HomeMy WebLinkAboutC96-081 American Airlinesf nericanAirlim, s C V6 R , 7 0
April 19, 1996
Mr. George Gates
Chairman, Board of County Commissioners
County of Eagle, State of Colorado
500 Broadway
P.O. Box 850
Eagle, Colorado 81631
Re: New Termin
Dear Mr. Gates:
We are pleased with the progress made to date in discussions
concerning Eagle County's (the "County") proposed construction of
a new passenger terminal at Eagle County Airport (the "Airport").
The terms and conditions of the proposed transaction are
summarized below:
1. The County will construct a new passenger facility at the
Airport at a total cost (excluding financing) of approximately $9
million, substantially in accordance with the schematic drawings,
dated April 15, 1996, prepared by the Van Sant Group (the
"Terminal Building"). In addition, the County will make available
to airlines using the Terminal Building an outbound curb -side
baggage system and at least three ramp parking positions suitable
for Boeing 757 or comparably -sized aircraft.
2. (a) The County will make leasehold space in the Terminal
Building available to carriers who wish to serve the Airport,
including American Airlines, Inc. ("American"). American and such
other carriers who become signatories to Terminal Building leases
are hereinafter referred to as "Signatory Airlines". American will
lease for its exclusive use approximately 10 counter positions and
office and other space consisting of a total of approximately 3000
sq. ft. of exclusive -use space in the Terminal Building, as shown
on the schematic drawing referred to above. The County will be
responsible for and bear the cost of finishing out the interior of
the Terminal Building, including American's exclusive -use space,
except as further detailed below. The Lease shall provide for an
initial term of ten (10) years beginning on American's occupancy of
the Terminal Building, as described further in Sections 7 and 8
hereof. The parties will promptly begin negotiating to reach a
written definitive lease agreement, containing representations,
warranties, indemnities, conditions and agreements (including,
without limitation, environmental indemnities by the County in
favor of American for conditions predating the lease) customarily
found in municipal airport terminal facilities leases and
reflecting the terms of this Letter Agreement (the "Lease
Agreement"). The County and its counsel will prepare the initial
P.O. BOX 619616, DALLAS/FORT WORTH AIRPORT. TEXAS 75261-9616
draft of the Lease Agreement.
(b) If the County during the term of the Lease Agreement
enters into a lease with another Signatory Airline or otherwise
permits a non -signatory airline to use the Terminal Building upon
more favorable terms and conditions than those contained herein or
in the Lease Agreement, the County shall immediately make available
to American (retroactive to the effective date of such third -party
lease or use agreement) such more favorable terms or conditions.
3. Construction of the Terminal Building will be financed by
tax exempt revenue bonds (the "Bonds") issued by a non-profit
corporation formed under Colorado law and qualifying under IRS
Revenue Ruling 63-20 (the "Terminal Corporation"), and the Lease
Agreement will be entered into with, or will be assigned to, the
Terminal Corporation. It is American's understanding that the
repayment of principal of such bonds will be funded by Passenger
Facility Charges ("PFCs") to the maximum extent allowed by federal
and other applicable laws and regulations and the County will use
its best efforts to apply for and obtain FAA authorization for the
Terminal Corporation to use PFC's for such purposes. In the event
the PFCs exceed the annual principal payments required under the
Bonds, the Terminal Corporation may apply the excess to prepay
principal amounts due in subsequent fiscal years in inverse order
of maturity or as may otherwise be provided in the Bonds and
permitted under the PFC rules.
4. (a) The Lease Agreement shall obligate American to pay a
fixed annual rent of $750,000 ("Base Rent") for use of the Terminal
Building. In the first year of the lease term the Base Rent shall
be paid in four equal monthly installments coinciding with the ski
season (specifically December 1, 1996, January 1, 1997, February 1,
1997 and March 1, 1997). From and after the second year of the
lease term, the Base Rent shall be paid in twelve equal monthly
installments. Notwithstanding the foregoing, in the event
American's Base Rent and the rents or similar charges of all other
Signatory Airlines and non -signatory airlines for any fiscal year
exceed the Terminal Building Requirement (the "Excess Rental
Amount") , the County shall apply 50% of the Excess Rental Amount
to reduce American's Base Rent and the rents or similar charges of
such other Signatory Airlines and non -signatory airlines prorata
(based on rent) for the ensuing fiscal year.
