1_-_A_-_T3_F&B_Micro_Resturant_Mobile_Kiosk_-_Draft_Lease.pdf

CITY OF PHOENIX

TERMINAL 3 FOOD & BEVERAGE CONCESSION LEASE

(SMALL BUSINESS OPPORTUNITIES)

MICRO RESTAURANT AND MOBILE KIOSK

between

THE CITY OF PHOENIX,

an Arizona municipal corporation and

TABLE OF CONTENTS

SECTION 1 TERM

SECTION 1.1 – Initial Term

SECTION 1.2 – Primary Term

SECTION 2 PREMISES AND PRIVILEGES

SECTION 2.1 - Premises

SECTION 2.2 - Rights and Privileges

SECTION 3 RENT

SECTION 3.1 - Gross Sales

SECTION 3.2 - Credits and Discounts

SECTION 3.3 - Annual Rent

SECTION 3.4 - Percentage Rent Payments and Reports

SECTION 3.5 – Rent Remittance

SECTION 3.6 – Miscellaneous Charges

SECTION 3.7 - Delinquent Rent and Charges

SECTION 3.8 - Late Statements or Reports

SECTION 3.9 - Books and Records

SECTION 3.10 – Independent Audits

SECTION 3.11 – Final Audit Binding

SECTION 3.12 – Support Space

SECTION 4 LESSEE OPERATING STANDARDS

SECTION 4.1 - Service Standards

SECTION 4.2 - Operation Requirements

SECTION 4.3 - Management

SECTION 4.4 - Sanitation, Hygiene, and Cleanliness

SECTION 4.5 – Menu/Food Quality

SECTION 4.6 - Deliveries

SECTION 4.7 - Signs

SECTION 5 CITY'S RIGHT TO MONITOR PERFORMANCE

SECTION 5.1 – Operational Performance Audits

SECTION 5.2 – Annual Performance Evaluation

SECTION 5.3 – Remediation Plan

SECTION 6 MPROVEMENTS TO BE MADE BY LESSEE

SECTION 6.1 - Furnish and Equip Premises

SECTION 6.2 - Plans and Specifications for Leasehold Improvements

SECTION 6.3 - Title to Leasehold Improvements

SECTION 6.4 - Removal and Demolition

SECTION 7 CLOSURE, RELOCATION, REDUCTION, EXPANSION OR CONDEMNATION

SECTION 7.1 - Lessor's Authority

SECTION 7.2 – Compensation

SECTION 7.3 - Condemnation

SECTION 8 JANITORIAL SERVICES

SECTION 9 MAINTENANCE OF PREMISES

SECTION 9.1 – Maintenance

SECTION 9.2 - Repairs

SECTION 9.3 - Right to Enter

SECTION 9.4 - Failure to Maintain or Repair

SECTION 9.5 - Operation Costs

SECTION 9.6 - Utilities

SECTION 10 INSURANCE REQUIREMENTS

SECTION 10.1 – Introduction

SECTION 10.2 – Minimum Scope and Limits of Insurance

SECTION 10.3 – Notice of Cancellation

SECTION 10.4 – Acceptability of Insurers

SECTION 10.5 – Verification of Coverage

SECTION 10.6 – Contractors

SECTION 10.7 – Approval

SECTION 11 INDEMNIFICATION OF CITY

SECTION 12 LIENS AND PERFORMANCE AND PAYMENT BONDS

SECTION 12.1 - Liens

SECTION 12.2 - Payment Bond

SECTION 12.3 - Performance Guarantee

SECTION 13 ASSIGNMENT AND SUBLETTING

SECTION 13.1 – Assignment

SECTION 13.2 – Terms of Sublease

SECTION 13.3 – Approved Partners

SECTION 14 CANCELLATION BY LESSOR

SECTION 14.1 - General Default

SECTION 14.2 - Rental Default

SECTION 14.3 - Failure to Commence Construction of Leasehold Improvements

SECTION 14.4 – Remedies on Default of Service Standard Hours of Operation

SECTION 15 CANCELLATION BY LESSEE

SECTION 15.1 - General Defaults

SECTION 16 REDELIVERY AND HOLDING OVER

SECTION 16.1 - Redelivery

SECTION 16.2 - Holding Over

SECTION 17 DAMAGE OR DESTRUCTION

SECTION 17.1 - Damage or Destruction to Terminal 3 or to Micro Restaurant, Mobile Kiosk, Mobile Kiosk Storage Space, and Food & Beverage Equipment

SECTION 17.2 - Damage to Premises

SECTION 17.3 - Protection of Contents of Premises

SECTION 18 FORCE MAJEURE

SECTION 19 ATTORNEYS' FEES

SECTION 20 AMENDMENT

SECTION 21 RELATIONSHIP OF PARTIES

SECTION 22 NO THIRD-PARTY BENEFICIARIES

SECTION 23 PROHIBITED INTERESTS

SECTION 24 QUIET ENJOYMENT

SECTION 25 COMPLIANCE WITH LAWS

SECTION 25.1 - Rules and Regulations

SECTION 25.2 - Supplemental Terms and Conditions to All Airport Agreements

SECTION 25.3 - Taxes and Licenses

SECTION 26 GENERAL PROVISIONS

SECTION 26.1 – Small Business Participation

SECTION 26.2 – Equal Employment Opportunity and Equal Pay

SECTION 26.3 - Subordination to Agreements with the United States

SECTION 26.4 - Notices

SECTION 26.5 - Approvals, Consents and Notices

SECTION 26.6 – Offset Provisions

SECTION 26.7 - Transactional Conflicts of Interest

SECTION 26.8 - Paragraph Headings

SECTION 26.9 - Saving Clause

SECTION 26.10 - Waiver of Claims

SECTION 26.11 - Business Certification

SECTION 26.12 - Right to Develop Airport

SECTION 26.13 - Incorporation of Exhibits

SECTION 26.14 - Incorporation of Required Provisions

SECTION 26.15 - Successors and Assigns Bound

SECTION 26.16 - Right to Amend

SECTION 26.17 - Time of Essence

SECTION 26.18 - Good Faith

SECTION 26.19 - Interpretation

SECTION 26.20 - Entire Lease

SECTION 26.21 - Conflicts

SECTION 26.22- Hazard, Potential Hazard, Nuisance, or Annoyance

SECTION 26.23 – Airport Security Program

SECTION 26.24 – Lessee and Sublessee Worker Background Screening

SECTION 26.25 – Contract Worker Access Controls, Badge and Key Access Requirements

