HomeMy WebLinkAbout5 Broadband Agenda Item # 5
Memorandum
To: Board of Directors
From: Alan Harry, Director of Telecommunications Services
Date: September 12, 2003
Subject: Broadband Business Planning; Financing; Placement Agent
Summary
The District has been actively moving forward to provide competitive data, video and voice services to the homes and
businesses within its service territory. As part of the process to secure the funds necessary to construct the District's Fiber to
the User Broadband System, an Underwriting firm is needed. District staff, General Counsel, Bond Counsel and Aggregate
Networks staff recommend that the Board approve a Letter of Engagement with Barton Creek as the projects Placement
Agent.
History
At your regular meeting of March 5, 2002, Rick Kaufman of Aggregate Networks and I recommended that the Board engage
the firm of Friedman, Luzzatto and Company and the District's Underwriters. Since that time District Staff, General Counsel,
Bond Counsel and Aggregate Networks have worked with Friedman with the goal of funding the project by the later part of the
third quarter,2003.
At your Special meeting of August 15,2003, the Board acted to terminate its contract with Friedman, Luzzatto and Company.
In that the District requires the assistance of an Underwriting firm to assist in the process of receiving the funds necessary to
construct a Fiber to the User system, District Staff have located a firm with experience in funding"start-up"business units like
the District's FTTU system. Barton Creek.
New Information
Over the past 45 days District Staff, General Counsel and Bond Counsel have held teleconferences with representatives of
Barton Creek in order to develop a Letter of Engagement acceptable to both parties.
As of this writing a final document has not been agreed to by the District and Barton Creek. It is, however, expected that an
executable document will be completed by the end of business on Tuesday September 16,2003.
In that the engagement of Barton Creek is necessary for staff to complete the securing of funds needed to construct the
District's Broadband system,this report has been prepared and submitted to the Board prior to the completion of negotiations.
Recommendation
In accordance with the recommendation of District Staff, General Counsel, Bond Counsel and Aggregate Networks, it is j
recommended that the Board authorize the District Manager to enter into a Letter of Engagement with Barton Creek to secure
them as the District's Placement Agent for the Broadband Financing.
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September 17, 2003
Truckee Donner Public Utility District
PO Box 309
Truckee, California 96060
Re: Letter of Engagement re Placement Agent for Broadband Financing
Dear Peter Holzmeister:
This letter agreement (the "Agreement"), when countersigned by you, will confirm the
engagement of Barton Creek Ltd. (`Barton Creek") by Truckee Donner Public Utility District
and/or its affiliates or agents ("Truckee") as their placement agent in connection with the
potential placement of revenue bonds (or other obligations or participations required for the
Transaction (defined below) and approved by Truckee) backed by receivables or accounts related
to broadband services (the "Underlying Assets") and having an estimated aggregate face amount
of approximately $15,000,000 (the "Securities"), which placement is expected to close prior to
December 31, 2003 (the "Transaction").
This engagement shall be subject to the following terms and conditions:
1. Enga ement
(a) Barton Creek is engaged to evaluate the feasibility and potential structure of the
Transaction and to provide the services specifically set forth below in Section 1(c). 1f feasible,
the potential structure and terms of the Transaction will be set forth in a draft term sheet (the
"Draft Term Sheet") that will be prepared by Barton Creek subsequent to the execution of this
Agreement. The actual terms of the Transaction may vary from such Draft Term Sheet and will
be subject to, among other things, the outcome of due diligence and prevailing market
conditions.
(b) Subject to the evaluation of the Transaction described in Section l(a) above,
Truckee and Barton Creek expect to privately place the Securities in a manner that complies with
an exemption from the registration requirements of Securities Act of 1933, as amended, and to
close the placement of the Securities prior to December 31, 2003, or such other date as is
mutually agreed upon by Barton Creek and Truckee (the "Placement Date"). Subject to the
terms and conditions set forth herein, Barton Creek and Truckee will enter into an agreement(the
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September 17, 2003
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"Placement Agreement"), to be prepared by Barton Creek or its counsel, pursuant to which
Barton Creek will agree to use commercially reasonable efforts to place the Securities with
investors, it being understood and agreed that the Placement Agreement will specify that Barton
Creek will not be obligated to purchase any Securities or other assets. The Placement Agreement
shall contain representations, warranties and indemnities with respect to the Underlying Assets
satisfactory to Barton Creek and Truckee.
