Location Franchise Agreement

Exhibit 10.9


January 1, 2003

PIZZA HUT, INC.

LOCATION FRANCHISE AGREEMENT


Table of Contents


Page


1.

DEFINITIONS

1


1.1

Adequate Delivery Service

1


1.2

Advertising Fund

1


1.3

Affiliates

1


1.4

Agreement

1


1.5

Approved Products

2


1.6

CPR

2


1.7

Co-op

2


1.8

Delivery Area

2


1.9

Development Opportunity

2


1.10

Direct or Indirect

2


1.11

Franchisee

2


1.12

Good Standing

2


1.13

Gross Sales

2


1.14

Initial Franchise Fee

2


1.15

Interest

2


1.16

IPHFHA

2


1.17

Lease

2


1.18

Location(s)

3


1.19

Manual

3


1.20

Monthly Service Fee

3


1.21

Person

3


1.22

PHI

3


1.23

Pizza Hut Marks

3


1.24

Related Persons

3


1.25

Single Site Region and Single Site Franchisee

3


1.26

System Restaurants

3


1.27

System Restaurant Concepts

3


1.28

Technology Systems

4


1.29

Term

4


1.30

Transfer

4


1.31

Appendix I Defined Terms

4


2.

GRANT OF FRANCHISE

4


2.1

Grant of Franchise

4


2.2

No Subfranchise Right

4


2.3

Delivery Service

4


2.4

Relocation Rights

5


2.5

Limitations on the Franchise

5


2.6

Protected Territories

5


i


Page


2.7

Right of First Refusal On New System Restaurants

6


2.8

Renewal Rights

7


2.9.

Notice of Intent Not to Renew

9


3.

DESIGNATION AND USE OF MARKS

10


3.1

Designation of Pizza Hut Marks

10


3.2

Use of Pizza Hut Marks

10


3.3

Ownership of Pizza Hut Marks

10


3.4

Protection of Pizza Hut Marks

10


4.

TRAINING AND ASSISTANCE

11


4.1

Management Training Programs

11


5.

MANUAL

11


5.1

Loan of Manual

11


5.2

Ownership of Manual

11


5.3

Confidentiality of Manual

12


5.4

Protection of Trade Secrets

12


5.5

Updates

12


6.

STANDARDS; DUTIES OF FRANCHISEE

12


6.1

Interpretation of Standards

12


6.2

Promulgation of Standards

12


6.3

Limitation on Promulgation of Standards

12


6.4

Inspections

12


6.5

Compliance with Laws

13


6.6

Identification

13


6.7

Uniforms

13


6.8

Coin-Operated Machines

13


6.9

Assumed Name Certificate

13


6.10

Approved Products

14


6.11

Standard and Optional Items

14


6.12

Menu Modification

14


6.13

No Unprepared Products

14


6.14

Point-of Sales System

14


6.15

Prices

14


7.

ADVERTISING

14


7.1

National Advertising

14


7.2

Local Advertising

15


7.3

Approval of Advertising

15


7.4

Cooperative Advertising

16


ii


Page


7.5

Limitation on Aggregate Amount of Advertising Contributions

16


8.

PURCHASE OF EQUIPMENT, SUPPLIES AND OTHER PRODUCTS

16


8.1

Use of Approved Supplies and Approved Distributors

16


8.2

Purchasing Co-op

16


9.

FEES AND PAYMENT SCHEDULE

17


9.1

Initial Franchise Fee

17


9.2

Monthly Service Fees

17


9.3

Transfer Fees

18


9.4

Offset Rights

18


9.5

Taxes

18


10.

BUSINESS PREMISES

18


10.1

Restrictions on Use

18


10.2

Site Selection

18


10.3

Construction of System Restaurants

18


10.4

Right to De-Identify

18


10.5

Repair and Maintenance

19


10.6

Proof of Compliance

19


10.7

System Restaurant Closure

19


11.

BOOKS AND RECORDS; REPORTS; AUDITS

19


11.1

Maintenance of Books and Records

19


11.2

Reports

19


11.3

Inspection and Audit

20


11.4

Selection of Accountants

20


12.

COVENANTS AGAINST COMPETITION

20


12.1

Acknowledgments

20


12.2

In-Term Covenants

21


12.3

Post-Term Covenants

21


12.4

Perpetual Covenant

21


12.5

Stock Ownership

22


13.