SECTION 26.26 - Lessor Improvements to Terminal 3 Food and Beverage Concession Space ... 52

SECTION 26.27 - Statutory Remedies

SECTION 26.28 - Non-Waiver

SECTION 26.29 - Tenant Liability Continues

SECTION 26.30 - Lessee Bankruptcy

SECTION 26.31 - Governing Law; Forum; Venue

SECTION 26.32 - Calculating Time Periods

SECTION 26.33 - Counterparts; Electronic Signatures

LIST OF EXHIBITS

EXHIBIT 1A PREMISES – MICRO RESTAURANT

EXHIBIT 1B PREMISES – MOBILE KIOSK

EXHIBIT 1C PREMISES – MOBILE KIOSK STORAGE SPACE

EXHIBIT 2 CONCEPTS

EXHIBIT 3 TENANT DESIGN CRITERIA

EXHIBIT 4 CONCESSION OPERATING AND SERVICE STANDARDS

EXHIBIT 5 MANAGEMENT, MARKETING, OPERATIONS, AND TECHOLOGY PLANS

EXHIBIT 6A LETTER OF CREDIT FORM

EXHIBIT 6B CASH DEPOSIT FOR PERFORMANCE GUARANTEE

EXHIBIT 7 COMPLIANCE WITH ENVIRONMENTAL LAWS

EXHIBIT 8 SUPPLEMENTAL TERMS AND CONDITIONS TO ALL AIRPORT AGREEMENTS

EXHIBIT 9 AIRPORT CONCESSION DISADVANTAGED BUSINESS ENTERPRISE-NEUTRAL

(ACDBE-N) CONCESSION LEASE CLAUSE POST-AWARD

EXHIBIT 10 FORM EO1-200 STATEMENT OF OUTREACH COMMITMENT

EXHIBIT 11 FORM EO2-200 SMALL BUSINESS OUTREACH EFFORTS AND PARTICIPANTS

LIST

EXHIBIT 12 FORM EO3-200 SMALL BUSINESS UTILIZATION COMMITMENT

EXHIBIT 13 LESSEE SUSTAINABILITY PROGRAM

EXHIBIT 14 MICRO RESTAURANT AND MOBILE KIOSK EQUIPMENT LIST

EXHIBIT 15 CONCESSION OPERATING HOURS SCHEDULE

EXHIBIT 16 LESSOR’S AGREED-UPON-PROCEDURES FOR ANNUAL ACCOUNTING

STATEMENT

PHOENIX SKY HARBOR INTERNATIONAL AIRPORT

TERMINAL 3 FOOD & BEVERAGE MICRO RESTAURANT AND MOBILE KIOSK

CONCESSION LEASE

This TERMINAL 3 FOOD & BEVERAGE MICRO RESTAURANT AND MOBILE KIOSK

CONCESSION LEASE (Lease) is made and entered into between the CITY OF PHOENIX, a municipal corporation of the State of Arizona (Lessor or City), and <Insert Successful Respondent Name> (Lessee or Concessionaire), whose principal place of business is located at <insert information>. The City and Concessionaire are collectively referred to herein as the Parties and individually as a Party.

This Lease is effective upon full execution by Lessor, including the countersignature of the Phoenix City Clerk (Effective Date).

RECITALS

1. Lessor is the owner and operator of Phoenix Sky Harbor International Airport (Airport or PHX) in Phoenix, Arizona, including Terminal 3 (Terminal 3).

2. Lessor desires to grant to Lessee the non-exclusive rights specified in this Lease and to establish the terms and conditions for the operation of Lessee's Food and Beverage concession units in Terminal 3 Pre-Security areas (Terminal 3 F&B concessions units).

3. Lessor desires to have the existing Lessor-owned Micro Restaurant and Mobile Kiosk, associated Mobile Kiosk Storage Space and all associated Food & Beverage Equipment (collectively “Micro Restaurant, Mobile Kiosk, Mobile Kiosk Storage Space, and Food & Beverage Equipment”) as described in Exhibit 14 (Micro Restaurant and Mobile Kiosk Equipment List) to be operated and managed as a means to offer the traveling public current F&B concepts.

4. Lessor has solicited responses from Food and Beverage concessionaires for Terminal 3 and Lessor has negotiated with Lessee to operate a first-class Food and Beverage concession for the convenience and necessity of the customers, passengers and public using Terminal 3.

5. At any time during the term of this lease, Lessor reserves the right to add or change Food and Beverage concessions in Terminal 3.

6. Lessee is responsible for all contractual obligations of its Food and Beverage operations in Terminal 3, including those Food and Beverage operations operated by its Airport Concessions Disadvantaged Business Enterprise (ACDBE) small business, sublease, and joint ventures partners (collectively referred to as Partners).

