Development Agreement [Addendum] - Starbucks Corp. and Host International Inc.
DEVELOPMENT AGREEMENT ADDENDUM
THIS DEVELOPMENT AGREEMENT ADDENDUM (the "Addendum") is entered into as
of March 2, 1998, between Starbucks Corporation ("Starbucks") and Host
International, Inc. ("Licensee").
RECITALS:
WHEREAS, Licensee and Starbucks are parties to that certain development
agreement dated March 1994, as amended (the "Development Agreement"); and
WHEREAS, the parties have developed numerous airport and other locations
pursuant to the Development Agreement; and
WHEREAS, the parties desire to amend the Development Agreement as
provided herein;
NOW THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. PURPOSE. The parties mutually desire to enter into a test program as
discussed herein (the "Test") for the purpose of evaluating the feasibility of
offering Starbucks' own line of pastries as they are currently being rolled-out
by Starbucks (the "Starbucks Pastries") from certain Licensed Locations (as that
term is defined in the Development Agreement).
2. SELECTION OF TEST SITES. The parties shall mutually select between three (3)
and five (5) of Licensee's Licensed Locations, within Licensee's airport
concessions business, where the Test shall occur (the "Test Sites").
3. PERIOD OF THE TEST. After the introduction of the Starbucks Pastries has been
implemented at all Test Sites, the parties shall evaluate the performance of the
Test Sites. The criteria for evaluation shall be mutually established by the
parties in a letter to be executed after the date of this Addendum (the
"Evaluation Criteria"), and shall include but not be limited to the maintenance
or improvement of product quality, increased Gross Revenues from the sale of
pastries, decrease in cost of product, maintenance of or increase in the revenue
stream flowing to Licensee from its airport operations, etc... The period of the
Test shall be as follows:
a. Within sixty days following the implementation of the Starbucks
Pastries at all Test Sites, the parties shall jointly review the results,
and shall evaluate such results using the Evaluation Criteria.
b. If both parties agree that the data collected from the Test Sites
within the first sixty (60) days following the commencement of the Test
at all Test Sites is clear, then the parties shall end the Test.
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c. If the parties do not both agree that the data collected from the Test
Sites within the first sixty (60) days following the commencement of the
Test is clear, then the parties shall extend the Test for an additional
sixty (60) day period.
d. At the conclusion of the Test, the parties shall review the results of
the Test using the Evaluation Criteria. Depending on the results of the
Test, the parties may:
(i) introduce the Starbucks Pastries at Licensee's locations which
currently offer Licensee's pastries in the same manner as during
the Test, and enter into an amendment/agreement providing that
Licensee shall pay a Royalty of five percent (5%) of the Gross
Revenues from the sales of such Starbucks Pastries;
(ii) end the Test without further action; or
(iii) negotiate in good faith the modification of the manner of
the implementation of the Starbucks Pastries to Licensee's units
that offer pastries, and/or modification of the Royalty, so that
the Evaluation Criteria may be met
4. ROYALTY. Pursuant to Exhibit A to the Development Agreement (i.e., the form
license agreement), the parties agreed that Licensee would pay a Royalty to
Starbucks equal to five percent (5%) of the Gross Revenue (the "Royalty" as
defined in Exhibit A to the Development Agreement), which currently excludes the
sales of pastries. During the Test, the following shall apply:
a. In order to defray Licensee's expenses in implementing the Test,
Starbucks hereby waives collection of the Royalty based on Gross Revenues
from the sales of Starbucks Pastries from the Test Sites during the Test.
b. At the conclusion of the Test, Section 3(d)(iii) of this Addendum,
immediately above, shall apply.
5. ENTIRE AGREEMENT. Except as modified hereby, the Development Agreement
remains in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year written below their signature.
HOST INTERNATIONAL, INC.
BY: /s/ [Signature Illegible]
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ITS: SR. VICE PRESIDENT
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STARBUCKS CORPORATION
By: /s/ A. B. CRAIG
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Its: SR. V.P. OPERATIONS
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