Attachment 5b agreement for Special Meeting held May 28, 2013 1:00PM at Pier 69

5b agreement

S/r6/70 - aT Vo.Vy

MANAGEMENT/CONCESSION
AGREEMENT

WITH

VIP HOSPITALITY L.L.C.

FOR OPERATION OF LOUNGE
SERVICES AT
SEATTLE-TACOMA INTERNATIONAL
AIRPORT

Port Summ
of Seattle

PORT OF SEATTLE

SEATTLE-TACOMA INTERNATIONAL AIRPORT

MANAGEMENT AGREEMENT FOR OPERATION OF LOUNGE SERVICES

Table of Contents

= . Term
WN. Designation of lounges. Hours open for use, rules of conduct, menus and other policy matters
A. Lounge Patrons and Pre-paid Lounge Users
. Pay-per-use Customers
OO. Tracking use by Pre-paid Lounge Users and Pay-per-use Customers
~N
. Contractor Representative
oo
. Full-time manager
© . Port Representative
ed . Purchase, storage and inventory
eedaD . Maintaining clean,safe and healthy lounges
ed . Preventing unauthorized entry, improper use
2dRAN . No guarantee of level of business
ocONO; . Liquor license, permits and compliance with laws and rules
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sd . Procurement
md . Storage and office space tobe provided by Port
ed . Hiring, training and supervision of personnel
cd . First year of operation
wdOO . Description of services to be offered at Designated Lounges
ON . Operating Expenses to be paid by Port
NN= . Annual Operating Budget
ON . Operating statements
NQN . Pre~opening responsibilities

24. Compensation to Contractor ~ fees

25. Revenue Account

26. Revolving Fund for payment of expenses

27. Additional operating expenses — not counted as Direct Operating Expense
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28. Audits

29. Indemnification

30. Insurance

31. Deviations from Annual Operating Budget

32, Termination of Agreement
33. Notices

34. Attorney's fees

35. Disadvantaged Business Enterprise (DBE)

36. Nondiscrimination
- 37. Captions
38. Severability

39. Survival of indemnities

40. Governing law and venue

41. Entire agreement — amendments

PORT OF SEATTLE

SEATTLE-TACOMA INTERNATIONAL AIRPORT
MANAGEMENT AGREEMENT FOR OPERATION OF LOUNGE SERVICES

This Management Agreement for Operation of Lounge Services (hereinafter
“Management Agreement”) is made on the fifth day of March, 2010, by and between
the Port of Seattle, a Washington municipal corporation (“Port”) and VIP Hospitality
L.L.C, (“Contractor”).
WITNESSETH
WHEREAS, the Port, an owner and operator of Seattle-Tacoma International Airport
(*Airport”), desires to provide a wide range of services for the benefit of the air traveling
public and others using the Airport; and
WHEREAS, currently, customer airlines rent Club International, the Port's common use
lounge on a per-flight basis and cater exclusively to their own passengers; and
WHEREAS, demand for lounge service has increased in recent years while the supply
of available service in the Airport's South Satellite has remained constant; and
WHEREAS, the Port is interested in a new business model that would allow the use of
the lounge by multiple airlines simultaneously while providing a higher level of service
and meet the Airport's business objectives of satisfying increasing demand from
international carriers for premium lounge service and providing a key amenity that can
be used to attract new businessto the Airport; and
WHEREAS, Contractor is interested in operating, managing and maintaining lounge
services af designated lounges at the Airport in consideration of management fees to be
paid by the Port; and
WHEREAS, the Port may enter into certain agreements with airlines or other
businesses who will pay the Port for use of designated lounges at the Airport by their
customers and/or employees; and
WHEREAS, the Port may designate certain lounges at certain times for use by persons
who may pay on a per-use basis for their use of such lounges; and
WHEREAS, the Port wishes tohave the Contractor be responsible for all tasks required
to operate efficient, reliable and profitable lounge services in clean, attractive, safe and
well-maintained facilities;
NOW, THEREFORE,in consideration of their mutual promises, the parties
mutually agree as follows:

1. TERM

This Management Agreement is effective as of the date it is executed by the Port and
Contractor (“Effective Date”). Unless earlier terminated, the term of this Management
Agreement shall be three (3) years commencing on the Effective Date. At the sole
discretion of the Port the Agreement may be extended beyond the three years for one
or two, one-year periods.

2. DESIGNATIONOF LOUNGES
The Port shall have the sole discretion to determine the number of locations of lounges
at the Airport to be managed by Contractor (“Designated Lounge(s)’). Attached at
Exhibit A is a list of each Designated Lounge as well as depiction of the Lounge
premises and location within the Airport, which may be amended by the Port at any time
with reasonable notice to the Contractor.

-3. HOURS OPEN FOR USE, RULES OF CONDUCT, MENUS AND OTHER
POLICY MATTERS RELATING TO OPERATION OF DESIGNATED LOUNGES

For each Designated Lounge, the Port shall have sole discretion to set the hours each
Designated Lounge will be open for use, determine the rules of conduct for users,
establish menus and decide other matters of policy relating to the operation of each
Designated Lounge. The Port shall retain the right to make changes from time to time in
matters of policy relating to the operation of each Designated Lounge.

4, LOUNGE PATRONS
“Lounge Patrons” are airlines and other businesses or entities that contract with the Port
for use of Designated Lounges by their passengers, customers, employees (“Pre-paid
Lounge Users”). Except as provided in Section 5, Contractor has no authority to allow
User
any person to use a Designated Lounge unless the person is a Pre-paid Lounge
covered by a contract between the Port and a Lounge Patron.

