Lease Agreement for Rental Car Center Operations Distributed

Lease Agreement for Rental Car Center Operations Distributed July 2008

COMMENTS AND RECOMMENDATIONS

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Questions/Comments/Recommendations Airport Response

REQUEST FOR BID

1. Define Multi-branded bidders.

The language regarding the number of brands vs. operators is confusing. Please clarify that it is 9 brands and not necessarily 9 tenants.

A brand is defined as a nationally or regionally recognized rental car operator with at least five rental outlets in operation in the three of the last five years which generated at least $1,000,000 per year for each of those three years.

Multi-branded bidders are those bidders who submit one bid but specify on section A.2. of the Qualifications Questionnaire (Submittal 1) that they will operate more than one brand.

There will be no more than nine brands awarded the opportunity to operate on-Airport as a result of this Request for Proposal. Those nine brands may operate through nine or fewer leases. The final number of leases is dependent upon the number of Lease Agreements awarded. All brands, regardless of whether introduced through a single or multi-branded bid, must occupy the minimum allocation of 17 linear feet of counter and 54 ready/return parking spaces.”

2. Section II.B, Summary Business Terms - The “Commencement Date” is defined as when the Tenant takes possession. This definition conflicts with that contained in the Lease Summary, p.ii, which states that Commencement Date is when the “Airport Director gives notice to Tenant” that the premises are ready for Tenant to take possession. Which definition is correct?

The Commencement Date is the date on which the Airport Director gives notice to Tenant that the Premises are ready for Tenant to take possession.



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3. Section II.C, Newly Formed Entities – Avis Budget Car Rental, LLC is the parent company of two incumbents, Avis Rent a Car System, LLC, and Budget Rent A Car System, Inc. It is not a “newly formed” entity. If AB Car Rental, LLC, is the bidder for a multi-branded operation, does the bid submittal require Minimum Qualification Submittals from all 3 entities, or just AB Car Rental, LLC, if that is the bidding entity?

If the non-incumbent Bidder is not a “newly formed entity” that can independently satisfy the Minimum Requirements and proposes to operate multiple brands that are incumbent operators, does any information about its members, or the brands, need to be submitted?

Whomever you are going to conduct business as (ex: AB Car Rental LLC) has to submit Minimum Qualifications Submittals. (RFB Section II-2).

Yes.

4. Section III. B., Format – The bid response is required to be printed “double-sided to the maximum extent practical….” Submittal 2, p.1, middle of page, states that the number of typed pages is limited to ten (10) “single-sided” pages. Is the Bid response to be limited to five (5) double-sided pages? Also, does the page limitation include or exclude typed Exhibit pages (such as organizational charts, lists of officers and directors, etc.)?

Please submit five (5) pages, double sided, for the narrative response required in Submittal 2. Typed exhibit pages such as organizational charts are considered separate.

5. Sections II and III, Format and Content – Section II infers we only need to submit 2 items with our Bid; Section III infers we need to submit more. Which should we follow?

Please submit the items requested in Section III.C., specifically, an introduction and executive summary; completed Submittals 1, 2 and 3; an original bid bond; and, any additional information you deem necessary.

6. Section III.C.1, Content - What is expected to be in the “executive summary of the bid” that is not on the bid form. We don’t understand what the City is looking for here.

A cover letter may suffice as an executive summary.



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7. Section III.C., Qualifications Questionnaire - We respectfully request that incumbent bidders be exempt from completing the following as the City is already familiar with the organization, structure, management, financial strength, and business practices of such bidders:

o Officer Experience in the Business (Submittal 1, A, 5d,e,f)

o Summary of Experience (Submittal 1, B, Page 4)

o References (submittal 1, C, Pages 5)

Should the City not waive Submittal 1 Part B for incumbent bidders, we respectfully request that this submittal be waived for any bidder that has generated over one million dollars in revenues at SFO in any year.

All bidders must complete the Qualifications Questionnaire in its entirety.

8. Section III.2., Qualifications Questionnaire - Please waive this information for incumbents or parent companies of incumbent brands. In the alternative to total waiver, B-6 indicates the submittal of financial statements is optional yet B-3 seems to make the submittal of financial reports mandatory. Which is it? If we are required to submit financial statements, it’s not clear how many years are meant by the term “each qualifying year”? Elsewhere it says annual reports (which would include a financial statement) for the last two years. Clarify and please limit to a reasonable period such as 2 years.

The financial history is required of all bidders. The Board of Supervisors and Airport Commission will require this information to complete their analysis. In B-1, we have provided multiple options for providing evidence of ownership. B-3 is required. All bidders is required to submit evidence for the qualifying years (3 out of the last 5 years).

9. Section III.C.2., Qualifications Questionnaire, Submittal 1 - Reference letters seem silly. If there is a question about any of the major bidders, contact information for the 3-5 largest airports in the US should suffice.

Three reference letters from non-affiliated organizations are required. Request that this requirement be waived for incumbents. If this request is rejected, may we provide letters of reference from financial institutions rather than airport reference letters?

All bidders must submit reference letters. We must ask the same information of all bidders regardless of their history at SFO. Contact information at 3-5 of the bidder’s largest airport operations would be acceptable.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Reference letters from financial institutions are acceptable.



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10. Section III.C.2., Qualifications Questionnaire, Submittal 1 – Requires officers and members to list the amount of stock ownership. These may be individuals who privately own less than 10% of stock. This information is highly personal, and can change at any given moment, and does not represent controlling interests in the bidder. Please delete for any person or entity that owns less than 10% of the total outstanding stock in the entity.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Stock ownership of less than 10% may be denoted as <10%.

11. Section III.C.2., Qualifications Questionnaire, Submittal 1 – A list of names, addresses and telephone numbers of landlords “for all operations listed above” is required. We have hundreds of locations. Please allow us to provide contact information for 5 locations.

A list of names, addresses and telephone numbers of landlords at five locations is adequate. We prefer the locations be large airports.

12. Section III.C.2., Qualifications Questionnaire, Submittal 1 – Under “Experience in the Business”, does the Airport want us to disclose how many years for positions held?

The column “Experience in the Business” is deleted.

13. Section III.C.2., Qualifications Questionnaire, Submittal 1 – What is the difference between the financials required in Section 2 vs. Section 3?

The information provided by the bidder could be the same for each of these sections. Our need for the information is slightly different. The financial documentation requested in Section 2 will be used as evidence that a bidder meets the minimum qualifications for volume of sales in the “qualifying years”. The financial documentation requested in Section 3 is requested to ascertain the financial health of the bidder.



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14. Section III.C.2, Qualifications Questionnaire, Submittal 1 –Requires the Bidder’s president and secretary to sign. We don’t have an officer whose title is “president”. May the document be signed by an authorized officer who normally signs such agreements as well as an Assistant Secretary? A corporate or board resolution evidencing signing authority could be provided.

Where a bidder is an LLC that is member-managed by two corporations, please confirm that the bid can be signed by the Vice President of each corporation and the Vice President of the LLC.

The Qualifications Questionnaire may be signed by an officer of the Bidder’s organization who is authorized to sign such a document. Documentation validating that signatory authority, for individuals with a title other than “president”, is required.

15. Section III.C.2, Qualifications Questionnaire, Submittal 1 - Can the City please confirm that annual unaudited balance sheets and income statements together with a certification letter from the parent company’s CFO will satisfy the requirements of this Part B, Item 3 of Submittal 1 of a bidding LLC?

Confirmed

16. Section III. C.4, Bid Form, Submittal 2 – The second paragraph requires that the person signing Submittal 2 has visited this Airport. This is not practical. Please delete.

Agreed. Requirement (2) in the second paragraph of Submittal 2 is deleted.

17. Section III.C.6., Original Bid Bond - The Bid Bond form attached as Submittal 4 states that it is a “sample”. Are any modifications allowed?

Will you allow us to submit our own form for your review and approval?