EMPLOYMENT RELATIONS

22


13.1

Franchisee' s Employees

22


13.2

Interference

22


14.

TRANSFERS

22


14.1

Transfers by PHI

22


14.2

Transfers by Franchisee

22


iii


Page


14.3

Transfer of Assets

22


14.4

Consent to Transfers

23


14.5

Death or Incapacity

23


14.6

Right of First Refusal

24


14.7

Other Permitted Assignments

24


15.

NON-INDIVIDUAL FRANCHISEES

24


15.1

List of Individual Owners

24


15.2

Personal Guaranties

24


15.3

Organizational Documents

25


15.4

Transfer Restrictions

25


15.5

Permitted Assignments

25


15.6

No Publicly Traded Ownership Interests

25


15.7

Changes in Ownership or Organization

26


16.

INSURANCE AND INDEMNIFICATION

26


16.1

Property Insurance

26


16.2

Liability Insurance

26


16.3

Proof of Insurance

26


16.4

Indemnification and Waiver

26


17.

REQUESTS FOR WAIVERS AND CONSENTS

27


17.1

Requests for Waivers or Consents

27


17.2

Effect of Waivers and Consents

27


17.3

No Implied Waivers

27


18.

DEFAULT AND TERMINATION

27


18.1

Definite Without Cure Right

27


18.2

Defaults Subject to Cure Rights

28


18.3

Non-Termination Remedies

29


19.

POST-TERMINATION PROVISIONS

29


19. 1

Use of Pizza Hut Marks and Systems

29


19.2

Cessation of Rights

29


19.3

Effect on Other Duties

29


19.4

Trademarked Items

29


19.5

Telephone Numbers

29


20.

DISPUTE RESOLUTION

30


20.1

Jurisdiction and Governing Law

30


20.2

Remedies Cumulative

30


20.3

Mediation

30


iv


Page


20.4

Injunctive Relief

30


20.5

Attorneys' Fees

30


21.

MISCELLANEOUS

31


21.1

Relation of Parties

31


21.2

Counterparts

31


21.3

Third-Party Beneficiaries

31


21.4

Severability

31


21.5

Protests, Requests and Notices

31


21.6

Time of Essence

32


21.7

Rules of Construction

32


21.8

Merger

33


v


PIZZA HUT, INC.


LOCATION FRANCHISE AGREEMENT


DATE :

January 1, 2003


PARTIES :

" PHI" -

Pizza Hut, Inc.


14841 Dallas Parkway Dallas, Texas 75254-7552


" Franchisee" -

NPC Management, Inc.


14400 College Blvd., Suite 201


Lenexa, KS 66215


RECITALS : PHI franchises a system of restaurants throughout the United States and in certain foreign countries under the name and mark " PIZZA HUT" . PHI and Franchisee have previously entered into a Franchise Agreement (the " Old Franchise Agreement" ) pursuant to which Franchisee was granted the right to operate one or more " PIZZA HUT" restaurants at the site(s) specified in this Agreement. PHI and Franchisee now desire that this Agreement supersede the Old Franchise Agreement.


AGREEMENT : NOW, THEREFORE, in consideration of the mutual promises and agreements set forth in this Agreement, PHI and Franchisee agree as follows:


1. DEFINITIONS


In this Agreement, the following terms have the following meanings:


1.1 Adequate Delivery Service . " Adequate Delivery Service" means delivery of Approved Products in accordance with the standards described in Section 2.3.


1.2 Advertising Fund. The " Advertising Fund" is the fund established in accordance with Section 7.1, into which PHI, Franchisee, and other domestic franchisees of PHI (subject to the terms of Section 7.1) make payments for national advertising, and which PHI or its designee will spend in accordance with Section 7.1.


1.3 Affiliates . A Person' s " Affiliates" are all Persons that directly or indirectly control, are controlled by, or are under common control with, the Person.


1.4 Agreement . " Agreement" means this Franchise Agreement (including all Appendices), as amended from time to time.


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1.5 Approved Products . " Approved Products" are the food, beverages, promotional items, and other products approved by PHI (in the Manual or another written document) for sale in, or other disposition to the public from, System Restaurants.


1.6 CPR . " CPR" refers to the Center for Public Resources, Inc., a non-profit organization which provides, among other things, mediation and arbitration services.