5. PAY-PER-USE CUSTOMERS
“Pay-per-use customers”are persons who pay for his/her use of a Designated Lounge
on a per-use basis. The Port, in its sole discretion, may allow Pay-per-use Customers to

use certain Designated Lounges at certain times to be determined by the Port. -

6. TRACKING USE BY PRE-PAID LOUNGE USERS AND PAY-PER-USE
CUSTOMERS
a. The Port shall provide Contractor with a list identifying Lounge Patrons for
Designated Lounges, Contractor shall be responsible for ensuring that every person
granted admission fo a Designated Lounge as a “Pre-paid Lounge User” presents proof
of such status. Proof of “Pre-paid Lounge User” status can include an airline boarding
pass, or a voucher issued by the Port. In the event a visitor claims s/he is a “Pre-paid
lounge User” based on pre-payment by an airline, but s/he fails to present acceptable
proof, Contractor shall contact the Duty Manager of the appropriate Airline to resolve
the issue. Port will provide in writing a list of documents for each designated lounge that
are acceptable as proof of status for all visitors requesting admission as Pre-paid
Lounge Users.
Contractor shall create and maintain daily records hoting and preserving reasonable
evidence of each Pre-paid Lounge User's affiliation with a Lounge Patron. Contractor
shall provide to Port a detailed report in a format specified by Port no later than the third
day of each month providing information about the use of the Lounge by Pre-paid
Lounge Users which shall serve as a basis for preparing invoices to Lounge Patrons.
The Port will contract with each Lounge Patron to provide Lounge services at a flat rate
per head for each Pre-paid Lounge User.

b. With respect to Pay-per use customers, the Contractor shall create and maintain
daily records, noting each Pay-per-use Customer, and shall collect fees on a “per-use”
basis. “Per-use” shall mean all goods consumedor used and all services received
during a four-hour period of use. Contractor shall accept only debit or credit cards for
payment of fees. Contractor shall provide to Port a detailed report in a format specified
by Port no later than the third day of each month providing information about the use of
the Lounge by Pay-per-use Customers. The Port will set a flat fee per-use, without
regard to the type or amount of goods consumed or used or services received.
Contractor shall not be responsible for itemizing goods or services provided to each
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Pay-per-use Customer.

7. CONTRACTOR REPRESENTATIVE

Within seven (7) days of the Effective Date of this Management Agreement, the
Contractor shall name a Contractor Representative for the purposes of providing the
Port with a primary point of contact for communications relating to the Contractor's
performance under the Management Agreement and the management of the day-to-day
relationship with the Port. Said Contractor Representative shall be an employee or
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officer of the Contractor. The Contractor shall provide the Port with a phone number or
phone numbers at which the Contractor Representative or Contractor Representatives
designee can be reached 24 hours a day, seven days a week.

8. FULL-TIME MANAGER
Within thirty (30) days of the Effective Date of this Management Agreement, the
Contractor shall appoint a full-time manager whose time will be devoted to the
management of lounge services. The Contractor will provide contact information to the
Port for the full-time manager.

9. PORT REPRESENTATIVE
Within seven (7) days of the Effective Date of this Management Agreement, the Port
shall name a Port Representative for the purposes of providing the Contractor with a
primary point of contact for communications relating to performance under the
Management Agreement. The Port shall provide the Contractor with the Port
Representative's contact information.

10. PURCHASE, STORAGE AND INVENTORY
a. Contractor shall purchase, store and inventory food and beverages, including
alcoholic beverages, of a quality and quantity appropriate for consumption by Pre-paid
Lounge Users and Pay-per-use Customers.
b. Contractor shall purchase, store and inventory equipment and supplies
necessary to serve food and beverages to Pre-paid Lounge Users and Pay-per-use
Customers.
c. Contractor shall purchase, store and inventory equipment and supplies
necessary to operate and maintain clean, attractive and safe facilities at Designated
Lounges.

11. MAINTAINING CLEAN, SAFE, AND HEALTHY LOUNGES

a. Contractor shall perform or arrange for the performance of cleaning and
maintenance of Designated Lounges.

b. Contractor shall maintain facilities,at all times, so that Designated Lounges are
clean, safe, and healthy in accordance with the best practices of Contractor's industry.
Contractor shall immediately notify the Port Representative, in writing, of any notices of
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violations received during or in connection with inspections by any government or
regulatory agency. In the event a notice of violation is received, Contractor shall prepare
action plans to correct the conditions causing the violations.
Cc. Contractor shall inspect each Designated Lounge on a weekly basis to ensure
clean, safe, and healthy conditions. Contractor shall notify the Port Representative, in
writing, of any condition in the physical elements of the Lounge facilities that may
compromise the health or safety of Contractor's employees, agents, subcontractors,
Pre-paid lounge Users or Pay-per-use customers that the Contractor is not able to
correct.

d. Contractor shall be solely responsible for addressing any issues related to the
health or safety of Contractor's employees, subcontractors or agents while at work,
including but not limited to taking all appropriate and necessary action to respond to any
accident or incident involving Contractor's employees, subcontractors or agents and
assuming all cost and liability associated with such issues.
e. Contractor shall immediately notify the Port Representative of any accident or
incident in the Lounge premises involving injury to a customer or damage to the
premises. Contractor shall also advise the Port in writing of whatever action the
* Contractor has taken to immediately respond to such accident or incident.

f. Contractor shall comply with all applicable safety and health standards,
regulations and laws, including but not limited to food handling and serving
requirements of the City of SeaTac, King County and State of Washington. A copy of
some of the applicable safety and health standards is attached at Exhibit B and
incorporated here by reference. Provided, however, by referencing such standards, the
Port does not imply or warrant that Exhibit B constitutes a complete or current list of
applicable standards, regulations and laws. It is the Contractor's sole responsibility to
ensure that its officers, employees and subcontractors comply with current and
applicable safety and health standards, regulations and laws.

12. PREVENTING UNAUTHORIZED ENTRY, IMPROPER USE OF DESIGNATED
LOUNGES
Contractor shall take all reasonable measures to prevent the unauthorized entry to or
improper use of Designated Lounges. Contractor shall report any unauthorized entry or
improper use to the Port Representative.

13. NO GUARANTEE OF LEVEL OF BUSINESS
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During the review of the Operating Budget (term defined below in Section 21), the Port
shall provide Contractor with an estimate of the level of business expected for each
Designated Lounge. The Port does not guarantee any particular level of business and
does not warrant the continued operation of any Designated Lounge.