Modifications are allowed pending Airport approval. The content should be essentially the same. Please note that this should be done well in advance of the Bid Due Date. If we receive an incorrect Bid Bond along with the Bid on the Due Date, your Bid will be deemed non-responsive.

18. Section III.C.6., Original Bid Bond - Who should the Bid Bond be made payable to?

City and County of San Francisco

19. Section III.C.6., Original Bid Bond – When will the bid bond be returned? Under what circumstances would the bid bond be exercised?

The bid bond will be returned after the Commission awards the Leases. It will be exercised if a confirmed successful bidder decides not to execute the Lease.



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20. Section III.C.6., Original Bid Bond - Please confirm that a multi-branded bidder is required to submit only one bid deposit ($175,000).

Confirmed. One Bid Bond in the amount is required to accompany each Bid (regardless of how many brands the Bidder is proposing).

21. Section IV.4, Tenants In Compliance with Existing Lease – Please forward a copy of our accounts receivable statement so we can clear up any discrepancies in advance of submitting a bid.

Current accounts receivable status will be provided to all incumbent operators in early July.

22. Section IV, Minimum Qualification Requirements - Because of the page limitation, may an incumbent reference an enclosed Annual Report or 10-K rather than submit a lengthy typed narrative?

Yes, an incumbent may reference an enclosed Annual Report or 10-K.

23. Section VI.D., Change Notices (Addenda) to RFB - Is there an established final day prior to the Bid submission date by which the Airport may issue an addendum?

There is no deadline for the Airport to issue Addendums prior to the Bid Due Date. The Airport will make every reasonable effort to notify bidders in a timely manner of modifications to the RFB.

24. Sections VI.C and D, Nondiscrimination in Employment Program and First Source Hiring Program FSHP) – Is the five days referred to five days within the bid submittal date?

Five days from the date that the apparent successful bidder is notified.

25. Section VII.J, Sunshine Ordinance - We are a privately held company. Certain financial information is considered highly confidential and is protected from public disclosure under rules of California law, as long as they are so marked and we follow the law. Does this provision J, reject those protections once a contract is awarded? It has been held to be protected at other airports located in California, will SFO be different?

All documents clearly marked at “Proprietary” will not be subject to the Sunshine Ordinance. All other documents, however, are subject to the Sunshine Ordinance.

26. Appendix 3- When does the apparent successful Bidder have to show evidence that it is authorized to conduct business within the state of California and Counties of San Mateo and SF?

Apparent successful bidders will be identified on the Bid Due Date. Apparent successful bidders need to provide evidence of being authorized to conduct business in the state and counties within five days after this event.



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27. Appendix 3 - Indicates we need to submit four forms but then only lists three. Are there four forms to complete?

No. The three forms listed on Appendix 3 are the entire list.

28. Appendix 3 - Bidder’s must show evidence that it is authorized to conduct business in San Mateo and San Francisco. Do these counties issue business registration licenses or good standing certificates?

Please refer to www.sfgov.org/site/treasurer _page.asp?id=14980 for San Francisco and www.co.sanmateo.ca.us/portal/site/smc for San Mateo

LEASE

29. Pages i – iii, Major Lease Term Summary – Many of the Lease reference sections are erroneous. For example, “Lease Year” is not defined in Sec. 4; “Deposit Amount” is Sec. 12, not 13; “Initial Tenant Representative” is Sec. 3.12, not 3.9; and, “Other Agreements” is not Sec. 14.1.

Also, change the references “as described below” to “as described in the Lease” under “Base Rent” and “Minimum Annual Guarantee”.

The appropriate changes will be made to the Lease.

The Major Lease Term Summary is part of the Lease. When the phrase “as described below” appears, it indicates that more information can be found further on in the Lease document.

30. Page ii, Major Lease Term Summary – Typo. Does Rent Commencement Date start 90 or 120 days after the Commencement Date? Rent Commencement definition is confusing given most Operators are already occupying the premises they will in the future, with some possible adjustments.

This section will be rewritten as follows: “The earlier of: (a) the date the Tenant opens for business therein, and (b) the date that is one hundred twenty (120) days after the Commencement Date.”

31. Page ii, Major Lease Term Summary - The base term is approximately five years. Why “approximately”?

The term “approximately” is used because a new (9th) tenant may not be operational on the Commencement Date; it would be under construction. It is anticipated that incumbent operators will be operational on the commencement date. All Leases will expire on Dec. 31, 2013.

http://www.sfgov.org/site/treasurer

http://www.co.sanmateo.ca.us/portal/site/smc



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32. Page ii, Major Lease Term Summary - The “Rent Commencement Date” is defined as the earlier of when (a) the Initial Improvements “(as defined below)” are “substantially complete” and “Tenant opens for business,” and (b) the date that is 120 days after the Commencement Date. First, who determines and what are the criteria for the premises being “substantially complete”? The Initial Improvements are not “defined below”.

The Airport will determine what is “substantially complete”. The connective wording is grammatically correct. Initial Improvements defined in section 2.2 of the Lease.

33. Page ii, Major Lease Term Summary – Reallocation triggers from the Rent Commencement Date. What happens if all the operators do not have the same Rent Commencement Date?

Please confirm that if the Lease is extended five years that reallocation will take place on the first day of the 37th month from the last reallocation (rather than from the start of the new five-year term).

The number of ready/return and storage spaces assigned to each brand will be reallocated on according to market share on January 1, 2012.

In the event the City exercises its option to extend the Lease term as provided in Section 2.3 hereof, all space comprising the Premises, excluding Administrative Space and QTA Fuel Wash/Canopy Space, will be subject to reallocation on January 1, 2014 and on January 1, 2017. Beginning six months prior to these dates the RACs will have 45 days to agree on a reallocation plan.

34. Page ii, Major Lease Term Summary – State that Lease Year starts on the first of a month and ends on the last day of a month.

Lease Year means the period commencing on the Rent Commencement Date and terminating on December 31st. For each subsequent Lease Years, the period commencing January 1 and ending on December 31 of each year, or expiring on the Expiration Date, as the case may be.

35. Page 2, Section 1.1 (a)(i), Exclusive Space - Seems to leave out 3rd floor.

Noted. Exclusive Space means space leased by Tenant for its exclusive use on Levels 1 through 4 of the Rental Car Facility.

36. Page 2, Section 1.1( c)(i), Limited Common Use Space - Why would Level 2 be the only one with Limited Common Use Space?

Noted. On each Tenant’s final Lease, the appropriate level will be designated.



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37. Page 3, Section 1.2, Allocation and Reallocation of Space at Rental Car Facility – Please add an express statement in the opening paragraph that states “companies that submit multi-branded bids may, but are not required to, co-locate into each area of the Premises, Counters, Ready Return, QTA and Storage Parking, at their discretion, as described in the following sections”.

A statement will be added to the Lease that states that co-locating is optional in all areas of the RAC and QTA.

38. Page 3, Section 1.2 (a), Counters and Back Office Space - This says what happens if multi -branded bidders co-locate, but should also expressly say what happens if they do not., eg, "Multi branded bidders who do not elect to co locate will select its counters in the market share order, per 1.2 (f)..."

We will add this language to section 1.2(a) “Multi branded bidders who do not elect to co locate will select their counters in the market share order.”

39. Page 4, Section 1.2 (c), Ready/Return Space - How can it be stated, before the bids are open, that the new entrant will go in the 3rd floor?

The industry has 45 days to determine space allocation. In the event that they fail to arrive at a unanimous conclusion, the Airport has determined an allocation plan as described in Section 1.2 of the Lease. The 3rd floor was selected as the most likely floor for the 9th brand to occupy, in that it was the least disruptive to the whole group. The ninth brand was allocated 54 spaces based on calculations of what the minimum requirements would be for a new operator.

40. Page 4, Section 1.2 (c) v. – Redundant with Section 1.2 (i).

Agreed. Section 1.2(c)v. will be deleted.

41. Pages 4 and 5, Section 1.2., Allocation and Reallocation of Space at Rental Car Facility – Where non-vacated space is reduced to accommodate a potential 9th operator, please confirm that the 9th operator pays all required demolition, relocation and replacement costs of displaced incumbent.