7. On <insert date>, Phoenix City Council approved Ordinance <insert number> authorizing this lease.

NOW, THEREFORE, in consideration of the foregoing Recitals, which the parties acknowledge are a part of this Lease, and of the following terms and conditions which are agreed by and between the parties as follows:

SECTION 1 - TERM

SECTION 1.1 – Initial Term

The Initial Term of this Lease shall commence on the Effective Date listed above and shall continue until Lessee begins any Food and Beverage operations included in its City identified premise locations under this Lease or <90 days from Effective Date>, whichever comes earlier. All dates are subject to change at the discretion of the City.

SECTION 1.2 – Primary Term

The Primary Term of this Lease shall commence when Lessee begins all Food and Beverage operations in its City identified premise locations included under this Lease for Terminal 3, or <90 days from the Effective Date>, whichever occurs earlier. The Primary Term will expire in three (3) years with two (2) one-year renewal options unless this Lease is terminated earlier as hereinafter provided. If Lessee begins all operations on a day other than the first day of the month, all monetary obligations under the Lease will be prorated for the remainder of the month.

SECTION 2 – PREMISES AND PRIVILEGES

SECTION 2.1 - Premises

2.1.1 Lessor hereby leases to Lessee the areas specifically shown in Exhibit 1A (Micro Restaurant), Exhibit 1B (Mobile Kiosk), and Exhibit 1C (Mobile Kiosk Storage Space) collectively referenced as “Premises” in Terminal 3 shown on the drawings attached to this Lease in Exhibits 1A, 1B, and 1C (Premises), which in the aggregate occupy approximately 1,560 square feet for concession space. The Micro Restaurant and seating area is approximately 1,200 sq. ft., the mobile kiosk is approximately 150 square feet, and 210 sq. ft of storage space located behind the mobile kiosk space. Lessor grants Lessee the right of ingress and egress to and from the Premises on public access roadways, sidewalks, and areas of the Airport.

2.1.2 If available, Lessee may lease additional support space (Additional Support Space) in Terminal 3, meaning terminal space separate from and in addition to the Premises as shown in Exhibits 1A, 1B, and 1C, used exclusively by Lessee for non-public purposes, including but not limited to storage, administrative office, and employee breakroom facilities. Additional Support Space shall be requested in writing by Lessee and is subject to approval by the Aviation Director in the Aviation Director’s sole discretion and leased at the then current terminal rental rates authorized by Phoenix City Code, subject to annual adjustment.

2.1.3 Lessee leases the Premises after a full and complete examination of the Premises and the title and has full knowledge of the present uses and non-uses. Lessee accepts the foregoing in the “as-is” condition without any representation or warranty, express or implied in fact or by law, by Lessor and without recourse to Lessor as to the title, nature, condition, or usability or use to which the Premises may be put. Lessor shall not be required to furnish any services or facilities or to make any repairs or alterations in or to the Premises other than those expressly provided in this Lease. Lessee assumes the full and sole responsibility for the condition, operation, repair, and maintenance of the Premises.

SECTION 2.2 - Rights and Privileges

2.2.1 Lessor hereby grants to Lessee a non-exclusive right to engage in business at the Premises as a Food and Beverage concessions operator, a commercial activity defined and regulated by this Lease and the Phoenix City Code, to operate the concession concepts identified in Exhibit 2 (Concepts). Lessee shall use the Premises for no other purpose. Lessor may grant rights to others to conduct the same or similar operations in Terminal 3.

2.2.2 It is the objective of Lessor and Lessee that the Terminal 3 F&B concession units maintain a distinctive quality. Therefore, the Food and Beverage concession unit must be operated in compliance with Exhibit 2 (Concepts). Any modifications to Exhibit 2 (Concepts) must be approved in writing, in advance, by Lessor. It is agreed that in the event of any conflict between Lessee and another lessee as to the services provided and goods sold, the City shall have sole authority to resolve the conflict as it deems appropriate and decide which goods may be sold by each concessionaire.

Lessee shall provide for the sale of any additional merchandise, or the furnishing of any additional service as directed by the City and shall not be entitled to any compensation or damages as result of such decision.

2.2.3 Unless expressly provided by this Lease, Lessee shall not operate electronic games or vending machines containing any food or Food and Beverage items on the Premises.

2.2.4 The Lessor reserves the right to require modification to Lessee’s menu subject to franchise brand concept approval, if applicable, and merchandise plan.

2.2.5 Exclusive of Mobile Kiosk Storage Space allotted to the Premises under Section 2.1.1 or leased by Lessee as Additional Support Space, Lessee agrees that one hundred percent (100%) of the Premises shall be devoted to Lessee’s operation of the Food and Beverage concession Concepts listed in Exhibit 2 (Concepts). Lessee’s failure to comply with Exhibit 2 (Concepts) will be grounds for termination of this Lease. Such compliance by Lessee shall be at the sole determination of Lessor.

2.2.6 The rights and privileges described in this Section may be modified by Lessor to implement the purpose and intent of this Lease.

2.2.7 As a condition of its right to occupy the Premises, Lessee shall ensure the operation of any wireless access point does not cause interference with existing communication users, including, without limitation, aviation-related operations and equipment at the Airport, the operation of any existing wireless users operating at the Airport, and the Airport’s own radio systems. If the operation of Lessee’s wireless access point causes any interference to any existing users, Lessee shall immediately take all steps necessary to remove the cause of the interference after notification. Lessee shall cooperate with the Lessor and any necessary third parties to identify and eliminate the cause of the interference. If Lessor determines, in its sole discretion, that Lessee’s wireless access point or signals being transmitted by means of the wireless access point, are the cause of any interference, Lessor may direct Lessee to immediately cease operation of all or any portion of Lessee’s wireless access point or otherwise take action to eliminate the interference at sole cost to Lessee.

