberExhibitDate10.11‡Executive Employment and Non-Competition Agreement dated as of January 7, 2013among PMI Holdings, Inc. and Jayson Tipp.S-1/A333-19448810.15April 4, 201410.12*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Jayson Tipp. 10.13*‡Executive Employment and Non-Competition Agreement dated as of October 19, 2015between PMI Holdings, Inc. and Brandon Solano. 10.14*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Brandon Solano. 10.15‡Executive Employment and Non-Competition Agreement dated as of May 4, 2010among PMI Holdings, Inc. and Victoria T. Blackwell.S-1/A333-19448810.14April 4, 201410.16*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Victoria T. Blackwell. 10.17‡Executive Employment and Non-Competition Agreement dated as of March 21, 2014among PMI Holdings, Inc. and Mark Hutchens.S-1/A333-19448810.18April 4, 201410.18*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Mark Hutchens. 10.19‡Form of Stock Option Agreement subject to time-vesting under the Amended 2010Management Incentive Plan.S-1/A333-19448810.20April 21, 201410.20‡Form of Stock Option Agreement subject to performance-vesting under the Amended2010 Management Incentive Plan.S-1/A333-19448810.21April 21, 201410.21‡Form of Restricted Stock Agreement subject to time-vesting under the Amended 2010Management Incentive Plan.S-1/A333-19448810.22April 21, 201410.22‡Form of Restricted Stock Agreement subject to performance-vesting under the Amended2010 Management Incentive Plan.S-1/A333-19448810.23April 21, 201410.23‡Form of Amendment to the Restricted Stock Agreement subject to performance-vestingunder the Amended 2010 Management Incentive Plan.S-1/A333-19448810.24April 21, 201410.24‡Form of Stock Option Agreement subject to time-vesting under the Form of 2014 EquityIncentive Plan.S-1/A333-19448810.25April 21, 201410.25‡Form of Restricted Stock Agreement subject to time-vesting under the Form of 2014Equity Incentive Plan.S-1/A333-19448810.26April 21, 201410.26Form of Indemnification Agreement between Papa Murphy’s Holdings, Inc. and each ofits directors and executive officers.S-1/A333-19448810.27April 21, 201410.27Form of Indemnification Agreement between Papa Murphy’s Holdings, Inc. and each ofits sponsor-affiliated directors.S-1/A333-19448810.28April 21, 201410.28‡Form of Stock Option Agreement subject to performance-vesting under the Form of2014 Equity Incentive Plan.S-1/A333-19448810.29April 28, 201410.29‡Executive Employment and Non-Competition Agreement between PMI Holdings, Inc.and Dan Harmon.S-1/A333-19448810.30April 28, 201410.30*‡Amended and Restated Executive Employment and Non-Competition Agreement datedas of July 27, 2016 between Papa Murphy's Holdings, Inc. and Dan Harmon. 10.31First Amendment to Credit Agreement, dated as of October 31, 2016, among PMIHoldings, Inc., Wells Fargo Bank, National Association, and the other financialinstitutions party thereto.10-Q001-3643210.1November 2, 201610.32*Master Marketing Agreement dated as of September 7, 2016 between Murphy'sMarketing Services, Inc. and GroupM Worldwide, Inc. (d/b/a Modi Media). 10.33*Amendment to Master Marketing Agreement dated as of September 27, 2016 betweenMurphy's Marketing Services, Inc. and The Midas Exchange, Inc. 21.1*List of Subsidiaries of the Registrant. 23.1*Consent of Moss Adams LLP 24.1*Directors' Powers of Attorney 93Table of Contents Incorporated By ReferenceExhibit File FilingNumberDescription Of ExhibitsFormNumberExhibitDate31.1*Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) ofthe Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002. 31.2*Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of theSecurities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002. 32.1*Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, asAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2*Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS*XBRL Instance Document 101.SCH*XBRL Taxonomy Extension Schema Document 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*XBRL Taxonomy Extension Label Linkbase Document 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith‡ A management contract or compensatory plan or arrangement94Table of ContentsSCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANTPapa Murphy’s Holdings, Inc.Parent Company InformationCondensed Statements of Income Fiscal Year(in thousands)2016 2015 2014Equity in earnings of subsidiaries$6,905 $9,486 $4,046Selling, general and administrative expense2,140 2,380 1,392Operating Income4,765 7,106 2,654 Other expense, net180 136 180Income Before Income Taxes4,585 6,970 2,474 Provision for income taxes1,936 2,059 1,226Net Income2,649 4,911 1,248See accompanying notes.95Table of ContentsSCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANTPapa Murphy’s Holdings, Inc.Parent Company InformationCondensed Balance Sheets (in thousands, except par value and share data)January 2, 2017 December 28,2015Assets Current Assets Prepaid expenses and other current assets$547 $3,109Total current assets547 3,109Investment in affiliates145,349 138,444Total assets$145,896 $141,553Liabilities and Equity Current Liabilities Other current liabilities$36 $70Due to consolidated affiliates185 1,388Total current liabilities221 1,458Deferred tax liability44,179 42,439Total liabilities$44,400 $43,897Commitments and contingencies Shareholders’ Equity Preferred stock ($0.01 par value; 15,000,000 shares authorized; no shares issued or outstanding)— —Common stock ($0.01 par value; 200,000,000 shares authorized; 16,955,970 and 16,949,720 shares issued and outstanding,respectively)170 169Additional paid-in capital119,932 118,801Stock subscription receivable— (100)Accumulated deficit(18,606) (21,214)Total shareholders’ equity101,496 97,656Total liabilities and shareholders’ equity$145,896 $141,553See accompanying notes.96Table of ContentsSCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANTPapa Murphy’s Holdings, Inc.Parent Company InformationCondensed Statements of Cash Flows Fiscal Year(in thousands)2016 2015 2014Net cash (used in) provided by operating activities$(209) $(7,278) $6,106 Investing Activities Investment in subsidiary— — (59,675)(Deemed) dividend from subsidiary— 6,912 (1,098)Net cash provided by (used in) investing activities— 6,912 (60,773) Financing Activities Issuance of common stock, net of underwriting fees— — 59,675Repurchases of common stock(84) (10) (1,518)Proceeds from exercise of stock options293 376 —Costs associated with initial public offering— — (3,490)Net cash provided by financing activities209 366 54,667 Net change in cash and cash equivalents— — — Cash and Cash Equivalents, beginning of year— — —Cash and Cash Equivalents, end of period$— $— $—See accompanying notes.97Table of ContentsSCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANTPapa Murphy’s Holdings, Inc.Parent Company InformationNotes to Condensed Financial InformationNote 1—Basis of PresentationPapa Murphy’s Holdings, Inc. (the “ Parent Company ”) is a holding company with no material operations of its own that conducts substantially all of itsactivities through its subsidiaries.These consolidated financial statements have been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company ’sinvestments in subsidiaries are presented under the equity method of accounting. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with GAAP have been condensed or omitted. As such, these parent-only statements should be read inconjunction with the Notes to Consolidated Financial Statements of Papa Murphy’s Holdings, Inc. and subsidiaries included in Financial Statements andSupplementary Data .98Table of ContentsSchedule II—Valuation and Qualifying AccountsPapa Murphy’s Holdings, Inc. and Subsidiaries Balance atBeginning ofPeriod Charged to costsand expenses (Write-offs), Net ofRecoveries CurrencyTranslationAdjustments Balance at End of PeriodFiscal year 2016 Allowance for trade and other receivables$31 $6 $— $— $37Fiscal year 2015 Allowance for trade and other receivables$60 $(30) $1 $— $31Fiscal year 2014 Allowance for trade and other receivables$37 $26 $(3) $— $60Allowance for notes receivable825 — (763) (62) —Total$862 $26 $(766) $(62) $6099Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned, hereunto duly authorized, on March 15, 2017PAPA MURPHY’S HOLDINGS, INC. By: /s/ Mark Hutchens Name:Mark Hutchens Title:Chief Financial OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant in the capacities and on the dates indicated. SIGNATURETITLEDATE /s/ Jean BirchChair of the Board and Interim Chief Executive OfficerMarch 15, 2017 Jean Birch(Principal Executive Officer) and Director /s/ Mark HutchensChief Financial OfficerMarch 15, 2017 Mark Hutchens(Principal Financial Officer and Principal Accounting Officer) /s/ Benjamin Hochberg*DirectorMarch 15, 2017 Benjamin Hochberg /s/ Yoo Jin Kim*DirectorMarch 15, 2017 Yoo Jin Kim /s/ L. David Mounts*DirectorMarch 15, 2017 L. David Mounts /s/ John Shafer*DirectorMarch 15, 2017 John Shafer DirectorMarch 15, 2017 Rob Weisberg /s/ Jeffrey B. Welch*DirectorMarch 15, 2017 Jeffrey B. Welch /s/ Katherine L. Scherping*DirectorMarch 15, 2017 Katherine L. Scherping *By: /s/ Mark Hutchens Mark Hutchens Attorney-in-fact pursuant to filed Power of Attorney100Exhibit 10.9AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Ken Calwell, a resident of Vancouver, Washington (“ Executive ”) amends and restates the Executive EmploymentAgreement and Non-competition Agreement dated as of the 25 th day of May, 2011, by and between PMI Holdings, Inc., a Delawarecorporation and the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 25 th day of May, 2011, and amended and restated as of the 21 st day of March, 2014;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Chief Executive Officer of the Company and Executive’s duties andresponsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Board of Directors (the “Board ”). During the Employment Term, the Board shall nominate Executive for re-election as a member of the Board at the expirationof each then-current term. Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sickdays and periods of disability) and use his best effortsin his employment with the Company; provided, however, that this Agreement shall not be interpreted as prohibiting Executive frommanaging his personal affairs, engaging in charitable or civic activities, or serving as a director of or providing services to anotherbusiness or enterprise (whether engaged in for profit or not; provided, however, with respect to for profit businesses, Executive shall belimited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interferein 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 Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $515,000 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 60% at the discretion of the Compensation Committee and the Board (subject to anyrequired stockholder approval) 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 immediately following the fiscal year towhich such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets as agreed upon by Executiveand the Board with respect to the Company’s financial performance for any fiscal year ending during the Employment Period. TheAnnual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other senior2executives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.4. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of his duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate his employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of his duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of his employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or his legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable through thedate of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the3Board 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 Total Disability. Executive or his legalrepresentatives shall also be entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance withthe Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the two-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of 18 months after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the two-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the two-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the two-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no4longer subject to restriction on or before the two-year anniversary of Executive’s date of termination; and (f) (1) outstanding stockoptions held by Executive with performance-based vesting that are not vested and exercisable on Executive’s date of termination will notbe forfeited when Executive’s employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary ofthe date on which such stock options become vested and exercisable and (y) the stock option expiration date as set forth in the applicablestock option agreement and (2) for outstanding restricted stock awards held by Executive with performance-based vesting, suchrestricted stock awards shall not cease to vest upon Executive’s date of termination and any Company repurchase right shall not becomeexercisable with respect to any such restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay orother benefits which may be owing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;5(c) a reduction in Executive’s Base Salary of 5% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within two years a Change in Control (A) byExecutive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upon termination shallbe governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executive shall be entitledsolely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payroll payment date; (2) anamount equal to the sum of two-times his Base Salary and two-times his target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of 18 months after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within two years after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the two-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than6stock options and restricted stock awards (but including restricted stock units) with solely time-based vesting, Executive willimmediately vest in and have the right to exercise or payment of such awards, all restrictions on such awards will lapse, and all otherterms and conditions of such awards will be deemed met; (4) outstanding stock options held by Executive with performance-basedvesting that are not vested and exercisable on Executive’s date of termination will not be forfeited when Executive’s employmentterminates and shall instead remain outstanding until the stock option expiration date as set forth in the applicable stock optionagreement; and (5) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stockawards shall not cease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable withrespect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with his obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date7and, thereafter, the remaining portion of such benefits shall be paid over the remainder of the time period originally scheduled for suchpayments.5.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich8may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such information anddocuments as the Tax Counsel may reasonably request in order to make the computations and determinations called for by thisSection 5.8. The Company shall bear all costs that the Tax Counsel may reasonably incur in connection with the computations anddeterminations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate his or his relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting9for or on behalf of Executive or any such competitor any client (including all franchisees) of the Company or any of its direct or indirectsubsidiaries and affiliates, or any former client (including all franchisees) of the Company or any of its direct or indirect subsidiaries andaffiliates who was a client (including all franchisees) during the 6-month period immediately preceding the date of such solicitation and(d) diverting to any person (as hereinafter defined) any client (including all franchisees) or business opportunity of the Company or anyof its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.107.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that transpired while Executive was employed by the Company. The Company shall reimburse Executivefor any reasonable out-of-pocket expenses incurred in connection with Executive’s performance of obligations pursuant to thisSection 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Ken Calwell2222 SE 12 th AvenueCamas, WA 98607or 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall not operate or be construed as a waiver of any other or subsequent breach by the other party.1211.5 Withholding . The Company shall be entitled to withhold from any amounts to be paid or benefits provided toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold. The Company shall be entitled to rely on advice of counsel if any question as to the amount orrequirement 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 providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed13to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to comply withSection 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing ofany severance payments payable hereof) so that either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409Aof the Code will be achieved; provided, that, neither the Company nor its employees or representatives shall have liability to Executivewith respect hereto.(c) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Mark Hutchens Mark Hutchens, Chief Financial Officer EXECUTIVE:/s/ Ken Calwell Ken Calwell15Exhibit 10.10EXECUTIVE SEPARATION AGREEMENT AND RELEASEThis Executive Separation Agreement and Release (“Agreement”) is made and entered into by and between Ken Calwell(“Executive”) on the one hand, Papa Murphy’s Holdings, Inc. (together with its affiliates or successors, the “Company”) on the other,hereinafter collectively referred to as the “Parties.”RECITALSA. WHEREAS, on or about May 25, 2011, the Company’s predecessor and Executive entered into an Executive EmploymentAgreement and Non-competition Agreement, pursuant to which the Company engaged Executive in the capacity of Chief ExecutiveOfficer of the Company, and thereafter amended said Executive Employment Agreement and Non-competition Agreement on March 21,2014, and the Parties thereafter amended the Executive Employment Agreement and Non-competition Agreement on July 27, 2016 (the“Employment Agreement”);B. WHEREAS, Executive tendered his notice of resignation from his employment with the Company on December 29, 2016;C. WHEREAS, the Parties mutually desire to settle and compromise any and all claims and differences between them,including, but not limited to, those arising from Executive’s employment with and resignation from the Company;D. WHEREAS, in view of the Executive’s impending resignation from the Company, Executive desires to immediately resignfrom the offices, positions, and Board membership that the Executive currently holds with the Company;E. WHEREAS, the Company has advised Executive of his right to consult an attorney prior to signing this Agreement.Executive has consulted an attorney of Executive’s choice or voluntarily waived his right to do so, and understands that he is waiving allpotential claims against the Company; andE. WHEREAS, the Parties wish to end the employment relationship amicably and to enter into certain covenants below, toprovide assurances and peace of mind to each party; andNOW, THEREFORE, in consideration of the Recitals and the mutual promises, covenants, and agreements set forth herein, thereceipt and sufficiency of which are hereby acknowledged, the Parties covenant and agree as follows:1. TERMINATION OF EMPLOYMENT1.1 Termination of the Employment Agreement. The Employment Agreement and Executive’s employment with the Company willterminate by Executive’s voluntary resignation effective February 27, 2017, (the “Separation Date”) at 11:59 p.m. Pacific StandardTime. Executive acknowledges and agrees that this voluntary resignation shall be automatically effective as of such date and timewithout any further action of the Parties.Pursuant to the provisions of paragraph 4.2 of the Employment Agreement, Executive must give the Company at least 60 days’ priorwritten notice of his resignation. Executive has provided the Company with written notice of his resignation on December 29, 2016(“Resignation Notice Date”). Executive agrees that he has resigned as a Director and Officer of the Company and from all otherpositions he holds with the Company effective as of the Resignation Notice Date.1.2. Interim Employment of Executive. The Parties agree that Executive’s day-to-day responsibilities as Chief Executive Officer withthe Company will cease effective as 11:59 p.m. Pacific Standard Time on the Resignation Notice Date. Subject to Executive’scompliance with the terms of this Agreement, the Company will continue to employ Executive through the close of business on February27, 2017 (the “Interim Period of Employment”). Pursuant to the terms of paragraph 4.2 of the Employment Agreement, the Companyhas excused Executive from any and all duties during the Interim Period of Employment. Executive acknowledges and agrees that theCompany may terminate his employment at any time during the Interim Period of Employment if he materially fails to comply with theterms of this Agreement.1.3. Effect of this Agreement. This Agreement shall fully supersede any inconsistent provisions of the Employment Agreement whichwere intended, or may be construed, to survive the Employment Agreement’s termination. In the event that any terms of this Agreementconflict with or contradict any terms of the Employment Agreement, the terms of this Agreement shall govern and be controlling.2. COMPENSATION2.1 Wages and Benefits . Whether Executive signs this Agreement or not, the Company will pay Executive all wages due him forservices through the Separation Date.2.2. Separation Compensation .a. Subject to Executive’s compliance with all the terms and conditions of this Agreement, for services rendered by Executiveduring the Interim Period of Employment, the Company will continue to pay Executive’s base salary (determined as of December 1,2016), less standard deductions and withholdings required by law or directed by Executive, and maintain Executive’s health careallowance, subject to the terms and conditions of the applicable benefit plans or programs. Executive will be paid on the regular payrolldates of the Company, provided that no such payment will be made before the expiration of the Revocation Period described inparagraph 7.2 of this Agreement.b. The Executive’s base salary (determined as of December 1, 2016), less standard deductions and withholdings required bylaw, shall continue for a period