14. LIQUOR LICENSE, ALCOHOL SERVER PERMITS, COMPLIANCE WITH
ALCOHOL BEVERAGE CONTROL LAWS, STATE LIQUOR CONTROL BOARD
RULES

The Port shall apply for a license to sell alcohol on the premises of the Designated
Lounges. To the extent that the Port obtains such a license, Contractor shall comply -
with State alcohol beverage control laws at Title 66 RCW and State Liquor Control
Board rules at Title 314 WAC to ensure that the license is maintained. Without limiting
the generality of the foregoing statement, Contractor shall be responsible for obtaining
and maintaining alcohol server permits, as well as any necessary agreements with the
State Liquor Control Board, and checking the identification of Pre-paid Lounge Users
and Pay-per-use Customers. To the extent permitted by law, Contractor shall also
purchase alcohol to be served in Designated Lounges as an agent of the Port and
obtain and maintain any necessary permits or agreements with the State Liquor Control
Board to or other public regulatory or licensing agencies to buy and serve alcohol. In the
event that the Port determines, in its sole discretion, that it is not logistically practical,
economically feasible, or otherwise appropriate for the Port to be the liquor licensee,
Contractor shall apply for the liquor license and obtain any necessary agreements and
permits.

15. PROCUREMENT

Contractor shall use its best efforts to procure all food, beverages, supplies and
equipment necessary to provide Lounge Services from vendors offering the best value,
in terms of highest quality for the lowest price. The Port retains the right to disapprove
any vendor selected by Contractor or select vendors for Contractor from time to time.

Contractor has no authority to bind, nor shall it bind, the Port to any contract it executes
without the prior written approval of the Port. All contracts entered into pursuant to this
Section, without regard to whether the Port is bound by such contracts, shall contain a
provision: (i) that the Port of Seattle is a third-party beneficiary of the agreement, (ii) that
all representations, warranties and guaranties are fully assignable to the Port of Seattle,
and (iii) that the contract may be assigned to and assumed by the Port of Seattle in the

event of termination of this agreement. In addition, all goods acquired pursuant to this
Section shall be titled in the name of the Port of Seattle.

16. STORAGE AND OFFICE SPACE TO BE PROVIDED BY PORT

Port shall provide to Contractor adequate space, without charge, for storage of food,
beverages, supplies and equipment necessary for the performance of this Management
Agreement. Port shall provide to Contractor space, without charge, for Contractor's full-
time manager and other personnel to perform tasks related to this Management
Agreement including, but not limited to, record-keeping, accounting, preparation of
Operating Budgets, Operating Statements and other reports to the Port, procurement,
and communications with the Port. The location of the space shall be determined by the
Port in its sole discretion.

17. HIRING, TRAINING, AND SUPERVISION OF PERSONNEL

a. Contractor shall hire, train and/or retain, supervise and discipline qualified
.
personnel to perform the services for which Contractor is responsible under this
Management Agreement. Such personnel may be subcontractors or employees of
Contractor.

b. Contractor shall require personnel to dress in uniforms when performing work
- assignments.

c. Contractor shall submit samples of proposed uniforms and proposed name
-badges to the Port for approval prior to the opening of the first Designated Lounge.
Name badges will be used only if the Port approves their use and will be used only as
directed by the Port.

I Contractor shall require its personnel during work hours to use only those
entrances and exits designated by the Port Representative for their use. Said entrances
and exits will be designated by the Port Representative in consultation with building
management.
e. Contractor shall restrict its personnel to assigned areas during work hours unless
the Port expressly agrees to other areas.

f. Contractor shall train substitute personnel to relieve regular personnel in the
event of absences so as to maintain high quality Lounge Services at all times.
d. Contractor shall designate one personnel acting manager in the event that the
regular full-time Manager or the Contract Representative cannot be reached by the Port
Representative.
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h. Contractor shall require such personnel to comply with all instructions, standards,0
regulations, and codes of conduct as specified by the Port.
i. Absent standards provided by the Port, Contractor shall perform in accordance
with best practices in Contractor's industry.
i Contractor shall train personnel to comply with all Washington State alcohol
beverage control laws and Liquor Control Board regulations as well as all applicable
public health and safety laws, regulations and standards.

18. FIRST YEAR OF OPERATION

Within fourteen (14) days of the Effective Date of this Management Agreement, the Port
and Contractor shall meet and confer on the number of personnel to be employed by
Contractor, levels of inventory to be maintained, sources of procurement, lead times for
ordering inventory, and locations where food, beverages, supplies and equipment will
be stored.

19. DESCRIPTION OF SERVICES TO BE OFFERED AT DESIGNATED LOUNGES

A menu (or menus) of goods and services to be provided by Contractor at Designated
Lounges is/are attached as Exhibit C. Contractor shall provide the goods and services
called for in the attached Exhibit C unless amended in writing by the Port.

20. OPERATING EXPENSES TO BE PAID BY PORT
All Operating Expenses as defined in Section 24(a)(2) will be paid for by the Port either
through the use of an Expense Fund as described in Section 26 or shall be borne
directly by the Port.

21, ANNUAL OPERATING BUDGET
a. Except for the first year of operation under this Management Agreement,
Contractor shall prepare a draft Annual Operating Budget for Lounge Services and
submit such draft to the Port at least three months prior to the start of the Port's Fiscal
Year.
b. For the development of an Annual Operating Budget, the Contractor shall
consider the following information to the extent such information is available: 1) number
of Designated Lounges to be operated during the Port’s Fiscal Year; 2) menus of goods
and services to be provided at each Designated Lounge to be operated during the

Port's Fiscal Year; 3) number of Lounge Patrons under contract with the Port; 4)
estimated number of Pre-paid Lounge Users expected to be served; 5) estimated
capacity of each Designated Lounge; 6) estimated number of Pay-per-use Customers.
To the extent such information is available, the Port shall provide it to Contractor.
c. The Annual Operating Budget shall include reasonable details regarding time
and money to be spent on operations, as well as estimates of Operating Expenses. The
proposed expenditures for the Fiscal Year shall be summarized in a Summary page.
d. After the Port receives the draft Operating Budget from the Contractor, the Port
will meet as soon as reasonably possible with Contractor to discuss the Annual
Operating Budget. Following such meeting, the Port will advise Contractor in writing
whether the Port accepts or rejects the Annual Operating Budget. If the Port chooses to
reject it, the Port will provide specific reasons for the rejection. Contractor shall then
submit an amended Annual Operating Budget that addresses the Port's concerns.
When the Annual Operating Budget is approved, Contractoris authorized to incur the
expenditures and implement the provisions of the Annual Operating Budget. Contractor
shall not expend more than the operating expenses described in the Summary Page
without the Port's prior written approval. Contractor shall not exceed spending for
any
line item on the Summary Pageby more than 15 percent without the Port's prior written
approval. With the exception of the first year of operation, until the Annual Operating
Budget is established, Contractor must operate the Designated Lounges in accordance
with the prior year's Annual Operating Budget or actual results from the prior year,
whichever is more favorable to the Port.