The 9th operator will pay for its new construction only. Incumbents who are dislocated from any space will be responsible for removing their trade fixtures, signage, equipment and furnishings, at their own cost, located in the 9th operator’s premises.



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42. Page 5, Section 1.2(d)(iv), 5th Floor Space - What is part of the 5th floor being reserved for? This should only be for RAC use, or will this be parking for outside vendors who are working at the GTC? No one unrelated to the GTC should be allowed to park at all.

Use of Airport property is determined by the Airport.

43. Page 5, Section 1.2 (e), QTA Space - What if more than one "brand family" co-locates in the QTA area, they must move into "one" of its existing QTAs. Given the current ownership picture, 3 vacant QTAs could be left. It should state that a 9th operator will take the smallest, vacant QTA before "sharing" an existing with the low market share RAC. If none are vacated, the sharing formula applies.

Currently, Alamo and National (Vanguard) occupy two QTA fuel wash spaces. They have one Concession Agreement but two Leases. Per Lease Section 1.2 (e) (ii), if as a result of the bid, a vacancy is created at the QTA, the ninth brand will take that space.

44. Page 5, Section 1.2 (e), QTA Space - Please confirm that per the QTA exhibit distributed at the pre-bid meeting (attached) depicting where each operator operates today is what is meant by the term “in their current configuration” used in this section.

Confirmed. Yes, the exhibit distributed at the meeting depicts the current operating configuration of the incumbent operators.

45. Page 5, Section 1.2 (e), QTA Space – On the QTA exhibit distributed at the pre-bid meeting (attached), Avis is depicted in red and Budget is depicted in orange. For the purposes of co-locating, does the Airport consider this area (red and orange) one current location or two current locations?

Avis and Budget are operating in the QTA in one shared space. The drawing will be updated to reflect a total of five (5) operating spaces.

46. Page 6, Section 1.2 (f), Market Share Determination - Can a company that owns multiple brands submit a multi-brand bid for some, but not all brands, and another for a single brand?

Yes.

47. Page 6, Section 1.2 (f), Market Share Determination – The second paragraph seems misplaced and needs it own section number.

Agreed. This paragraph will be designated as 1.2(g) and the subsection will be renumbered.

48. Page 6, Section 1.2 (f), Market Share Determination – How is the Common Use Space and Limited Common Use Space calculated for the 9th operator?

The 9th Operator’s minimum proportionate share will be calculated at 2%.



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49. Page 6, 1.2 (g), Minimum Space Allocation - This misstates how the minimum allocation works. Should say "No operator will receive less than an area accommodating 54 RR positions and 17 linear feet of counter..." This avoids the problem of first giving every RAC 54 stalls out of the total prior to allocating the remaining space based on bid share.

Agreed.

50. Page 6, 1.2 (g), Minimum Space Allocation - In the “Minimum Space Allocation”, please confirm the location and amount of Administrative Space that will be made available to the potential 9th operator.

The ninth operator will be offered space on the first floor with space and square footage to be selected by the operator from several potential locations.

51. Page 7, Section 1.2 (k), Method of Allocation - In the “Method of Allocation” section on page 7, please confirm that market share data will be based upon the previous twelve months (not “calendar year”) of reported gross revenues.

This section will be rewritten to reflect that the initial space allocation will based on calendar yaer 2007. Subsequent space allocation pursuant to Section 1.2 will be based on a twelve-month period ending September 30 of the year prior to the year in which the reallocation becomes effective. The Airport reserves the right to stipulate a different twelve-month period, if deemed appropriate.

52. Page 7, Section 1.3, Relocation, Expansion, Contraction - Should a company, whether a new entrant or an existing company acquire significant market share increases, will the airport use this section to force space changes to make the building work better if the companies cannot agree among themselves.

Possibly. It is envisioned, however, that Section 1.2, Allocation and Reallocation of Space at the Rental Car Facility will suffice in keeping the space balanced from an operational perspective.

53. Page 7, Section 1.3, Relocation, Expansion, Contraction - Strike this section. This facility is not part of Central Terminal area and was built specifically as a car rental facility. There should be no reason for any relocation, expansion, or contraction during the term of this agreement. Please explain what would cause an implementation of this section if not to better utilize the existing space.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained.

This provision is rarely utilized by the Airport; it is a necessity due to the dynamic environment we all operate within. This provision will support us in an unseen event such as an urgent need to change the use of a space.



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54. Page 7, Section 1.3, Relocation, Expansion, Contraction - Please confirm the definition of “Maximum Reimbursement Amount”.

The Maximum Reimbursement Amount will be agreed upon between the Airport and the tenant prior to any construction taking place.

55. Page 8, Section 1.3, (c and d), Relocation, Expansion, Contraction - Please confirm that with any “Required Relocation”, the RACS’ MAG will never be increased.

The Airport should not have the right to adjust MAGs when space is adjusted, particularly to increase the MAG.

Agreed. We will adjust lease language so that space rent would be increased or decreased due to relocation, expansion and contraction as opposed to MAG.

56. Page 8, Section 1.4, Re-measurement of Premises - Delete this section. The Airport should not be permitted to retroactively bill, for years, due to a re-measurement. There must be a responsibility on the part of the Airport to bill correctly.


57. Page 8, Section 1.5, Changes to Airport - More boilerplate that should not apply to the Rental Car Center, particularly with no relief from our MAG in event of negative impacts to our business. Strike completely.


58. Page 8, Section 1.5, Changes to Airport - This paragraph essentially allows the airport to do as it pleases in connection with how the airport operates to make it as efficient as possible. Under this clause, we waive all rights for redress. Without questioning the right of the airport to manage and operate the airport, if there is a material adverse restriction caused by the airport, it appears the concessionaires have no recourse. Would SFO consider allowing the MAG to be eliminated, reduced or amended, or allow a company to terminate their concession, should such material adverse condition be imposed upon any concessionaire?

Should the Airport enforce this or any other section of the Lease that would cause a tenant to relocate, redress is afforded under Section 1.3.



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59. Page 9, Section 1.6, Common Areas – States that the City may impose parking charges. Is the City’s right to do so relevant to our agreement or operation?

Yes. The Airport retains the right under Section 1.6 to impose parking charges. For example, parking fees have been levied on Rental Car Operators that have parked rental cars on Airport Property outside their leased areas.

All tenants are subject to City and County laws that apply to parking on Airport, City and County streets.

60. Page 9, Section 1.6, Common Areas - Please confirm whether the operating and maintenance services provided by the City for the RACS’ common areas have changed.

No. There are no changes to the maintenance services provided by the City to the RAC.

61. Page 10, Section 2.2, Tenant Improvements and Required Opening Day – Tenant improvement work should be minimal. However, there could be some tenant improvement work which will take longer than 120 days to get permitted. Since this area of the Rental Car Center does not impact airport operations, the $500/day fine is not reasonable and should be stricken.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. If, for reasons out of your control, you cannot complete the work by the 120th day deadline, you can submit a request to extend the completion date. The request should provide justification. The request will be reviewed by the Director and all reasonable requests will be granted. The fine language will remain.

62. Page 10, Section 2.3, City’s Option to Extend Term – Rental car operators want the option to extend the Lease. Conditions at that time may be such that it is no longer prudent to operate.




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63. Page 11, Section 3.4, Transportation Fee – Add "The RACs shall be consulted on any proposed increase to the Transportation fee, and City shall reasonably review any potential impacts to the RAC business before making any final decisions to increase the Fee." Third sentence strike "in its sole discretion."

Please limit any proposed increase to the Transportation Fee to no more than once every five years after “reasonable” notice is provided to the RACS.

We would like to consult with the Airport on the Transportation Fee. Please remove “in its sole discretion” and add ”in consultation with the rental car operators”.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. The rental car operators will be notified 45 days in advance of a transportation increase.