of 16 months following the Separation Date (the “Benefit Period”), payable in such installments and atsuch times as the Company pays its regularly salaried executives and shall be subject to all necessary withholding taxes, FICAcontributions, and similar deductions in accordance with the Company’s customary payroll procedures.2.3. COBRA . The Company further agrees that subject to Executive’s compliance with his obligations under this Agreement, ifExecutive properly elects COBRA coverage after the Separation2Date, upon Executive delivering written evidence to Company of the payment of any COBRA premiums Executive is required to pay inorder to continue medical coverage through December 31, 2017, the Company will promptly reimburse Executive for the employer’sshare of such payments (“COBRA Reimbursement”). Company’s obligation to reimburse Executive for the employer’s share of theCOBRA premium payments shall not start until after the 8th day following the Revocation Period referenced in paragraph 7.2 of thisAgreement; and the Company’s obligation to reimburse Executive for the employer’s share of COBRA premium payments will cease ifExecutive becomes eligible for medical coverage with a new employer prior to December 31, 2017. Executive acknowledges that he willbe solely responsible for remitting all COBRA payments in accordance with the terms of Company’s applicable group health plan andrelated notices, and will be solely responsible for the cost of any COBRA coverage at the standard COBRA rate if he elects suchcoverage.2.4 Equity Compensation . Effective on the Effective Date of this Agreement, all outstanding stock options held by Executive (whichrepresent the right to purchase a total of 372,965 shares) shall immediately terminate and be forfeited by Executive and the Companywill waive its repurchase right with respect to all outstanding restricted stock awards held by Executive with performance-based vesting(representing a total of 82,976 shares), and all such outstanding restricted stock awards will be vested in full on the Effective Date.Additionally, the Company acknowledges that an aggregate of an additional 173,642 shares of Company common stock held byExecutive are not subject to any Company rights of repurchase, forfeiture or other Company restrictions, equaling a total of 256,618 ofshares held by Executive without restriction.2.5 Legal Consideration . Executive agrees that the Separation Compensation is sufficient legal consideration for his promises andcovenants set forth in the Agreement. Executive further acknowledges and agrees that the Separation Compensation is not required bythe policies and procedures of the Company, by the Employment Agreement or by any other contractual obligation, but rather is offeredsolely as consideration for Executive’s promises and covenants made pursuant to this Agreement. Executive further agrees that he is notentitled to any other compensation not expressly provided for herein.3. GENERAL RELEASE AND WAIVER OF CLAIMS BY EXECUTIVE3.1 In consideration of the mutual agreements and covenants set forth in the Agreement, including those set forth in Section 2 above,Executive, on behalf of himself, his marital community, heirs, executors, administrators, successors and assigns, agrees to the following:a. Executive expressly waives any claims against the Company and releases the Company and its predecessors, successors,parents, subsidiaries, and related or affiliated entities (including, without limitation, their present, former, and future officers, directors,stockholders, managers, agents, employees, attorneys, and representatives) (the “Released Parties”) from any claims that Executive mayhave in any way connected with Executive’s employment with the Company and the termination thereof, whether or not such claims arepresently known or unknown to Executive. It is understood that the release includes, but is not limited to, any claims for damages of anykind whatsoever, including any claims for employment benefits, arising out of any contracts, express or implied, any covenant of goodfaith and fair dealing, express or implied, any theory of unlawful discharge or other tort theory, any legal restriction on the Company’sright to terminate3Executives, or any federal, state or other governmental statute or ordinance, including, without limitation, Title VII of the Civil RightsAct of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with DisabilitiesAct, the Executive Retirement Income Security Act of 1974, the Washington Law Against Discrimination (“WLAD”), any other statelaws concerning discrimination or harassment, or any other legal limitation on the employment relationship to the maximum extent suchclaims are allowed by law to be released. The waiver and release shall not waive or release claims where the events in dispute first ariseafter execution of the Agreement, nor shall it preclude Executive or the Company from filing a lawsuit for the exclusive purpose ofenforcing the Agreement.b. Executive represents and warrants that he has not filed any lawsuits, complaints, or charges against the Released Parties withany governmental agency or any court.c. Executive understands that nothing in this Agreement is intended to interfere with or deter Executive’s right to challenge thewaiver of an ADEA claim or state law age discrimination claim or the filing of an ADEA charge or ADEA complaint or state law agediscrimination complaint or charge with the EEOC or any state discrimination agency or commission or to participate in anyinvestigation or proceeding conducted by those agencies. Further, Executive understands that nothing in this Agreement would requireExecutive to tender back the money received under this Agreement if Executive seeks to challenge the validity of the ADEA or state lawage discrimination waiver, nor does the Executive agree to ratify any ADEA or state law age discrimination waiver that fails to complywith the Older Workers’ Benefit Protection Act by retaining the money received under the Agreement. Further, nothing in thisAgreement is intended to require the payment of damages, attorneys’ fees or costs to the Company should Executive challenge thewaiver of an ADEA or state law age discrimination claim or file an ADEA or state law age discrimination suit except as authorized byfederal or state law.d. This release excludes any claim which cannot be released by private agreement, such as workers’ compensation claims,claims after the Effective Date of this Agreement (as defined below), and the right to file administrative charges with certain governmentagencies. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge with or participating in anyinvestigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, or acomparable state or local agency. Notwithstanding this or the immediately preceding paragraph, Executive agrees to waive any right torecover monetary damages in any charge, complaint, or lawsuit against the Company filed by Executive or by anyone else onExecutive’s behalf with respect to any Released Claim.3.2 This general release covers both claims that Executive knows about and those that Executive may not know about, except that itdoes not waive any rights or claims, including claims under the ADEA that may arise after the Effective Date of this Agreement.Executive further represents and warrants that: (i) Executive has been fully and properly paid for all hours worked, (ii) Executive hasreceived all leave to which Executive is entitled in accordance with applicable law; and (iii) Executive has not suffered any on the jobinjury for which Executive has not already filed a claim. Executive further acknowledges, agrees and hereby stipulates that: (i) duringExecutive’s employment with the Company, Executive was allowed to take all leave and afforded all other rights to which Executivewas entitled under the Family and Medical Leave Act (“FMLA”); and (ii) the Company has not in any way interfered with, restrained ordenied the exercise of (or attempt to4exercise) any FMLA rights, nor terminated or otherwise discriminated against Executive for exercising (or attempting to exercise) anysuch rights.4. RETURN OF COMPANY PROPERTY4. On or before December 31, 2016 Executive shall turn over to the Company all property of the Company, including withoutlimitation all files, memoranda, keys, manuals, equipment, data, records, and other documents, including electronically recordeddocuments and data that Executive received from the Company or its directors or employees or that Executive generated in the course ofhis employment with the Company. No later than his last day in the offices of the Company Executive shall also provide the Companywith access to all Company-related computer files and any and all passwords needed to access those files.5. RESTRICTIVE COVENANTS5.1. Non-Competition, Non-Solicitation, Confidentiality, and Proprietary Rightsa. Executive acknowledges and agrees that during his employment with the Company he acquired considerable ConfidentialInformation about the Company. Executive acknowledges and agrees that the term “Confidential Information” shall mean informationbelonging to the Company which is of value to the Company or with respect to which Company has right in the course of conducting itsbusiness and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Informationincludes information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, storedin 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 financialreports 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 orfacilities) which have been discussed or considered by the management of the Company. Confidential Information includes informationdeveloped by Executive in the course of Executive’s employment by the Company, as well as other information to which Executive mayhave access in connection with Executive’s employment. Confidential Information also includes the confidential information of otherswith which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not includeinformation in the public domain, unless due to breach of Executive’s duties under Section 7.2 of the Employment Agreement.b. Executive hereby reaffirms and agrees to the terms of the Non-Competition, Non-Solicitation, Confidentiality, andProprietary Rights provisions of the Employment Agreement, specifically including, but not limited to, the provisions regardingnondisclosure of the Company’s trade secrets and confidential and proprietary information, non-solicitation, and noncompetition, as setforth in Exhibit A to this Agreement; provided, however, Executive hereby agrees that the Noncompetition Period (as defined in theEmployment Agreement) shall be extended and shall end on the date that is eighteen months following the date of the termination ofExecutive’s employment with the Company. Executive covenants and agrees that both prior to and after the Separation Date5he will continue to be bound by the terms of the Non-Competition, Non-Solicitation, Confidentiality, and Proprietary Rights provisionsof the Employment Agreement, restated and incorporated herein by reference, provided that the Noncompetition Period shall beextended and shall end on the date that is eighteen months following the date of the termination of Executive’s employment with theCompany.c. Notwithstanding anything to the contrary, this Section does not prohibit the disclosure of trade secret information within thelimitations permitted by the Defend Trade Secrets Act, and Executive is hereby notified that no individual will be held criminally orcivilly liable for the disclosure of a trade secret (as defined in the Act) that is: (a) made in confidence to a federal, state, or localgovernment official, either directly or indirectly, or to an attorney, and made solely for the purpose of reporting or investigating asuspected violation of law; (b) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made underseal so that it is not made public; or (c) disclosed to the individual’s attorney or used in a court proceeding (as permitted by court order)in connection with a lawsuit for retaliation by an employer for reporting a suspected violation of the law.d. Nothing in this Section or Agreement shall be construed to prohibit Executive from filing a charge with or participating inany investigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, or acomparable state or local agency. Furthermore, this Section does not apply to the Executive filing a charge with or participating in anyinvestigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, or acomparable state or local agency.5.2. Non-Disparagement . Executive agrees to refrain from any disparagement, defamation, libel, slander or making of any othernegative statement regarding the Company, its prospects, products or services (together, the “Company Business”), its officers,employees, directors, shareholders, consultants, advisors, agents or representatives (the “Company People”), or its business reputation,or tortious interference with the contracts and relationships of the Company. Executive further agrees that he will not otherwiseintentionally engage in conduct that is not in good faith and that is intended to disrupt, damage, impair or interfere with the CompanyBusiness, the Company People, and the Company’s reputation and relationships. To the extent that Executive becomes aware of anyperson or entity that, based in part on information or interaction with Executive, develops a disparaging impression of the CompanyBusiness or Company People, Executive will promptly so notify the Company and provide detail around the circumstances in whichsuch situation arose. Jean Birch, Benjamin Hochberg, Yoo Jin Kim, John Shafer, L. David Mounts, Rob Weisberg, Jeffrey Welch, MarkHutchens, Victoria Blackwell, Dan Harmon, Jayson Tipp and Brandon Solano each agrees to refrain from any disparagement,defamation, libel, slander or making of any other negative statement regarding Executive.5.3. Remedies . It is specifically understood and agreed that any breach of the provisions of Section 5 of this Agreement is likely toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis6Agreement, including, without limitation, any Separation Compensation required under Section 2 of this Agreement, in each case inaddition to any other remedy to which the Company may be entitled at law or in equity.6. NOTICESAll notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand or mailed by (a) certifiedmail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Victoria BlackwellIf to the Executive:Ken Calwell2222 SE 12th AvenueCamas, WA 98607or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 6.7. GENERAL PROVISIONS7.1. No Admissions. The Agreement should not be construed as an admission or a statement of any party hereto that such party hasacted wrongfully or unlawfully. Each party expressly denies any wrongful or unlawful action.7.2. Opportunity to Review and Revocation Period . Executive hereby warrants and represents that (a) he has carefully read thisSeparation Agreement and General Release, and finds that it is written in a manner that he understands; (b) Executive knows thecontents hereof; (c) Executive has been advised to consult and has discussed the Separation Agreement and its effects with his personalattorney or has knowingly and voluntarily waived the right to do so; (d) Executive understands that he is giving up all claims, damages,and disputes that have arisen before the date of this Separation Agreement and General Release, except as provided herein; (e) Executivehas had the opportunity to review and analyze this Separation Agreement and General Release for twenty-one (21) days (the “ReviewPeriod”), but agrees that if he signs this Agreement before expiration of the Review Period, he knowingly and voluntarily agrees towaive the remainder of the Review Period; (f) Executive has seven (7) days to revoke this Agreement by notifying Victoria Blackwellvia written communication at the address below before midnight on the seventh day after you sign this Separation Agreement (the“Revocation Period”); (g) Executive did not rely upon any representation or statement concerning the subject matter of this SeparationAgreement, except as expressly stated in the7Separation Agreement; (h) Executive understands the Separation Agreement’s final and binding effect; and (i) Executive has signed theSeparation Agreement as his free and voluntary act.7.3. Entire Agreement; Amendment . This Agreement constitutes the entire Agreement between the parties hereto with regard to thesubject matter hereof, superseding all prior understandings and agreements, with the exception of Non-Competition, Non-Solicitation,Confidentiality, and Proprietary Rights provisions of the Employment Agreement, whether written or oral. This Agreement may not beamended or revised except by a writing signed by the parties.7.4. Section 409A . The parties intend that this Agreement and the payments and benefits provided hereunder be exempt from therequirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferral exceptiondescribed in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg. Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend that this Agreementand any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictions imposed underSection 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operated andadministered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of its affiliatesor successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409A of theCode or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing to complywith, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding any otherprovision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion. The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate in good faith8any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) so that either(i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code will be achieved; provided, that, neitherthe Company nor its employees or representatives shall have liability to Executive with respect hereto.(b) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(c) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, each installment shall be treated as a separate payment.(d) A termination of employment shall not be deemed to have occurred for purposes of any provision of thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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.7.5 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.7.6. Arbitration of Disputes . Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwisearising out of the termination of Executive’s employment (including, without limitation, any claims of unlawful employmentdiscrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum andform agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association(“AAA”) in Vancouver, Washington in accordance with the Employment Dispute Resolution Rules of the AAA, including, but notlimited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Executiveor the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitrationsubject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any courthaving jurisdiction thereof. This Section 7.6 shall be specifically enforceable. Notwithstanding the foregoing, this Section 7.6 shall notpreclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminaryinjunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitrationproceeding pursuant to this Section 7.6.7.7. Cooperation; Indemnification of Executive by Company . In return for the amounts paid hereunder, Executive agrees to cooperatein defense of the Company in any legal action or claim in9which Executive is named as a witness. Cooperation shall include, upon request by the Company, participating in and testifying atdepositions, trials, mediations, arbitrations, or other hearings; providing information in written format such as declaration or affidavit;making himself available to the Company and its attorneys for interview or other consultation; and providing general assistance to theCompany and its attorneys. Executive acknowledges that this is a material term of this Separation Agreement, and that breach of thisterm would cause damage to the Company. Lack of compliance shall be shown by failure, after notice in writing, to abide by theCompany’s request.In exchange for Executive’s agreement to cooperate and assist in the defense of the Company in any legal action, the Company agrees tobe responsible and reimburse Executive for reasonable expenses or costs associated with his participation and cooperation in suchpossible legal actions, including any and all travel, airfare and transportation, lodging, and meals within thirty (30) days after submissionof receipts by Executive. The Company similarly agrees to compensate Executive a daily rate for any partial or entire days spent inassisting the Company with the defense against any legal actions, but only for any such assistance provided after expiration of theBenefit Period, with such daily rate to be $500. The Parties agree that (i) the full daily rate shall be payable for an entire day ofassistance by Executive, which shall be defined as at least eight (8) hours in a calendar day, (ii) half the daily rate shall be payable formore than four (4) hours of assistance but less than eight hours in a calendar rate, and (iii) that no payment shall be made for assistancethat is less than four hours in a calendar day. Executive shall submit records of hours spent in assisting the Company within thirty (30)days.This release will not affect any vested rights that Executive may have under health insurance plans or under any 401(k) plan maintainedby Papa Murphy’s or for workers’ compensation or unemployment compensation benefits or any claims that may arise after the dateExecutive signs this Separation Agreement. Should Executive choose to file for unemployment, Executive agrees to inform theEmployment Department that Executive resigned in lieu of termination. Papa Murphy’s will not contest Executive’s unemploymentclaim.7.8. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and shallhave the same effect as if the signatures hereto and thereto were on the same instrument.7.9. The “Effective Date” of this Agreement is the date that is eight (8) days following the date on which Executive signs thisAgreement, so long as Executive has not revoked acceptance of this Agreement before such date.7.10. By executing this Agreement, Executive also acknowledges that Executive: (a) is not relying upon any statements,understandings, representations, expectations, or agreements other than those expressly set forth in this Agreement; (b) has madeExecutive’s own investigation of the facts and is relying solely upon Executive’s own knowledge and the advice of Executive’s ownlegal counsel; and (c) knowingly waives any claim that this Agreement was induced by any misrepresentation or nondisclosure and anyright to rescind or avoid this Agreement based upon presently existing facts, known or unknown. The Parties stipulate that each Party isrelying upon these representations and warranties in entering into this Agreement. These representations and warranties shall survive theexecution of this Agreement.107.11. All terms and provisions of this Agreement, and the drafting of this Agreement, have been negotiated by the Parties at arm’slength and to mutual agreement, with consideration by and participation of each, and no party shall be deemed the scrivener of thisAgreement.7.12. Construction . Section 3 of the Agreement is integral to its purpose and may not be severed from it. Should any other provisionof the Agreement be deemed invalid or unenforceable, that provision shall be narrowed to the extent required to make it lawful andenforceable, and the remaining provisions shall not be affected but instead remain valid and enforceable to the maximum extentconsistent with current law.7.13. Knowing and Voluntary Agreement . Executive understands this Agreement is a release of claims against Releasees arisingbefore or on the Effective Date of this Agreement. Executive understands that Executive is not waiving claims that the law does notpermit Executive to waive, nor is Executive waiving any claims arising after the Effective Date of this Agreement, including, but notlimited to, claims for enforcement of this Agreement.If Executive wishes to enter into this Separation Agreement and General Release, he must sign the enclosed copy where indicated andreturn it to Victoria Blackwell, 8000 NE Parkway Drive, Suite 350, Vancouver, Washington 98662. To be effective, the signedSeparation Agreement must be deposited by U.S. mail and postmarked no later than January 19, 2017, however, Executive is free to signthe Agreement earlier if he so chooses.Notwithstanding any other provision in this Agreement, if Executive does not sign and deliver this Agreement to VictoriaBlackwell on or before 21 days following Executive’s receipt of this Agreement, then this Agreement will be null and void , andExecutive will not be entitled to the Lump Sum Payment, or any other consideration described in this Agreement.11IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates indicated below.“ COMPANY ” PAPA MURPHY’S HOLDINGS, INC.Name: /s/ Mark Hutchens Title: CFO Dated: January 2, 2017 “ EXECUTIVE ”/s/ Ken Calwell Ken CalwellDated: January 1, 2017 12Exhibit 10.12AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Jayson Tipp, a resident of Portland, Oregon (“ Executive ”) amends and restates the Executive Employment Agreementand Non-competition Agreement dated as of the 7 th day of January, 2013, by and between PMI Holdings, Inc., a Delaware corporationand the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 7 th day of January, 2013;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Chief Development Officer of the Company and Executive’s duties andresponsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Chief Executive Officer andSenior Vice President of Technology. 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 thisAgreement shall not be interpreted as prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities,or serving asa director of or providing services to another business or enterprise (whether engaged in for profit or not; provided, however, withrespect to for profit businesses, Executive shall be limited to serving as a director to three for-profit business enterprises other than theCompany), so long as such activities do not interfere in any material respect with the performance of Executive’s duties andresponsibilities hereunder.3. Compensation .3.1 Base Salary .(a) In consideration of the services rendered by Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $300,051 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 50% of the Base Salary, payable in accordance with the Company’s incentivecompensation policy; provided, that, such Annual Bonus shall in no event be paid later than March 15 of the calendar year immediatelyfollowing the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets asagreed upon by Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during theEmployment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.24. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of his duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate his employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of his duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of his employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or his legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable through thedate of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the yearin which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time assuch payment would have been made if not for Executive’s death or Total Disability. Executive or his legal representatives shall also be3entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the one-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of one year after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the one-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the one-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no longer subject to restriction on or before the one-year anniversary of Executive’s dateof termination; and (f) (1) outstanding stock options held by Executive with performance-based vesting that are not vested andexercisable on Executive’s date of termination will not be forfeited when Executive’s4employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary of the date on which such stockoptions become vested and exercisable and (y) the stock option expiration date as set forth in the applicable stock option agreement and(2) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stock awards shall notcease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable with respect to anysuch restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may beowing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or5(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within one year after a Change in Control(A) by Executive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upontermination shall be governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executiveshall be entitled solely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payrollpayment date; (2) an amount equal to the sum of his Base Salary and his target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of one year after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within one year after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than stock options and restrictedstock awards (but including restricted stock units) with solely time-based vesting, Executive will immediately vest in and have the rightto exercise or payment of such awards, all restrictions on such awards will lapse, and all other terms and conditions of such awards willbe6deemed met; (4) outstanding stock options held by Executive with performance-based vesting that are not vested and exercisable onExecutive’s date of termination will not be forfeited when Executive’s employment terminates and shall instead remain outstanding untilthe stock option expiration date as set forth in the applicable stock option agreement; and (5) for outstanding restricted stock awards heldby Executive with performance-based vesting, such restricted stock awards shall not cease to vest upon Executive’s date of terminationand any Company repurchase right shall not become exercisable with respect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with his obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portionof such benefits shall be paid over the remainder of the time period originally scheduled for such payments.75.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such informationand documents as the Tax Counsel may reasonably request in order to make8the computations and determinations called for by this Section 5.8. The Company shall bear all costs that the Tax Counsel mayreasonably incur in connection with the computations and determinations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate his or his relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting for or on behalf of Executive orany such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, orany former client (including all franchisees)9of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the 6-monthperiod immediately preceding the date of such solicitation and (d) diverting to any person (as hereinafter defined) any client (includingall franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that10transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocketexpenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Jayson Tipp1816 NE 37 th AvenuePortland, OR 97212or 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold.12The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shallarise.11.6 Set Off . The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate13in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) sothat either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code 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 andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Ken Callwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Jayson Tipp Jayson Tipp15Exhibit 10.13EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENTThis EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “ Agreement ”), dated as of the 19th dayof October, 2015, by and between PMI Holdings, Inc., a Delaware corporation (the “ Company ”), and Brandon Solano, a resident ofPowell, Ohio (the “ Executive ”).WHEREAS, the purpose and business of the Company is 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will be available to theCompany, and that Executive is willing and able to render such services on the terms and conditions hereinafter set forth; andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to employ Executive, and Executive hereby agrees to accept employment with theCompany, upon the terms and conditions contained in this Agreement, to be effective on the date that Executive commencesemployment with the Company (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earliertermination of such employment pursuant to the terms hereof, until May 5, 201_ after 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. On May 5, 201_and on each anniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. TheCompany or Executive may elect to terminate the automatic extension of the Employment Period by giving written notice of suchelection 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 managerialcapacity in a manner consistent with Executive’s position as Chief Marketing Officer of the Company and Executive’s duties andresponsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Chief Executive Officer andSenior Vice President of Technology. 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 thisAgreement 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, Executive shall be limited to serving as a director to three for-profit business enterprisesother than the Company), so long as such activities do not interfere in any material respect with the performance of Executive’s dutiesand responsibilities hereunder.3. Compensation .3.1 Base Salary .(a) In consideration of the services rendered by Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $310,000 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company.3.2 Bonus . During the Employment Period, 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 immediately following the fiscal year to whichsuch Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets as agreed upon by Executive and theBoard with respect to the Company’s financial performance for any fiscal year ending during the Employment Period. The AnnualBonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Incentive Shares . Within 60 days after the Effective Date, Executive may purchase up to _____ shares of theCompany’s common stock at $_____ per share, that may be issued pursuant to the Company’s Management Incentive Plan (the “Management Incentive Shares ”). The Management Incentive Shares shall be split ____ shares time vesting and ____ sharesperformance vesting. Alternatively, Executive may purchase the economic equivalent in options as a public company.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.4. Termination . Executive’s employment hereunder may be terminated as follows:4.1 Automatically in the event of the death of the Executive;24.2 At the option of the Company, by written notice to Executive or his personal representative in the event of thePermanent Disability of Executive. As used herin, the term “ Permanent Disability ” shall mean a physical or mental incapacity ordisability 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 theCompany;4.6 Immediately in the event of a breach by the Executive of Section 7 of this Agreement; or4.7 At the option of Executive for Good Reason (as defined in Section 5.5 ), on ninety (90) days prior written notice to theCompany.5. Payments .5.1 Death or Permanent Disability . Upon the termination of Executive’s employment due to death or PermanentDisability, Executive or his legal representatives shall be entitled to receive (i) an amount equal to Base Salary payable through the dateof termination and (ii) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year for whichExecutive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the year inwhich termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time as suchpayment would have been made if not for Executive’s death or Permanent Disability. Executive or his legal representatives shall also beentitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . If Executive’s employment is terminated by theCompany at any time during the Employment Period without Cause or by Executive at any time during the Employment Period forGood Reason, Executive shall be entitled to receive (i) any accrued but unpaid Base Salary through the date of termination; (ii) BaseSalary through the one-year anniversary of such date of termination, payable at the time such payments would have otherwise beenpayable under this Agreement had the Executive not been terminated; provided, however, that no portion of such severance pay shall bepaid to the Executive prior to the first regular payroll following the sixtieth (60th) day of the date of the Executive’s termination ofemployment with the Company (the “ First Payroll Date” ); (iii) a pro rata portion of Executive’s Annual Bonus, if any, for theapplicable period of the calendar year for which Executive was employed (which portion of the Annual Bonus shall be reasonablydetermined by the Board at the end of the year in which termination occurs in accordance with the Board’s bonus determination policiesthen in effect), payable at the same time as such payment would have been made if not for termination of Executive’s employment withthe Company as set forth in Section 3.2 hereof, and (iv) continuation of group health benefits to the extent authorized by and consistentwith 29 U.S.C: § 1161 et seq. (commonly known as (“ COBRA” ))3starting on Executive’s termination of employment, with the cost of the regular premium for such benefits shared in the same relativeproportion by the Company and the Executive as in effect immediately prior to the date of termination, for a period of one year after thedate of termination; provided, that, if Executive does not execute a fully effective non-revocable release within sixty (60) days of thetermination of employment, then, beginning on the sixtieth (60th) day following the termination of employment, the Company shallcease 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 theCompany’s policies. In the case of cause (ii) in this Section 5.2, the portion of the severance pay that would have been paid to theExecutive during the period between the date of termination of Executive’s employment with the Company and the First Payroll Dateshall be paid to the Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portion of the severance pay shall bepaid without delay over the time period originally scheduled in this Section 5.2.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.3, by Executive without Good Reason pursuant to Section 4.5 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis Section 5.4 , 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’sconsent:(a) the Company materially breached its obligations under this Agreement;4(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 allsenior executives or employees generally;provided, that, in each case, in the event that Executive provides written notice of termination for Good Reason in reliance upon thisSection 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 otherwiserequired 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within sixty (60) days of Executive’s termination of employment and (ii) compliance by Executive with his obligations underthis Agreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholdersor 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 inSections 5.2 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance 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 ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.9 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished 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 oneyear following the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period” ), Executivewill not, without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreigncountry in which the Company has conducted business, is conducting business or is then contemplating conducting business, engage inany 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 of5Executive, whose business, activities, products or services are competitive with any of the business, activities, products or servicesconducted, offered or then contemplated to be conducted or offered by the Company or its subsidiaries or affiliates; provided, however,nothing herein shall prohibit Executive from being employed by any business, organization or person that operates in the quick servicerestaurant industry and derives less than 10% of its total revenue from the sale of pizza. Without implied limitation, the foregoingcovenant shall be deemed to prohibit (i) hiring or engaging or attempting to hire or engage for or on behalf of Executive or any suchcompetitor any officer or employee of the Company or any of its direct and/or indirect subsidiaries and affiliates, or any formeremployee of the Company and any of its direct and/or indirect subsidiaries and affiliates who was employed during the six (6)-monthperiod immediately preceding the date of such attempt to hire or engage, (ii) encouraging for or on behalf of Executive or any suchcompetitor any such officer or employee to terminate his or his relationship or employment with the Company or any of its direct orindirect subsidiaries and affiliates, (iii) soliciting for or on behalf of Executive or any such competitor any client (including allfranchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, or any former client (including all franchisees) ofthe 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, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than two percent (2%) of the equity of such enterprise. Neither Executive nor anybusiness entity controlled by Executive is a party to any contract, commitment, arrangement or agreement which could, following thedate hereof, restrain or restrict the Company or any subsidiary or affiliate of the Company from carrying on its business or restrain orrestrict Executive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments 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 allpredecessors 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 ConfidentialInformation 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise6agreed between the Company and Executive in writing. Executive expressly agrees that any products, inventions, discoveries orimprovements made by Executive or Executive’s agents or affiliates in the course of Executive’s employment shall be the property ofand inure to the exclusive benefit of the Company. Executive further agrees that any and all products, inventions, discoveries orimprovements developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of hisemployment, or involving the use of the time, materials or other resources of the Company or any of its affiliates, shall be promptlydisclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and alldocuments 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 orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that transpired while Executive was employed by the Company. The Company shall reimburse Executivefor any reasonable out-of-pocket expenses incurred in connection with Executive’s performance of obligations pursuant to thisSection 7.3 .7.4 The term “Confidential Information” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2 , in each case in addition to any otherremedy to which the Company may be entitled at law or in equity.79. Severable Provisions . The provisions of this Agreement are severable and the invalidity of any one or more provisions shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed 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 LLC8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662With copies to (which shall not constitute notice):Papa Murphy’s Holdings, Inc.c/o Lee Equity Partners, LLC650 Madison Avenue, 21 st FloorNew York, NY 10022Attn: Ben HochbergYoo Jin KimFacsimile: (646) 781-3700If to the Executive: 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement or policy to which Executive is a party or otherwise bound.811.2 Entire Agreement; Amendment . This Agreement constitutes the entire Agreement between the parties hereto withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold. The Company shall be entitled to rely on advice of counsel if any question as to the amount orrequirement 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 providedhereunder 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 employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits9during the six-month period and the Company shall pay Executive an amount equal to the amount of such premiums paid by Executiveduring such six-month period promptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate in good faith any such benefit or payment (including, without limitation, as to the timing ofany severance payments payable hereof) so that either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409Aof the Code will be achieved; provided, that, neither the Company nor its employees or representatives shall have liability to Executivewith respect hereto.