22. OPERATING STATEMENTS

Contractor shall provide to the Port monthly operating statements. Each operating
statement shall consist of three parts. The first part shall provide details regarding the
number of Pre-paid Lounge Users and/or Pay-per-use Customers for each Designated
Lounge during the previous calendar month and clearly indicate which Pre-paid Lounge
Users should be billed to which Lounge Patron. The second part shall provide a
breakdown of all Operating Expenses (term defined below in Section 24), Direct
Operating Expenses (term defined below in Section 24), and expenditures from the
Expense Fund (term defined below in Section 26) incurred during the previous calendar
month. The third party shall provide a narrative detailing significant activities and
ongoing projects during the previous calendar month and highlight opportunities for
improvement of services. Port may specify changes to format and/or content of
operating statements from time to time and will advise Contractor of such changes.

23. PRE-OPENING RESPONSIBILITIES

Contractor shall prepare and submit to the Port Representative a time-line for
accomplishing “Pre-opening Responsibilities” to achieve the opening date of the
Designated Lounge(s) as proposed by Contractorin its Proposal. Said time-line must be
submitted not more than ten days after the Effective Date of this Management
Agreement. The “Pre-opening Responsibilities” shall include, but not be limited to the
following:
a. Contractor will confirm with the Port Representative which Designated Lounges
will be operated.

b. Contractor will confirm with the Port Representative the scheduled opening date
of the Designated Lounge(s).

c. After consulting with the Port, the Contractor will submit a draft Operating Budget
for the Port's review.

d. Contractor will revise the Operating Budget, if requested by the Port.
e. Contractor will work to obtain the Port's approval of the revised Operating Budget
at least 30 days prior fo the scheduled opening date.

f. Contractor will submit proposed uniforms, badges, if any, and menus to the Port
Representative so as to obtain approval of these items at least 30 days prior to the
scheduled opening date.

a. Contractor will provide details to the Port Representative regarding scheduled
training for personnel and start-up procedures.
h. Contractor will coordinate with the Port Representative to ensure that all licenses
and permits have been obtained at least 15 days prior to the scheduled opening date.
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i. Contractor will provide certificates of insurance and endorsements as required by
this Agreement.

24. COMPENSATION TO CONTRACTOR — FEES

a. Definitions. For purposes of this Agreement, the following terms have the meanings
set forth in this Section.
(1) Gross Revenues. “Gross Revenues” means all income for any period,
whether in cash or on credit (computed on an accrual basis in accordance with
generally accepted accounting principles) received for food, beverage or services
provided to Pre-paid Lounge Users or Pay-per-use Customers. Gross Revenues
do not include the following:

(i) federal, state, and local excise, sales, use or admission taxes:
(if) contributions by the Port to an Expense Fund (term defined below in
Section 26);
(iii) interest, if any, on funds in the Revenue Account (term defined below
in Section 25).
(2) Operating Expenses. “Operating Expenses” means the aggregate of the
following Designated Lounge expenses for any period (called out in this
Agreement). Unless otherwise specified below, “Operating Expenses” shall
include the Designated Lounge expenses referenced below without regard to
whether they are incurred by the Port or by Contractor:
(i) cost of operations, maintenance, and repair of all operating equipment
and replacement of minor items initially supplied by the Port and cost of
operating supplies;
(ii) Contractor's expense associated with the cost of compensation,
benefits and payroll taxes of all employees working full or part-time at the
Designated Lounges or performing duties with respect to the Designated
Lounges, excluding Contractor's executive personnel and Contractor's full
time manager for the Designated Lounge(s). The Port has the right to
approve all time spent and billed to Lounge operations by Contractor
personnel located outside the Designated Lounges;
(iii) cost of repair and maintenance of the Designated Lounges;
(iv) cost of liability insurance required under this Agreement and any
deductibles or reasonable costs to cover any self-insured losses except if
Contractor or its employees or subcontractors were grossly negligent;
(v) cost of all business taxes (except for business and occupation taxes on
any management fees paid to Contractor by the Port);

(vi) cost of purchasing food and beverages, including alcohol, for
Designated Lounges;
(vii) cost of Parking at Airport for Contractor's personnel;
(viii) cost of badges and keys for Contractor's personnel working at the
Designated Lounges;
(ix) cost of disposable items related to food and beverage service, such as
napkins, drink stirrers;

(x) cost of uniforms and shoes for Contractor’s personnel working at the
Designated Lounges;
(xi) cost of laundry for uniforms and shoes worn by personnel and other
supplies at Designated Lounges;
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(xii) cost of telephone, electricity or other utilities;
(xiii) cost of janitorial services;
(xiv) cost of plates, glasses, cups, cutlery or other serving equipment;
(xv) cost of postage and stationary provided to Pre-paid Lounge Users or
Pay-per-use Customers and supplied for use by Contractor's personnel to
perform work related to this Management Agreement;
(xvi) cost of maintaining and operating a van to carry equipment and
supplies between the Designated Lounge(s) and other locations;
(xvii) costof reasonable accounting fees for services directly related to the
operation of the Designated Lounges, including, but not limited to, annual
audit fees;
(xviii) cost of applying for, obtaining and maintaining a liquor license and
necessary permits and agreements to buy and serve alcohol onthe
premises of the Designated Lounges.
(xix) cost of purchase or lease and operation of a vehicle to be used by
Contractor inproviding lounge services.
(3) Direct Operating Expenses. “Direct Operating Expenses” means all
Operating Expenses except as providedin Section 27 (Contractor's management
fee, cost of janitorial services, cost of utilities, cost of security services, cost of
repairing and maintaining systems and other elements of facilities, Port's
deposits into Expense Fund, cost of applying for, obtaining and maintaining liquor
license) plus the Contractor's cost of obtaining and maintaining required
insurance,
(4) Net Operating Income. “Net Operating Income” {or “NOI”), which may be
measured for a monthly, quarterly or yearly period, means Gross Revenues for
the period minus Operating Expenses for the period.
(5) Gross Operating Profit Margin. “Gross Operating Profit Margin” (or
“GOPM"), which may be measured for a monthly, quarterly or yearly period,
means:
GOPM = (Gross Revenues — Direct Operating Expenses) X 100