1.7 Co-op . " Co-op" means any cooperative advertising association established in accordance with Section 7.4.


1.8 Delivery Area . " Delivery Area" means the area(s) described in Appendix 1 or the modified Delivery Area if Franchisee' s Delivery Area is changed pursuant to Section 2.3.


1.9 Development Opportunity . " Development Opportunity" has the meaning assigned to it in Section 2.7.


1.10 Direct or Indirect. " Direct or indirect" , when used in describing ownership or other interests in an entity or an agreement, means that intervening levels of ownership are disregarded.


1.11 Franchisee . " Franchisee" , when capitalized, means the Person(s) identified as " Franchisee" on the first page of this Agreement, or any approved successor.


1.12 Good Standing . Franchisee is in " Good Standing" under this Agreement at all times except when Franchisee is in default of this Agreement (regardless of whether PHI has given Franchisee notice pursuant to Section 18.2).


1.13 Gross Sales . " Gross Sales" means the total of all cash or other payments received (including the fair value of an exchange and all payments by check, credit, or charge account, regardless of whether the checks, credits, or charge accounts are ultimately paid) for the sale or use of any products, goods, or services that are sold at or from any System Restaurant. Gross Sales exclude only price discounts and allowances, and taxes imposed directly on sales, or services by governmental authorities, and then only if the amount of the tax is added to or absorbed in the selling price and is actually paid to the appropriate governmental authority.


1.14 Initial Franchise Fee . " Initial Franchise Fee" refers to the payment Franchisee must make to PHI in order to obtain the right to operate System Restaurants, as described in Section 9.1.


1.15 Interest . " Interest" , when used in the context of an interest in Franchisee or in this Agreement, means any direct or indirect beneficial or legal ownership interest in Franchisee or in this Agreement.


1.16 IPHFHA . " IPHFHA" means I.P.H.F.H.A., Inc., a Delaware corporation, that is frequently referred to as the International Pizza Hut Franchise Holders Association.


1.17 Lease . " Lease" means any written or oral contract allowing one Person to possess or use the property of another Person, and includes subleases and contracts for deed.


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1.18 Location(s) . " Location(s)" means the specific site or sites, listed in Appendix B, at which franchisee is authorized by this Agreement to operate System Restaurants.


1.19 Manual . The " Manual" is the set of documents (in one or more volumes), as published, supplemented and revised (from time to time), and disseminated by PHI, that explain and define the proper operation of System Restaurants.


1.20 Monthly Service Fee . " Monthly Service Fee" refers to the payments required of Franchisee, as described in Section 9.2.


1.21 Person . " Person" means both natural persons and legal entities (including corporations, partnerships, limited liability companies, and trusts).


1.22 PHI . " PHI" means Pizza Hut, Inc., a California corporation, and its successors and assigns.


1.23 Pizza Hut Marks . " Pizza Hut Marks" means only those trademarks, trade names, service marks, trade dress (including product package designs), symbols, slogans, emblems, logos, insignia, designs, external and internal building designs and other architectural features, and any combination of the foregoing that Franchisee is authorized to use in connection with the System Restaurants. Appendix A to this Agreement is a list of the Pizza Hut Marks that consist of words or a combination of words and design that Franchisee is authorized to use on the date of this Agreement. PHI may, from time to time, designate other Pizza Hut Marks pursuant to Section 3.1 of this Agreement.


1.24 Related Persons . Franchisee' s " Related Persons" consist of all Persons having an Interest in Franchisee; all of Franchisee' s Affiliates; the officers, directors, partners, trustees, and beneficiaries of Franchisee and of any Person having an Interest in Franchisee; and the spouses and minor children of any of the foregoing individuals.


1.25 Single Site Region and Single Site Franchisee . " Single Site Region" and Single Site Franchisee" have the meanings assigned to such terms in Section 2.7.


1.26 System Restaurants. " System Restaurants" are only the following three types of Dine-in " Pizza Hut" restaurant concepts: (a) " Pizza Hut Restaurants" - (PHI' s original concept) from which Pizza Hut pizza (and other Approved Products) are sold for dine in and carryout consumption, and may be delivered for off-premises consumption; in order to be a Pizza Hut Restaurant, a restaurant must have either at least 30 seats or at least 15% of its sales attributable to dine-in service; (b) " Delivery Restaurants" - from which Pizza Hut pizza (and other Approved Products) are delivered for off-premises consumption; and (c) " Delivery/Carryout" (or " Del Co" ) Restaurants - from which Pizza Hut pizza (and other Approved Products) are sold for carryout and are delivered, all for off-premises consumption.