(c) Notwithstanding anything to the contrary contained in this Agreement, all reimbursements for costs andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear, provided, however, that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangementcovered by Seection 105(b) of the Internal Revenue Code of 1986, as amended, solely because such expenses are subject to a limitrelated 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 of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA” ) in the city of New York, NY, in the borough of M10anhattan in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules andprocedures applicable to the selection of arbitrators. In the event that any person or entity other than Executive or the Company may be aparty with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such otherperson or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdictionthereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9 shall not preclude eitherparty from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction incircumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceedingpursuant to this Section 11.9 .11.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.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 Callwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Brandon Solano Brandon Solano11Exhibit 10.14AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Brandon Solano, a resident of Vancouver, WA (“ Executive ”) amends and restates the Executive EmploymentAgreement and Non-competition Agreement dated as of the 19 th day of October, 2015, by and between PMI Holdings, Inc., a Delawarecorporation and the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 19 th day of October, 2015;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Chief Marketing Officer of the Company and Executive’s duties andresponsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Chief Executive Officer.Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods ofdisability) and use his best efforts in his employment with the Company; provided, however, that this Agreement shall not be interpretedas prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of orproviding services to anotherbusiness or enterprise (whether engaged in for profit or not; provided, however, with respect to for profit businesses, Executive shall belimited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interferein 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 Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $310,000 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 50% of the Base Salary, payable in accordance with the Company’s incentivecompensation policy; provided, that, such Annual Bonus shall in no event be paid later than March 15 of the calendar year immediatelyfollowing the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets asagreed upon by Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during theEmployment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.24. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of his duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate his employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of his duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of his employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or his legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable through thedate of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the yearin which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time assuch payment would have been made if not for Executive’s death or Total Disability. Executive or his legal representatives shall also be3entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the one-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of one year after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the one-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the one-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no longer subject to restriction on or before the one-year anniversary of Executive’s dateof termination; and (f) (1) outstanding stock options held by Executive with performance-based vesting that are not vested andexercisable on Executive’s date of termination will not be forfeited when Executive’s4employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary of the date on which such stockoptions become vested and exercisable and (y) the stock option expiration date as set forth in the applicable stock option agreement and(2) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stock awards shall notcease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable with respect to anysuch restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may beowing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or5(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within one year after a Change in Control(A) by Executive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upontermination shall be governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executiveshall be entitled solely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payrollpayment date; (2) an amount equal to the sum of his Base Salary and his target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of one year after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within one year after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than stock options and restrictedstock awards (but including restricted stock units) with solely time-based vesting, Executive will immediately vest in and have the rightto exercise or payment of such awards, all restrictions on such awards will lapse, and all other terms and conditions of such awards willbe6deemed met; (4) outstanding stock options held by Executive with performance-based vesting that are not vested and exercisable onExecutive’s date of termination will not be forfeited when Executive’s employment terminates and shall instead remain outstanding untilthe stock option expiration date as set forth in the applicable stock option agreement; and (5) for outstanding restricted stock awards heldby Executive with performance-based vesting, such restricted stock awards shall not cease to vest upon Executive’s date of terminationand any Company repurchase right shall not become exercisable with respect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with his obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portionof such benefits shall be paid over the remainder of the time period originally scheduled for such payments.75.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such informationand documents as the Tax Counsel may reasonably request in order to make8the computations and determinations called for by this Section 5.8. The Company shall bear all costs that the Tax Counsel mayreasonably incur in connection with the computations and determinations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate his or his relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting for or on behalf of Executive orany such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, orany former client (including all franchisees)9of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the 6-monthperiod immediately preceding the date of such solicitation and (d) diverting to any person (as hereinafter defined) any client (includingall franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that10transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocketexpenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Brandon Solano 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold.12The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shallarise.11.6 Set Off . The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate13in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) sothat either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code 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 andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Ken Calwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Brandon Solano Brandon Solano15Exhibit 10.16AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Victoria T. Blackwell, a resident of Vancouver, Washington (“ Executive ”) amends and restates the ExecutiveEmployment Agreement and Non-competition Agreement dated as of the 4 th day of May, 2010, by and between PMI Holdings, Inc., aDelaware corporation and the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 4 th day of May, 2010;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Senior Vice President of Talent and Chief Legal Officer of the Companyand Executive’s duties and responsibilities shall include those duties reasonably assigned to him from time to time by the Company’sChief Executive Officer. Executive shall devote her entire business time, attention and energies (excepting vacation time, holidays, sickdays and periods of disability) and use her best efforts in her employment with the Company; provided, however, that this Agreementshall not be interpreted as prohibiting Executive from managing her personal affairs, engaging in charitable or civic activities, or servingasa director of or providing services to another business or enterprise (whether engaged in for profit or not; provided, however, withrespect to for profit businesses, Executive shall be limited to serving as a director to three for-profit business enterprises other than theCompany), so long as such activities do not interfere in any material respect with the performance of Executive’s duties andresponsibilities hereunder.3. Compensation .3.1 Base Salary .(a) In consideration of the services rendered by Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $262,800 per calendar year during her employment.(b) The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 50% of the Base Salary, payable in accordance with the Company’s incentivecompensation policy; provided, that, such Annual Bonus shall in no event be paid later than March 15 of the calendar year immediatelyfollowing the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets asagreed upon by Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during theEmployment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.24. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of her duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate her employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of her duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of her employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or her legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable throughthe date of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the yearin which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time assuch payment would have been made if not for Executive’s death or Total Disability. Executive or her legal representatives shall also be3entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the one-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue her coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of one year after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the one-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the one-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no longer subject to restriction on or before the one-year anniversary of Executive’s dateof termination; and (f) (1) outstanding stock options held by Executive with performance-based vesting that are not vested andexercisable on Executive’s date of termination will not be forfeited when Executive’s4employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary of the date on which such stockoptions become vested and exercisable and (y) the stock option expiration date as set forth in the applicable stock option agreement and(2) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stock awards shall notcease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable with respect to anysuch restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may beowing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or5(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within one year after a Change in Control(A) by Executive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upontermination shall be governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executiveshall be entitled solely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payrollpayment date; (2) an amount equal to the sum of her Base Salary and her target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue her coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of one year after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within one year after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than stock options and restrictedstock awards (but including restricted stock units) with solely time-based vesting, Executive will immediately vest in and have the rightto exercise or payment of such awards, all restrictions on such awards will lapse, and all other terms and conditions of such awards willbe6deemed met; (4) outstanding stock options held by Executive with performance-based vesting that are not vested and exercisable onExecutive’s date of termination will not be forfeited when Executive’s employment terminates and shall instead remain outstanding untilthe stock option expiration date as set forth in the applicable stock option agreement; and (5) for outstanding restricted stock awards heldby Executive with performance-based vesting, such restricted stock awards shall not cease to vest upon Executive’s date of terminationand any Company repurchase right shall not become exercisable with respect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with her obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portionof such benefits shall be paid over the remainder of the time period originally scheduled for such payments.75.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such informationand documents as the Tax Counsel may reasonably request in order to make8the computations and determinations called for by this Section 5.8. The Company shall bear all costs that the Tax Counsel mayreasonably incur in connection with the computations and determinations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by Executive directly in connection with the business and affairs of the Company and the performance of her duties hereunder,upon presentation of proper receipts or other proof of expenditure and in accordance with such reasonable guidelines or limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate her or her relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting for or on behalf of Executive orany such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, orany former client (including all franchisees)9of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the 6-monthperiod immediately preceding the date of such solicitation and (d) diverting to any person (as hereinafter defined) any client (includingall franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing her employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror not able to be protected by copyright, patent or trademark) during the course of her 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that10transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocketexpenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Victoria T. Blackwell3306 NW 129 th StreetVancouver, WA 98685or 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold.12The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shallarise.11.6 Set Off . The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with her employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate13in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) sothat either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code 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 andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Ken Calwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Victoria T. Blackwell Victoria T. Blackwell15Exhibit 10.18AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Mark Hutchens, a resident of Vancouver, Washington (“ Executive ”) amends and restates the Executive EmploymentAgreement and Non-competition Agreement dated as of the 21 st day of March, 2014, by and between PMI Holdings, Inc., a Delawarecorporation and the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 21 st day of March, 2014;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Chief Financial Officer of the Company and Executive’s duties andresponsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Chief Executive Officer.Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods ofdisability) and use his best efforts in his employment with the Company; provided, however, that this Agreement shall not be interpretedas prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a director of orproviding services to anotherbusiness or enterprise (whether engaged in for profit or not; provided, however, with respect to for profit businesses, Executive shall belimited to serving as a director to three for-profit business enterprises other than the Company), so long as such activities do not interferein 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 Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $360,500 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 50% of the Base Salary, payable in accordance with the Company’s incentivecompensation policy; provided, that, such Annual Bonus shall in no event be paid later than March 15 of the calendar year immediatelyfollowing the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets asagreed upon by Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during theEmployment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.24. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of his duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate his employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of his duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of his employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or his legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable through thedate of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the yearin which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time assuch payment would have been made if not for Executive’s death or Total Disability. Executive or his legal representatives shall also be3entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the one-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of one year after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the one-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the one-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no longer subject to restriction on or before the one-year anniversary of Executive’s dateof termination; and (f) (1) outstanding stock options held by Executive with performance-based vesting that are not vested andexercisable on Executive’s date of termination will not be forfeited when Executive’s4employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary of the date on which such stockoptions become vested and exercisable and (y) the stock option expiration date as set forth in the applicable stock option agreement and(2) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stock awards shall notcease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable with respect to anysuch restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may beowing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or5(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within one year after a Change in Control(A) by Executive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upontermination shall be governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executiveshall be entitled solely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payrollpayment date; (2) an amount equal to the sum of his Base Salary and his target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of one year after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within one year after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than stock options and restrictedstock awards (but including restricted stock units) with solely time-based vesting, Executive will immediately vest in and have the rightto exercise or payment of such awards, all restrictions on such awards will lapse, and all other terms and conditions of such awards willbe6deemed met; (4) outstanding stock options held by Executive with performance-based vesting that are not vested and exercisable onExecutive’s date of termination will not be forfeited when Executive’s employment terminates and shall instead remain outstanding untilthe stock option expiration date as set forth in the applicable stock option agreement; and (5) for outstanding restricted stock awards heldby Executive with performance-based vesting, such restricted stock awards shall not cease to vest upon Executive’s date of terminationand any Company repurchase right shall not become exercisable with respect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with his obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portionof such benefits shall be paid over the remainder of the time period originally scheduled for such payments.75.