Gross Revenues
.
b. BaseManagement Fee. The Port will pay Contractor a Base Management Fee
in
the amount of $73,150, which the Port and Contractor
agree is a reasonable amount to
cover the Contractor's expenses associated with the cost of compensation, benefits and
payroll taxes associated with employing a full-time manager dedicated to the
Designated Lounge(s)..
c. Incentive Management Fee. The Port will pay Contractor an Incentive Management
Fee (“IMF”) according to the following schedules:

Agreement Years 1 and 2

if GOPM is: Share of NOI

Less than 35.0% 0.00%

Greater than or equal to 35.0% but less than 40% 2%

Greater than or equal to 40% but less than 45% 3%

Greater than or equal to 45% but less than 50% 4%

Greater than or equal to 50% but less than 55% 5%

Greater than or equal to 55% but less than 60% 6%

Greater than or equal to 60% but less than 65% 7%
Greater than or equal to 65% but less than 70% 8%
Greater than or equal to 70% 9%

Agreement Year 3

if GOPM is: Share of NOI
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Less than 40% 0.00%
}

Greater than or equal to 40% but less than 45% 3%
Greater than or equal to 45% but less than 50% 4%
Greater than or equal to 50% but less than 55% 5%
Greater than or equal to 55% but less than 60% 6%
Greater than or equal to 60% but less than 65% 7%
Greater than or equal to 65% but less than 70% 8%
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Greater than or equal to 70% but less than 75% 9%

Greater than 75% : 10%

25. REVENUE ACCOUNT
The Port shall establish an account (the ‘Revenue Account”) for use in connection with
the deposit of Gross Revenues and other receipts associated with the operation of the
Designated Lounges. The Port's establishment of the Revenue Account shall be subject
to the following rights and responsibilities:

a. The Revenue Account shall be maintained with a financial institution as the Port may,
from time-to-time, elect.

b.Only the Port shall have authority to make withdrawals or disbursements from the
Revenue Account. Only the Port shall have the right to invest amounts on deposit in the
Revenue Account. Contractor shall not have any authority to make withdrawals,
disbursements or investments from the Revenue Account.

c. In connection with Contractor's use of the Revenue Account, the Port shall also
provide to Contractor such other materials and services as may reasonably be
necessary for Contractor to make effective use of the Revenue Account, specifically
including, but not limited to, credit card processing equipment and services.

d. Excepting only credit card processing fees and bank charges associated with
insufficient funds or other dishonored insiruments, all costs associated with the
17

Revenue Account and the associated materials and services provided by the Port shall
be paid by the Portand shall not be Operating Expenses.

e. All funds associated with the operation of the Designated Lounges and received by
Contractor shall be deposited promptly in the Revenue Account.
f. Contractor shall have no authority to make withdrawals, disbursements, or
investments from the Revenue Account.

g. Contractor shall, unless otherwise agreed by the Port, make use of any materials
and/or services provided by the Port in connection with the Revenue Account.

h. Contractor shall beresponsible for providing the Port a statement, in a form
reasonably specified by the Port, detailing the nature-of the funds deposited into the
Revenue Account.

i. To the extent not inconsistent with the terms of this Agreement, Contractor shall
otherwise comply with the Port's reasonable instructions regarding the receipts of cash,
deposits and other internal control and reporting procedures associated with the
Revenue Account.

26. REVOLVING FUND FOR PAYMENT OF EXPENSES

The Port shall establish and fund a revolving fund (the “Expense Fund”) for use in
connection with the payment of Direct Operating Expenses associated with the
operation of the Designated Lounges. The Port's establishment of the Expense Fund
shall be subject to the following rights and responsibilities:

a. The amount of the Expense Fund for each Fiscal Year shall be equal to the sum of
Twenty Thousand dollars ($ 20,000.00) plus the amount of budgeted expenses set forth
in the approved Annual Operating Budget for the Designated Lounges for the two
highest expense months for that Fiscal Year.

b. The Expense Fund shall be maintained with a financial institution as the Port may,
from time-to-time, elect. :

¢. To the extent that there are any unused or idle funds in the Expense Fund, the Port
shall have the right (but not the obligation) to invest such amounts as it may, in its sole
discretion, elect; provided that such investment does not limit Contractor's right to make
use of the Expense Fund in the manner intended.

d. The Port shall, within ten (10) working days of any request by Contractor for
replenishment of the Expense Fund, replenish the Expense Fund.

e. In connection with Contractor's use of the Expense Fund, the Port shall also provide
to Contractor such other materials and services as may reasonably be necessary for
Contractor to make effective use of the Expense Fund, specifically including, but not
limited to, checks, on-line account access, and duplicate account statements.

f. All costs associated with the Expense Fund and the associated materials and services
provided by the Port shall be paid by the Port and shall not be Operating Expenses.
shall (in
g. The only persons authorized to make disbursements from the Expense Fund
addition to any Port employees designated by the Port) be those officers or employees
of Contractor designated by Contractor and approved by the Port, all as reflected by
schedule on file with the Port. All officers and employees authorized to make
disbursements shall, notwithstanding any other term of the Agreement, be bonded for
the full amount of the Expense Fund.

h. Contractor shall have no responsibility or authority to invest any idle funds remaining
in the Expense Fund.

i. Contractor shall, unless otherwise agreed by the Port, make use of any materials
and/or services provided by the Port in connection with the Expense Fund.

j. Contractor shall use the Expense Fund for all purchases of items that fall under
Operating Expenses to be paid by the Port (term defined in Section 20); provided,
however, the Port shall have the right to directly purchase/fund the purchase of any
item(s) that would otherwise be paid from the Expense Fund by providing Contractor
notice of such intention.

k. Contractor shall, not less frequently than once each calendar month, seek
replenishment of the Expense Fund. Contractor shall request replenishment through
use of a form reasonably approved by the Port, and all requests for replenishment shall
be accompanied by such documentation as the Port reasonably requests. Contractor
shall also be responsible for reconciling the Expense Fund.