64. Page 11, Section 3.5, Hours of Operation – Delete everything after the second sentence of the second paragraph. We agree to comply with specific obligations of our service such as cleanliness, safety, and model year but we cannot have the Director objecting to quality and appearance of automobiles available etc.

The second sentence of the second paragraph has been amended to read, “Director shall have the right to make reasonable objections to the cleanliness, safety and model year of the automobiles available for rental, the character of the service rendered to the public, and the appearance and condition of the Premises.”

65. Page 12, Section 3.10 (b), Prohibited Activities - Why are vending machines and other credit card devices prohibited? Some of us have business traveler areas and such, the purpose of which is to provide our customers with an area, and perhaps services and material, of use. We can include any revenue we net into the Gross Revenues as Misc income.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. This language is not intended to prohibit appropriate amenities. Please note that the Airport Director has the authority to grant exception to this prohibition and will be reasonable in doing so.

66. Page 13, Section 3.11, Audit of Operation - SFO can audit all aspects of a concessionaires’ business and possibly begin a default process. Is there an appeal process? Is there a time for cure under this provision? Is this section tied to the cure provisions found in the default sections of the Lease?

All pertinent information regarding default, including remedies, is contained in Section 14. Default; Remedies.



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67. Page 13, Section 3.11, Audit of Operation – Please confirm that the City will provide “reasonable” notice prior to an audit.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Operational inspections are sometimes spontaneous - unscheduled and unannounced.

68. Page 13, Section 3.13, Investigative Reports - This is not applicable to a rental car facility. We have our own Policies and Procedures and union agreements which govern our hiring practices, we will not submit to the Director telling us how we should conduct a background investigation. We are not providing services on the AOA. Strike this.

This language will be changed to: “mutually agreed upon by the tenant and the Director…”

69. Page 14, Section 4.1, Definitions – The phrase “Full Rent Commencement Date” is used but it is not defined anywhere in the Lease.

References to “Full Rent Commencement Date” will be deleted in the Lease.

70. Page 14, Section 4, Rent – Please add the following language for RACS that opt to recoup the concession fee:

“Tenant shall list separately on any customer rental agreements, contracts or invoices, the concession fee payable by Tenant to the City for the privilege of doing business at the Airport under this Agreement. Tenant shall list such concession fee as a “Concession Recovery Fee” on all such customer rental agreements, contracts or invoices. Tenant agrees that at no time will the concession fee listed on the customer rental agreement, contract or invoice, exceed eleven and eleven one-hundredths percent (11.11%).”

Agreed. The requested language has been added to the Lease as Section 4.1(a)viii.

71. Pages 14 thru 17, Section 4, Rent – It is confusing to mix Base Rent and Space Rent.

Agreed. Definitions of Base Rent and Space Rent will be included under the Summary page and Section 4.1(a) of the Lease.



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72. Page 16, Section 4, Rent and Exhibit A, Premises – Why do we have rent components in both?

Lease Section 4 is intended, in part, to outline the different types of Space rent (i.e. Exclusive, Common Use) while Exhibit A is intended to list the square footage of the different types of space that an individual tenant has.

73. Page 14, Section 4.1, Definitions - Strike "at the time of renting" in the first sentence and substitute with "at the time of closing out the rental agreement." Final charges are sometimes adjusted at the close of the rental because the customer, for example, rented for 2 days instead of 3 as initially noted at the beginning of the rental, or some other such errors that are corrected at the counter when closing out the rental transaction.

Agree. The Lease language will be amended to read “…completion of rental.”

74. Page 15, Section 4.1, Definitions – Define “Base Rent”.

Base Rent is defined as the gerater of the MAG and 10% of gross revenues, per Lease Year. This item will be included in the Lease as Section 4.1(c) and the subsection is renumbered.



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75. Page 15, Section 4.1, Definitions – Add the following language: "Notwithstanding the Exclusions from Gross Revenue listed above, in the event California Civil Code Sec 1936 et seq is amended, repealed or otherwise limits the Operator's right to charge a Concession Recoupment fee in any manner, the following sources of revenue shall also be excluded from the term Gross Revenues:

1. The amount charged to Operator's Customer at the commencement or conclusion of the rental agreement as an optional charge for waiver by Operator of its right to recover from customer for damage to or loss of the Vehicle rented;

2. The amount charged to Operator's Customers at the commencement or conclusion of the rental transaction for the cost of furnishing and/or replacing fuel provided by the Operator;

3. The retroactive adjustment by Operator of Gross Revenues designated as volume discounts."


76. Page 15, Section 4.1, Definitions - We respectfully request the following items be specifically excluded from Gross Revenues (page 14):

• Fuel • Transportation (AirTrain) Fees • Carbon Offsets • Damage Waivers, Personal Effects

Coverage, Personal Accident Insurance, Supplemental Liability Protection

• Amenities: GPS, satellite radio, baby seats, etc.

• Parking tickets, Tolls, Towing & Impound Fees, Traffic & Red Light Tickets




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77. Page 15, Section 4.1, Definitions - We note that you are disallowing our Corporate Discount Program, we prefer it be allowed.


78. Page 15, Section 4.3 (a), Monthly Space Rent Payments – The breakdown of the components of Structure Rent adds up to $9.25 rather than the total charge of $10.13. Is the $0.88 difference profit to the Airport? Also, why are we paying $0.47/square foot for the “financial savings” realized from the use of General Airport Revenue Bond Financing (emphasis added).

This section will be corrected. The missing “$0.88” represents the Airport’s operations and maintenance costs associated with maintaining the rental car center. Tenants are paying financial savings because had they obtained construction financing that would have been at a higher interest rate than the Airport was able to secure.

79. Pages 15 and 16, Section 4.3 (a), Monthly Space Rent Payments - If “unimproved land value” is already a square footage rent component in Surface Rent why is it also included as a square footage rent component in Structure Rent ?

Unimproved land value is built into structure rent because the structure sits on that land.

80. Page 16, Section 4.3(a)(i), Monthly Space Rent Payments - Level 3 space is not mentioned.

Level 5 is incorrectly included in this section.

Agreed. The Lease language will be amended to include Level 4 and remove Level 5 in Monthly Space Rent Payments.

81. Page 16, Section 4.3, Monthly Space Rent Payments - As mentioned in the pre-bid meeting, the uncovered garage space on the 3rd and 4th floors should be charged the same rent as the 5th floor overflow parking space (“Surface Rent”).


82. Page 16, Section 4.3, Monthly Space Rent Payments - We believe the wording implies that the rents will be prorated to the actual space occupied, and later defined after the Bids are accepted. Is the language sufficient to prorate the rent to each company for their space occupied and a prorate of common space?.

The language is sufficient to prorate exclusive and common space rent.



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83. Page 16, Seciton 4.4, Adjustments to Annual Space Rent – If the appraisal evidences that the market value of unimproved land has decreased, will the Annual Space Rent be decreased below prior rates?

No. The Annual Space Rent will never be less than the previous year.

84. Page 16, Seciton 4.4, Adjustments to Annual Space Rent - We respectfully request that any annual adjustments be capped at 2%.


85. Page 17, Section 4.7, Monthly Concession Rent Payments – Requires a monthly concession rent payment of the “estimated monthly Base Rent” on or before the 1st day of each month. Because our accounts payable department does not have the financial rental data or ability to make estimates, please request that car rental companies be required to only pay 1/12 of the MAG and Space Rents. We do not pay an estimated percentage concession fee at any other airport in the county.

Base Rent is 1/12 of the MAG. The methodology of paying Concession Rent and Space Rent is consistent with the current practices for RAC tenants at SFO.

86. Page 17, Section 4.7 (d), Monthly Concession Rent Payments – In what case would the first Lease Year be less than 12 months?

A new 9th operator would probably need to utilize the 120 day build-out time frame, thereby, lessening its first Lease Year.

87. Page 17, Section 4.7 (f), Monthly Concession Rent Payments - We respectfully request that the City provide written notice prior to assessing any service charges or interest.