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such informationand documents as the Tax Counsel may reasonably request in order to make8the computations and determinations called for by this Section 5.8. The Company shall bear all costs that the Tax Counsel mayreasonably incur in connection with the computations and determinations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate his or his relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting for or on behalf of Executive orany such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, orany former client (including all franchisees)9of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the 6-monthperiod immediately preceding the date of such solicitation and (d) diverting to any person (as hereinafter defined) any client (includingall franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that10transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocketexpenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Mark HutchensP.O. Box 873965Vancouver, WA 98687or 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold.12The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shallarise.11.6 Set Off . The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate13in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) sothat either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code 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 andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Ken Calwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Mark Hutchens Mark Hutchens15Exhibit 10.30AMENDED AND RESTATED EXECUTIVE EMPLOYMENT ANDNON-COMPETITION AGREEMENTThis AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement ”), dated as of the 27th day of July, 2016, by and between Papa Murphy’s Holdings, Inc., a Delaware corporation (the “Company ”), and Dan Harmon, a resident of Vancouver, Washington (“ Executive ”) amends and restates the Executive EmploymentAgreement and Non-competition Agreement dated as of the 18 th day of February, 2014, by and between PMI Holdings, Inc., a Delawarecorporation and the Company’s predecessor, and Executive.WHEREAS, the Company’s predecessor and Executive entered into that certain Executive Agreement and Non-CompetitionAgreement dated as of the 18 th day of February, 2014;WHEREAS, the parties 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 preservedfor the exclusive benefit of the Company;WHEREAS, the Company desires to be assured that the unique and expert services of Executive will continue to be available tothe Company, and that Executive is willing and able to continue to render such services on the terms and conditions hereinafter set forth;andNOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agreeas follows:1. Employment . The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to acceptcontinued employment with the Company, upon the terms and conditions contained in this Agreement, to be effective on the date of thisAgreement (the “ Effective Date ”). Executive’s employment with the Company shall continue, subject to earlier termination of suchemployment pursuant to the terms hereof, until April 1, 2017 after the Effective Date (the “ Employment Period ”). Notwithstandinganything herein to the contrary, this Agreement shall be of no force or effect until the Effective Date. On April 1, 2017 and on eachanniversary thereof, the Employment Period shall be automatically extended for an additional twelve-month period. The Company orExecutive may elect to terminate the automatic extension of the Employment Period by giving written notice of such election not lessthan 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 managerialcapacity in a manner consistent with Executive’s position as Senior Vice President of Operations of the Company and Executive’s dutiesand responsibilities shall include those duties reasonably assigned to him from time to time by the Company’s Chief Executive Officer.Executive shall devote his entire business time, attention and energies (excepting vacation time, holidays, sick days and periods ofdisability) and use his best efforts in his employment with the Company; provided, however, that this Agreement shall not be interpretedas prohibiting Executive from managing his personal affairs, engaging in charitable or civic activities, or serving as a directorof or providing services to another business or enterprise (whether engaged in for profit or not; provided, however, with respect to forprofit businesses, Executive shall be limited to serving as a director to three for-profit business enterprises other than the Company), solong 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 Executive under this Agreement, the Company shall payExecutive a base salary (the “ Base Salary ”) at the rate of $240,698 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 salariedexecutives and shall be subject to all necessary withholding taxes, FICA contributions and similar deductions in accordance with theCompany’s customary payroll procedures.(c) The Base Salary will be reviewed on an annual basis by the Board and may be increased based on individualperformance and/or the performance of the Company; provided, however, that Executive’s Base Salary may not be decreased at any time(including after any increase) other than as part of an across-the-board salary reduction similarly affecting all or substantially allmanagement employees.3.2 Bonus . During the Employment Period, Executive shall be eligible to receive an annual bonus award (the “ AnnualBonus ”) with the target amount equal to at least 50% of the Base Salary, payable in accordance with the Company’s incentivecompensation policy; provided, that, such Annual Bonus shall in no event be paid later than March 15 of the calendar year immediatelyfollowing the fiscal year to which such Annual Bonus relates. The Annual Bonus shall be based upon the attainment of certain targets asagreed upon by Executive and the Board with respect to the Company’s financial performance for any fiscal year ending during theEmployment Period. The Annual Bonus shall be subject to all necessary withholding taxes, FICA contributions and similar deductions.3.3 Equity Incentive Awards . The Compensation Committee shall determine the timing, amount and form of any grantsequity-based incentive compensation awards to be made to Executive.3.4 Vacation . Executive shall be entitled to take vacation consistent with Company policy, such vacation to extend forsuch periods and to be taken at such intervals as shall be appropriate and consistent with the proper performance of Executive’s dutieshereunder.3.5 Benefits . During the term of Executive’s employment under this Agreement, Executive shall be entitled to participatein any benefit plans (excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Companyas in effect from time to time (collectively, “ Benefit Plans ”), on the same basis as that generally made available to other seniorexecutives of the Company, to the extent Executive may be eligible to do so under the terms of any such Benefit Plan. Executiveunderstands that any such Benefit Plans may be terminated or amended from time to time by the Company in its discretion.24. Termination . Executive’s employment hereunder may be terminated as follows:4.1 By the Company . With or without Cause (as defined below), the Company may terminate the employment ofExecutive at any time during the term of employment upon giving Executive at least 90 days’ prior written notice thereof. The effectivedate of the termination of Executive’s employment shall be the date on which such applicable 90-day period expires; provided, however,that the Company may, upon notice to Executive and without reducing Executive’s Base Salary during such 90-day period, excuseExecutive from any or all of his duties during such period and request Executive to immediately resign as a director of the Company, ifapplicable, and officer of the Company, whereupon, if requested to so resign, Executive shall immediately resign.4.2 By Executive . Executive may terminate his employment at any time upon giving the Company, in the case oftermination by Executive (a) other than with Good Reason, at least 60 days’ prior written notice thereof and (b) with Good Reason, atleast 31 days’ prior written notice thereof. The effective date of the termination of Executive’s employment shall be the date on whichsuch applicable 60- or 31-day period expires; provided, however, that the Company may, upon notice to Executive and without reducingExecutive’s annual base salary during such 60- or 31-day period, excuse Executive from any or all of his duties during such period andrequest Executive to immediately resign as a Director, if applicable, and officer of the Company, whereupon, if requested to so resign,Executive shall immediately resign; and provided further, that in the case of termination with Good Reason, the Company has not curedthe condition constituting Good Reason. Any such resignation at the Company’s request following Executive’s notice of terminationother than with Good Reason shall not be deemed to represent termination of Executive’s employment by the Company for purposes ofthis Agreement or otherwise, but shall be deemed voluntary termination by Executive of his employment without Good Reason.4.3 Total Disability of Executive . This Agreement and Executive’s employment hereunder shall terminate automaticallyupon the death or Total Disability of Executive. The term “ Total Disability ” as used herein shall mean a physical or mental incapacityor disability which renders Executive unable to render the services required hereunder (a), with or without reasonable accommodation,for a period or periods aggregating 180 days in any 12-month period or (b) for a period of 90 consecutive days. Executive and Employerhereby acknowledge that Executive’s ability to perform the duties specified in Section 2 hereof is of the essence of this Agreement.Termination hereunder shall be deemed to be effective immediately upon Executive’s death or a determination by the Board of Directorsof Executive’s Total Disability.5. Termination Payments .5.1 Death or Total Disability . Subject to Section 5.7, upon the termination of Executive’s employment due to death orTotal Disability, Executive or his legal representatives shall be entitled to receive (a) an amount equal to Base Salary payable through thedate of termination and (b) a pro rata portion of Executive’s Annual Bonus, if any, for the applicable period of the calendar year forwhich Executive was employed (which portion of the Annual Bonus shall be reasonably determined by the Board at the end of the yearin which termination occurs in accordance with the Board’s bonus determination policies then in effect), payable at the same time assuch payment would have been made if not for Executive’s death or Total Disability. Executive or his legal representatives shall also be3entitled to any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company’s policies.5.2 Termination Without Cause or by Executive for Good Reason . Subject to Section 5.7, if Executive’s employment isterminated by the Company at any time during the Employment Period without Cause or by Executive at any time during theEmployment Period for Good Reason, Executive shall be entitled to receive (a) any accrued but unpaid Base Salary through the date oftermination; (b) Base Salary through the one-year anniversary of such date of termination, payable at the time such payments wouldhave otherwise been payable under this Agreement had the Executive not been terminated; provided, however, that no portion of suchseverance pay shall be paid to the Executive prior to the first regular payroll following the 60th day of the date of the Executive’stermination of employment with the Company (the “ First Payroll Date” ) and the portion of the severance pay that would have beenpaid to the Executive prior to the First Payroll Date shall be paid to the Executive on the First Payroll Date in a single lump sum; (c) apro 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 inaccordance with the Board’s bonus determination policies then in effect), payable at the later of (i) same time as such payment wouldhave been made if not for termination of Executive’s employment with the Company as set forth in Section 3.2 hereof and (ii) the FirstPayroll Date; (d) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group healthplans pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (commonly known as (“ COBRA ”)), payment by(or reimbursement from) the Company of the same portion of the premium for such coverage as the Company was paying forExecutive’s coverage under such plans as of Executive’s date of termination, for a period of one year after the date of termination oruntil Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans, whichever period isshorter; provided, however, that the Company may unilaterally amend clause (d) of this sentence or eliminate the benefit providedthereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company or itsaffiliates (or successors), including, without limitation, under Section 4980D of Internal Revenue Code of 1986, as amended (the “ Code”); (e) (1) outstanding stock options held by Executive with solely time-based vesting shall become immediately exercisable with respectto the portion that would have otherwise become exercisable on or before the one-year anniversary of Executive’s date of terminationand shall remain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and(y) the stock option expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards heldby Executive with solely time-based vesting, any vesting requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate, with respect to the portion that would have otherwise become vested and no longer subject to forfeiture orrepurchase on or before the one-year anniversary of Executive’s date of termination; and (3) with respect to any other outstanding equitycompensation awards other than stock options and restricted stock awards (but including restricted stock units) with solely time-basedvesting, Executive will immediately vest in and have the right to exercise or payment of such awards, restrictions on such awards willlapse, and all other terms and conditions of such awards will be deemed met, with respect to the portion that would have otherwisebecome vested and exercisable or payable and no longer subject to restriction on or before the one-year anniversary of Executive’s dateof termination; and (f) (1) outstanding stock options held by Executive with performance-based vesting that are not vested andexercisable on Executive’s date of termination will not be forfeited when Executive’s4employment terminates and shall instead remain outstanding until the earlier of (x) the fifth anniversary of the date on which such stockoptions become vested and exercisable and (y) the stock option expiration date as set forth in the applicable stock option agreement and(2) for outstanding restricted stock awards held by Executive with performance-based vesting, such restricted stock awards shall notcease to vest upon Executive’s date of termination and any Company repurchase right shall not become exercisable with respect to anysuch restricted stock awards. Executive shall also be entitled to any accrued and unpaid vacation pay or other benefits which may beowing in accordance with the Company’s policies.5.3 Termination for Cause, by Executive without Good Reason or by Nonrenewal . Except for Base Salary through theday on which Executive’s employment was terminated and any accrued and unpaid vacation pay or other benefits which may be owingin accordance with the Company’s policies or applicable law, Executive shall not be entitled to receive severance or any othercompensation or benefits after the last date of employment with the Company upon the termination of Executive’s employmenthereunder by the Company for Cause pursuant to Section 4.1, by Executive without Good Reason pursuant to Section 4.2 or as a resultof 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) dishonest statements or acts of Executive with respect to the Company or any affiliate of the Company;(b) the commission by or indictment of Executive for (A) a felony or (B) any misdemeanor involving moralturpitude, deceit, dishonesty or fraud (“ indictment ,” for these purposes, meaning an indictment, probable cause hearing or any otherprocedure 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 Executive with respect to the Company or anyaffiliate of the Company; or(d) material breach by Executive of any of 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 uponthis, Executive shall have the opportunity to cure such circumstances within 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’sverbal or written consent:(a) the Company materially breached its obligations under this Agreement;(b) any material diminution of significant duties of Executive;(c) a reduction in Executive’s Base Salary of 10% or more, other than pursuant to a reduction applicable to allsenior executives or employees generally; or5(d) the company’s corporate headquarters is moved a distance of at least 50 miles from its current corporateheadquarters in Vancouver, Washington.Notwithstanding the foregoing subsections (a) through (d), Good Reason for termination shall not exist unless (i) Executive notifiesEmployer in writing of the occurrence or existence of the event or condition which Executive believes constitutes Good Reason within90 days of the occurrence or initial existence of such event or condition (which notice specifically identifies such event or condition),(ii) the Company fails to cure or remedy such event or condition within 30 days after the date on which it receives such notice (the“Remedial Period”), and (iii) Executive actually terminates employment within 90 days after the expiration of the Remedial Period.5.6 Termination for Good Reason or Without Cause Following a Change in Control .(a) Payment . Notwithstanding anything to the contrary in the Company’s 2010 Management Incentive Plan, ifExecutive’s employment is terminated (i) in connection with a Change in Control or (ii) within one year after a Change in Control(A) by Executive for Good Reason, or (B) by the Company without Cause, then Executive’s compensation and benefits upontermination shall be governed by this Section 5.6 and Section 5.7 instead of the provisions of Section 5.2 above. In such event, Executiveshall be entitled solely to the following: (1) Base Salary through the date of termination, paid on the Company’s’ normal payrollpayment date; (2) an amount equal to the sum of his Base Salary and his target annual bonus for the year of termination, payable in alump sum on the First Payroll Date; (3) an additional amount equal to Executive’s target annual bonus for such year pro rated for thenumber of full months during the bonus year prior to such termination of employment, payable in a lump sum on the First Payroll Date;(4) if Executive is entitled (and timely and properly elects) to continue his coverage under the Company’s group health plans pursuant toCOBRA, payment by (or reimbursement from) the Company of the same portion of the premium for such coverage as the Company waspaying for Executive’s coverage under such plans as of Executive’s date of termination for a period of one year after the date oftermination or until Executive is no longer entitled to COBRA continuation coverage under the Company’s group health plans,whichever period is shorter; provided, however, that the Company may unilaterally amend clause (4) of this sentence or eliminate thebenefit provided thereunder to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on theCompany or its affiliates (or successors), including, without limitation, under Section 4980D of the Code; and (5) any accrued andunpaid vacation pay or other benefits which may be owing to Executive in accordance with the Company’s policies.(b) Equity Compensation . If Executive’s employment is terminated (i) in connection with a Change in Control or(ii) within one year after a Change in Control (A) by Executive for Good Reason, or (B) by the Company without Cause, then:(1) outstanding stock options held by Executive with solely time-based vesting shall become immediately fully exercisable and shallremain exercisable until the earlier of (x) the 60th day after the one-year anniversary of Executive’s date of termination and (y) the stockoption expiration date as set forth in the applicable stock option agreement; (2) for outstanding restricted stock awards held by Executivewith solely time-based vesting, any vesting or performance requirements shall be deemed satisfied, and any Company repurchase rightsshall immediately terminate; (3) with respect to any outstanding equity compensation awards other than stock options and restrictedstock awards (but including restricted stock units) with solely time-based vesting, Executive will immediately vest in and have the rightto exercise or payment of such awards, all restrictions on such awards will lapse, and all other terms and conditions of such awards willbe6deemed met; (4) outstanding stock options held by Executive with performance-based vesting that are not vested and exercisable onExecutive’s date of termination will not be forfeited when Executive’s employment terminates and shall instead remain outstanding untilthe stock option expiration date as set forth in the applicable stock option agreement; and (5) for outstanding restricted stock awards heldby Executive with performance-based vesting, such restricted stock awards shall not cease to vest upon Executive’s date of terminationand any Company repurchase right shall not become exercisable with respect to any such restricted stock awards.(c) Change in Control Defined . A “Change in Control” shall mean: (i) any consolidation or merger of theCompany in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company’s CommonStock would be converted into the right to receive cash, securities or other property, other than a merger of the Company in which theholders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the survivingcorporation immediately after the merger; (ii) any sale, lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all or substantially all the assets of the Company; (iii) the acquisition by any person (as such term is defined inSection 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), excluding, for this purpose, the Company) ofany shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is thebeneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 40% or more ofthe outstanding Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire commonstock); or (iv) the failure, for any reason, of the persons comprising the Board of Directors as of the date hereof (the “ Incumbent Board”) to constitute at least a majority of the Board of Directors; provided, however, that any person whose election or nomination forelection was approved by a majority of the persons then comprising the Incumbent Board (other than an election or nomination of aperson whose initial assumption of office is in connection with an actual or threatened election contest relating to the election ofdirectors) shall be, for purposes of this Agreement, deemed to be a member of the Incumbent Board.5.7 Condition to Payment . All payments and benefits due to Executive under this Section 5 which are not otherwiserequired by law shall be contingent upon (a) 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 andformer stockholders, directors, members, managers, employees and agents, in such form as determined by the Company in its solediscretion within 60 days of Executive’s termination of employment and (b) compliance by Executive with his obligations under thisAgreement, including, without limitation, the restrictions on activities of Executive set forth in Section 7 and under any stockholders orother agreement to which the Company and Executive are a party. No payments (or reimbursements) that are subject to this Section 5.7shall be made prior to the First Payroll Date. Any payments that would have been made to (or on behalf of) Executive under Section 5.2during the period between the date of termination of Executive’s employment with the Company and the First Payroll Date, but for therequirements of this Section 5.7, shall be paid to Executive in a lump sum on the First Payroll Date and, thereafter, the remaining portionof such benefits shall be paid over the remainder of the time period originally scheduled for such payments.75.8 Section 280G .