2.2.8 Lessee shall submit for Lessor’s approval any and all television programming packages (including content of all channels) to be used or music to be played, within the Premises, prior to Lessee’s implementation of such programming or music. The volume of all television programming and music must be set at a level that does not disturb other Airport operations or passengers. It is expressly agreed, however, that any programming related to any accident or incident involving a commercial passenger airline may only be included in the programming without graphic video coverage of the accident site, unless the incident involves a national emergency or threat to security.

In accordance with 49 CFR 27.71 (i), Lessee must also ensure that the captioning function is enabled on all televisions for any programming, live or pre-recorded, shown within the Premises. Lessor conducts periodic monitoring for the captioning function and will notify the Lessee in writing about noncompliance. A Lessee that receives three (3) such notifications within one (1) calendar year could be subject to further action by Lessor.

2.2.9 Airport Employee Parking Program: Lessee may participate in the Airport’s Employee Parking Program, in accordance with all rules and regulations promulgated by the Aviation Department, and Phoenix City Code. Lessee shall be responsible for any parking fees for anyone enrolled under Lessee’s account.

2.2.10 Consolidated Receiving and Distribution Center: Lessor reserves the right to develop, construct, and operate a Consolidated Receiving and Distribution Center (CRDC) during the term of the lease. A CRDC is a centralized facility for receiving, screening, sorting, storing, and securely distributing food and beverage goods and supplies to airport concession units at the Airport. Lessor agrees to provide Lessee with written notice of its intent to develop a CRDC a minimum of two (2) years' prior to facility construction commencement, and written notice of its intent to solicit for CRDC logistics management service a minimum of one (1) year prior to issuance of such solicitation. During the planning and development process, Lessor agrees to engage with Lessee to gather input on facility operational needs; however, Lessor shall retain final decision-making authority regarding all aspects of the CRDC development. If Lessor implements a CRDC operation, Lessee, along with Lessee’s subtenants, joint venture partners and authorized vendors will be required to utilize this facility and costs associated with the CRDC will be assessed to Lessee.

2.2.11 Beverage Pouring Rights: The City may enter into an exclusive beverage pouring rights partnership and subsequent contract. Under such an agreement, all Food & Beverage concessions units at the Airport shall be required to sell only the designated beverage provider’s products. City reserves the exclusive right to solicit and enter into product advertising and sponsorship agreements for the display and sale of non-alcoholic beverages including but not limited to carbonated drinks, sports drinks, juices, and bottled water for the display and sale at the Airport. If the City elects to develop a solicitation for exclusive beverage pouring rights partnership, the City agrees to provide Lessee with a minimum of one (1) year prior written notice prior to the issuance of such solicitation.

Upon this written notice, Lessor agrees to engage Lessee to gather input regarding operations with exclusive beverage pouring rights provider. Lessee agrees to cooperate with and assist City, as necessary, in the implementation of such exclusive agreements.

SECTION 3 – RENT

SECTION 3.1 - Gross Sales

The term Gross Sales refers to the total amount of all sales and services provided at or from the Premises, including kiosk transactions and any other revenue of any kind arising out of or in connection with the Lessee's operations under this Lease. This includes all transactions, regardless of the payment method, whether by cash, credit, or other means when or where the order was received, whether payment has been collected, or who performed the service (the Lessee or its Partners). Gross Sales is measured by the greater of the actual amount received or the fair and reasonable value of the goods or services provided. Only the following items may be excluded or deducted from the calculation of Gross Sales:

3.1.1 Any and all transaction privilege taxes (sales taxes), excise taxes or related taxes upon or passed through to customers and collected by Lessee on such sales.

3.1.2 Receipts from the sale or trade-in value of any furniture, fixtures or equipment used upon the Premises and owned by Lessee.

3.1.3 The value of any merchandise, supplies or equipment exchanged or transferred from or to Lessee’s other business locations where such exchanges or transfers are not made for the purpose of avoiding a sale that otherwise would be made at or from the Premises.

3.1.4 Receipts in the form of refunds from or the value of merchandise, supplies or equipment returned to shippers, suppliers, or manufacturers.

3.1.5 Receipts with respect to any sale where the subject of such sale, or some part thereof, is thereafter returned by a customer to and accepted by Lessee, to the extent of any refund actually granted or adjustment actually made, either in the form of cash or credit.

3.1.6 The amounts of cash or quantity discounts received from sellers, suppliers, and manufacturers.

3.1.7 Expenses charged to customers that are paid by Lessee for the shipment of approved Food and Beverage goods sold as a convenience to customers.

3.1.8 The amounts of any gratuities paid or given by customers to Lessee’s employees.

3.1.9 Receipts from the sale, at cost, of uniforms or clothing to Lessee’s employees where such uniforms or clothing are required to be worn by such employees.

3.1.10 Receipts from the sale of garbage or scrap materials resulting from Lessee’s operations at the Premises.

3.1.11 Meal, tip, and other wage credits to Lessee’s employees for purposes of compliance with minimum wage laws.

3.1.12 Gift cards sold at the Premises. When a gift card is redeemed or accepted as payment for a purchase at the Premises, the transaction must be reported as part of Gross Sales.

SECTION 3.2 - Credits and Discounts

Lessee may allow customary discounts on sales to its own employees. Lessee shall not be credited with nor allowed to have any reduction in the amount of Gross Sales those results from any arrangements for a rebate, discount or hidden credit given or allowed to any customer, City, or other Airport employees.

SECTION 3.3 - Annual Rent

3.3.1 Immediately upon Lessee’s receipt of monies from the operation of the Food and Beverage concession units herein authorized, the portion of monies belonging to Lessor under the terms of this Lease shall immediately be vested in and become the property of Lessor. Lessee shall be responsible for the monies until the same are delivered to Lessor.

3.3.2 For purposes of this Lease, Lease Year means the twelve-month period beginning on January 1st and ending December 31st. Prorated Lease Year means the period from when Lessee begins operation or December 31st, whichever occurs first, until the beginning of the first Lease Year, and the period from the last Lease Year until termination.

