Memorandum of Understanding - California Pizza Kitchen Inc. and Host International Inc.
MEMORANDUM OF UNDERSTANDING REGARDING
FORM OF AGREEMENT
This Memorandum of Understanding ("MOU" or "Agreement") is made and entered
into effective the 12/th/ day of May, 1998 by and between California Pizza
Kitchen, Inc., a California corporation having an address at 6053 West Century
Boulevard, Suite 1100, Los Angeles, California 90045-6442 ("Licensor") and Host
International, Inc., having an address at Third Floor (Mail Stop 177), 6600
Rockledge Drive, Third Floor, Bethesda, Maryland 20817, Attn: Chief Counsel,
Development, Dept. 72/928.83 ("Licensee").
RECITALS:
WHEREAS, Licensor represents that it has the right and authority to license
the use of the name California Pizza Kitchen, CPK, CPK ASAP and the other
licensed marks of Licensor, service marks, copyrights, interior and exterior
designs and specifications ("Marks"); and
WHEREAS, Licensee is in the business of conducting food and beverage and
merchandise concessions at domestic and international airports, tollroads,
enclosed malls, stadiums & arenas, and other off-airport locations; and
WHEREAS, Licensor and Licensee are parties to a certain Trademark License
Agreement dated as of the 31st day of July, 1996, for the operation of
trademarked locations at Los Angeles International Airport (referred to herein
as the "Existing License Agreement"); and
WHEREAS, the parties desire to enter into this MOU for the purpose of
creating a binding obligation on each party with respect to future development
opportunities for California Pizza Kitchen ASAP and the form of agreement with
addendum to be executed for any and all future locations developed during the
term of this MOU (the "Form Agreement" attached hereto as Exhibit "A").
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this MOU and for other good and valuable consideration, the parties
hereby contract as follows:
1. Form Agreement.
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a. Licensor and Licensee are parties to the Existing License Agreement
with respect to Los Angeles International Airport ("LAX"). The
Existing License Agreement for LAX remains in full force and effect
with respect to LAX; however, the additional terms of this MOU shall
apply to the relationship of the parties with respect to San Diego
International Airport, Dulles International Airport, and all other
Locations (as defined below) developed during the term of this MOU.
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b. Licensee and Licensor will consider development of additional licensed
sites for California Pizza Kitchen ASAP restaurants in Licensee's
domestic and international airport concessions ("Airport Locations"),
tollroad concessions ("Tollroad Locations"), malls where the
landlord/owner/developerseeks a master concessionaire for a food court
or other multiple concept area ("Mall Locations") and other locations
in addition to the LAX site. The Airport Locations, Tollroad Locations
and Mall Locations are collectively referred to herein as the
"Locations," except that the Locations set forth in Exhibit D are
excluded from the terms of this Agreement.
c. The parties hereby agree that the Form Agreement (with addendum)
attached hereto as Exhibit A, and by this reference incorporated
herein, shall be used to document the agreement of the parties for
each California Pizza Kitchen ASAP site developed during the term of
this MOU, subject to compliance with applicable law. California Pizza
Kitchen ASAP restaurants are generally smaller in size, have a more
limited menu and more limited service than the full service California
Pizza Kitchen, because the full service CPK is a unit offering the
full CPK menu (the current version of which is attached as Exhibit B,
but is subject to change), providing full waiter/waitress table
service and full bar, and operating in a restaurant space of generally
2,500 or more square feet (the "Full Service CPK Restaurant").
d. Licensee may, in its sole discretion, designate an affiliate of
Licensee to hold or be transferred the site-specific Form Agreement,
so that the entity which holds the California Pizza Kitchen ASAP
license will be the same entity which holds the rights to concession
space under the ground lease or master concession agreement for the
Location. By way of example and not by way of limitation, Licensee and
Licensor acknowledge that the Form Agreement for Mall Locations would
ordinarily be entered into in the name of Host Marriott Services USA,
Inc., while Host Marriott Tollroads, Inc. may be the entity which
holds or is transferred the rights to operate a California Pizza
Kitchen ASAP facility at certain Tollroad Locations.