Written notification will be the invoice which includes the charges or interest. The Airport staff is available to discuss these charges or interest after the invoice has been received by the rental car operator.

88. Page 18, Section 4.10, Rental Car Concessionaire Incentive Program - Please reduce the green initiative incentive targets to a) 12% in years’ one and two, or b) 10% in year 1 and 13% in year 2.


89. Page 18, Section 4.10, Rental Car Concessionaire Incentive Program - Please clarify how the green initiative rent credits will be received at the close of each lease year after the annual qualifying target has been met.

The green incentive rent credits, direct to the rental car operators, will come in the form of a rent credit issued after the year-end true up is conducted. The year-end true up is conducted as a result of your annual certified statement.



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90. Page 18, Section 4.11, Rental Car Customer Incentive Program - Please clarify the last sentence of this paragraph. Does this sentence in any way diminish the benefits given under paragraphs 4.9 and 4.10 for those companies able to comply?

The last sentence states that the Airport will not reimburse tenants for the proportionate share of a concession recoupment fee that they COULD have charged a customer on the $15 discount. We don’t believe the benefits under paragraphs 4.9 and 4.10 are diminished by this.

91. Page 18, Section 4.12, Annual Report and Adjustment - Delete provision that requires annual report to be certified by a CPA.

The following language will be added to the Lease:

Within ninety (90) days after the end of each Lease Year, Tenant shall submit to Director an unqualified year-end financial report certified by a Certified Public Accountant, or a year-end financial report certified by Tenant's chief financial officer if such officer is approved by the Director, showing Gross Revenues achieved with respect to the prior Lease Year.

92. Page 19, Section 4.13, Cash Register Requirements - Delete this whole provision as not relevant to the rental car Industry. We do not have cash registers, all of our documentation is computer generated.

Agreed. This Section will be deleted.

93. Page 19, Section 4.14, Books and Records; Audits Rights - Please change this to keeping records for 3 years after the record was created or at least reduce the time period for keeping documents. With an extension of this agreement it is feasible that we would have to keep records for as long as 15 years. Also, delete the balance of the entire provision beginning with the last sentence on the page, not relevant to the rental car Industry.

Please consider requiring rental car operator to maintain records for a rolling three year period.

Delete reference to cash registers in this Section. Cash registers are not used.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. All City departments are required to keep records for 5 years.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Agreed. This reference has been deleted from the Lease.



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94. Page 20, Section 4.15, Other Reports and Submissions - Delete this provision, we will not provide quarterly California sales and use tax returns or Federal income tax returns.


95. Page 21, Section 4.17, Prepay Rent - Delete this provision, we already pay 1/12th the Minimum Annual Guarantee (MAG), now you want to collect rent on a quarterly basis?

This provision is relating to Tenants that have failed to pay rent when due and it asked for rent one month in advance.

96. Page 21, Section 4.18, Nature of Lease - It appears that we have no redress or right to object to actions taken by SFO. If that is the case, please delete Section 19.5, as they appear to be inconsistent.


97. Page 21, Section 4.19, Severe Decline in Enplanements – The basis for abatement should be on “deplanements” rather than “enplanements”. Please note that Appendix 2 provided by the City actually lists “deplanements” for the calendar years 2003 – 2007.

This recommendation is correct in theory. We will, however, use the language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008. Deplanements historically mirror enplanements, so, there is no benefit to be derived by making this change. Enplanements is the basis of MAG adjustment process for all our leases and we would like to have the rental car leases consistent for practical reasons.

98. Page 21, Section 4.19 (a) i., Defined Terms – Relevant Boarding Area is not defined in the Summary.

Definition will be changed as follows: “Relevant Boarding Area is the total of all boarding areas.”

99. Page 21, Section 4.19 (a) v., Defined Terms – Percentage Rent is not defined in the Summary.

Agreed. “Percentage Rent” will be inserted into the Base Rent definition on the Major Lease Term Summary.

100. Page 21, Section 4.19 (d)., Determination of Enplanements and True-Ups – Please change the requirement to true-up any deficiency after notification from the City from “5 days” to “5 business days”.

Agreed. This change will be made.



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101. Pages 24 and 25, Section 5, Assignments or Subletting - Please consider allowing for mergers and acquisitions to take place without prior approval of SFO as long as there is no diminishment of net worth after the acquisition or merger.

Begin this provision with "Except to a company with whom it merges," and continue with the balance of the paragraph.

Suggest this be added: "Notwithstanding anything to the contrary in this Lease, the City agrees that it will not require prior consent, nor will it unreasonably condition or withhold its subsequent consent to an assignment or transfer of this Lease and all rights, title, and interest hereunder by Operator to: (i) any corporation or other legal entity which at the time of such assignment is a parent of, subsidiary of or under common ownership and control with the Operator, (ii) to any corporation or other legal entity with which the Operator may merge or into which it may consolidate, or (iii) to any person, firm or corporation which may acquire all or substantially all of Operator's rental car business or assets; provided in each instance the surviving, resulting or transferee corporation expressly assumes in writing all the obligations of Operator contained in this Lease. In such cases, the Operator shall notify the City of such assignment and request consent within 60 days following any such assignment."

Conform to recognize that a tenant has the right to merge or be acquired by another tenant or entity upon notice to the Airport.


102. Page 25, Section 5.6, Waiver – Delete this section.




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103. Page 25, Section 6.1(a), Taxes - Why should we acknowledge or agree that the City's unilateral exercise of an option to extend the term "constitutes a change in ownership for purposes of property taxation..." Delete this. Under the tax code, it either is, or isn't a "change in ownership". We are not going to affirm, extend, or broaden, by contract, what the tax code presumably already provides.


104. Page 26, Section 7.1, Minimum Investment - Why must we make an investment of $150 a square foot if the work we must do only costs $120 a square foot? Please delete this provision.

Delete this provision, not relevant, the initial investment has been made.

Minimum Investment language required for non-incumbent operators. Language in Lease will be changed to match RFB.

105. Page 28, Section 7.9, Labor Harmony – If we are required to comply, change the reference to the domestic and international terminals to the rental car center. If we are not required to comply, delete this section.

Required. Reference has been changed to read “the rental car center.”

106. Page 29, Section 8.3, Shared Telecommunications Services - We are not sure of all of the implications of this section, but we are not willing to now waive our right to obtain competitive telecommunications systems or service that might otherwise be available to us and guarantee our participation in the City "STS Program", the terms of which are currently, totally unknown. That's just not reasonable.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. The STS program does not currently exist at the Rental Car Center. When it becomes available at the Rental Car Center, it will be optional for all existing tenants. All new services after that time will be required to use the “STS Program”.

107. Page 29, Section 9, Maintenance and Repair - With respect to accepting the premises in “as is” condition (page 29), please indemnify Tenant over any pre-existing conditions and also specifically as to “environmental condition”.

No.



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108. Page 29, Section 9, Maintenance and Repair - We respectfully request the following language be incorporated, so as to indemnify Tenant over any pre-existing conditions (page 29)-

“City and its successors, assigns, trustees, beneficiaries and legal representatives will protect, indemnify, defend and hold harmless Tenant, its officers, directors, shareholders, representatives, and their respective successors and assigns from and against all judgments, suits, proceedings, liabilities, losses, costs, judgments, orders, obligations, damages, expenses or claims (whether by third parties or governmental authorities) arising out of or in any way relating to the existence of any Hazardous Materials placed on, in or under the Premises by any person or entity other than Bidder or any person or entity acting for, by or through Tenant or with Tenant’s permission or acquiescence. This indemnity includes, but is not limited to, remedial, removal, response, abatement, cleanup, legal, investigative and monitoring costs, penalties, fines and disbursements (including, without limitation, attorneys', consultants' and experts' fees) of any kind whatsoever, which may at any time be imposed upon or incurred by any indemnitee arising, directly or indirectly, (i) from requirements of any federal, state or local environmental law; (ii) in connection with claims by government authorities or third parties related to the condition of the Premises; and/or (iii) from the presence or existence of Hazardous Materials on, in or near the Premises, including all consequential damages.”