I. In the event that Contractor uses the Expense Fund to create any petty cash or
change fund, Contractor shall specifically notify the Port in writing of this use and
adhere to Port policy in connection with any such cash or change fund.

m. To the extent not inconsistent with the terms of this Agreement, Contractor shall
otherwise comply with the Port's reasonable instructions regarding the disbursements
and other internal control and reporting procedures associated with the Expense Fund.

n. Contractor shall promptly remitto the Port any amounts remaining in the Expense
Fund on the expiration or eatlier termination of this Agreement.

27. ADDITIONAL OPERATING EXPENSES — NOT COUNTED AS DIRECT
OPERATING EXPENSE

The Port shall bear the following categories of Operating Expenses and said categories
shall not be counted as a Direct Operating Expense:

a. Contractor'smanagement fee. The Port shall pay Contractor's base and any
incentive management fee earned by Contractor.

b. Cost of janitorial services. The Port shall, at the Port's sole cost and expense, provide
or arrange for all necessary janitorial services within the Designated Lounges.

c. Cost of utilities. The Port shall, at the Port's sole cost and expense, provide all
utilities, including electricity and telephone.

d. Cost of applying for, obtaining and maintaining liquor license. The Port shall, at the
Port's sole cost and expense, obtain and maintain a liquor license for the Designated
Lounges. Provided, however, the costs associated with obtaining and maintaining
necessary permits and agreements with the State Liquor Control Board to buy and
serve alcohol in the Lounge premises, shall be considered a Direct Operating Expense.

e. Cost of security services. The Port shall, at the Port's sole cost and expense, provide
or arrange for necessary security in the Designated Lounges. Contractor shall be
responsible for coordinating with the Port Representative, Port of Seattle Police and the
Port's Security Department.

f. Cost of repairing and maintaining systems and other elements. The Port shall, at the
Port's sole cost and expense, repair and maintain the structural components, all exterior
elements, all fixtures within the Designated Lounge facilities and systems, including, but
not limited to, fire suppression system and HVAC system.

28. AUDITS

a. Contractor shall keep all books of accounts and records with respect to the
operation of the Designated Lounges, accounted for in accordance with Generally
Accepted Accounting Principles (GAAP) as prescribed by the Financial Accounting
Standards Board (FASB). A representative designated by the Port shall be allowed to
inspect and audit Contractor's books of accounts and records with reference to the
determination of any matters relevant to this Agreement at all reasonable times. The
cost of such audit shail be borne by the Port unless the results of such audit reveal a
discrepancy of more than two percent (2%) reported for any twelve (12) month period.
In the event of such discrepancy, the full cost of the audit shall be borne by the
Contractor, and Contractor shall promptly pay all additional fees owing to the Port.

b. In the event of loss of any business and/or accounting records that impairs the
Port's ability to audit the books and records relating to the operation of the Designated
Lounges, Contractor shall, at its sole cost and expense,(i) promptly recreate any and all
records necessary for the Port to undertake a reliable audit; and (ii) pay (without regard
to the result of the audit) the increased costs (including, but not limited to, delay costs
and/or interim examinations) of any audit that results from the loss of any business
and/or accounting records. In the event that Contractor's books of accounts and records
are not maintained in the Puget Sound region, they shall be made available for audit
locally within five (5) business days of a request by the Port, or Contractor shall pay in
full, any travel andrelated expenses of Port representative(s) to travel to the location
outside the Puget Sound region. In addition, The Port shall have the right to conduct a
“surprise” audit not more frequently than twice every twenty four (24) months, and, in
the event that Contractor's books and records are not maintained locally, Contractor
shall further pay in full, any travel and related expenses of the Port representative(s) to
travel the location outside the Puget Sound region for such “surprise” audit(s).
Cc. In addition to audits of financial records, Contractor shall be subject to periodic,
unannounced operating audits of facilities by representatives of the Port and/or by
consultants retained by the Port. Such audits may include a comprehensive review of:

(i) Service quality, attentiveness, courtesy and professionalism of personnel
(ii) Food quality and presentation
(ii) Hygiene and sanitary practices of personnel
|
(iv) Uniforms worn by personnel

(v) Training programs, techniques

(vi) Safety, security and cleanliness of facilifies

(vii) Compliance with Statealcohol beverage control laws and Liquor Control Board
rules.

29. INDEMNIFICATION

To the maximum extent permitted by law, Contractor shall indemnify, defend (with
counsel reasonably acceptable to the Port) and save harmless the Port, the
commissioners, representatives, directors, officers, agents and employees of the Port,
and those in privity of estate with the Port, from and against all claims, expenses
(including, without limitation, attorney's fees) or liability of whatever nature arising from
any default, act, omission or negligence of Contractor, or Contractor's subcontractors,
licensees, agents, servants or employees, or the failure of Contractor or such persons
21

to comply with any rule, order, regulation or lawful direction now or hereafter in force of
any public authority, in each case to the extent the same are related, directly or
indirectly, to the Contractor's performance under this Management Agreement;
provided, however, nothing in this Section shall require Contractor to indemnify the Port
from injury or damage caused by the sole negligence of the Port. This indemnity and
hold harmless agreement shall include indemnity against all costs, expenses (including,
without limitation, reasonable attorneys’ fees) and liabilities incurred in or in connection
with any such claim, or any action or proceeding brought thereon.