e. The Franchise Fee (as defined in the Form Agreement) shall be Twenty
Thousand ($20,000), or Ten Thousand Dollars ($10,000) if such Form
Agreement is executed in connection with an additional California
Pizza Kitchen restaurant at any Location. The level of support
provided by Licensor for any initial openings shall be the same as
that provided in the opening at LAX (including but not limited to
three of Licensor's trainers for 21 days each; plus two directors, one
of whom will stay for ten days and the other shall stay for four days;
at least one quality insurance inspection; and two mystery shoppers
within six weeks of restaurant opening). Such Twenty Thousand Dollar
($20,000) Franchise Fee shall remain in effect during the five-year
initial term of this MOU, and shall be adjusted every five years
(i.e., upon each renewal of this MOU) to reflect the percentage
increase, if any in the Consumer Price Index.
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f. The level of support provided by Licensor for any California
Pizza Kitchen restaurant which has a Ten Thousand Dollar ($10,000)
Franchise Fee shall be less than that provided for a first unit at a
Location, and the parties' goal shall be to manage such support so
that overall costs for subsequent units are lower.
2. Inclusion in Portfolio: Renewal Rights: Exclusivity.
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a. Inclusion in Portfolio. Licensee and Licensor hereby agree that
Licensor is an authorized member of Licensee's portfolio of
approved branded products for use in its concession operations,
including but not limited to prospective Locations. Each Licensed
site shall be documented by the Form Agreement, subject to
compliance with applicable law.
b. Limited Exclusivity. Except as otherwise expressly provided
herein, this Agreement shall not affect Licensor's right to
operate and license others to operate a Full Service CPK
Restaurant and shall apply only to California Pizza Kitchen ASAP
(or other later version of smaller limited square footage or
limited service or menu version of California Pizza Kitchen
differing from the Full Service CPK Restaurant concept) for all
Locations (except that Mall Locations are also subject to the
additional provisions of Subsection 2(b)(vi) below):
i. Extension Rights for Locations. Licensee's and its
affiliates' right to extend the term of any of the
individual Form Agreements shall be governed by the terms of
the applicable Form Agreement for the Location, which term
shall correspond to the term of Licensee's lease for the
premises at the applicable Location.
ii. Bids and Proposals Where Licensee Holds a Form Agreement.
Licensee and its affiliates shall have the right to include
Licensor in their proposals or bids for extension or renewal
of the ground lease or master concession agreement for the
Locations where Licensee or its subsidiary or affiliate then
holds a Form Agreement; provided however, that Licensee
shall notify Licensor of Licensee's intention to include
Licensor in a proposal or bid (the lesser of: two months
prior to the bid/proposal submission date; or one-half the
number of days between release of a request for proposals or
invitation to bid and the submission date, so as to allow
Licensor sufficient time to comply with the requirements of
applicable law); and provided, further, that Licensee shall
provide Licensor with the information described in Paragraph
2(b)(iii)(B) below. In such event, Licensor agrees that it
shall bid with Licensee or its affiliates and shall not
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(directly or indirectly, neither as a California Pizza
Kitchen ASAP nor as a Full Service CPK Restaurant) bid
against Licensee or its subsidiaries or affiliates for any
Location where Licensee or its subsidiary or affiliate then
holds a Form Agreement, except as follows:
A. Notification Procedure Where Licensee Holds a Franchise
Agreement. Licensee shall inform Licensor of whether or
not Licensee intends to submit a bid or proposal for a
particular Location, and whether or not Licensee
intends to include Licensor in such bid or proposal at
the lesser of two months prior to the submission date,
or a date which is one-half the number of days between
the public release of the request for proposals and the
proposal/bid submission date. In the event that
Licensee does not intend to submit a bid or proposal,
or does not intend to include Licensor in a bid or
proposal for a particular Location, then Licensor shall
be free to itself bid or propose for such Location, or
to enter into an agreement with another party to
include Licensor in such other party's bid or proposal.
Notwithstanding the foregoing, nothing contained in
this Agreement is intended to negate any radius
restriction granted to Licensee by Licensor in the Form
Agreement (e.g., Licensor will not grant a new CPK ASAP
or Full Service CPK Restaurant to a third party, or
itself operate a CPK ASAP of Full Service CPK
Restaurant, in the same Airport Location or Tollroad
Location where such new facility would serve the same
customer already being served by Licensee's existing
facility).