3.3.3 Lessee, for and in consideration of the use of the Premises, facilities, rights and privileges granted hereunder, hereby covenants and agrees to pay Lessor without notice, and free from any and all claims, deductions or set-offs against Lessor, Percentage Rent as rent, calculated monthly and paid to the Lessor based on a percentage of Lessee’s monthly Gross Sales generated from concession units from the sale of goods by category as described below, with no minimum annual guarantee.

a. For concession units in the Premises, Lessee shall pay Percentage Rent as follows:

• Micro Restaurant (L-MR)

• Mobile Kiosk (L-MK) o Eighteen percent (18%) on alcohol sales for consumption within the concession units, and o Eight percent (8%) on food, non-alcoholic beverages, and concept-related merchandise sales

3.3.4 The termination of this Lease, by the lapse of time or as otherwise provided herein, shall not relieve Lessee of its obligation to pay any rent or other charges that have accrued during the period in which this Lease is in effect or Lessee has had the benefit of the Premises.

SECTION 3.4 - Percentage Rent Payments and Reports

3.4.1 In computing Percentage Rent to be paid by Lessee, the first reporting period shall commence on the date Lessee receives monies from the operation of any Food & Beverage concession activity and shall end at the close of business on the last day of the same calendar month. Thereafter, the reporting period shall be on a calendar month basis.

3.4.2 Lessee shall, within twenty (20) days after the close of each month, furnish Lessor a detailed statement of Gross Sales and any deductions from Gross Sales, from each individual Food and Beverage concession unit for the preceding month prepared in accordance with Generally Accepted Accounting Principles (GAAP) and certified by a responsible financial officer of Lessee.

These Gross Sales reports must show such data and breakdown for Lessee and Lessee’s Partners, including small businesses, including an itemized list identifying all Gross Sales by Percentage Rent category purchases of goods and services as described in Section 3.3.3a and any other type of reporting as may be required by Lessor, and shall be accompanied by Lessee's payment of additional rent that may be due hereunder based on the application of Percentage Rent, plus all applicable taxes.

Lessor may require changes to the format of these reports at any time.

By March 31st of each Lease Year, Lessee is required to submit to Lessor an annual accounting statement of Gross Sales and Percentage Rent for each Food and Beverage concession unit, including all Partners, and small businesses. This statement shall be prepared by a responsible financial officer of Lessee in accordance with Generally Accepted Accounting Principles (GAAP) and examined by an independent Certified Public Accountant (CPA) under an AICPA Agreed-Upon Procedures (AUP) engagement. The agreed-upon procedures, as determined by Lessor as outlined in Exhibit 16 (Lessor’s Agreed-Upon Procedures for Annual Accounting Statement), shall focus on verifying Gross Sales and Percentage Rent reported for accuracy and compliance with the Lease.

This requirement applies to prorated Lease Years at the start and end of the Lease. This annual accounting statement shall serve as the Lessor’s certified annual financial statement for purposes of verifying Percentage Rent and Gross Sales under this Lease.

3.4.3. Sales and Transactional Activities Reports: Lessee shall report concession sales and transaction data via an automated process utilizing the Lessor provided API (Application Program Interface) standard on each transaction starting the first day of any food and beverage, kiosk transaction activities. Lessee shall provide near real-time, daily, weekly, and monthly reporting of concession gross sales and gross transactional activities data for each concession location using this published API specification. Reporting concession sales and transaction data via this method is required regardless of other means that the Lessor might choose to report similar data to Lessor on a monthly basis for reporting percent sales revenue information to meet its other reporting requirements.

It is the intent of Lessor that Lessee shall provide all required reporting concession sales and transaction data through the Lessor-provided API specification without any Lessor-provided hardware equipment. Any and all equipment and transmission changes necessary to accomplish this reporting process will be the responsibility of the Lessee.

The draft API specification can be accessed at:

https://skyharbor.com/docs/default-source/technology/avn-phx-concession-data-openapi-json_v1.json?sfvrsn=31846389_2&download=true

• To access, click on the link, save file to computer, and open the file using any standard text editor program like “Notepad”, “WordPad”, etc.

• The API specification may change depending on the Lessor’s operational needs.

3.4.4. Lessee must provide weekly gross sales and gross transactional activities reports for each concession location to the Aviation Department Business and Properties, avn.buscon@phoenix.gov every Wednesday for the prior week’s sales.

3.4.5. Annual Pro-Forma Financial Statement: By January 31 of each Lease Year, Lessee shall provide a good faith estimate of the projected Gross Sales and Rent for each concession location in the form of a Pro Forma Financial Statement for current Lease Year over the duration of the Lease. The Pro Forma shall be submitted to Aviation Department Business and Properties at avn.buscon@phoenix.gov. The Lessor reserves the right to request additional financial data from the Lessee and upon request, the Lessee agrees to provide such data subject to appropriate confidentiality provisions.

SECTION 3.5 – Rent Remittance

Rent payments shall be made payable in check form to the Aviation Department’s lockbox at:

Aviation Department City of Phoenix P.O. Box 29110 Phoenix, Arizona 85038-9110

In the event technological advances make point of sale Gross Sales reporting and payment transfers more economically feasible, Lessor reserves the right to revise how payment remittances are made. Any and all equipment and transmission changes necessary to accomplish the change in the reporting and/or remittance process will be the responsibility of Lessee.