109. Page 31, Section 9.4, Waiver of Repair Rights – Delete this section.




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110. Page 31, Section 10, Signs and Advertising - Delete the second paragraph.


111. Page 32, Section 11.1, Waiver – We object to the waiver of the benefit of Section 1542 of the CA Civil Code.


112. Page 32, Section 11.1, Waiver – In Section 11.1 on Page 32, please replace the following language in the first sentence of Section 11.1, “whether or not such Losses shall be caused in part by any act, omission or negligence of any of City, Commission, its members, or any officers, agents, and employees of each of them, and their successors and assigns (each, a “City Entity”), except if caused by the sole gross negligence or willful misconduct of City” with “Unless such damage or loss arises from the negligence, wrongful acts or omissions, or willful misconduct of the City, Commission, its members, or any officers, agents, and employees of each of them, and their successors and assigns (each, a “City Entity”).”


113. Page 32, Section 11.2, Indemnity - Please remove the last part of the first sentence of the Indemnity provision on page 32 (“whether or not Losses shall be caused in part by any act, omission or negligence of City or any City Entity”) and replace it with “unless such damage or loss arises from the negligence, wrongful acts or omissions, or willful misconduct of the City or any City Entity.”


114. Pages 32 and 33, Section 11.6, Insurance - Regarding insurance requirements (pages 32-33), we respectfully request that language be included stating that City insures the buildings in which Tenants operate, and that City carries comprehensive general liability insurance covering City, its officers, agents, employees, contractors, subcontractors, and representatives.




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115. Page 33, Section 11.6 (e), Insurance - With the security deposits, is this type of insurance necessary? Will SFO waive this provision?

Delete the requirement to obtain Business Interruption Insurance.

Throughout the document the Operator waives all claims for any loss or damages for almost any peril conceivable, thus, the requirement to provide business interruption insurance coverage is not needed. That is a business decision each company should make. What is the City's interest, or risk if a RAC decides not to obtain this coverage?

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. For instance, if there is a power outage at the Rental Car Center, the Airport is not liable for the potential loss of business revenues due to the outage. Security deposits only protect against 50% of the annual MAG, and Business Interruption insurance would protect against the other half.

116. Page 33, Section 11.6 (e), Insurance – Delete “partially” from the second paragraph under this section.

Agreed.

117. Page 33, Section 11.7, Form of Policies - With respect to the insurance being “primary” as referenced in part (b) of 11.7, please incorporate the following language, “except as to claims of damages or injuries caused by the negligence, wrongful act or omission, or willful misconduct of the City, its successors, officers, agents, employees, or contractors.”


118. Page 33, Section 11.8, Delivery of Policies or Certificates - Please delete requirement to provide actual copies of insurance policies.

We will not deliver an actual copy of our insurance certificate. There is confidential information on it. We will provide a copy of an insurance certificate.

Certificates are acceptable. However, the City reserves the right to examine Tenant’s actual insurance policies on a case by case basis.”

119. Page 34, Section 12.1, Form of Deposit - Will the City accept our standard performance bond to fulfill the Deposit requirement?

No. Proposer must provide a new deposit to fulfill the bid bond requirements.



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120. Page 34, Section 12.1, Form of Deposit – Please lower the security deposit from 50% to 25%.


121. Page 34, Section 12.2,, Maintenance of Deposit - Will SFO reduce the time to less than 30 days? 45 days in advance is unreasonable; our insurers like to have the most current data available as they renew our bonds and insurance.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Forty-five (45) days will give the tenant ample time to locate a suitable insurer should they need to change agents.

122. Page 35, Section 13, Damage or Destruction - We respectfully request that if the premises are damaged or destroyed, Tenant is not required to pay Rent.


123. Page 35, Section 13.1 (d), Partial Destruction of the Premises - 10 days is not sufficient time to fully investigate and make a decision relevant to a partial destruction of the premises. Will SFO consider making this 30 days.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. 10 days is enough time to assess damage.

124. Page 36, Section 13.5, Abatement of Rent: Tenant's Remedies - Delete this provision. We will not waive the statute for destruction or damage of Premises.


125. Page 36, Section 14, Default; Remedies - Please confirm that written notice by City will be provided in the event of any alleged Default.

Confirmed. Airport will provide written notice of default.

126. Page 36, Section 14.1, Event of Default - Default is an extreme penalty. Will SFO consider extending the notice date from 3 days to 10 days, or at least 5 business days? This additional time is needed in case of error, transmission issues or non delivery of money thru no fault of the company. Having someone around who can sign may not be available on 3 days notice (especially with having to give 22 days off under this lease. SFO has 6 months of security as additional protection.

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. Prior to a three (3) day final notice, the tenant is given a thirty (30) day notice.



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127. Pages 37 and 41, Sections 14.2 and 14.11, Statutory Notices and Waiver of Notice - Waivers need to be deleted. If there is a problem, concessionaires need some notice and time to cure. Will SFO delete these provisions, thus requiring some statutory notice for ultimate resolution of problems, if any occur?

Language published in the RFB for Lease Agreement for Rental Car Center Operations at San Francisco International Airport dated May 2008 shall be maintained. The two sections will not be deleted.

128. Page 38, Section 14.3, Remedies - Third paragraph change the interest rate to 12% from 18%.


129. Page 40, Section 14.8, Fines – Delete the fines (especially the exorbitant $500/day for failure to submit required documents and vague “failure to comply” or “abide” with Lease requirements). The City already has the right to default a Tenant if need be.


130. Page 41, Section 14.9, City Lien – Please incorporate the following into the Lease: “The City will not claim or have a lien of any kind, be it contractual or statutory, on or against Tenant’s motor vehicles for non-payment of Rent, default of Tenant or any other reason, and the City hereby waives all such liens available to the City.”


131. Page 41, Section 14.10, Commencement of Legal Action – Request deletion of this waiver concerning the expiration of the statutory period to enforce obligations.


132. Page 41, Section 14.11, Waiver of Notice - Delete this section.




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133. Page 41, Section 15, Surrender - Regarding the requirement to restore the Premises to the same condition as when received, we respectfully request that any permanent improvements that may have been installed, such as demising walls, are not required to be removed.

Please add the following language to the end of this section, “The Tenant shall not be required to remove any permanent improvements, including but not limited to demising walls. Tenant shall only be required to remove personal property and trade fixtures, and shall leave the Premises broom clean, and in good condition, ordinary wear and tear excepted.”


Please refer to Lease Section 7.5 Title to Alterations.

134. Page 41, Section 15, Surrender – We need to know whether underground storage tanks (UST’s) will remain with the property and become the property of the City or, if we will be responsible for removing UST’s at the end of the term.

The UST’s will be grandfathered in to the QTA fuel / wash area, therefore remaining with the property.

135. Page 42, Section 16.1 (b), Hazardous Material – We need to know what materials are listed in the Airport’s TI Guide. Please provide a copy.

An electronic copy of the Tenant Improvement Guide can be obtained by contacting Matthew McCormick, SFO Revenue Development and Management, at 650-821-4500.

136. Page 42, Section 16.2, Tenant’s Covenants – Typo. Change "retail sales" to "rental car services."

Agreed.

137. Page 42, Section 16.4, Environmental Audit – Should the last word of the second sentence be “containment” rather than “contamination”?


138. Page 42, Section 16.5, Closure Permit – Change the last sentence to read, “Such removal shall be performed in accordance with local, state and/or federal requirements.”




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139. Page 42, Section 16.6 (a), Environmental Compliance Requirements – Change the last sentence to require Notices of Violation are forwarded to the Airport within “10 working days” rather than “5 working days”.


140. Page 47, Section 18.7, Sponsor’s Assurance Agreement - Will SFO make this provision both directions creating limitations on damages for both sides of this Lease?

No. The City will not be liable to any entity for damages or loss of revenues (profit).

