MEMORANDUM OF UNDERSTANDING REGARDING
FORM OF LICENSE AGREEMENT
This Memorandum of Understanding ("MOU") is made and entered into
effective the 30 day of November, 1995 by and between Strathmore Bagels
Franchise Corp. ("Licensor") and Host International, Inc. ("Operator").
RECITALS:
WHEREAS, Licensor represents that it has the right and authority to
license the use of the name STRATHMORE BAGELS AND DELI, and other trademarks,
service marks, copyrights, interior and exterior building designs and
specifications ("Marks"); and
WHEREAS, Operator is in the business of conducting food and beverage
and merchandise concessions at domestic and international airports, tollroads,
stadiums & arenas, and off-airport locations (the "Locations"); and
WHEREAS, Licensor has authorized Operator to develop a number of retail
stores ("Stores") operating under the Marks; and
WHEREAS, Licensor and Operator now desire to enter into individual
Strathmore Bagel and Deli license agreements (the "License Agreements") for
existing and prospective Locations (the term "Location" referring to the entire
airport or travel plaza or stadium or hotel, while the term "Store refers to the
individual site at the Location where the Operator conducts the licensed
"Strathmore Bagel and Deli" facility); and
WHEREAS, Licensor and Operator further desire to enter into this MOU
regarding the licensing of the Marks to Operator pursuant to the form of license
agreement attached hereto as TAB I, and by this reference incorporated herein
(the "Form Agreement").
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Form Agreement and for other good and valuable consideration,
the parties hereby contract as follows:
1. Form Agreement. Licensor and Operator hereby agree that the Form
Agreement, attached hereto as TAB I shall be entered into between Licensor and
Operator applicable to all existing Stores (including, but not limited to Stores
at John F. Kennedy International Airport, Newark International Airport, and one
location at Resorts Internatioal Hotel, Atlantic City, New Jersey), as well as
any future Stores developed by Operator at any Location during the term of this
MOU. Notwithstanding the foregoing, the parties acknowledge that the Form
Agreement shall be modified for the Atlantic City Resorts Location.
2. Exclusivity.
a. Operator and Licensor hereby agree that Licensor is an
authorized member of Operator's portfolio of approved branded products
for use in its concession operations, including but not limited to
existing and prospective Locations. Each Store will be approved by
Operator individually, and shall be documented by a License Agreement
as shown in the Form Agreement in TAB I. In the event that Licensor
ceases to meet Operator's on-going review, Operator will notify
Licensor in writing that Operator is no longer included within
Operator's portfolio of brands. The inclusion of Licensor in Operator's
portfolio of brands shall permit Operator to list Licensor in any of
Operator's proposals for food and beverage concessions at any Location
in domestic and international airports, tollroads, stadiums or arena;
Licensor's consent shall be required for Operator to list Licensor in
its portfolio of brands for use at any other Location.
b. The parties hereby further agree and acknolwedge that:
(i) there shall be no exclusive rights granted to
Operator by Licensor, except as provided in Subsection 2(c);
and
(ii) there shall be no exclusive rights granted to
Licensor by Operator, except as provided in Subsection 2(d).
c. Licensor hereby agrees to the following limited exclusivity
granted to Operator:
(i) Licensor hereby agrees that Licensor shall not
itself develop, or allow any party other than Operator (or, at
Operator's sole discretion, a subsidiary or affiliate of
Operator), to develop, a licensed or franchised or
company-owned bagel operation in the Atlantic City area.
(ii) Licensor shall not itself develop, or allow any
party other than Operator (or, at Operator's sole discretion,
a subsidiary or affiliate of Operator), to develop a licensed
or franchised or company-owned bagel operation at any Location
where Licensor has a current license agreement with Operator;
and
(iii) Licensor shall not itself or through any third
party bid for any lease, concession agreement or permit rights
at any Location where Licensor has agreed to become part of
Operator's bid or proposal for such lease, concession
agreement or permit rights.
d. Operator hereby agrees that in return for the exclusive
rights granted to Operator pursuant to Subsection 2(b)(i), Operator
agrees that it shall not operate a nationally or regionally franchised
branded bagel concept at any Location in Atlantic City, unless (i) such
franchised location is acquired by Operator through merger or
acquisition of the assets or stock of a third party, where such
Atlantic City branded concept represents less than ten percent (10%) of
the assets or stock so acquired; or (ii) Licensor has failed to execute
a Form Agreement for such Atlantic City Location; or (iii) Licensor is
otherwise incapable of permitting Operator to be licensed a Store in
Atlantic City; or (iv) all of Operator's licensed Locations in Atlantic
City are closed.
3. Term. The term of this MOU shall commence effective as of the date
first above written and shall terminate on November 30, 2005. The Form
Agreements shall continue in full force and effect for their individual terms
notwithstanding any termination of this MOU.
4. Other Terms. Notwithstanding any other provision of this MOU, or any
provision of the Form Agreement, the parties agree that:
a. Operator and its subsidiaries and affiliates are
experienced operators of food and beverage concessions, and Operator is
the holder of numerous competing franchises (e.g. Pizza Hut and
Sbarro's). Licensor acknowledges and agrees that Operator shall not be
prohibited from developing its own bagel or deli concept or from having
an interest in, or acquiring an interest in a bagel or deli concept;
b. Nothing contained in this MOU or the Form Agreement shall
be construed as prohibiting Operator from operating branded bagel or
deli concepts of third parties; or from producing or operating its own
branded or unbranded bagel and/or deli concepts. Licensor expressly
agrees that Operator shall not be prohibited from developing its own
bagel or deli concept or from acquiring an interest in, subcontracting,
or managing a bagel or deli concept.
c. At Operator's option, Operator may designate a minority
business enterprise ("MBE") to operate a location, and in such event,
Licensor shall take all steps necessary to assure that such MBE is
provided a form Strathmore Bagel License Agreement, as attached hereto.