B. Set-Aside Locations. Notwithstanding anything to the
contrary herein contained, in the event that a lessor
releases a request for a bid or proposal for which
Licensee is ineligible (e.g. a set-aside contract for a
minority business), Licensee and Licensor will
consult with one another as to a qualified candidate
for the bid or proposal. Licensor shall not bid or
propose for such set-aside contract unless Licensee has
affirmatively indicated, within the time periods set
forth above, that Licensor will not be a part of
Licensee's bid or proposal for the non set-aside
Locations in the same facility. Notwithstanding the
foregoing, nothing contained in this Agreement is
intended to negate any radius restriction granted to
Licensee by Licensor in the Form Agreement (e.g.,
Licensor will not grant a new CPK ASAP or Full Service
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CPK Restaurant to a third party, or itself operate a
CPK ASAP of Full Service CPK Restaurant, in the same
Airport Location or Tollroad Location where such new
facility would serve the same customer).
iii. Locations Where Licensee Does Not Hold a Form Agreement.
With respect to Locations in which Licensee or its
subsidiary or affiliate does not then hold a Form Agreement,
the following Procedure shall apply:
A. Notice Procedure Where Licensee Does Not Hold a Form
Agreement. At the lesser of two (2) months prior to the
submission date, or a date which is one-half the number
of days between the public release of the request for
proposals and the proposal/bid submission date,
Licensee shall notify Licensor of whether or not
Licensee intends to submit a bid or proposal for a
particular Location, and whether or not Licensee
intends to include Licensor in such bid or proposal.
B. Licensor Option to be a part of any bid that Licensee
brings to Licensor. In the event that Licensee intends
to provide Licensor the option to be a part of such bid
or proposal for a new Location, Licensee shall also
notify Licensor of the projected date of commencement
of construction, the projected opening date, and a site
plan of the particular Location, which site plan shall
include the proposed location of the restaurant and the
lessor's then-proposed location of other spaces
available for food and beverage development. In the
case of Airport Locations, Licensee shall, in addition
to the information above, provide Licensor with any
government-supplied: layout of the airport terminals;
list or diagram from the request for proposals
reflecting other then-contemplated real estate in the
airport for food service concepts; and any government-
supplied data concerning enplanement and deplanement.
Licensor shall notify Licensee within five (5) business
days of whether or not Licensor in its sole and
absolute discretion, accepts the option to have CPK
ASAP included in Licensee's bid or proposal, and
subject to the provisions of Para. 2(b)(vi) below, in
the event that Licensor has declined the option to have
CPK ASAP included in Licensee's bid or proposal,
Licensor will not pursue such Location with another
party or on its own, or
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otherwise permit California Pizza Kitchen ASAP or a
Full Service CPK Restaurant, in any other bid or
proposal for concessions at such Location (except that
in malls there shall be no restriction on Licensor's
freedom to grant a Full Service CPK Restaurant to a
third party, or itself operate such Full Service CPK
Restaurant).
C. Acceptance of Option. If Licensor accepts the option to
become part of the bid or proposal for a Location by
Licensee or its affiliates, Licensee shall promptly
notify Licensor of whether or not the proposal was
awarded to Host.
iv. Restrictions After Inclusion of CPK ASAP in a bid or
proposal. In any Location where Licensor has agreed to
become part of the bid or proposal for such Location by
Licensee or its affiliates, Licensor shall not itself or
through any third party, directly or indirectly (neither as
a California Pizza Kitchen ASAP nor as a Full Service CPK
Restaurant), bid or submit a proposal for any lease,
sublease, concession agreement or permit rights for such
Location; and shall not be the subtenant of any party other
than Licensee (except that in malls there shall be no
restriction on Licensor's freedom to grant a Full Service
CPK Restaurant to a third party, or itself operate such Full
Service CPK Restaurant). Otherwise, except as provided in
Para. 2(b)(vi) below, if Licensee elects not to offer
Licensor an opportunity to be in Licensee's bid or proposal,
Licensor shall then have the right to pursue the
bid/proposal for the Location.