(a) Amount of Payments and Benefits . Notwithstanding anything to the contrary herein, in the event that theExecutive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetaryvalue of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan,agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that mayseparately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the TreasuryRegulations promulgated thereunder (or any similar or successor provision) (collectively, “ Section 280G ”) and it is determined that, butfor this Section 5.8 any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar orsuccessor provision (the “ Excise Tax ”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) anamount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excessparachute payment” (within the meaning of Section 280G) (the “ Capped Payments ”), whichever of the foregoing amounts results in thereceipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of thePayments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefitfrom the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax andall applicable federal, state and local taxes required to be paid by the Executive in respect of the receipt of such payments and (ii) suchpayments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individualsthat is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highestrate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevanttransaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could beobtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximumlimitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of stateand local income taxes under the Code). In the event that Executive will receive Capped Payments and to the extent that an ordering ofthe reduction other than by the Executive is required by Section 11.7 or other tax requirements, the Payments shall be reduced by theCompany in a manner and order of priority that provides the Executive with the largest net after-tax value; provided that payments ofequal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any suchreduction shall be structured in a manner intended to comply with Section 409A of the Code.(b) Computations and Determinations . All computations and determinations called for by this Section 5.8 shall bemade by an independent accounting firm or independent tax counsel appointed by the Company (the “ Tax Counsel ”), and all suchcomputations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculationsand determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and theCompany within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive paymentswhich may be considered “ parachute payments .” The Company and the Executive shall furnish to the Tax Counsel such informationand documents as the Tax Counsel may reasonably request in order to make8the computations and determinations called for by this Section 5.8. The Company shall bear all costs that the Tax Counsel mayreasonably incur in connection with the computations and determinations called for by this Section 5.8.5.9 No Other Severance . Executive hereby acknowledges and agrees that, other than the severance payment described inSections 5.2 and 5.6 hereof, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan orseverance policy generally available to the Company’s employees or otherwise.5.10 Board Resignation . Upon termination of Executive’s employment for any reason, Executive agrees to resign, as ofthe date of such termination and to the extent applicable, as an officer and director of the Company and all of its subsidiaries andaffiliates.5.11 Survival . This Section 5 shall survive any termination or expiration of this Agreement.6. Reimbursement of Expenses . The Company shall reimburse Executive for all reasonable and necessary expenses actuallyincurred by 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 limitationsestablished by the Board from time to time.7. Non-Competition; Non-Solicitation; Confidentiality; Proprietary Rights .7.1 Executive hereby agrees that during the period commencing on the date hereof and ending on the date that is one yearfollowing the date of the termination of Executive’s employment with the Company (the “ Noncompetition Period ”), Executive will not,without the express written consent of the Company, directly or indirectly, anywhere in the United States or in any foreign country inwhich the Company has conducted business, is conducting business or is then contemplating conducting business, engage in any activitywhich 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 Executive, whose business, activities, products or services arecompetitive with any of the business, activities, products or services conducted, offered or then contemplated to be conducted or offeredby the Company or its subsidiaries or affiliates; provided, however, nothing herein shall prohibit Executive from being employed by anybusiness, organization or person that operates in the quick service restaurant industry and derives less than 10% of its total revenue fromthe sale of pizza. Without implied limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or engaging or attempting tohire or engage for or on behalf of Executive or any such competitor any officer or employee of the Company or any of its direct and/orindirect subsidiaries and affiliates, or any former employee of the Company and any of its direct and/or indirect subsidiaries andaffiliates who was employed during the 6-month period immediately preceding the date of such attempt to hire or engage,(b) encouraging for or on behalf of Executive or any such competitor any such officer or employee to terminate his or his relationship oremployment with the Company or any of its direct or indirect subsidiaries and affiliates, (c) soliciting for or on behalf of Executive orany such competitor any client (including all franchisees) of the Company or any of its direct or indirect subsidiaries and affiliates, orany former client (including all franchisees)9of the Company or any of its direct or indirect subsidiaries and affiliates who was a client (including all franchisees) during the 6-monthperiod immediately preceding the date of such solicitation and (d) diverting to any person (as hereinafter defined) any client (includingall franchisees) or business opportunity of the Company or any of its direct or indirect subsidiaries and affiliates.Notwithstanding anything herein to the contrary, Executive may make passive investments in any enterprise the shares of which arepublicly traded if such investment constitutes less than 2% of the equity of such enterprise. Neither Executive nor any business entitycontrolled by 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 restrictExecutive from performing his employment obligations, and as of the date of this Agreement Executive has no business interestswhatsoever in or relating to the industries in which the Company or its subsidiaries or affiliates currently engage, and other than passiveinvestments in the shares of public companies of less than 2%.7.2 In the course of performing services hereunder, on behalf of the Company (for purposes of this Section 7 including allpredecessors 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 (a) to hold the Confidential Information in strict confidence, (b) not to disclose the ConfidentialInformation to any person (other than in the regular business of the Company or its affiliates), and (c) 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 Executiveby the Company or are produced by Executive in connection with Executive’s employment will be and remain the sole property of theCompany. Upon the termination of Executive’s employment with the Company for any reason and as and when otherwise requested bythe Company, all Confidential Information (including, without limitation, all data, memoranda, customer lists, notes, programs and otherpapers and items, and reproductions thereof relating to the foregoing matters) in Executive’s possession or control, shall be immediatelyreturned to the Company. Executive recognizes that the Company and its affiliates possess a proprietary interest in all of the ConfidentialInformation and have the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit theprocesses, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company andExecutive in writing. Executive expressly agrees that any products, inventions, discoveries or improvements made by Executive orExecutive’s agents or affiliates in the course of Executive’s employment shall be the property of and inure to the exclusive benefit of theCompany. Executive further agrees that any and all products, inventions, discoveries or improvements developed by Executive (whetheror 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 theexclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate toimplement the foregoing. Nothing in this Agreement is intended to or will be used in any way to limit Executive’s rights to communicatewith a government agency, as provided for, protected under or warranted by applicable law.7.3 During and after Executive’s employment, Executive shall cooperate fully with the Company in the defense orprosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company thatrelate to events or occurrences that10transpired while Executive was employed by the Company. The Company shall reimburse Executive for any reasonable out-of-pocketexpenses incurred in connection with Executive’s performance of obligations pursuant to this Section 7.3.7.4 The term “ Confidential Information ” shall mean information belonging to the Company which is of value to theCompany or with respect to which Company has right in the course of conducting its business and the disclosure of which could result ina competitive or other disadvantage to the Company. Confidential Information includes information, whether or not patentable orcopyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including, by way of example andwithout 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 andopportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by themanagement of the Company. Confidential Information includes information developed by Executive in the course of Executive’semployment by the Company, as well as other information to which Executive may have access in connection with Executive’semployment. Confidential Information also includes the confidential information of others with which the Company has a businessrelationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due tobreach 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 toresult in irreparable injury to the Company and that the remedy at law alone will be an inadequate remedy for such breach, and that inaddition to any other remedy it may have, the Company shall be entitled (a) to enforce the specific performance of this Agreement byExecutive and to seek both temporary and permanent injunctive relief (to the extent permitted by law) without bond and without liabilityshould such relief be denied, modified or violated and (b) to cease making any payments or providing any benefit otherwise required bythis Agreement, including, without limitation, any severance payment required under Section 5.2, in each case in addition to any otherremedy 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 shallnot affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of thisAgreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties heretoagree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extentnecessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permittedby law.10. Notices . All notices hereunder, to be effective, shall be in writing and shall be deemed effective when delivered by hand ormailed by (a) certified mail, postage and fees prepaid, or (b) nationally recognized overnight express mail service, as follows:11If to the Company:Papa Murphy’s Holdings, Inc.8000 N.E. Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentIf to the Executive:Dan Harmon 10503 NW 32 nd Drive Vancouver, WA 98685 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 thisAgreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute abreach of, or otherwise contravene, or be prevented, interfered with or hindered by, the terms of any employment agreement or otheragreement 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 withregard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement maynot 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 theCompany and any successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of Executiveshall be assignable by Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement beencumbered, transferred or in any way anticipated, except as required by applicable laws. All rights of Executive under this Agreementshall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, estates, executors, administrators, heirsand beneficiaries. All amounts payable to Executive hereunder shall be paid, in the event of 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 partyshall 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 toExecutive hereunder any federal, state, local or foreign withholding, FICA contributions, or other taxes, charges or deductions which it isfrom time to time required to withhold.12The Company shall be entitled to rely on advice of counsel if any question as to the amount or requirement of any such withholding shallarise.11.6 Set Off . The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder 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 . The parties intend that this Agreement and the payments and benefits provided hereunder be exemptfrom the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferralexception described in Treas. Reg. Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treas. Reg.Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A of the Code is applicable to this Agreement, the parties intend thatthis Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictionsimposed under Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operatedand administered in a manner consistent with such intentions; provided, however that in no event shall the Company (or any of itsaffiliates or successors) be liable for any additional tax, interest or penalty that may be imposed on Executive pursuant to Section 409Aof the Code or for any damages incurred by Executive as a result of this Agreement (or the payments or benefits hereunder) failing tocomply with, or be exempt from, Section 409A of the Code. Without limiting the generality of the foregoing and notwithstanding anyother provision of this Agreement to the contrary:(a) If any payment, compensation or other benefit provided to Executive in connection with his employmenttermination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409Aof the Code and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, then no portion of such“nonqualified deferred compensation” shall be paid before the day that is 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 thedate of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, anypayments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the timeperiod originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the foregoing, to the extent that theforegoing applies to the provision of any ongoing welfare benefits to Executive that would not be required to be delayed if the premiumstherefor were paid by Executive, Executive shall pay the full cost of premiums for such welfare benefits during the six-month period andthe Company shall pay Executive an amount equal to the amount of such premiums paid by Executive during such six-month periodpromptly after its conclusion.(b) The parties hereto acknowledge and agree that the interpretation of Section 409A of the Code and itsapplication to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to Executive that wouldbe deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to complywith Section 409A of the Code. If, however, any such benefit or payment is deemed to not comply with Section 409A of the Code, theCompany and Executive agree to renegotiate13in good faith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof) sothat either (i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code 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 andexpenses under this Agreement shall be paid in no event later than the end of the taxable year following the taxable year in whichExecutive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kindbenefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject toliquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits providedduring any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxableyear.(d) If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A of theCode, 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 thisAgreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination ofemployment unless such termination is also a “separation from service” as defined in Section 1.409A-1(h) of the Department of Treasuryfinal 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 ofDelaware, 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 thereofor otherwise arising out of the termination of Executive’s employment (including, without limitation, any claims of unlawfulemployment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration inany forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American ArbitrationAssociation (“ AAA ”) in Vancouver, Washington 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 thanExecutive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted toarbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This Section 11.9 shall be specifically enforceable. Notwithstanding the foregoing, this Section 11.9shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or apreliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through anarbitration proceeding pursuant to this Section 11.9.1411.10 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed anoriginal and shall have the same effect as if the signatures hereto and thereto were on the same instrument.IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.COMPANY:PAPA MURPHY’S HOLDINGS, INC.By: /s/ Ken Calwell Ken Calwell, Chief Executive Officer EXECUTIVE:/s/ Dan Harmon Dan Harmon15Exhibit 10.32MASTER MARKETING AGREEMENTTHIS MASTER MARKETING AGREEMENT (this “Agreement”), dated September 7, 2016 (the “Effective Date”), isbetween GroupM Worldwide, Inc (d/b/a Modi Media), a Delaware corporation (“Agency”), and Murphy’s Marketing Services, Inc., aFlorida corporation (“Company” or “Papa Murphy’s”).RECITALSA. Company is engaged in the business of providing take and bake pizza and related food product sales through corporate andfranchised retail stores throughout North America.B. Agency is engaged in the business of providing advertising and marketing services.C. Papa Murphy’s and Agency desire to enter into this Agreement to allow Agency to provide certain advertising andmarketing services (as described herein) on a non-exclusive, project basis subject to the terms and conditions of this Agreement.Now, therefore, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the partiesagree as follows:AGREEMENT1. Services; Work Orders; Change Orders .a. Services. During the term of this Agreement, Company shall authorize Agency, on a non-exclusive basis, to perform variousadvertising and/or marketing projects for Company and its affiliates pursuant to mutually executed Work Orders (defined below) andChange Orders (defined below) (collectively, the “Services”). Each Work Order and Change Order shall be subject to the terms andconditions of this Agreement. In the event there is a conflict between the terms of this Agreement and a Work Order or Change Order,the terms of this Agreement shall control unless otherwise expressly specified in such Work Order or Change Order.b. Work Orders . Company shall authorize the performance of Services to be performed by Agency by issuing written WorkOrders from time to time substantially in the form of Exhibit A attached hereto and incorporated herein for all purposes, and such WorkOrders shall not take effect until mutually executed by both parties (as amended, modified or supplemented by any applicable ChangeOrders, the “Work Orders”).c. Change Orders . If Company desires to change, modify or supplement the Services under a particular Work Order or if theAgency believes a Work Order needs to be changed, modified or supplemented, the requesting party shall request such changes,modifications or supplemental actions pursuant to a Change Order substantially in the form of Exhibit B attached hereto andincorporated herein for all purposes (the “Change Order”). Agency and Company shall mutually agree to the changes or modifications tothe Services as set forth in the applicable Change Order or the description of the supplemental Services describedPage 1 of 13therein. If a Change Order will result in an increase or decrease in 25% or more of the total compensation provided in the related WorkOrder, the parties shall each execute the Change Order reflecting such agreement. If a Change Order will not result in an increase ordecrease in 25% or more of the total compensation provided in the related Work Order, the parties shall merely confirm the ChangeOrder in writing, via email, facsimile, U.S. mail or other correspondence.2. Invoices and Payments .a. Agency shall render invoices monthly for Services performed for Company, and Company shall pay such invoices withinthirty (30) days from the date of invoice. b. Agency shall render invoices monthly for all reasonable travel and out-of-pocket expenses incurred by Agency inconnection with the performance of the Services, and Company shall pay such invoices within thirty (30) days of the date of invoice.c. The invoices submitted to Company shall show a description of Services performed during the period and detailed chargesfor Agency. In addition, any fees quoted shall include any applicable taxes. Agency’s invoices shall reflect, and Company shall pay, allapplicable sales, use, excise, value added and other taxes associated with Company’s receipt of the Services and Deliverables hereunder,excluding taxes on Agency’s income.d. If Company disputes any invoice, Company shall timely pay the undisputed portion and promptly notify Agency in writingof the nature of the dispute as to the remainder, and the parties will use their best efforts to resolve the dispute expeditiously.e. In the event payments are not received by Agency within ten (10) days after becoming due, Agency may: (i) charge intereston any such unpaid amounts at a