1.27 System Restaurant Concepts . The phrase " System Restaurant Concepts" refers collectively to the three types of Systems Restaurants described in Section 1.26. " System Restaurants" and " System Restaurant Concepts" do not include any other " Pizza Hut" restaurant concept or any other type of restaurant or business owned by PHI or its Affiliates.


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1.28 Technology Systems . " Technology Systems" refers to the hardware and software which Franchisee may install and use in connection with its System Restaurants, as described in Section 6.14.


1.29 Term . " Term" means the period during which the rights granted by this Agreement are in effect, which starts on January 1, 2003, and (unless terminated early as allowed by Section 18) ends on the day before the 30th anniversary of this Agreement, or any succeeding renewal term if this Agreement is renewed. The Term of this Agreement may be renewed in accordance with the provision of Section 2.8.


1.30 Transfer. " Transfer" includes every absolute or conditional method of transferring a legal or equitable, record or beneficial Interest in Franchisee or in this Agreement, whether voluntary, involuntary, or by operation of law, and includes a change in beneficiaries or trustees of a trust:


1.31 Appendix I Defined Terms . The terms " Adjusted Upgrade Schedule" , " Anniversary Date" , " Approved Investment" , " Checkpoint Date" , " Designated Arbitrator" , " Duly Modified" , " Excepted Restaurant" , " Full Reimage" , " High Volume Restaurant" , " Initial Upgrade Schedule" , " Initial Upgrade Schedule Notice" , " Low Volume/High Population Restaurant" , " Low Volume/Low Population Restaurant" , " Middle Volume/High Population Restaurant" , " Middle Volume/Low Population Restaurant" , " Minimum Asset Standards" , " Non-Standard Upgrade" , " Partial Reimage" , " Rebuild" , " Refurbish" , " Reimage" , " Relocation" , " Remodel" , " Replacement Demand" , " Reversionary Event" , " Upgrade" , " Upgrade Committee" , " Upgrade Requirements" and " WRPA" have the meanings ascribed to them in Appendix I.


2. GRANT OF FRANCHISE


2.1 Grant of Franchise . PHI grants to Franchisee, during the Term, the non-exclusive franchise to operate System Restaurants at the Location(s), using the Pizza Hut Marks; to promote and sell Approved Products and related services from System Restaurants at the Location(s); and to deliver Approved Products produced at System Restaurants throughout the Delivery Area (subject to Franchisee providing Adequate Delivery Service as provided for in Section 2.3). Franchisee may not operate any System Restaurant except at the Location(s), and may not deliver products produced at the System Restaurants or using the Pizza Hut Marks except within the Delivery Area. Franchisee covenants that it will use its best efforts to promote sales of Approved Products from its System Restaurants and throughout the Delivery Area.


2.2 No Subfranchise Right . The franchise granted by this Agreement is personal to Franchisee. Franchisee may not subfranchise to any other Person all or any part of the franchise granted by this Agreement.


2.3 Delivery Service . Franchisee shall provide Adequate Delivery Service to the entire Delivery Area throughout the Term. The term " Adequate Delivery Service" means delivery service in accordance with PHI' s then-current standards for delivery, taking into account criteria including potential sales volume, market demographics, saturation analysis, diversion of sales from Franchisee' s other System Restaurants, and physical and geographic characteristics of the Delivery Area.


4

At any time during the Term, PHI may consider whether Franchisee is providing Adequate Delivery Service to the entire Delivery Area. If PHI preliminarily determines that Franchisee is not providing Adequate Delivery Service throughout the Delivery Area, PHI will give Franchisee written notice of the areas within the Delivery Area that are not receiving Adequate Delivery Service. Franchisee may, within 90 days, submit a written protest to PHI that identifies the geographic boundaries of the area to which Franchisee contends it is providing Adequate Delivery Service. If Franchisee fails to timely submit a written protest, PHI' s preliminary determination shall become immediately effective. PHI will consider any written protest timely submitted by Franchisee but PHI shall in its sole discretion make the final determination of the area to which Franchisee is providing Adequate Delivery Service. PHI will give Franchisee written notice of its final determination within 90 days after receipt of Franchisee' s written protest, at which point it shall be effective. The Delivery Area shall be redefined to include only the areas to which PHI finally determines Franchisee is providing Adequate Delivery Service.