v. Airport and Tollroad Opportunities Not Awarded in a Bid or
Proposal Process. If Licensor has an opportunity to develop
a California Pizza Kitchen ASAP or a Full Service CPK
Restaurant at an Airport Location or Tollroad Location where
neither Licensee nor its affiliates currently has a Form
Agreement, and Licensor in its sole and absolute discretion,
elects to do so, and such opportunity is not offered
pursuant to a public bid or award process for which Licensee
is eligible, Licensor shall notify Licensee of the
opportunity and shall offer Licensee a right of first
refusal to act as Licensor's licensee/franchisee for such
Airport Location or Tollroad Location, subject to compliance
with applicable law, and further subject to any agreements
entered into by Licensor prior to the effective date of this
Agreement. Licensee shall have thirty (30) days following
receipt of all relevant information regarding such potential
site, to accept or reject development of such site under
the same terms and conditions as the Form Agreement. If,
after Licensee declines such opportunity,
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Licensor desires to grant a California Pizza Kitchen
license to a party other than Licensee or its
affiliates under terms more favorable than those in the
Form Agreement, Licensor shall first offer such
improved terms to Licensee, and Licensee shall have
thirty (30) days to accept or reject such Location.
vi. Additional Mall Provisions. With regard to Mall
Locations, in addition to other rights and restrictions
contained herein, the parties agree that:
A. If Licensee becomes aware of an opportunity for
development of a California Pizza Kitchen ASAP or
a Full Service CPK restaurant for a Mall Location,
and the landlord/developer for such development
opportunity has declared that the opportunity is
not part of a master concessionaire for the food
court/mall, Licensee shall notify Licensor or such
opportunity.
B. Subject to the provisions of this Agreement, if
Licensor becomes aware of an opportunity for a
master lease to develop food and beverage
facilities in a Mall Location, Licensor shall
notify Licensee of such opportunity pursuant to
the notice provision of this Agreement.
C. Licensor continues to have the right to operate
and to license a third party to operate a
California Pizza Kitchen ASAP Restaurant in a
mall, so long as the site was not then being
developed or leased by a master
concessionaire/master lessee of a mall food
court/mall at the time Licensor began operations,
or at the time Licensor licenses the third party.
In Mall Locations (i.e. where the
landlord/owner/developer seeks a master
concessionaire for a food court or other multiple
concept area, or where there is a master
concessionaire of the mall food court(s) or other
multiple concept area), Licensee shall have the
same limited exclusivity for California Pizza
Kitchen ASAP as it has in Airport Locations or
Tollroad Locations pursuant to this subsection
2(b), above, subject to territorial rights as set
forth in the list attached hereto as Exhibit C and
by this reference incorporated herein.
3. Term. The term of this MOU shall commence effective as of the date first
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above written and shall terminate March 31, 2003; except that Licensee
shall have the option to extend this
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MOU for three (3) additional terms of five (5) years each upon written
notice not less than thirty (30) days prior to the expiration of the
then-current term. Notwithstanding the foregoing, in the event that
Licensee and its affiliates have failed to execute a total of at least
twenty-five (25) franchise agreements with Licensor for CPK ASAP
Restaurants within five (5) years following the date of execution of this
MOU, then Licensor shall have the option to revoke the extension options
and by exercising such revocation shall cause this Agreement to terminate
as of its fifth anniversary. If Licensee operates two (or more) CPK ASAP
facilities under any one franchise agreement, such franchise agreement
shall be counted as two (or more) franchise agreements for the purpose of
determining whether or not Licensee and its affiliates have met or exceed
such twenty-five (25) site agreement threshold requirement. Licensor
acknowledges that the twenty-five (25) site agreement requirement shall be
met by Licensee's execution of the form agreements, and there is no
requirement that all twenty-five (25) CPK ASAP restaurants still be open
and operating at the end of such five-year period. The Form Agreements
shall continue in full force and effect for their individual terms under
each Form Agreement, notwithstanding any termination of this MOU.