SECTION 3.6 – Miscellaneous Charges https://skyharbor.com/docs/default-source/technology/avn-phx-concession-data-openapi-json_v1.json?sfvrsn=31846389_2&download=true https://skyharbor.com/docs/default-source/technology/avn-phx-concession-data-openapi-json_v1.json?sfvrsn=31846389_2&download=true mailto:avn.buscon@phoenix.gov mailto:avn.buscon@phoenix.gov

Lessee agrees it is responsible for all miscellaneous charges for services rendered by the Lessor to support the Premises and Food and Beverage concession operations. These charges may include but are not limited to: security badging for employees, City inspections for Lessee’s construction projects, parking, and work orders.

SECTION 3.7 - Delinquent Rent and Charges

Without waiving any other right or action available to Lessor in the event of default in payment of rents or charges hereunder, late rent or charges are subject to delinquent fees as defined in Section 4-7 of the Phoenix City Code, currently eighteen percent (18%) per annum and as may be amended, beginning on the date the rent or charges were due.

SECTION 3.8 - Late Statements or Reports

If Lessee is delinquent for ten (10) or more days in furnishing Lessor any monthly statements or reports required under this Lease, Lessee shall pay one hundred dollars ($100) per late statement or report to Lessor as liquidated damages for the additional administrative costs incurred by Lessor in processing and reviewing delinquent statements or reports. The parties agree this is a fair and reasonable estimate of Lessor's costs incurred in processing a delinquent monthly statement or report.

SECTION 3.9 - Books and Records

3.9.1 Recordkeeping Requirements: For the three (3) years after the expiration or earlier termination of this Lease, and until all payment obligations to the Lessor are fully settled, whichever is later, Lessee shall maintain accurate and separate records of Gross Sales in accordance with GAAP.

These records must clearly reflect all sales and business activities conducted on or related to the Premises. Lessee must keep these records available for the City to review so City can clearly and accurately confirm the total amount payable to Lessor and an accurate breakdown of Gross Sales under this Lease.

These records shall include, at a minimum, a chart of accounts, general ledger, daily business reports, and original or copies of rent agreements for all Airport-related transactions. The records should be kept in Phoenix. If Lessee stores the records not in Phoenix, then upon Lessor’s request or in the event of an audit, Lessee shall either: 1) pay for all expenses associated with delivering the records to the auditors’ location; or 2) pay for reasonable travel expenses for the auditors to review the records and conduct an audit at Lessee’s location, including an administrative fee of fifteen (15%) percent of the actual costs of the audit.

3.9.2 Audit Rights: Lessor may audit Lessee’s books and records at any time to verify compliance with this Lease. Within ten (10) days of Lessor’s request, Lessee will make available the books and records during normal business hours. These requirements also apply to any subsidiaries, partners, or sublessees. .

Audits may be performed by Lessor’s staff or an independent CPA . If an audit shows Gross

Sales were understated by two percent (2%) or more, Lessee shall pay the full audit cost and shall immediately pay any additional amounts due to Lessor under Section 3.7.

3.9.3 Point-of-Sale Controls: Lessee shall install and maintain a point-of-sale (POS) system at each food and beverage concession unit that accurately records gross revenues for all sales transactions by type, amount, date, time, and location. The POS system shall maintain a sequential, cumulative transaction log that tracks and stores all sales and includes a non-resettable grand total that accumulates all transactions. Any interruption or restart of the sequential numbering shall generate an audit log documenting the interruption. Lessee shall retain all transaction records and provide documentation of internal controls demonstrating complete recording of all receipts during all operating hours. All transaction amounts shall be displayed on a customer-facing screen that is clearly visible to customers from a reasonable distance during each transaction.

3.9.4 Internal Controls: Lessee shall maintain an internal control structure designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, that transactions are executed in accordance with management’s authority, and that the financial records are reliable for the purposes of preparing financial statements. The internal control structure shall be supported by the selection, training, and development of qualified personnel, by an appropriate segregation of duties, and by the dissemination of written policies and procedures.

3.9.5 Audit Standards: It is agreed that examination of the books, ledgers, journals, and accounts of Lessee will be conducted in accordance with GAAP, and that as such, the examinations do not require a detailed audit of all transactions. Testing and sampling methods may be used in verifying reports submitted by Lessee. If deficiencies are found through such testing and sampling, the Lessor may be applied the error percentage to all transactions for the entire period of reporting under examination. The calculated amount will be binding upon Lessee and to that end shall be admissible in any court of law to prove any amounts due to Lessor.

SECTION 3.10 – Independent Audits

If, as a result of an audit, Lessor determines that additional monies are due to Lessor, Lessee shall be notified of Lessor's findings and invoiced for the total amounts due. Within thirty (30) days of the notice and invoice from Lessor, Lessee shall do one of the following: (1) notify Lessor in writing that Lessee agrees with Lessor’s audit findings and pay all monies due to Lessor; or (2) dispute the audit findings, in writing. Failure of Lessee to dispute the audit findings, in writing, within thirty (30) days of receiving the notice and invoice, shall constitute acceptance of the findings and waiver of the right to appeal the findings. If Lessee elects to dispute the audit findings, it shall, within ninety (90) days after providing notice to Lessor of the dispute, furnish to Lessor, at Lessee’s expense, an audit made by an independent CPA mutually agreeable to both parties. If Lessee elects to request an independent audit under this Section, and if that audit results in a finding that there is a deficiency of two percent (2%) or more of the amount payable to Lessor, then Lessee agrees to pay Lessor for the cost of Lessor’s audit and for all deficiencies and delinquent fees. Interest shall accrue from the date the delinquent payment was due under the Lease in accordance with Section 3.7.

SECTION 3.11 – Final Audit Binding

The final audit of the independent CPA shall be conclusive upon the parties, and Lessee shall pay to Lessor, within thirty (30) days after a copy of the CPA's final report has been delivered to Lessee, the amount, if any, shown thereby to be due and owing to Lessor. The failure of the Lessee to make payment to Lessor within this thirty (30) day period shall constitute a material breach of this Lease and shall give cause to Lessor for immediate termination thereof.