In the alternative, Operator any such License Agreement to any of
Operators MBE subtenants.
d. Notwithstanding any other provision of this MOU or the Form
S Agreement attached hereto as TAB I, Host shall be entitled to control
the menu offerings and hour of operation at any location.
e. The Form Agreement shall provide that Operator's cost of
purchasing product shall be $2.05 per dozed bagels, with a royalty of
three percent (3%) on certain products.
f. Licensor shall continue to maintain standards at least as
high as those in effect as of the date this MOU is executed.
g. There shall be no press releases without the mutual
agreement of the parties.
5. Entire Agreement. This MOU, and the Form Agreement attached hereto
as TAB I, constitute the entire agreement between the parties, superseding the
Test Agreement and all written and oral agreements between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Form
Agreement the day and year first above written.
STRATHMORE BAGELS FRANCHISE CORP.
Attest: /s/ Harold L. Kestenbaum By: /s/ Jack Freedman
Title: VP
HOST INTERNATIONAL, INC.
Attest: /s/ Douglas B. Warren By: /s/ C. D. Sharpe
Title: V.P.
EXHIBIT B-1
LIST OF PROPRIETARY ITEMS ON WHICH HOST PAY ROYALTY
[FOR STORES OPENED PRIOR TO 12/1/95]
Following is the list of proprietary products on which Operator must pay royalty
for existing units as of December 1, 1995 [i.e. Kennedy (5), Newark (2), Joyce
Kilmer (1), Hartford (2), Raleigh Durham (2), Detroit (1), New Jersey Turnpike
Display Cases Only (9), Atlantic City (1)]:
I. Prior to 12/1/95:
Royality of 2% to be paid on the following menu items for all
existing Strathmore units -
Bagel, Plain
Bagel, Butter
Bagel, Cream Cheese (any variety)
Bagel, Dozen
Bagel Sandwich (any combination of deli meats,
cheese, wet salads, condiments produced on a bagel)
NOTE: No royalty on sandwiches which are not made from a
bagel; no royalty on other items.
II. Effective 12/1/95:
Royalty of 3% to be paid on the following menu items for all
existing Strathmore units -
Bagel, Plain
Bagel, Butter
Bagel, Cream Cheese (any variety)
Bagel, Dozen
Bagel Sandwich (any combination of deli meats,
cheese, wet salads, condiments produced on a bagel)
NOTE: No royalty on sandwiches which are not made from a
bagel; nor royalty on other items.
EXHIBIT B-2
LIST OF PROPRIETARY ITEMS ON WHICH HOST PAY ROYALTY
[FOR STORES OPENED AFTER 12/1/95]
Following is the list of proprietary products on which Operator must pay royalty
for units other than existing units as of December 1, 1995 [i.e. other than
Kennedy (5), Newark (2), Joyce Kilmer (1), Hartford (2), Raleigh Durham (2),
Detroit (1), New Jersey Turnpike Display Cases Only (9), Atlantic City (1)]:
Royalty of 3% to be paid on the following menu items for all units
developed after 12/1/95.
Bagel, Plain
Bagel, Butter
Bagel, Cream Cheese (any variety)
Bagel, Dozen
Bagel Sandwich (any combination of deli meats,
cheese, wet salads, condiments produced on a bagel)
Sandwich (any combination of deli meats, cheese, wet
salads, condiments produced on any combination of
bread varieties)
Wet Salads (any combination of wet salads served
either on a bread or atop a salad)
NOTE 1: No royalty paid on other items
NOTE 2: The term "WET SALAD" includes items such as tuna salad, chicken
salad; however, it excludes items such as garden greens, spinach salad,
etc....
EXHIBIT C
STRATHMORE BAGELS & DELI EQUIPMENT & SIGNAGE LIST
ITEM DESCRIPTION COST
EQUIPMENT
4 ft. Artica - Deli case (or) $5,000.00
6 ft. Artica - Deli case $7,000.00
Bain Marie - single unit (or) $ 900.00
Bain Marie - double unit $1,500.00
Refrigerator - single door reach-in (or) $1,400.00
Refrigerator - double door reach-in $2,000.00
Freezer - single door reach-in $1,400.00
Freezer - double door reach-in $2,000.00
Microwave $ 300.00
* Ice Machine $1,500.00
Convection oven - 1/2 size (or) $1,800.00
Convection oven - full size $3,500.00
Coffee Brewer/grinder $ 800.00
4 ft. Bagel case (or) $ 500.00
6 ft. Bagel case $ 800.00
Slicer $ 800.00
Toaster $ 800.00
Smallwares (total) $1,700.00
Signage - P.O.P.
Menu Board $2,000.00
Sign - Individually lite channel letters $6,000.00
Neon - Strathmore logo $1,500.00
Sign - back lite (Strathmore logo) $1,000.00
Stanchions $12.00 ea.
Duratrans $20.00 ea.
* Not included in locations that have an existing ice machine.