30. [INSURANCE

Contractor shall obtain and keep in forceduring the term of this Agreement the following
types of insurance, in the amounts specified and in the form described below. Such
expense to the Contractor shall be counted as a Direct Operating Expense:

a. Commercial General Liability. Contractor shall obtain and keep in force during
the term of this Agreement a commercial general liability policy of insurance protecting
Contractor and the Port, as an additional insured using ISO Form 20 26 11 85 or
equivalent, against claims for bodily injury, personal injury and property damage based
upon, involving or arising out of the Contractor's performance under this Management
Agreement and specifically including the action/inaction of any employee, subcontractor
or agent. Such insurance shall be on an occurrence basis providing single limit
coverage in an amount not less than two million dollars ($2,000,000) per occurrence.
The policy shall not contain any intra-insured exclusions as between insured persons or
organizations.
b. Automobile Liability, Contractor shall obtain and keep in force during the term of
this Agreement a business automobile liability insurance protecting Contractor and the
Port, as an additional insured using ISO Form 20 26 11 85 or equivalent, against claims
for bodily injury and property damage based upon, involving or arising out of any
automobile (whether owned, hired or non-owned), and specifically including the
action/inaction of any employee, subcontractor, or agent. Such insurance shall be on
an occurrence basis providing single limit coverage in an amount not less than two
million dollars ($2,000,000) per occurrence. Thepolicy shall not contain any intra-
insured exclusions as between insured persons or organizations.

c. Other Insurance, Contractor shall further obtain and keepin force such other
~~
and furtherinsurance as the Port may from time to time reasonably request for the
protection byinsurance of its interestin the areas of the Airport i in which Contractor, its
employees, subcontractors and agents will work.

d. Insurance Policies. Insurance required hereunder shall be in companies duly
licensed to transact business in the State of Washington, and maintaining during the
policy term a General Policyholders Rating of ‘A- or better and a financial rating of‘IX’
or better, or such other rating as may be required by a lender having a lien on the
Premises, as set forthin the most currentissue of “Best's Insurance Guide.” Contractor
shall not do or permit to be done anything that shall invalidate theinsurance policies
referred to in this Article. Contractor shall cause to be delivered to the Port certified
copies of policies of such insurance or certificates evidencing the existence and
amounts of such insurance with the insured and loss payable clauses as required by
this Agreement. No such policy shall be cancelable or subject to non-renewal or
modification except after forty five (45) days prior written notice to the Port. Contractor
shalt at least fortyfive (45) days prior to the expiration of such policies, furnish the Port
with evidence of renewals or “insurance binders” evidencing renewal thereof, or the Port
may order such insurance and charge the cost thereof to Contractor, which amount
shall be payable by Contractor to the Port upon demand. No insurance required herein
shall contain a deductible or self-insured retentionin excess of $10,000 without the prior
written consent of the Port.
e. Waiver of Subrogation. Without affecting any other rights or remedies,
Contractor (for itself and on behalf of anyone claiming through or under it by way of
subrogation or otherwise) hereby waives any rights it may have against the Port, its
officers, agents and employees (whether in contract or in tort) on account of any loss or
damage occasioned to Contractor arising out of or incident to the perils required to be
insured against under this Section. Accordingly, Contractor shall cause each insurance
. policy required by this Section to further contain a waiver of subrogation clause. The
effect of such release and waiver of the right to recover damages shall not be limited by
the amount of insurance carried or required, or by any deductibles applicable thereto.
f. Miscellaneous Insurance Provisions.
The limits of insurance required by this Agreement or as carried by Contractor shall not
limit the liability of Contractor nor relieve Contractor of any obligation hereunder. All
insurance to be carried by Contractor shall be primary to and notcontributorywith any
similar insurance carried by the Port whose insurance shall be considered excess
insurance only. :

The amounts and types of insurance specified in this Agreement shall be subject to
periodic adjustment to reflect changes in insuring practices for similar properties in the
same geographic area and changes in insurance products.

31. DEVIATIONS FROM ANNUAL OPERATING BUDGET

Contractor must consult with the Port promptly if total Operating Expenses for any three
month period exceed the Annual Operating Budget by more than 10 percent.

32. TERMINATION OF AGREEMENT
a. This Management Agreement may be terminatedin advance of its scheduled
expiration date by either party without cause upon 90 days’ written notice to the other
party.
b. The Port may immediately terminate this Agreement if the Port reasonably
determines that the actions or omissions of Contractor or its employees, subcontractors
or agents (i) has threatened or does threaten the health or safety of Pre-paid Lounge
Users, Pay-per-use-Customers, or any petson working or traveling in or around the
Designated Lounges; or (ii) caused loss of Port funds or damage to Port property.
C. At any time after the second full calendar year of operation, Port may, at its
option, terminate this Agreement if the NOI is lower than the Annual Operating Budget
by more than 10%fortwo consecutive calendar quarters unless such deficitis due to
circumstances beyond the control of Contractor, including, but not limited to, damage to
the Designated Lounge facilities and strikes.

33. NOTICES

All notices hereunder shall be in writing and shall be delivered personally, by certified or
registered mail, or by recognized overnight courier addressed as follows:
To the Port:

U. S. Postal Service Address: Overnight Delivery Address:
Port of Seattle Port of Seattle
Seattle-Tacoma International Airport Main Terminal Building
P. O. Box 68727 17801 Pacific Hwy. South
Seattle, Washington 98168 Seattle, WA 98158
Atin: Senior Manager, Airport Operations Attn: Senior Manager, Airport Operations

To Contractor;

U. S. Postal Service Address: Overnight Delivery Address:
VIP Hospitality L.L.C VIP Hospitality L.L.C.
PO Box 68757 PO Box 68757
Seatac, WA Seatac, WA
98168 08168
Atin: Michael Workman Attn: Michael Workman

For payments only, the following mailing address should be used:

VIP Hospitality L.L.C
PO Box 68757
Seatac, WA
98168
Attn: Michael Workman

or to such other respective addresses as either party hereto may hereafter from time to
time designate in writing. Notices shall be deemed delivered (i) when personally
delivered; (ii) on the third day after mailing when sent by certified or registered mait and
the postmark affixed by the United States Postal Service shall be conclusive evidence
of the date of mailing; (iii) on the date transmitted by facsimile, if the facsimile is
confirmed received; or (iv) on the first business day after deposit with a recognized
overnight courier if deposited in time to permit overnight delivery by such courier as
determined by its posted cutoff times for receipt of items for overnight delivery to the
recipient.
delivered by
may be made in the manner provided for notice or may be
~ Payments
regular mail (postage prepaid); provided, payments made by regular mail (postage
prepaid) shall be deemed delivered when actually received by the Port.