SECTION 3.12 – Additional Support Space

Based on availability, Lessee may lease Additional Support Space in Terminal 3. Additional

Support Space includes terminal space separate from and in addition to the Premises as shown in

Exhibits 1A, 1B, and 1C, used exclusively by Lessee for non-public purposes, including but not limited to storage, administrative office, and employee breakroom facilities. Additional Support Space shall be requested in writing by Lessee and is subject to approval in the Aviation Director’s sole discretion.

Lessee shall pay rent for Additional Support Space at the rate set forth in the Phoenix City Code Section 4-173 for terminal rental rates, as may be amended throughout the term of this Lease. Effective July 1, 2025, terminal rent is $197.88 per sq. ft. per fiscal year (July 1, 2025 – June 30, 2026). All rent and fees assessed in accordance with Section 4-173 are due and payable monthly in advance on the first day of each month. On each such date, Lessee shall pay one-twelfth (1/12) of the annual rent plus applicable tax as may be adjusted by the taxing authority throughout the term of this Lease. Rent and fees are delinquent if not received by Aviation by the tenth day of the month. Rent and fees shall be deemed delinquent and assessed as a delinquent account fee in accordance with Section 4-7 of the Phoenix City Code.

SECTION 4 – LESSEE OPERATING STANDARDS

SECTION 4.1 - Service Standards

4.1.1 Lessor is dedicated to providing exceptional customer service and requires Lessee to operate the Food and Beverage concession unit in an efficient, customer friendly, well-run, and professional manner to meet the needs of passengers and other customers. Lessee shall maintain the standards in this Section and in Exhibit 4 (Concession Operating and Service Standards – revised 5.16.2024) and shall maintain equal or higher standards included in the Lessee’s proposed Operation Plan included in Exhibit 5 (Management, Marketing, Operations, and Technology Plans).

4.1.2 Lessee shall conduct its Food and Beverage operations in a proper business-like manner so as not to disturb or be offensive to other tenants, customers, or passengers. Lessee shall not solicit business anywhere at the Airport, except within the Premises.

4.1.3 Lessor may monitor, test, or inspect the services of Lessee at any time through the use of a shopping service or other commercially reasonable means that do not unduly interfere with Lessee’s Food and Beverage operations.

4.1.4 If any of Lessee’s Partners fail to maintain Food and Beverage operations in compliance with this Lease, Lessee shall operate the Food and Beverage unit(s) to maintain compliance.

4.1.5 Lessee shall be responsible for escorting all unbadged Partners, contractors, and any invitees to post-security locations, twenty-four (24) hours a day, seven (7) days a week.

4.1.6 Lessee shall utilize attractive merchandising that entices potential customers to purchase goods. Lessee shall develop and implement creative and effective merchandising displays within the Premises; those displays may include without limitation window displays, display cases, promotional displays (for which Lessor approval must be obtained), and attractive packaging. All signage and merchandising displays must conform to the Tenant Design Criteria attached as Exhibit 3 (Tenant Design Criteria) and must be approved in advance by Lessor under the Tenant Improvement Process.

4.1.7 Processing payments from customers shall be prompt. Receipts shall be properly itemized, precisely reflect the actual sale of goods and date of sale, and list individual prices, taxes, and totals. All customers shall be thanked for their patronage.

4.1.8 Lessee shall accept traveler's checks and at least three (3) major credit cards for any purchase. Lessee understands and agrees that the operation of Terminal 3 Food and Beverage concession units necessitates the rendering of public services such as making reasonable changes and giving directions.

4.1.9 Lessee is responsible for ensuring all debit and credit card transactions are conducted in accordance with all applicable laws and in compliance with payment card industry standards.

4.1.10 Tip buckets, jars or containers are prohibited at all Food and Beverage concession unit unless approved in writing, in advance, by Lessor.

4.1.11 “Tipping” language is prohibited on printed sales and credit card receipts.

4.1.12 Lessee shall offer the same promotions and discounts, sell, and accept gift cards, as offered in street location(s) if applicable. Customers should not experience operational differences between the Terminal 3 Food and Beverage concession unit and its street location, if applicable.

4.1.13 Lessee is expected to implement technologies to enhance the customer experience and operational efficiency of the concession units at PHX, including:

• Expediting the in-store checkout process by accommodating virtual wallets and mobile payment options including Google Pay, Apple Pay and Samsung Pay, and offering checkout-free technologies, contactless card readers, wireless terminals, self-checkout, and email receipts.

• Lessee must obtain prior written approval from Lessor before entering into a contract with a third-party delivery service (“Third-Party Delivery Service”) that will allow Airport customers in Terminal 3 to order through the use of mobile applications, online platforms, or other digital ordering systems, menu offerings from concession locations in the Premises within Terminal 3. Such approval from Lessor shall be subject to the Third-Party Delivery Service’s compliance with all Airport security protocols, operational requirements, and other regulations. All sales generated through Third-Party Delivery Services shall be included in the calculation of Gross Sales for the purpose of determining Percentage Rent due to Lessor under this Lease.

• Lessor reserves the right, in its sole discretion, to solicit and contract for a third-party delivery program ("Delivery Program") for the Airport-wide concessions program at any time during the term of this Lease. The purpose of the Delivery Program is to facilitate the delivery of food, beverages, retail goods, or other concession items to Airport customers, employees, or other authorized recipients within the Terminals. If the Lessor elects to develop a solicitation for a Delivery Program, the Lessor agrees to provide Lessee with a minimum of one (1) year prior written notice prior to the issuance of such solicitation. If such a Delivery Program is implemented by the Lessor, Lessee shall participate in the Delivery Program including cooperating with and assisting Lessor, as necessary, in the implementation of such Delivery Program.