rate of 1.5% per month or, if lower, the maximum amount permitted under applicable law, from thedate such payment was due until the date paid and (ii) suspend performance for all Services until payment has been made in full.3. Independent Contractor .a. The parties acknowledge and agree that Agency and Company are, and at all times during this Agreement shall remain,independent contractors in relation to each other, and that neither party nor its employees or other representatives are authorized to makeany representations or any commitment on the other party's behalf unless previously authorized by such party in writing. Each party’sobligations to the other hereunder are exclusively contractual in nature. Neither this Agreement nor the performance of Services shall, orbe deemed to, create a partnership, joint venture, agency, fiduciary or employment relationship or any other legal relationship betweenthe parties. Agency’s personnel shall not be deemed employees or agents of Company, and Agency has and hereby retains the right toexercise full control of and supervision over the performance, employment, direction, compensation and discharge of any and all ofAgency’s employees performing Services hereunder. Agency shall be responsible forPage 2 of 13all employment withholding or other tax liability of any kind or nature arising in respect of Agency’s employees.4. Termination .a. Term of Agreement . This Agreement shall remain in full force and effect for a term of one (1) year following the EffectiveDate and shall be automatically renewed for an additional one (1) year term on the anniversary date of this Agreement and each yearthereafter, unless (i) no later than ninety (90) days prior to any anniversary date, one party notifies the other party of its intention not torenew the Agreement or (ii) this Agreement is terminated earlier as provided herein.b. Termination .i. Company or Agency may terminate this Agreement or any Work Orders at any time for convenience upon ninety(90) days prior written notice to the other party. The respective rights and responsibilities of Agency and Company, including, withoutlimitation, payment obligations, will continue in full force during the notice period. Upon such termination of this Agreement or anyWork Order, Company shall promptly pay Agency for all Services rendered and expenses incurred and unrecoverable prior to theeffective date of the termination of this Agreement or the applicable Work Order(s) or Services. ii. Either party also may terminate this Agreement at any time if: (aa) the other party materially breaches any of itsobligations hereunder or under a Work Order and such breach has not been cured within thirty (30) days of written notice specifying thenature of the breach; (bb) either party attempts to assign this Agreement or any obligation hereunder without the other party’s consent,except as otherwise allowed hereunder; or (cc) any assignment is made of the other party’s business for the benefit of creditors.iii. Company shall have the right to modify, reject, cancel or stop any and all schedules or work in progress; and insuch event Agency shall take proper steps to carry out Company’s reasonable instructions. In the event of any such modification,rejection or cancellation by Company, Company (a) assumes liability for all commitments entered into by Agency on Company’s behalf;(b) shall reimburse Agency for all expenses incurred in connection with carrying out Company’s instructions under this subsection; and(c) shall pay Agency any related service charges in accordance with this Agreement. In addition, in the event that such modification,rejection, or cancellation results in a reduction of more than ten percent (10%) of the compensation that would otherwise be due toAgency pursuant to the then-current Work Order, Company shall continue to be responsible for the original compensation that wouldhave been due to Agency in the absence of such reduction, for a period of ninety (90) days after the date of written notice of suchreduction. c. Consequences of Termination .i. Upon the expiration or termination of this Agreement or any Work Order or other Services, upon full and finalpayment, Agency shall return to Company all materialsPage 3 of 13and items furnished to Agency by Company hereunder or developed by Agency in the performance of the Services under thisAgreement.ii. For the avoidance of doubt, no termination of this Agreement or cancellation or termination of a Work Order shallrelieve Company from any obligation to pay Agency the compensation for any Services rendered (including services requested andagreed to by Company in connection with the termination) or out of pocket expenses incurred prior to such effective date of termination.In addition, this Agreement, including, without limitation, the compensation provisions set forth herein, shall apply to any Servicesperformed by Agency after termination of this Agreement, notwithstanding such termination.iii. Sections 4(c), 7, 9, 11 and 13 through 21 of this Agreement shall survive the expiration or termination of thisAgreement for any reason.5. Deliverables; Approval .a. Upon full payment, (ii) Company shall own all work identified in the applicable Work Order and prepared uniquely forCompany hereunder, excluding any third party research and materials included in such reports; and (ii) all video or television mediaplans, brochures, ad slicks, posters, direct mail pieces, email, data, written material or any other media prepared by Agency’s personnelfor Company in the performance of Services (collectively, the “Deliverables”) as a “work made for hire” as that term is defined in theCopyright Revision Act of 1976, 17 U.S.C. §101 et seq and the copyright therein shall be owned by Company, worldwide, for allpurposes. In addition, all intellectual property rights incorporated within such Deliverables shall become the exclusive property ofCompany upon payment of Agency’s invoices associated with each such Deliverable. Upon such payment, Agency agrees to assign toCompany all intellectual property rights in such Deliverables whether or not by right of trademark, copyright, trade secret or otherwiseand whether or not subject to protection by copyright or trademark laws. Agency agrees to execute all documents which Companyreasonably determines to be necessary or convenient for use in applying, perfecting or enforcing trademarks, copyrights or otherintellectual property rights in the Deliverables.Agency will retain exclusive ownership of all (a) its know-how, concepts, techniques, methodologies, ideas, templates, routines,sequences, software, firmware, designs, scripts, interfaces, programming code, applets, executables, objects, files, utilities and tools thatexisted prior to the performance of Services hereunder (collectively, “Agency’s Elements”) and (b) ideas, concepts, techniques andknow-how discovered, created or developed by Agency during the performance of Services that are of general application and that arenot based on or derived from Company’s Confidential Information. To the extent the Deliverables incorporate Agency’s Elements,Agency gives Company a non-exclusive, non-transferable (except to Company’s affiliates, subsidiaries or successors), perpetual,royalty-free, worldwide right to use such Agency Elements solely in connection with such Deliverables. For clarity, all improvements,modifications, and enhancements of Agency Elements shall also remain the sole property of Agency.Page 4 of 13b. Notwithstanding the foregoing, all materials, rights, and intellectual property owned by third parties (such as talent rights,photography, artwork, props and music, and any open source software or code) and incorporated into the Deliverables shall remain thesole and exclusive property of such third parties, and Company agrees to use such third party materials consistent with the restrictions,limitations, obligations and disclaimers for such third party materials communicated to Company in writing. Further, Company shallreceive under the third party sublicense only such rights and warranties as are offered by such third party licensor who shall be solelyresponsible to Company for such materials.c. Agency will submit to Company for approval all Deliverables, which Company shall review and respond to Agency withinten (10) business days of receipt thereof of its acceptance or rejection of the applicable Deliverables. In the case of a rejection of any ofthe Deliverables, Company shall provide Agency in writing all details related to the basis for rejection of such Deliverables provided thatany such rejection by Company must be solely based on whether or not Agency has materially conformed to the mutually agreed uponwritten specifications set forth in the Work Order (a “Deficiency”). To the extent Company fails to respond within ten (10) business daysor otherwise publicly uses the Deliverables, such Deliverables shall be deemed accepted by Company. If a Deficiency is claimed byCompany, and such Deficiency is not due to an act or omission of Company and/or a failure to cooperate with Agency in accordance theterms of this Agreement (and/or the applicable Work Order), Agency shall, within a mutually agreed upon time frame, revise theapplicable Deliverable at Agency’s own expense, redeliver the applicable Deliverable, and the acceptance procedure described hereinwill be followed again. If, following resubmission by Agency of the applicable Deliverable, Company rejects such Deliverable again andclaims a Deficiency, the parties may agree to extend the cure period or either party may terminate the applicable portion of the WorkOrder. If either party chooses to terminate a portion of the Work Order, Agency shall, as Company’s sole and exclusive remedy, refundany pre-paid fees for Services not yet rendered by Agency as of the date of any such termination.d. The Agency will require Company’s written approval before ordering production materials, making contracts with suppliers, andmaking reservations or contracts for media space or time and talent. Agency will promptly notify Company of all materials, space and/ortime ordered and amendments thereto. Company will designate in writing to whom, in addition to its Vice President, Marketing if any,may sign approvals and authorizations.6. Representations and Warranties .a. Agency Represents and Warrants:i. Agency and its employees, subcontractors, agents and representatives shall perform all of the Services in aprofessional manner and in accordance with the commercial industry standards.Page 5 of 13ii. Agency and its employees, subcontractors, agents and representatives shall, at all times, comply with all applicablefederal, state and local laws, regulations and ordinances, and be duly licensed and otherwise authorized to perform the Services.iii. The Services and Deliverables shall not infringe or violate any U.S. copyright, trademark, trade secret or otherproprietary or privacy right of a third party.iv. Agency shall take such reasonable actions with its employees and agents to effectuate the intent of Section 10 andthe confidentiality obligations imposed by this Agreement, including but not limited to advising each permitted employee to whomConfidential Information is disclosed of his/her obligations regarding confidentiality and non-use of such information.b. Company Represents and Warrants:i. Company and any information, data, or materials that Company provides to Agency shall not infringe or violateany U.S. copyright, trademark, trade secret or other proprietary or privacy right of a third party.ii. Company and its employees, subcontractors, agents and representatives shall, at all times, comply with allapplicable federal, state and local laws, regulations and ordinances.iii. Company shall take such reasonable actions with its employees and agents to effectuate the intent of Section10 and the confidentiality obligations imposed by this Agreement, including but not limited to advising each permitted employee towhom Confidential Information is disclosed of his/her obligations regarding confidentiality and non-use of such information.iv. Company shall assist and cooperate with Agency and Agency’s personnel whenever reasonably necessary bymaking Company’s personnel available to Agency for consultation and providing other information and data required for theperformance of the Services.v. Company shall be responsible for the accuracy, completeness and propriety of information concerning itsproducts, services and customers which it furnishes to Agency in connection with the performance of this Agreement, and whenapplicable, Company represents and warrants that it has or will have, through written agreements with its employees, agents,representatives, and third party providers, all releases, licenses, permits or other authorization to use copyrighted materials, data, and anyother property or rights belonging to third parties for items that Company provides to Agency for use by Agency in performing Servicesand/or preparing Deliverables for or on behalf of Company.c. Disclaimer: EXCEPT AS EXPRESSLY PROVIDED HEREIN, AGENCY MAKES NO WARRANTY, EXPRESS OR IMPLIED,REGARDING THE DELIVERABLES ORPage 6 of 13SERVICES TO BE PROVIDED HEREUNDER OR THAT ANY SOFTWARE OR OTHER ELECTRONIC DEVICES PROVIDEDOR WEBSITE HOSTED BY AGENCY WILL BE ERROR FREE OR OPERATE WITHOUT INTERRUPTION AND THEWARRANTIES OF TITLE, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLYEXCLUDED. FURTHERMORE, NOTWITHSTANDING ANYTHING TO THE CONTRARY, AGENCY SHALL NOT BE LIABLEIN ANY MANNER FOR DELAYS IN DELIVERY OR INSTALLATION OR INSERTION THAT ARE NOT THE DIRECT RESULTOF AGENCY’S GROSS NEGLIGENCE AND AGENCY SHALL NOT WARRANT ANY SERVICES OR DELIVERABLERELATED THERETO TO THE EXTENT ANY NON-CONFORMANCE IS CAUSED BY: (I) COMPANY’S MISUSE ORMODIFICATION OF THE SERVICES OR DELIVERABLE WITHOUT THE PRIOR WRITTEN CONSENT OF AGENCY; (II)COMPANY’S FAILURE TO USE CORRECTIONS OR ENHANCEMENTS MADE AVAILABLE; (III) COMPANY’S USE OF THESERVICES OR WORK PRODUCT RELATED THERETO IN COMBINATION WITH ANY PRODUCT OR INFORMATION NOTOWNED OR DEVELOPED BY AGENCY; OR (IV) INFORMATION, DIRECTION, SPECIFICATION OR MATERIALSPROVIDED BY COMPANY, OR ANY THIRD PARTY. COMPANY ACKNOWLEDGES THAT AGENCY HAS NO CONTROLOVER INFORMATION AND MATERIALS ONCE THEY HAVE BEEN PUBLISHED, RELEASED OR POSTED IN THE PUBLICDOMAIN AS REQUESTED OR APPROVED BY COMPANY, INCLUDING, WITHOUT LIMITATION, VIA SEEDINGMATERIALS ON SOCIAL NETWORKING, VIDEO SHARING WEBSITES, THE USE OF INTERNET-BASED “WIDGETS” ORANY OTHER PLATFORMS THAT MAKE USE OF USER-GENERATED CONTENT NOR DOES AGENCY HAVE ANYCONTROL OVER PRIVACY DISCLOSURES ON THIRD PARTY SITES OR THIRD PARTY DISCLOSURES GENERALLY. ASSUCH, AGENCY SHALL NOT BE RESPONSIBLE FOR ENSURING THE CONTENT OR ACCURACY OF WHAT ANY THIRDPARTY PUBLISHES OR FOR ANY OTHER THIRD PARTY ACTIONS.7. Indemnification .a. Each party (the “Indemnifying Party”) shall indemnify, defend and hold harmless the other party, its parent, affiliates andtheir respective employees, directors, officers, members, managers, shareholders, agents, successors, and permitted assigns (collectively,“Indemnitees”), from and against any third party claims, suits, demands, actions, fines, penalties, liabilities, judgments, losses, damages,injuries, costs and expenses (including reasonable attorneys’ fees and costs) (individually and collectively, “Liabilities”) resulting from:(a) claims for intellectual property infringement or misappropriation of trade secrets, and/or invasion of privacy; (b) breach of anyobligation, representation, or warranty in this Agreement; or (c) the gross negligence or willful misconduct of the Indemnifying Party orits employees, agents, representatives, or subcontractors.b. Further, Company shall indemnify, defend and hold harmless Agency and its Indemnitees from and against any Liabilitiesresulting from: (i) any media plan or other service prepared and executed by Agency which was approved by Company; (ii) advertisingor other materials or information supplied by Company or its representatives to Agency; (iii) the naturePage 7 of 13or use of any of Company’s products or services; and (iv) any risks or restrictions brought to the attention of Company by Agency whereCompany elects to proceed. Company’s obligations under this Section include payment by Company to Agency of all time charges andexpenses (including reasonable attorneys’ fees and expenses) incurred by Agency in connection with any subpoena, discovery demandor other directive having the force of law or governmental inquiry, served upon Agency or any Agency Indemnitees that arises out ofany litigation, proceedings or investigations involving Company, its business or its industry.c. Within ten (10) days of the assertion of any claim or the commencement of any suit or proceeding against an indemnifiedparty by a third party that may give rise to liability of the indemnitor hereunder, the indemnified party shall notify the indemnitor of theexistence of such claim, suit or proceeding and shall give the indemnitor a reasonable opportunity to defend and/or settle the claim atindemnitor’s own expense and with counsel of indemnitor’s own selection. The indemnified party shall at all times have the right to fullyparticipate, at its own expense, in any settlement that it reasonably believes would have an adverse effect on its business. Theindemnified party shall make available to the indemnitor all books and records relating to a claim, suit or proceeding, and the partiesagree to render to each other such assistance as reasonably may be requested to ensure a proper and adequate defense. The indemnifiedparty shall not settle any claim, suit or proceeding that might give rise to liability of the indemnitor hereunder without the prior writtenconsent of the indemnitor.d. Should the Services or Deliverables become, or in the reasonable opinion of Agency be likely to become, the subject ofinfringement of a third party’s intellectual property rights, Agency shall have the right to procure for Company (a) the right to continueusing the same, or (b) replace or modify it to make it non-infringing, provided that the replacement or modification performssubstantially similar functions and matches or exceeds the performance and functionality of the original Services or Deliverable. In theevent that neither (a) nor (b) above is commercially practicable, Agency shall refund the fees paid by Company to Agency for suchServices or Deliverables, and such refund shall be Company’s sole remedy hereunder.8. Insurance . Without limiting or qualifying Agency’s liabilities, obligations or indemnities otherwise set forth in this Agreement,Agency shall, at Agency’s sole expense and with companies reasonably acceptable to Company, maintain insurance coverage as follows:a. Commercial General Liability Insurance with coverage for bodily injury or death or property damage with limits ofliability of not less than one million dollars ($1,000,000) per occurrence. This coverage shall name Papa Murphy’s International LLCand its affiliates as additional insureds via endorsement.b. Business Automobile Liability Insurance, including owned, non-owned, and hired vehicles, with limits of liability ofnot less than one million dollars ($1,000,000) per occurrence. This coverage shall name Papa Murphy’s International LLC and itsaffiliates as additional insureds via endorsement.Page 8 of 13c. Professional Liability insurance (including errors and omissions coverage) with liability limits not less than one million($1,000,000) per occurrence.d. Workers’ Compensation Insurance in compliance with state statutory minimums.e. Agency shall provide Company with properly executed certificate(s) of insurance prior to commencement of anyServices hereunder and shall notify Company, no less than thirty (30) days in advance, of any reduction or cancellation of the abovecoverages. Such certificates shall be sent to the attention of Company at the address forth in Section 13 of this Agreement. Additionally,any insurance maintained by Company shall be excess and non-contributing and any insurance provided by Agency shall be primary.9. Limitations of Liability .NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, IN NO EVENT SHALL COMPANY ORAGENCY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVEOR EXEMPLARY DAMAGES, LOST PROFITS, LOST SALES OR ANTICIPATED ORDERS, OR DAMAGES FOR LOSSOF GOODWILL UNDER THIS AGREEMENT, EVEN IF A PARTY WAS INFORMED OR KNEW OR SHOULD HAVEKNOWN OF THE POSSIBILITY OF SUCH DAMAGES OR LOSS. THIS LIMITATION APPLIES REGARDLESS OFWHETHER SUCH DAMAGES, CLAIM OR LOSS ARE SOUGHT BASED ON BREACH OF CONTRACT, BREACH OFWARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION, OR ANY OTHER LEGAL OR EQUITABLETHEORY. COMPANY AGREES THAT (I) AGENCY’S LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEEDTHE AMOUNTS ACTUALLY RETAINED BY AGENCY AS ITS FEE FOR THE DELIVERABLES OR SERVICES WITHRESPECT TO WHICH THE CLAIM IS MADE, AND (II) CLAIMS FOR DAMAGES MUST BE MADE BY CUSTOMERWITHIN ONE (1) YEAR OF THE INCIDENT TO WHICH THEY RELATE OR BE FOREVER BARRED. EACH PARTYSHALL USE REASONABLE EFFORTS TO MITIGATE ANY LOSSES ARISING UNDER THIS AGREEMENT.10. Confidential Information .a. Obligations With Respect to Confidentiality . During the term of this Agreement and for a period of two (2) years after thelatter of (i) the termination of this Agreement, or (ii) the termination of the final Services, each party acknowledges and agrees that it (the“Receiving Party”) shall not use or disclose to anyone, other than officers, employees, members, manager, directors or representatives ofthe Receiving Party with a need to know for purposes of this Agreement, any Confidential Information disclosed to the Receiving Partyby the other party (the “Disclosing Party”). For purposes of this Agreement, the term “Confidential Information” shall mean and includeany non-public financial, operational, technical and other information relating to the present and future businesses and affairs of theDisclosing Party and its affiliates, whether such information is provided in written, oral, graphic, pictorial or recorded form orPage 9 of 13stored on computer discs, hard drives, magnetic tape or digital or any other electronic medium. The confidentiality obligations hereinshall not apply to any such information (i) which is or becomes publicly known without any fault of or participation by the ReceivingParty, (ii) was in Receiving Party’s possession prior to the time it was received from Disclosing Party or came into Receiving Party’spossession thereafter, in each case lawfully obtained from a source other than Disclosing Party and not subject to any obligation ofconfidentiality or restriction on use, or (iii) is required to be disclosed by judicial, arbitral or governmental order or process or operationof law, in which event the Receiving Party shall notify the Disclosing Party of the requirement of disclosure before