34. ATTORNEYS’ FEES

In the event that either party shall be required to bring any action to enforce any of the
provisions of this Agreement, or shall be required to defend any action brought by the
other party with respect to this Agreement, and in the further event that one party shall
prevail in such action, the losing party shall, in addition to all other payments required
therein, pay all of the substantially prevailing party's actual costs in connection with such
action, including such sums as the court or courts may adjudge reasonable as
attorneys’ fees in the trial court and in any appellate courts. For purposes of calculating
attorneys" fees, legal services rendered on behalf of the Port by public attorneys shall be
computed at hourly rates charged by attorneys of comparable experience in private
practice in Seattle, Washington. :

35. DISADVANTAGED BUSINESS ENTERPRISE (DBE)
a. It is the policy of the Port to support participation of Disadvantaged Business
Enterprises (DBEs), as defined in 49 CFR, Part 23, in concession activities related to
the Airport. This Management Agreement is a “management contract” within the
meaning of 49 CFR Sec. 23.3(6) and is thus a concession subject fo the requirements
of 49 CFR, Part 23. :

b. If Contractor identified itself as a DBE in its response to the Request for Proposal
or during negotiation of this Agreement, Contractor agrees to submit to the Port, upon
execution of this Agreement, certification from the State of Washington that Lessee is a
ceriified DBE.
C. It is the policy of the Port to ensure that Disadvantaged Business Enterprises
(DBEs) as defined by federal regulations at 49 CFR Part 23, and other small businesses
that meet the U.S. Small Business Association size standard have an equal opportunity
to receive and participate in DOT-assisted contracts. The Port encourages Contractor
to make every reasonable effort to maximize the contracting opportunities for DBEs and
other small businesses in the procurement of goods and services necessary for the
operation of Lounge Services at the Airport.
d. Contractor shall not be penalized in the event that Contractor fails to offer
contracting opportunities to DBEs or fails to otherwise obtain their participation in the
operation of Lounge Services; provided, however, Contractor shall submit such reports
as may be required by the Port, for the purpose of demonstrating compliance with 49
CFR Part 23 and shall comply with the nondiscrimination and assurance requirements
of 49 CFR Part 23 as set forthin Section 32 below.

36. NONDISCRIMINATION

This Agreement is subject to the requirements of the U.S. Department of
~
Transportation's regulations, 49 CFR part 23. The Contractor agrees that it will not
discriminate against any business owner because of the owner's race, color, national
origin, or sex in connection with the award or performance of any concession
- agreement, management contract, subcontract, purchase
or lease agreement or other
agreement covered by 49 CFR part 23.

The Contractor agrees to include the above statements in any subsequent concession
agreement or contract covered by 49 CFR part 23, that it enters and cause those -
businesses to similarly include the statements in further agreements.

37. CAPTIONS

The captions in this Agreement are for convenience only and do not in any way limit or
amplify the provisions of this Agreement.
26

38. SEVERABILITY

If any term or provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of this
Agreement or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be affected
thereby and shall continue in full force and effect.

39. SURVIVAL OF INDEMNITIES

All indemnities provided in this Agreement shall survive the expiration or any earlier
termination of this Agreement. In any litigation or proceeding within the scope of any
"indemnity provided in this Agreement, Contractor shall, at the Port's option, defend the
Port at Contractor's expense by counsel satisfactory to the Port.

40, GOVERNING LAW AND VENUE

This Agreement shall be construed under the Jaws of Washington without regard to its
conflicts of laws principles. Jurisdiction and venue for any action relating hereto shall be
in King County, Washington.

41. ENTIRE AGREEMENT — AMENDMENTS

This Agreement, together with Exhibits A, B, and C, the Port's RFP and Contractor's
and incorporated herein by this
response to the RFP, all of which are attached hereto
reference, constitute the entire agreement between the parties; provided, in the event of
conflict between the terms and conditions set forth in this Agreement and the
Contractor's response to the RFP, the terms and conditions of the Agreement shall
prevail. There are no terms, obligations, covenants, or conditions other than those
contained herein. No modification or amendment of this Agreement shall be valid or
effective unless evidenced by an agreement in writing signed by both parties.

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year first above written.
:

VIP Hospitality L.L.C: PORT OF SEATTLE
A Washington municipal corporation
By: fed By, Gre il
Its: _President Its:” og
j

STATE OF
r {ing| )
SS.
COUNTY OF ou )

i - I zh
4 a 0) 20}{), before me, personally appeared
(ADA tome known to be the
(UL 1 Hsp faded the corporation
,
that executed the foregoing a and a knowlod ed said instrument to be the
free and voluntary act and deed of said corporation, for the uses and
purposes therein
mentioned, and on oath stated that he/she was duly authorized to execute the same.

IN WITNESS WHEREOF | have hereunto amy hand a"ge ixed my official seal the
day and year first above written.

AMA
SONADpu 5
Residing at: pb
Aggy My commission oxortos:aaa
RL38RESat &f¥5
tae3 SyzeanaGr
oF i AD, Ok
HAGEwas
Higans®

STATE OF WASHINGTON )
) ss.
COUNTY OF KING 0)

.On this day of before me, personally appeared’
, 20__,
to me khown to be
the of the PORT OF SEATTLE, a
municipal corporation, the corporation that executed the foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated that
he/she was duly authorized to execute the same.

IN WITNESS WHEREOF, | have hereunto set my hand and affixed my official seal the
day and year first above written.

Notary Public in and for the
State of Washington
Residing at:
My commission expires:

EXHIBIT A

List of Potential Designated Lounges within Seattle-Tacoma International
Airport
Name Location Area/ffootprint

Club International North South Satellite, mezzanine level 2024sf

Club International South South Satellite, mezzanine level 2165sf

Former American Airlines Lounge A Concourse opposiie gate A8/9 4739sf

Former Delta Airlines Lounge A Concourse, opposite gate All 4886sf

EXHIBIT B

Safety and Health Standards

King County Food Code (R&R 91 §1(part), 5-14-93).

(State of) Washington Administrative Code, Chapter 246-215 WAC, Washington
Food Service Regulations

The Port does not imply or warrant that Exhibit B constitutes a complete or current list of applicable
standards, regulations and laws. It is the Contractor's sole responsibility to ensure that its officers,
employees and stibcontractors comply with current and applicable safety and health standards,
regulations and laws,

EXHIBIT C

Goods and Services to be provided by Contractor at Designated Lounges

1. Club International North and
2. Club International South

Service to be provided: food and beverage service to international passengers

3. Former American Airlines Lounge

No planned service at this time

4. Former Delta Airlines Lounge

No planned service at this time

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