(b) In addition to Base Rent, in the event that the
proposed PFC is not approved or the PFC is insufficient to pay
principal on the Bonds, the Base Rent of American and the rents or
similar charges of other Signatory Airlines may be increased
(prorata based on rent) to include an amount (the "Principal
Backstop Payment") equal to that portion of the annual principal
amount due and owing on the Bonds that would have been eligible for
PFC funding under federal law; provided, however, that in no event
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shall the Principal Backstop Payment exceed $450,000 annually.
5. (a) At the end of each fiscal year or part thereof
falling within the lease term, the County will credit against
future rent (within 60 days of the close of the audit) of American
and the other Signatory Airlines 50% of any Net Concession
Revenues. The Signatory Airlines' share of Net Concession Revenues
shall be distributed to them prorata based on enplanements from the
Terminal Building during such fiscal year. Notwithstanding the
foregoing, prior to such 50/50 split (i) at the end of the fiscal
years ending December 31, 1996 and December 31, 1997 only, there
shall first be subtracted from Net Concession Revenues (if any),
and paid into an O&M reserve fund established by the County, an
amount equal to 10% of such fiscal year's operating and maintenance
expenses, and (ii) at the end of the fiscal year ending December
31, 1998 only, there shall first be subtracted from Net Concession
Revenues (if any), and paid to the Signatory Airlines (prorata
based on enplanements), an amount equal to the amounts previously
paid into such O&M reserve.
(b) "Net Concession Revenues" shall equal Concession
Revenues reduced by the Terminal Building Shortfall. For these
purposes:
(i) "Concession Revenues" shall mean all Terminal Building
revenues derived by the County from food, beverage, news and gift
vendors, rental car and other ground transportation vendors,
parking, terminal advertising(including print, radio and
television), ski rentals and any other retail sales and services.
(ii) the "Terminal Building Shortfall" for each fiscal
year shall equal the Terminal Building Requirement reduced by the
sum of (A) American's Base Rent and the rents or similar charges of
all other Signatory Airlines, and (B) the rents or similar charges
paid by non -signatory airlines for use of the Terminal Building.
(iii) the "Terminal Building Requirement" for each fiscal
year shall equal the sum of the following amounts: (A) the total
amount of operations and maintenance expenses and depreciation
expense on airport -funded assets of the Terminal Building for such
fiscal year, (B) the total amount of that portion of the principal
due and owing on the Bonds during such fiscal year that is not
eligible for PFC funding, (C) the total amount of interest due and
owing on the Bonds during such fiscal year, plus (D) other
miscellaneous costs, expenses, judgments, assessments or charges
(net of insurance proceeds and excluding judgments and other
amounts from which American is entitled to be held harmless under
Section 14 hereof) incurred in such fiscal year and reasonably and
fairly allocated to the Terminal Building.
6. (a) American further understands that the County shall
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establish a reserve account (the "Debt Coverage Reserve Account")
which shall equal approximately $360,000 in the aggregate and shall
be funded initially by a portion of the Base Rent payable by
American in the first four months of the lease term coinciding with
the Ski Season specifically, December 1, 1996, January 1, 1997,
February 1, 1997 and March 1, 1997.