141. Page 56, Section 19.5, Interpretation of Lease – Please delete.


142. Page 57, Section 19.8, No Third Party Beneficiaries - This Lease has references to certain provisions making employees third party beneficiaries of our obligations to comply with City Codes. It is inconsistent then with this Section. Will SFO make changes or carve out those provisions for which there are third party beneficiaries?

There are no third party beneficiaries.

143. Page 57, Section 19.13, Attorney’s Fees - We believe it is unfair to tack on attorney’s fees for monitoring and federally authorized relief should that happen to any concessionaire. Will SFO delete the next to last sentence of this Section?

Request that liability for imputed fees of City Attorney should be based on their actual salaries – not attorneys in private practice.


144. Page 58, Section 19.18, Quiet Enjoyment and Title - Should stand on its own; however, that being said SFO retains the rights granted in this lease to enter our facilities at any time, for any reason, without notice and at some times with notice. Isn’t this inconsistent with the title quiet enjoyment?

No. The Airport retains the right to enter tenant spaces, just like all landlords.



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145. Page 59, Section 19.22, Estoppel Statements – Request that Estoppel Statements be delivered by Tenant within ten “business” days, rather than calendar days.

Please modify the language to read “within 10 days after receipt of request”.

Agreed. The Lease will be changed to specify ten (10) business days.

146. Page 60, New Section - Please incorporate the following into the Lease -

Most Favored Nations

In the event that any contract granted by City to any other automobile rental operator shall contain any terms and conditions more favorable to such operator than the terms and conditions herein described (other than the number of allocated parking spaces and the location of the concession area, etc.), then, at the option of Tenant, this agreement shall be amended to include such more favorable terms and any offsetting burdens that may be imposed on any such other Tenant. The intent of this provision is to ensure that Tenant will be able to compete on terms as equal as possible with all other automobile rental operators and to ensure that no other Tenant shall enjoy any rights or privileges more favorable to such Tenant than those enjoyed by the Tenant herein.”

Agreed and will be added as Lease Section 19.27.



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GENERAL QUESTIONS

147. Please define the term “Co-Locate” as used throughout these documents. There are times when its unclear if “co-locating” requires two, or more brands to share space, as currently sized, or if the facility, such as a counter, will be resized in proportion to the Operator’s bid or market share of all brands. It is anticipated the answer may be different depending upon which area, (RR, Counters, QTA or overflow parking), is being discussed.

Co-Locate is defined as two or more brands sharing one location.

Co-Locating would not affect RR, 5th Floor Storage Area or QTA stacking space because that is determined by bid amount.

If multi-branded bidders elect to co-locate their brands, their combined brand market shares will be considered for counter selection purposes. Counter will not be re-sized with the exception of the event of a ninth brand as detailed in Exhibit A, page 5.

QTA Fuel Wash Areas are grandfathered with the exception of the lowest market share brand which will share it’s space in the event of a successful bid of a ninth brand operator.

148. Please affirm that if a company submits a multi-branded bid that it may elect to co-locate in one area of the leased premises, but not all areas of the leased premises, as desired.

Multiple branding will be permitted. Companies owning more than one brand will be allowed to submit a multi branded bid. Companies who submit a multi branded bid will not be required to co-locate their brands. Companies may elect to co-locate in one area and not all areas of the leased premises.

149. When counters/back offices are selected in market share order, would they be re-sized to reflect the market share (single or combined) of the Bidder that wants it, or remain in same configuration?

Counters will not be re-sized with the exception of a successful ninth brand bidder.

150. The drawings do not indicate how many linear feet each existing counter has. Can we get that information?

Approximate linear lengths are as follows:

• Avis 62’ • Budget 31’ • Dollar 29’ • Enterprise 23’ • Hertz 90’ • Thrifty 22’ • Vanguard 96’



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151. Is SFO satisfied with the maintenance being conducted by the third party administrator under the existing Lease to date?

Yes.

152. Please confirm that if Avis (as a single-branded or non-co-located bidder with the second highest market share) selects the Vanguard Counter/Office Block, then Avis would be required to share the Vanguard Counter/Office Block with the potential 9th operator if no existing counters become available to the 9th operator in the bid.

The ninth operator s Ready Return space allocation is referred to in Section 1.2 (c) of the Lease and indicates the location on the third floor with 54 stalls. The drawing will be modified to reflect that the ninth operator will be placed somewhere on the 3rd floor, exact location to be determined after bidding.

153. If a multi-branded bidder does not co-locate parking and presently are on two different floors, does the bidder decide how much of its space, per total bid share, it takes on each floor for each brand?

The allocation of space will be in proportion to each brand’s proportionate market share of that entity.

154. Do Alamo and National currently occupy one or two QTAs? The market share seems to be reported as one. Do they have one or two Concession Contracts now?

Please confirm that the City is treating the current Alamo and National counters as one single counter block (hereinafter “Vanguard Counter/Office Block”).

Please confirm that the City is treating each of the existing Alamo and National space components subject to grandfathering (R/R location, QTA, 5th Floor Parking, and Administrative Offices) as single Vanguard space blocks.

Two QTAs. One concession contract. Two lease agreements.

Confirmed. The Airport considers the Vanguard or Alamo/National counter to be one location for the purposes of allocating counter space at the inception of this Lease.

155. Please confirm that the City is treating the five current QTA fuel/wash canopy areas subject to grandfathering as five “blocks” of space.

Please send a revised drawing of Level 1, QTA Space Allocation which shows 5 fence lines as was discussed in the pre-bid meeting.

The Airport is treating the QTA fuel/wash areas as five blocks of space for the purposes of grandfathering. Please remember that the stacking space will be allocated based upon bid. A new QTA drawing will be in the Addendum.



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156. Please confirm that the Administrative Space subject to grandfathering is based on the allocated space identified in our existing Leases.

Please provide an exhibit that identifies the RACS’ Administrative Space.

Confirmed. An exhibit will be provided in the Addendum.

157. Please confirm square footage totals for each space component to be awarded with this bid along with itemized breakdown for exclusive, common and limited common areas.

This will be determined once the bids are received, and after the RAC’s have had 45 days to deliberate on the space allocation.

158. Please confirm that if Vanguard and Enterprise multi-brand and select the Vanguard Counter/Office Block and choose to co-locate the Enterprise brand with Vanguard in this space, the vacated Enterprise brand’s counter/office space would be available as the potential 9th operator's counter/office space and the potential 9th operator would not be allowed to select any space from the multi-branded, co-located Vanguard Counter/Office Block.

Please confirm that if Vanguard and Enterprise multi-brand and select the Vanguard Counter/Office Block but choose not to co-locate the Enterprise brand in this counter/office space, the 17 linear feet of counter/office space for a potential 9th operator will be provided from the National side of the Vanguard Counter/Office Block rather than the Alamo side.

Confirmed with the caveat that this scenario assumes that Vanguard or Alamo/National/Enterprise will select a counter prior to the 9th operator based on the bid amount.

159. Please confirm that the City will allocate space that is not co-located in a multi-branded bid by market share between the multi-branded concessionaires’ brands.

If a bidder elects to co-locate its brands, the combined market share will be considered the bidders market share. If the bidder elects to maintain its brands in separate locations, the market share of each brand will be considered separately.



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160. Please confirm that for all space allocated by bid share, the number of spaces (R/R, overflow??, and QTA stacking) will be allocated by percentage of each “bidders” (rather than “brands”) bid divided into the aggregate total of all the MAGS.

Confirmed.

161. Please confirm whether the TSA will be paying rent for their portion of limited common and common areas allocated to them on the 5th floor of our garage.

The TSA will not be moving into the Rental Car Center.

162. Please confirm whether the 80,487 sf of “Rear Lot” staging space currently occupied by Hertz on the ground floor behind the garage is a) being made available in the bid (if so, please include in an Exhibit); b) considered the same as the “5th Floor Vehicle Storage Area” for space allocation purposes; c) subject to grandfathering; and d) subject to the “Surface Rent” rental rate.

Confirmed. Drawing of area will be included in the Exhibits.