4.1.14 Hours of Operation: Lessee must operate its concession location seven (7) days a week during all periods of time established by the Lessor as set forth in Exhibit 15 (Concession Units Hours of Operations). The Hours of Operations for each concession location must be posted in a clearly visible manner at each concession location in a professional manner and in a format (design and size) identified in the Exhibit 3 (Tenant Design Criteria). The Lessor may amend the Hours of Operation from time to time based on airline schedules and demand of the traveling public, including satellite locations. Such amendments to Hours of Operation will be made effective upon a thirty (30) calendar day written notice to Lessee from the Lessor in accordance with Section 26.5 Notices. Such amended Hours of Operation will remain in effect until revised in writing by the Lessor. No further amendment to this Lease, other than this written notice, will be required for amended Hours of Operation. Additionally, the Lessee may be required to temporarily extend Hours of Operation to accommodate the traveling public due to delayed or cancelled flights.

Failure to adhere to the established Hours of Operation will result in inconvenience to the public and will adversely affect the overall business of the Airport and the passenger experience.

Quantification of the resulting damages is difficult. The Parties agree that the liquidated damages set forth herein are reasonable estimates of the actual damages that would be incurred by the public and Lessor for the specified breaches of the forgoing operating standards. Therefore, for three (3) or more cited violations of this Section by an individual concession location of the Lessee that occurs in thirty

(30) calendar day period, Lessee shall pay one thousand dollars ($1,000) per cited violation occurrence to Lessor as liquidated damages – for example, three (3) cited violations in a thirty (30) day period results in $3,000 in liquidated damages. Furthermore, after a total of nine (9) cited violations of this Section by an individual concession location of the Lessee in the same Lease Year or partial Lease Year, the Lessor reserves the right, at its sole discretion, to seek any other remedies available to it for an Event of Default (defined in Section – 14.4 Remedies on Default of Service Standard Hours of Operations), including termination of this Lease as set forth therein.

4.1.15. Annual PHX Airport Customer Appreciation Day: The City may establish an annual PHX

Airport Customer Appreciation Day during the term of the Lease. Lessee shall participate in the annual PHX Airport Customer Appreciation Day at a minimum by offering the traveling public a discount of ten percent (10%) on all food, non-alcoholic beverage and merchandise-related purchases on the designated day. Lessee is encouraged to develop additional promotions to celebrate on the designated appreciation day.

4.1.16. Airport-wide Customer Experience Programs: The City reserves the right to develop and implement an airport-wide customer experience programs including but not limited to, a loyalty program during the term of this Lease. Lessee, along with Lessee’s subtenants and joint venture partners, shall cooperate and participate in the implementation of such airport-wide customer experience programs. Lessor agrees to provide Lessee ninety (90) calendar days prior written notice of anticipated program commencement date(s).

4.1.17. Response to Complaints: Questions or complaints raised by customers or on the City’s own initiative or otherwise may be submitted to Lessee for response. Lessee shall respond to City and to any customers within two (2) business days, and thereafter promptly work toward a resolution or such questions or complaints. At Lessor’s request, Lessee shall meet with Lessor to review any complaints or concerns and shall promptly correct any deficiencies.

SECTION 4.2 - Operation Requirements

4.2.1 Lessee’s Standards: Lessee shall recruit, train, supervise, direct, and deploy the optimum number of employees to meet the service requirements of this Lease. Lessee must ensure that its employees maintain high standards of professional conduct and appearances while on duty. To maintain safety and security at the Airport, Lessee-approved uniforms must clearly display the Airport security identification badge showing the names of the employees and employer at all times while at the Airport. Lessee’s Management Plan included in Exhibit 5 (Management, Marketing, Operations and Technology Plans) must specify the standards Lessee will require of its employees to ensure professional conduct and appearances during the performance of this Lease.

4.2.2 Lessee shall provide services in English to meet the expectations of the traveling public, who are predominantly domestic passengers at this Airport. Offering services in other languages is encouraged but not required. Lessor reserves the right to require Lessee to address staffing levels if the customer service requirements set forth in this Lease are not being met in Lessor’s judgment.

Lessee should anticipate peak travel seasons such as Spring Break, Thanksgiving, Christmas, other holidays, and events, and add additional staff accordingly.

4.2.3 Lessee is on notice that any employee who enters a Security Identification Display Area (SIDA) without a clearly displayed Airport security identification badge violates federal regulations, and that such violation can result in revocation of the employee’s security badge in accordance with Airport security provisions.

SECTION 4.3 - Management

4.3.1 The operation and maintenance of a concession unit operated by Lessee shall be under the constant direct supervision of trained, qualified, and experienced managers employed by Lessee.

Managers shall be authorized to accept any notice required or allowed by this Lease and shall have authority to make all decisions reasonably necessary in the day-to-day operation of the concession unit. Managers shall be available on-site during business hours, provided that a subordinate with decision-making authority on behalf of Lessee may be designated as an acting manager during brief absences of the manager.

4.3.2 Lessee must identify the General Manager (GM) to be assigned to the oversight of Food and Beverage operations of the Premises including those Food and Beverage concession units operated by Lessee’s Partners, if any. The GM is the primary individual responsible for fulfilling Lessee’s obligations under the Lease and is the primary point of contact for interaction with Lessor.

The GM should be available twenty-four (24) hours a day, seven (7) days a week for Lessor to communicate any challenges and/or emergencies. If the GM is not available, Lessee shall provide the name and telephone number of a manager who is available twenty-four (24) hours a day, seven (7) days a week and able to make decisions on Lessee’s behalf. The GM assigned under this Lease must be fully qualified. Lessee shall submit and maintain an updated organizational chart on file with Lessor at all times.