(b) In the event that the County is unable to generate
Available Revenues sufficient to satisfy the Bond requirement that
Available Revenues in each fiscal year be at least equal to 130
percent of the aggregate annual principal and interest due on the
Bonds in such fiscal year, American and all other Signatory
Airlines shall pay an amount equal to the shortfall. Such
shortfall shall be allocated to each Signatory Airline in the same
proportion that its total annual enplanements at the Terminal
Building bears to the sum of all of the Signatory Airlines' total
annual enplanements at the Terminal Building and shall be payable
as of the last day of the fiscal year in which such shortfall
occurs. Any shortfall amount paid by a Signatory Airline for any
fiscal year will be repaid to such Signatory Airline in cash within
3 business days of the County's receipt of such shortfall payment
from such Signatory Airline. For these purposes "Available
Revenues" in each fiscal year shall include PFCs, Principal
Backstop Payments and all rental, concession and other revenues
from the Terminal Building plus the balance in the Debt Coverage
Reserve Account, minus the total amount of operations and
maintenance expenses and other miscellaneous costs, expenses,
judgments, assessments or charges incurred in such fiscal year and
reasonably and fairly allocated to the Terminal Building.
7. The County will complete construction of the Terminal
Building and ensure its availability for occupancy by American by
November 25, 1996. The County shall grant to American the right of
ingress and egress in, to and from the Terminal Building at least
ten (10) business days before such date to finish out its
exclusive -use space.
8. (a) The parties intend this Letter Agreement to set forth
the material terms of their agreement with respect to the matters
described herein and to be binding, with the understanding that
other terms shall be included in the Lease Agreement, as provided
in Section 2(a).
(b) The County understands and acknowledges that American
will allow its current facility lease at the Airport to expire on
November 30, 1996 in reliance on the County's undertaking to enter
into the Lease Agreement and make leasehold space in the Terminal
Building available to American as herein provided. If, for any
reason, the Terminal Building is not ready for occupancy on time,
the County will provide suitable temporary facilities (including
utilities) for American's use until the Terminal Building is ready
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for occupancy by American. The rent and other charges for
American's use of the temporary facilities and utilities will not
in total exceed the actual cost of providing such facilities and
utilities (but in no event shall exceed $272,000 on an annualized
basis). Any period of occupancy of the temporary facility will be
in addition to the lease term provided for in the Lease Agreement.
The County will reimburse American (or credit against Base Rent)
for any incremental moving expenses (not in excess of $ 5,000)
incurred by American as a result of the double relocation
necessitated by American's occupancy of the temporary facilities.
Furthermore, in the event the Terminal Building has not been
substantially completed by May 1, 1997 for any reason, American may
terminate this Letter Agreement and the Lease Agreement (and such
temporary occupancy) upon written notice to the County given by
five p.m. local time (of the party to be notified) on May 4, 1997.
(c) American understands and acknowledges that the County
will in reliance on this Letter Agreement exert additional efforts
and incur expenses in planning, financing, and constructing the
Terminal Building.
9. American shall have the right from time to time during
the term of this Letter Agreement and the Lease Agreement, upon
five (5) days prior written notice, to review the County's
construction and financing plans, books and records pertaining to
the Terminal Building and related Airport operations to ensure that
construction of the Terminal Building is progressing substantially
in accordance with the schematic drawings referred to above, and
that PFCs, Terminal Building rentals and Concession Revenues are
and will be applied in a manner consistent with the terms of this
Letter Agreement and the Lease Agreement.
10. (a) American's responsibility to finish out its
exclusive-use space within the Terminal Building shall be limited
to the installation of ticket counter inserts, signage and computer
terminals, printers and related equipment.
(b) American shall at its own expense provide passenger
security screening equipment for use at the Terminal Building. The
passenger security checkpoint shall be manned by American or its
contractors and the associated O&M costs shall be borne by American
and the other Signatory Airlines prorata based on enplanements.
11. If for any reason the County (or the Terminal Corporation
as its assignee) has not closed on the sale of the Bonds by June
25, 1996, the County (or such Terminal Corporation) may terminate
this Letter Agreement and the Lease Agreement upon written notice
to American given by five p.m. local time (of the party to be
notified) on June 30, 1996; provided, further, that if for any
reason such financing has not closed by September 1, 1996, either
party may terminate this Letter Agreement and the Lease Agreement
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upon written notice to the other party given by five p.m. local
time (of the party to be notified) on September 4, 1996.