163. What is the unamortized cost(s) and amortization schedule of the RACS’ garage and QTA project for which the RACS continue to pay “cost recovery for construction and financing”?

Cost recovery is based on a thirty (30) year amortization plan. 10 years have passed, with 20 years remaining on the plan.

164. How would a second vacant QTA be distributed? It’s not really possible to just call an area "the QTA" as they each contain differing amounts of wash bays and fuel nozzles. It would be inequitable for a 9th operator with less than 2% share, if any, to take an entire QTA now used by a RAC with 5-10% market share simply because, as a result of "co-location".

Under the proposed plan by the Airport, if, in the unlikely event that a second QTA becomes vacant, the Airport will, in its sole discretion, either reallocate the space to the remaining companies or re-bid the available space.

We will adjust language so that the minimum space allocation is applicable to the ninth operator only.

165. The use of the Stall Measure seems out of sync with the rest of premises drawings which use square footage.

The exclusive use area depicted on Level 3 of the SFO Rental Car Center for the 9th operator is 16,053 sq. ft.



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166. Concerning the Proposed Lease Agreement and after viewing the ready return lot, should space for the 9th operator be made available either on Level 3, Level 2 or any other level, will there be a requirement for the new occupant to demolish unused signage, or does the unused signage become a part of the new space available for the new occupant to use (or demolish)? If an incumbent company relinquishes space, will they be allowed (or required) to take their proprietary signage with them? If they leave it, can it be reused by the new occupant?

Who will be required to pay for the demolition?

The incumbent relinquishing space can remove any trade fixtures, signage, furnishings or equipment. If the choose to leave it, they must do so with the understanding and agreement that the tenant moving into the vacated space can either use what is left or dispose of it.

Whoever removes the trade fixtures, signage, furnishings or equipment pays for its demolition or removal or disposal.

167. In looking at the current use of the building, will the new operator be afforded office space? Where will it be located?

Will there be an opportunity to use some of the old counter space on Level 1 and convert it to office space?

If there is a new operator, it will be provided with administrative space on the first floor. Several spaces are available and exact location will be determined by the ninth brand.

There may be an opportunity to lease this space under a separate permit with the Airport; however, neither of these spaces will be assigned to the 9th operator under the lease which is the subject of this RFB.

168. What is the plan for use of Level 1 old counter space now unoccupied?

There are presently no plans for the use of the Level 1 counters.

169. If SFO does not to allow for growth, will SFO allow a company to voluntarily withdraw from the concession and lease if they become landlocked with no ability to grow because of space limitations?

The Airport will not allow a company to withdraw from a Lease due to space limitations.



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170. Will SFO allow access to prospective space during the time prior to the start of the 120 day period of time to take measurements, have architects and engineers investigate the then status of the proposed new space, without unnecessary impediments to then current operations? An example today, the Hertz space on level 2 was totally empty, dark and without use. If that were the space to be awarded to the 9th operator, could that 9th operator investigate the space when convenient to Hertz, but prior to the start of the 120 day period of time?

Access will be made available for these purposes. Prospective tenants must give current tenants adequate notice and can’t interfere with current operator’s business.

171. Will SFO send to all persons signed in at the pre-bid meeting the following:

1) Market share reports for last 3 years including 2008 numbers

2) Gross revenue reports for the last 3 years, including 2008 numbers

3) Documents that reflect the use plan for the 1st level of empty counter space

4) Copy of the sign in sheets for the Pre Bid Conference

Items 1, 2 and 4 are attached. Item 3 is not applicable.

172. Has any current concessionaire been sent a default letter in the past 12 months?

No.

173. If a default letter has been sent, will it prevent the acceptance of that recipient company from being awarded a new concession agreement?

If an incumbent tenant is in default on the Bid Due Date, a bid will not be accepted from it.

174. Has SFO sent any default or issue letters to the operator (CBRichard Ellis) or to the members of the industry concerning operations and maintenance under Section 9.2 or a similar section in the current concession agreement? If so, will you attach a copy of such letter in the responses to these questions?

No defaults have been initiated.



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175. Given the fact that the counter locations will be selected in market share order (calendar year 2007), it is evident that the 9th operator’s area is disproportionately large compared to its known market share. In the event that another bidder, with a greater market share than Vanguard, selects the Vanguard counter location (Alamo and National combined area) then the 9th operator’s counter will still be carved out of the newly located “Vanguard” counters, so long as after Vanguard selects its counter location the disparity between Vanguard market share and its new counter area still provides for the 9th operator’s counter to be carved out of that location as well. In that case, the 9th operator counter could be located somewhere other than where it is depicted on Exhibit A-5. Is that a correct hypothetical assumption?

This hypothetical situation could occur.

176. For incumbants, the minimum bid is based on a percentage of gross revenues for year ending 12/31/07. Does that mean gross revenues upon which concession fee was paid, and therefore, after exclusions were taken or before? Please submit a report detailing what the Airport understand actual gross revenues to be for each company for year ending 12/31/07.

Will be included as an attachment to Addendum No. 1 to the RFB. Data reflects Gross Revenues as reported in each operator’s Certified Annual Statement.

177. Please provide market share information for Thrifty, Dollar, Fox, Payless and Advantage, if possible.

Will be included as an attachment to Addendum No. 1 to the RFB.

178. It was stated at the pre-bid meeting that the location for the 9th operator on the 3rd floor is hypothetical. Please confirm that, until the bids are open, and the amount of space allocated by the bid to the existing companies on the 3rd floor is established, the exact location for the 9th operators cannot be determined.

Confirmed.

179. Please confirm that the location of the potential 9th operator’s R/R space is not fixed and that it will be determined after the bid.

The number of ready/return spaces is fixed at 54 stalls. The exact location of the ready/return spaces has not been determined.

180. Please confirm that the potential 9th operator is not allocated any 5th floor parking space.

Confirmed.



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181. Please provide a copy of the appraisal that was used in determining the new land value (“unimproved land value”) for the garage and QTA land.

A copy of the appraisal can be picked up from Matthew McCormick at the Revenue Development and Management Office.

182. Please provide the supporting information for the City’s determination/ calculation of the increased rental rates that are based upon the new “unimproved land value”.

Rental Rates were based on the most recent unimproved land appraisal conducted at the airport with a 8% rate of return.

183. Please confirm that multi-branded bidders will not be required to declare with the bid submittal whether to co-locate or not at each space component.

Confirmed.

184. Please change the Bid Due Date to August 2. The Bid Due Date has been extended to Monday, August 8, 2008 at 10:00 a.m.

185. The 2nd slide on page 3 of the pre-bid meeting handout states, “Airport Commission may review Bidder’s financial performance in other projects.” Please explain what this means.

The Airport may request further information of your financial standings in other locations.



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186. It appears that members of the industry, excluding some possible new entrants, agreed among themselves and with or without SFO participation, that reallocation of ready/return space should occur at 37 months. Should market shares change more frequently, a company will be strangled not having sufficient space to operate. Will SFO create a method to regulate such reallocation if such market shares dramatically change? If not, will SFO change the reallocation to every 24 months during the terms of the Lease Agreement? This situation is made worse when you add in the extension period of time. Over 74 months, market shares will change, companies will change and to not have a provision allowing for this change restricts a company from being able to grow. Will SFO add a provision to monitor and correct this if there are significant shifts in market shares? Without a provision fixing the problem, the lease as it now stands becomes an institutional prohibition for a 9th operator to grow beyond 1 or 2% of the market simply because they will not have sufficient space to operate. While this situation and questions seem simple, the bid process becomes obstructed for a new 9th operator because they will ultimately be unable to grow unless a company is purchased, merged or fails. Would SFO consider a remedy by adding a provision alleviating this problem?

Reallocation will take place in 2012 and, potentially, in 2014 and 2017. The Airport views this, along with your ability to sublease space from the other users of the Rental Car Center, to be adequate for addressing market share changes.

X:\Concession Opportunities\Rental Cars 2008\Addenda Attachments\Q and A, Att 2.doc 07.03.2008