making suchdisclosure, if allowed by applicable law, and shall comply with any protective order or other limitation on disclosure obtained by theDisclosing Party; or (iv) is independently developed by the Receiving Party by persons not having exposure to Disclosing Party’sConfidential Information.b. Ownership of Confidential Information . Confidential Information shall remain the exclusive property of the DisclosingParty and no patent, copyright, trademark or other proprietary right is licensed, granted or otherwise transferred by this Section 10 or anydisclosure of Confidential Information to the Receiving Party.c. Return or Destruction of Confidential Information . Receiving Party agrees to return to the Disclosing Party, or to destroy,any and all Confidential Information received pursuant to this Agreement, together with all copies that may have been made, promptlyupon request of the Disclosing Party or, if not requested earlier, upon completion of the Services or termination of this Agreement. Uponreturn or destruction of Confidential Information or any copies thereof, the Receiving Party shall certify in writing to the DisclosingParty that such destruction has occurred. Notwithstanding the foregoing, Agency may retain copies as necessary for archival purposes.d. Injunctive Relief . Both parties acknowledge that any use or disclosure of the other party’s Confidential Information in amanner inconsistent with the provisions of this Agreement may cause the Disclosing Party irreparable damage for which remedies otherthan injunctive relief may be inadequate, and both parties agree that the Disclosing Party may request injunctive or other equitable reliefseeking to restrain such use or disclosure.e. Aggregate Statistics and General Trend Data . Notwithstanding anything to the contrary set forth in this Agreement,Company acknowledges and agrees that Agency and its affiliates may collect and retain anonymous information about users ofCompany’s and other third party web sites and may use data derived from Company’s use and Agency's performance of the Services (i)to compile aggregate statistics, metrics and general trend data for the enhancement and optimization of Company’s campaigns and formarketing, promotional, and analytics purposes, and (ii) in an aggregate, anonymous agency database used for trending, analytics andmedia planning purposes for Company and other agency clients, provided that Company will not be identified to any third party inconnection therewith and under no circumstances will Agency provide any Company Confidential Information to any other client inconnection with such use.Page 10 of 1311. Assignment; Delegation . Neither party may assign this Agreement or any Work Order or Change Order executed in connectionherewith or delegate any of its rights or obligations hereunder without the express written consent of the other party, except that: (a)Agency can assign this Agreement in its sole discretion to its parent or any affiliate or subsidiary; and (b) a party may assign all of itsrights and obligations to a third party who has acquired all or substantially all of the business or assets of such party related to theperformance of this Agreement through a sale, merger, consolidation, reorganization or similar transaction. Any attempted assignment inviolation of this Section 11 shall be void. Except as set forth above, this Agreement shall inure to the benefit of and be binding upon theparties, their successors and permitted assigns.12. Force Majeure . Except for Company’s payment obligations hereunder, neither party will incur any liability to the other partyresulting from any delay or failure to perform all or any part of this Agreement if such delay or failure is caused, in whole or in part, byevents, occurrences or forces beyond the reasonable control and without the negligence of such party (including, without limitation, anyact of God, fire, natural disaster, accident, riots, acts of government, acts of war or terrorism, cyber attack, malicious act of third parties,shortage of materials or supplies, failure of transportation or communications or of suppliers of goods or services). In addition, Agencyshall endeavor to guard against any loss to Company as the result of the failure of media or suppliers to properly execute theircommitments, but Agency shall not be responsible for any such failure.13. Notices . Except as otherwise provided herein, all notices or other communications to be given or that may be given by either partyto the other shall be deemed to have been duly given when made in writing and delivered in person, by facsimile, email correspondence;or one business day after being sent by recognized overnight courier or five days after deposit in the United States mail, certified,postage prepaid, return receipt requested and addressed as follows:TO AGENCY : TO COMPANY :GroupM Worldwide Inc. Murphy’s Marketing Services, Inc.(d/b/a Modi Media) 8000 NE Parkway Drive200 5 th Avenue Suite 350New York, NY 10010 Vancouver, WA 98662Attn: Mindy Welsh Attn: Shannon Pedersen, Media Strategy DirectorTelephone: (212) 474-0242 Telephone: (360) 449-4159Facsimile: (360) 260-0500Page 11 of 13With a Copy to :Murphy’s Marketing Services, Inc.8000 NE Parkway Drive, Suite 350Vancouver, WA 98662Attn: Legal DepartmentFacsimile: 360-397-6665The address to which notices or communications may be given to either party may be changed by written notice given by one party tothe other pursuant to this section.15. Subcontracting .a. Agency shall not subcontract any Services or Deliverables to be performed without Company’s prior written consent. In theevent that Company approves the use of a subcontractor, Agency agrees to do so in compliance with the following conditions:i. Agency guarantees its subcontractor’s fulfillment of the applicable obligations imposed on Agency by thisAgreement.ii. Agency shall promptly pay all costs of labor employed and materials and services furnished and used in theperformance of the Services and shall not allow or permit any lien to be filed against Company or any of Company’s real or personalproperty.b. The term "subcontractor" shall not include third party production companies, photographers, stock houses, shippingcompanies, technology companies, hosting companies, media providers and other vendors engaged by Agency to assist Agency in thecompletion of or provide services where such assistance is incidental, ancillary or supplemental to the services hereunder ("Vendors").Agency will endeavor to the best of its ability to guard against the failure of Vendors to properly execute their commitments hereunderbut Agency shall not be held responsible for any failure on the part of (i) any Vendor or (ii) any subcontractor that Company requires ordirects Agency to engage or that performs services that Company requires or directs Agency to subcontract.16. Waivers and Amendments . Waiver by either party of any default by the other party shall not be deemed a waiver of any otherdefault. No provision of this Agreement or any Work Order or Change Order shall be deemed waived, amended or modified by eitherparty, unless such waiver, amendment or modification is in writing and signed by authorized representatives of both parties.17. Headings . The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall notaffect in any way the meaning or interpretation of this Agreement.18. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of Washington without regardto its conflicts of law principles. Either party may give the other party written notice of any dispute not resolved in the normal course ofbusiness.Page 12 of 13Within ten (10) business days after delivery of the disputing party’s notice, the executives or any persons authorized to resolve thedispute of both parties will meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, toattempt to amicably resolve the dispute in good faith. All reasonable requests for information made by one party to the other will behonored. All negotiations pursuant to this section are confidential. If the parties continue to be unable to resolve the dispute within thirty(30) business days from the first meeting, either party may initiate litigation proceeding. The parties agree that in the event that any suitor proceeding is brought in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ feesand costs, such suit or proceeding shall be brought in the state or federal courts of and the parties shall submit to the exclusivejurisdiction of such courts and waive any and all jurisdictional, venue and inconvenient forum objections to such courts. 19. Severability . If any provisions, or any portion of any provision, contained in this Agreement is determined to be invalid under anystatute or rule of law, then it shall, to that extent alone, be deemed omitted, and the remainder of this Agreement shall remain in fullforce and effect.1.Entire Agreement . This Agreement, including any applicable Work Orders and Change Orders, constitutes the entire agreementbetween the parties with respect to the subject matter hereof, and supersedes all prior or contemporaneous agreements,understandings, proposals and communications, oral or written, regarding such subject matter.2.Representation of Counsel and Mutual Negotiation . Each party has had the opportunity to be represented by counsel of its choicein negotiating this Agreement. This Agreement shall therefore be deemed to have been negotiated and prepared at the jointrequest, direction, and construction of the parties, at arm’s length, with the advice and participation of counsel, and shall beinterpreted in accordance with its terms without favor to either Papa Murphy’s or Agency.IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorizedrepresentatives as of the Effective Date.AGENCY : COMPANY :GroupM Worldwide, Inc (d/b/a Modi Media)MURPHY’S MARKETING SERVICES, INC.By: /s/ Ralph Pepino By: /s/ Cynthia Hofmann Name: Ralph Pepino Name: Cynthia Hofmann (Print Name) (Print Name)Title: CFO Title: VP Marketing CommunicationsPage 13 of 13EXHIBIT AWORK ORDERTOMASTER MARKETING AGREEMENTTHIS WORK ORDER (“WO”) dated the _____ day of _____________, 20___, is attached to and made a part of that certainMaster Marketing Agreement dated ___________ (the “Marketing Agreement”), by and between GroupM Worldwide, Inc (d/b/a ModiMedia), a Delaware corporation (“Agency”), and Murphy’s Marketing Services, Inc., a Florida corporation (“Company”). All definedterms used herein shall have the meaning ascribed to such terms as set forth in the Marketing Agreement unless otherwise definedherein.1. Agency’s personnel who will perform the Services:2. Description of Services: 3. Estimated Timetable for Services:4. Deliverables to be furnished by Agency’s personnel:5. Assumptions and Company Responsibilities:6. Compensation for Services shall be:7. Deviations from Marketing Agreement (describe provisions in this WO which shall override the terms of the MarketingAgreement, if any):Exhibit A Page 18. Other provisions:Agreed to and Accepted by the Parties:AGENCY : COMPANY :GroupM Worldwide, Inc (d/b/a Modi Media)MURPHY’S MARKETING SERVICES, INC.By: By: Name: Name: (Print Name) (Print Name)Title: Title: Exhibit A Page 2EXHIBIT “B”CHANGE ORDER NO. _________TOWORK ORDER NO. ________THIS CHANGE ORDER (“CO”) is dated __________________, 20____, and is attached to and made a part of that certainMaster Marketing Agreement dated _______________, 20__ (the “Marketing Agreement”) by and between _______________, a__________ limited liability company (“Agency”), and Murphy’s Marketing Services, Inc., a Florida corporation (“Company”).This CO modifies, amends, changes and/or supplements Work Order No. _____, dated ____________, 20____, [which has beenpreviously modified by WO/CO Nos. _____, _____ and _____,] as follows:Work Order No. ______, as amended by the previously issued CO Nos. _____, _____ and ______, is in full force and effect,except as otherwise modified, amended or supplemented by this CO.Agreed and Accepted:AGENCY : COMPANY :GroupM Worldwide, Inc (d/b/a Modi Media)MURPHY’S MARKETING SERVICES, INC.By: By: Name: Name: (Print Name) (Print Name)Title: Title: Exhibit B Page 1Exhibit 10.33AMENDMENTTOMASTER MARKETING AGREEMENTTHIS AMENDMENT NO. 1 (the “Amendment”) is dated September 27, 2016 and is between The Midas Exchange, Inc. (“ Midas ”), andMurphy’s Marketing Services, Inc. (“ Company ”).RECITALSA . WHEREAS, GroupM Worldwide, Inc. (d/b/a Modi Media) and Company entered into that certain Master Marketing Agreement datedSeptember 7, 2016 (the “ MSA ”);.B. WHEREAS, Midas has expertise in media planning and buying, and Midas has access to certain media inventory from national mediavendors which Midas has purchased at a discounted cost, and that Midas wishes to make such discounted media available to Company on terms andconditions different from certain of the terms and conditions set forth in the MSA; andC. WHEREAS, Company desires to have access to such discounted media inventory, and the parties agree to amend the MSA in themanner set forth herein.Midas and Company agree as follows:1.All capitalized terms used and not defined herein shall have the same meaning as in the MSA.2.Solely for the purpose of providing, and solely to the extent necessary to provide, the Services described in this Amendment, Midas shall bedeemed a party to the MSA, as modified by this Amendment.3.Company hereby agrees to a not yet committed, total net media expenditure through Midas or its affiliated companies in an amount to bemutually agreed to by the parties in accordance with the terms of this MSA and this Amendment and Midas’s or its affiliates’ applicable insertionorder terms.4.Midas will invoice Company for media in the month which placement airs. All such bills shall be due and payable by Company no later than 30days from invoice date.5.If any payment due hereunder is not received by Midas in accordance with the payment terms herein, and/or if Midas reasonably believes thatCompany will be unable to remit payment for any of its obligations hereunder, (i) any media purchase may be cancelled by Midas; (ii) Midas maysuspend its performance hereunder in Midas’s sole discretion; and (iii) Company shall be liable for any and all cancellation penalties or otherlosses in connection with such cancellation. Without limiting the foregoing, if Company does not use all of the space or time that Companyauthorized Midas to contract for and purchase, and as a result of such non-use, a higher rate or any other fees or penalties are imposed themedia provider, Midas shall invoice Company any such additional amounts due as a result of this rate differential. Midas also reserves the rightto change any and all other terms and conditions of payment set forth in this MSA, in the event that Midas is unable to obtain sufficient creditinsurance for Company, or if such coverage is revoked or modified, (ii) Company is delinquent in its payments, or (iii) Midas believes, in its solereasonable discretion, that Company is sufficiently impaired in its credit that future payments may be endangered.6.Midas agrees that, notwithstanding anything else contained in the MSA or this Amendment to the contrary, any audit or review of Midas’srecords pertaining to the MSA or this Amendment by Company shall not include any costs paid by Midas to the media vendor nor any payroll,overhead, profit or loss or other similar financial information. Without limiting the foregoing, Company acknowledges and agrees thatnotwithstanding anything to the contrary set forth in the MSA or this Amendment, (1) the rates for media provided pursuant to the MSA and thisAmendment are offered “as is” and will not be subject to audit (and accordingly, no data related to will be subject to audit), (2) Midas does notrepresent that the rates offered to Company are the rates at which Midas purchased such media, nor will Midas pass through any furtherdiscounts associated with such media to Company, and (3) Midas may transact with its affiliates and other entities in which Midas has aninterest with respect to Non-Traditional Media Offerings in order to purchase such media for Company and Midas may receive benefits from itsaffiliates and such entities as a result of such transactions.7.This Amendment may be executed by facsimile and in one or more counterparts, all of which shall be considered one and the same agreement.8.Except as expressly provided herein, all of the terms and conditions contained in the MSA shall remain in full force and effect and in the eventany terms or conditions of the MSA conflict with the terms or conditions of this Amendment, the terms or conditions of this Amendment shallcontrol.9.This Amendment shall be governed by and construed in accordance with the laws of Washington without regard to its conflicts of law principles.Either party may give the other party written notice of any dispute not resolved in the normal course of business. Within ten (10) business daysafter delivery of the disputing party's notice, the executives or any persons authorized to resolve the dispute of both parties will meet at amutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to amicably resolve the dispute ingood faith. All reasonable requests for information made by one party to the other will be honored. All negotiations pursuant to this section areconfidential. If the parties continue to be unable to resolve the dispute within thirty (30) business days from the first meeting, either party mayinitiate litigation proceeding. The parties agree that in the event that any suit or proceeding is brought in connection with this Amendment, theprevailing party shall be entitled to recover reasonable attorneys' fees and costs, such suit or proceeding shall be brought in the state or federalcourts of and the parties shall submit to the exclusive jurisdiction of such courts and waive any and all jurisdictional, venue and inconvenientforum objections to such courts.[signature page follows]2IN WITNESS WHEREOF , the parties hereto have executed this Amendment No. 1, in the manner appropriate to each, as of the date first setforth above.Murphy’s Marketing Services, Inc. By: __/s/ Ken Calwell______________________ ( signature )Name: _ Ken Calwell____ _______________ ( printed name )Its: __CEO______________________________ ( title )By: __/s/ Mark Hutchens___________________ (signature) Name: _Mark Hutchens_______________ (printed name) Its: __CFO______________________________ (title)ACCEPTED AND AGREED :The Midas Exchange, Inc. By: /s/ Ralph Pepino _________________( signature )Name: Ralph Pepino ____________________( printed name )Its: CFO _____________________________( title )3Exhibit 21.1SUBSIDIARIES OFPAPA MURPHY'S HOLDINGS, INC.Subsidiary Jurisdiction ofOrganizationMM1 Regional LLC FloridaMM2 Regional LLC FloridaMurphy’s Marketing Services, Inc. FloridaPapa Murphy’s Company Stores, Inc. WashingtonPapa Murphy’s Intermediate, Inc. DelawarePapa Murphy’s International LLC DelawarePapa Murphy’s Worldwide LLC DelawarePMI Holdings, Inc. DelawareExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-203907 and Form S-8 No. 333-195634) of PapaMurphy's Holdings, Inc. of our report dated March 15, 2017 , relating to the consolidated financial statements and financial statement schedules of PapaMurphy's Holdings, Inc. and subsidiaries appearing in this Annual Report (Form 10-K) for the year ended January 2, 2017 ./s/ Moss Adams LLPPortland, OregonMarch 15, 2017Exhibit 24.1 SPECIAL POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appointsMark Hutchens his or her true and lawful attorney‑in‑fact and agent with full power of substitution and resubstitution, for him or her andin his or her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10‑K for the fiscal year ended January2, 2017, for filing with the U.S. Securities and Exchange Commission by Papa Murphy’s Holdings, Inc., a Delaware corporation,together with any and all amendments to such Form 10‑K, and to file the same with all exhibits thereto, and all documents in connectiontherewith, with the U.S. Securities and Exchange Commission, granting to such attorney‑in‑fact and agent full power and authority to doand perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents andpurposes as he or she might or could do in person, hereby ratifying and confirming all that such attorney‑in‑fact and agent may lawfullydo or cause to be done by virtue hereof.This Power of Attorney may be signed in any number of counterparts, each of which shall be an original, with the same effect asif the signatures thereto and hereto were upon the same instrument.[Signature Pages Follow]IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ Jean M. Birch Jean M. BirchIN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ Benjamin Hochberg Benjamin Hochberg IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ Yoo Jin Kim Yoo Jin KimIN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ L. David Mounts L. David MountsIN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ John D. Shafer, Jr. John D. Shafer, Jr.IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ Jeffrey B. Welch Jeffrey B. WelchIN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 8th day of March, 2017./s/ Katherine L. Scherping Katherine L. ScherpingExhibit 31.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a) AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Jean Birch, certify that:1.I have reviewed this annual report on Form 10-K of Papa Murphy's Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principals;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2017 /s/ Jean Birch Jean Birch Chair of the Board and Interim Chief Executive Officer (Principal Executive Officer)Exhibit 31.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a) AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Mark Hutchens, certify that:1.I have reviewed this annual report on Form 10-K of Papa Murphy's Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principals;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2017 /s/ Mark Hutchens Mark Hutchens Chief Financial Officer (Principal Financial Officer)Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Papa Murphy's Holdings, Inc. (the “Company”) on Form 10-K for the period ended January 2, 2017 , as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Jean Birch, interim Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 15, 2017 /s/ Jean Birch Jean Birch Interim Chief Executive OfficerExhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Papa Murphy's Holdings, Inc. (the “Company”) on Form 10-K for the period ended January 2, 2017 , as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Hutchens, Chief Financial Officer of the Company, certify, pursuantto 18 U.S.C. § 1350, adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 15, 2017 /s/ Mark Hutchens Mark Hutchens Chief Financial Officer

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