12. It is understood that the executed Lease Agreement is
needed to finance the construction of the Terminal Building.
Accordingly, the parties acknowledge that if for any reason the
Lease Agreement has not been executed and delivered by May 28,
1996, the County may terminate this Letter Agreement by written
notice to American given not later than May 30.
13. (a) American acknowledges that the County may, in its
sole discretion, assign its rights and/or duties under this Letter
Agreement to the Financing Entity. American hereby consents to any
such assignment, and agrees that the County immediately thereupon
shall be discharged from any and all duties under this Letter
Agreement to the extent of such assignment and relieved from any
and all liabilities arising from the duties assigned; provided,
however, that in the event of the County's assignment of its
obligations under the indemnity and related provisions of Section
14 of this Letter Agreement, the County and the Terminal
Corporation shall be jointly and severally liable to American for
the full and timely discharge thereof.
(b) American also consents to the County granting a
security interest in all of its right, title and interest in the
Lease Agreement in support of the Bond financing
14. The County agrees to defend and indemnify American and
its affiliates, directors, officers and employees, from and against
any and all losses, liabilities, claims, damages or expenses
(including, without limitation, except as provided below,
reasonable attorneys' fees and reasonable fees for expert
witnesses, consultants and litigation support services and costs
for post judgment and appellate proceedings) arising from or in
connection with any suit, claim or action pertaining to events or
allegations described in that certain letter to the County, dated
March 18, 1996, from attorneys for Fixed Base Operators, Inc. d/b/a
Vail/Beaver Creek Jet Center, except to the extent that any such
losses, liabilities, claims, damages or expenses arise out of
American's breach of a contractual obligation or tortious conduct
as determined in a final, non -appealable adjudication. The County
shall assume all responsibility for conducting the defense or
settlement of any such suits, claims or actions with counsel
reasonably acceptable to American. American shall have the right,
but not the duty, to participate in the defense and settlement of
any such suits, claims or actions with separate counsel of its own
choosing without relieving the County of any of the foregoing
indemnity obligations; provided, however, that the County shall not
be required to indemnify American for such separate counsel's fees,
expenses and costs unless American shall have reasonably concluded
that there is a conflict of interest between the County and
American in the conduct of such defense or settlement. No
compromise or settlement of such a suit, claim or action may be
effected without American's written consent which shall not be
unreasonably withheld or delayed; if American rejects a compromise
or settlement which the County desires, the County's total
liability on the suit, claim or action, including the costs of
defense, shall not exceed the amount of the expenses and costs to
it incurred up to the rejection plus the amount of such compromise
or settlement. The provisions of this Section 14 shall survive the
termination of this Letter Agreement for any reason.
15. This Letter Agreement shall be governed by and construed
in accordance with the internal laws of the State of Colorado
without regard to conflicts of law.
16. In the event that any one or more of the provisions of
this Letter Agreement is determined by a court of competent
jurisdiction to be invalid, unenforceable or illegal, such
invalidity, unenforceability or illegality shall not affect any
other provisions of this Letter Agreement, and the Letter Agreement
shall be construed as if the challenged provision had never been
contained herein. The parties further agree that in the event such
provision is an essential part of this Letter Agreement, they will
immediately begin negotiations for a suitable replacement
provision.
17. Except as otherwise provided herein, each party shall be
responsible for and bear all of its own costs incurred at any time
in connection with preparing the Lease Agreement and pursuing or
consummating the proposed transaction.
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Please confirm your agreement to and acceptance of the
foregoing by countersigning this Letter Agreement and returning it
to the undersigned.
Yours sincerely,
AMERICAN AIRLINES, INC.
Gary F. ennedy
Mng. Director rporate Real Estate
Approved and Agreed:
County of Eagle, State of Colorado
By:
Name: George A. Gates
Title: Chairman of BOCC
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