4. Other Terms. Notwithstanding any other provision of this MOU, or any
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provision of the Form Agreement, the parties agree that:
a. Licensee and its subsidiaries and affiliates are experienced licensees
of food and beverage concessions, and Licensee is the holder of
numerous competing licenses (e.g., Pizza Hut, Sbarro, California Pizza
Kitchen etc...). Licensor acknowledges and agrees that Licensee
shall not be prohibited from developing its own pizza concepts,
operating other such concepts, or granting others the right to operate
pizza concepts; provided, however, that Licensee shall in no event use
Licensor's trademarks, trade dress, franchise systems, trade secrets
or any proprietary information in connection with the development or
operation of such other concepts.
b. At Licensee's option, Licensee may designate a minority business
enterprise ("MBE") to operate a Location in which Licensor has been
included in Licensee's bid in accordance with the terms hereof or
Licensee's concept plan as provided herein, and in such event,
Licensor shall, subject to compliance with applicable law and the
conditions described below, take all steps necessary to assure that
such MBE is provided a California Pizza Kitchen Form Agreement, as
attached hereto. In the alternative, Licensee may assign any such Form
Agreement, subject to compliance with applicable law and the
conditions described below, to any of Licensee's MBE subtenants.
Licensee shall provide all relevant information concerning the MBE to
Licensor and Licensor shall have the opportunity to perform Licensor's
normal approval and due diligence investigation with regard to such
MBE, in accordance with Licensor's standard policies and practices.
Licensor shall not be required to enter into the Form Agreement with a
proposed MBE unless the MBE meets Licensor's then-current criteria for
new owners of California Pizza Kitchen restaurants, as determined by
Licensor in its sole discretion. Notwithstanding the
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foregoing, Host may assign or transfer any Form Agreement to joint venture
or other entity, such as a joint venture with a DBE, so long as Host
retains at least fifty and one-tenth percent (50.1%) ownership of
assignee or transferee.
c. Licensee acknowledges that Licensor is currently a party to or may shortly
become party to contracts with third parties for the inclusion of Licensor
or its other licensees in bids or proposals in the Austin, Texas airport.
d. There shall be no press releases without the mutual written agreement of
the parties.
e. Notices issued hereunder shall be by certified or registered mail, return
receipt requested, to the addresses first listed above. Notices sent in
accordance with this Section shall be deemed effective on the date of
dispatch, and an affidavit of mailing or dispatch, executed under penalty
of perjury, shall be deemed presumptive evidence of the date of dispatch.
f. The parties agree that the interpretation of this Agreement and the rights
and liabilities of the parties hereto shall be governed by the laws of the
state of Delaware. The prevailing party in any litigation, arbitration or
other proceeding shall be ensiled to payment of its reasonable costs,
including attorney's fees.
g. The rights and remedies of either party hereunder shall not be mutually
exclusive (i.e., the exercise of one or more of the provisions hereof
shall not preclude the exercise of any other provisions hereof). Each
party confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agree that, in the event
of a breach or threatened breach of any provision hereof, the respective
rights and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing herein
contained is intended to, nor shall it, limit or affect any rights of law
or by statute or otherwise of any party aggrieved as against the other for
a breach or threatened breach of any provision hereof, it being the intent
of the parties that the respective rights and obligations of the parties
be enforceable in equity as well as at law.
h. Except as otherwise expressly provided herein, Licensee and Licensor
shall use their best efforts to resolve any differences which may arise
between them by discussion and negotiation rather than litigation. If
these methods fail, either party may refer the matter to non-binding
mediation to be conducted under the Procedure for Resolution of Franchise
Disputes of the Center for Public Resources, Inc. of New York, New York.
Mediation shall take place in mutually agreed upon location, and each
party shall bear their own costs and one-half (1/2) of the costs of the
mediator and the Center for Public Resources, Inc.
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5. Entire Agreement. This MOU and the exhibits attached hereto, the Existing
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License Agreement, and the Form Agreement (with form addendum) attached
hereto, constitute the entire agreement between the parties, superseding
any other written and oral agreements between the parties. If any article,
section, provision, term or condition of the Agreement is held to be
invalid by a court of competent jurisdiction, such article, section,
provision term or condition shall be reformed to the extent necessary to
be held valid, and the parties agree that the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.
CALIFORNIA PIZZA KITCHEN, INC.
Attest:_________________ By: /s/ Frederick R. Hipp
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Title: PRESIDENT
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HOST INTERNATIONAL, INC.
Attest: /s/ Jon W. Stentz By: /s/ J.A. Boragno
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JON W. STENTZ
ASSISTANT SECRETARY Title: SVP - CONCEPTS
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Exhibit A
CPK ASAP Franchise Agreement and Addendum
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