2.4 Relocation Rights . If Franchisee desires to relocate any of Franchisee' s existing System Restaurants, Franchisee will request PHI' s permission to do so. As part of its request, Franchisee must supply PHI with justification for the relocation (such as expiration of an existing lease or changed demographics) and any other information PHI requests. If PHI consents to the relocation, PHI will notify Franchisee of the portion (if any) of the Initial Franchise Fee that Franchisee may transfer from the existing System Restaurant to the proposed replacement System Restaurant and the date by which Franchisee must open the replacement System Restaurant to receive the credit (if any). To receive any credit, Franchisee must open the replacement System Restaurant for business within 12 months after closure of the existing System Restaurant. This Agreement will govern Franchisee' s operations at any such replacement System Restaurant.


2.5 Limitations on the Franchise . Franchisee (a) may not conduct any business using any portion of the System Restaurant Concepts licensed by this Agreement at any sites except the Location(s), and (b) may not make deliveries of products produced at the System Restaurants to any points outside the Delivery Area.


2.6 Protected Territories .


A. During the Term, and so long as Franchisee is not in default hereunder (including a breach or default under Appendix I hereto), PHI will not develop, franchise or license another to operate a Pizza Hut Restaurant within a circle centered on the Pizza Hut Restaurant that contains 15,000 households, but in no event will such circle of protection have a radius of less than 1 mile or greater than 10 miles.


B. As long as Franchisee is providing Adequate Delivery Service throughout the Delivery Area, PHI will not provide delivery service, and will not allow another franchisee or licensee to provide delivery service, for Approved Products using the Pizza Hut Marks to any point within the Delivery Area.


C. If Franchisee' s Old Franchise Agreement was PHI' s form of New Construction Franchise Agreement, then, with respect to each of the Pizza Hut Restaurants


5


identified on Appendix L hereto, until the expiration date of the original term of such Old Franchise Agreement:


i) PHI will not develop nor franchise or license another to develop any other restaurant concept that uses the Pizza Hut Marks at a " non-captive location," as defined below, that is within a one-mile radius of the Location; and


ii) PHI will not develop, franchise or license any such other restaurant concept that sells medium (" 12 diameter" ) or larger pizzas using the Pizza Hut Marks from a " non-captive location" that is within the circle of protection as described in subsection 2.6.A., above.


For purposes of this Section, " non-captive locations" are only convenience stores, gas stations, grocery stores, and multi-branding accounts in which a non-traditional Pizza Hut outlet, such as a kiosk, is placed within a restaurant that is primarily identified by another trademark.


Except as set form in this Section 2.6 and Section 2.7 below, Franchisee has no exclusivity and no rights to exclude development of concepts owned, franchised or licensed by PHI or its Affiliates. PHI and its Affiliates may develop and operate, or may franchise and license others to operate, any business concept except the System Restaurant Concepts at any place, including immediately adjacent to the Location(s), and may use the Pizza Hut Marks or any other trademarks owned or developed by PHI or its Affiliates in connection with those concepts, even if such concepts sell products that are the same as, or similar to, Approved Products.


2.7 Right of First Refusal On New System Restaurants . Notwithstanding anything contained in this Agreement to the contrary, PHI hereby grants to Franchisee the following right of first refusal:


A. If PHI identifies a development opportunity (" Development Opportunity" ) for a System Restaurant within a Single Site Region (as defined below) which includes the Location(s) of Franchisee' s System Restaurant(s), PHI will determine whether Franchisee operates the System Restaurant that is nearest to the Development Opportunity and is otherwise within the same general market area. If so, and unless PHI reasonably concludes that there are geographic obstacles within the market that would make development of the Development Opportunity by Franchisee impractical, PHI will offer the Development Opportunity to Franchisee. If Franchisee elects to accept the Development Opportunity, Franchisee must pay the applicable Initial Franchise Fee for such Development Opportunity within 90 days after receipt of PHI' s offer and must agree to use its best efforts to expeditiously develop the Development Opportunity. If Franchisee does not accept the Development Opportunity by timely tendering payment of the Initial Franchise Fee, PHI may thereafter elect to develop the Development Opportunity itself or may offer the Development Opportunity to another. If Franchisee accepts PHI' s offer as provided above, but does not begin constructi ...