(c) As part of its engagement hereunder, Barton Creek shall provide the following
services to Truckee, to the extent such services are necessary (in the discretion of Barton Creek)
to consummate the Transaction:
(i) Advise Truckee throughout the structuring, placement and closing process
on issues that arise, including communications with the applicable rating agencies;
(ii) Facilitate any credit enhancement solutions for the Transaction; and
(iii) Assist Truckee in obtaining any necessary internal approvals relating to
the Transaction;
provided that the foregoing shall not constitute any guarantee, obligation or commitment of
Barton Creek to obtain any rating, credit enhancement or approval or to place the Securities,
which placement of Securities is undertaken on a best efforts basis as set forth herein.
2. Fees
As compensation for Barton Creek's services in connection with this Agreement and the
Placement Agreement, Barton Creek shall be paid a fee equal to 2.00% of the gross proceeds of
the Securities placed by Barton Creek, its co-placement agents or its cooperating placement
syndicators (together "Co-Agents") payable on the Placement Date out of proceeds of the
Securities. It is understood and agreed that no additional compensation shall be payable by
Truckee to Barton Creek or any Co-Agent, except expense reimbursements as otherwise
provided in this Agreement.
3. Break-up Fees.
(a) In the event that notice of termination of this Agreement has not been given on or
before the 45`h day following the delivery of the Draft Term Sheet to Truckee, and, on or
following such 45°i day Truckee elects to terminate this Agreement prior to the expiration of the
Stated Term of this Agreement other than for cause due to the failure of Barton Creek to perform
its obligations hereunder (such termination, a "For Cause Termination"), then Truckee shall pay °
to Barton Creek a break-up fee of S25,000, in addition to the payment of expenses as provided in g
Section 6(b) below.
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September 17, 2003
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(b) In the event that, during the twelve (12) month period commencing upon any
termination of this Agreement prior to the expiration of the Stated Tenn of this Agreement, other
than a For Cause Termination, Truckee should complete a transaction with the same structure, or
a substantially similar structure, as set forth in the Draft Tenn Sheet or in any final tern sheet
agreed to by the parties hereto, then in such event, Barton Creek shall be entitled to a "Stalking
Horse Fee" equal to the amount calculated pursuant to Section 2, reduced by any break-up fee
previously paid by Truckee to Barton Creek, as if the Transaction contemplated hereby and
involving the parties hereto had been successfully completed for the gross proceeds received in
the other transaction.
4. [RESERVED]
5. Conditions of Barton Creek's Obligations
Barton Creek's obligation to serve as placement agent shall be subject to the following
terms and conditions, to be satisfied on or before the Placement Date:
(a) The completion of"due diligence" and investigation of the Underlying Assets and
Truckee, in each case satisfactory to Barton Creek.
(b) The execution and delivery of a Placement Agreement and other transaction
documents, duly authorized, executed and delivered by the parties thereto on the Placement Date,
in form and substance satisfactory to Barton Creek and its counsel.
(c) The satisfaction of all of the requirements for the issuance and placement of the
Securities to qualify for an exemption from the registration requirements under the Securities
Act.
(d) The delivery of certificates of Truckee and favorable opinions of counsel for
Truckee as are reasonable and customary for the Transaction, in form and substance satisfactory
to Barton Creek, and dated as of the Placement Date.
(e) Barton Creek shall have received from independent accountants, a letter dated as
of the Placement Date, relating to the Securities, as to such matters as Barton Creek may
reasonably request in form and substance satisfactory to Barton Creek and its counsel.
(f) No material adverse change or development involving a material adverse change,
in the business, operations or financial condition or the material properties or assets of Truckee
shall have occurred which in the reasonable judgment of Barton Creek will impair the
Underlying Assets or would adversely affect the placement of any Securities or the ability of
Truckee to perform its obligations contemplated hereby as of the Placement Date.
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(g) There shall have occurred none of the following as of the Placement Date: (1) a
suspension or material limitation in trading in securities generally on the New York Stock
Exchange or the equity trading markets in the United States; (2) a general moratorium is declared
on commercial banking activities in New York or declared by either Federal or New York State
authorities; (3) the outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war; or (4) a change in international,
political or economic conditions, if the effect of any such event in the preceding clauses in
Barton Creek's judgment makes it impracticable or inadvisable to proceed with the offering or
the delivery of the Securities, or materially impairs the ability of Barton Creek to place the
Securities.
6. Other Agreements
(a) Indemnification. To the extent permissible by law, Truckee shall indemnify and
hold harmless Barton Creek, its shareholders, directors, officers, employees, agents, controlling
persons and affiliates (the "Indemnified Parties") against any losses, claims, damages, expenses
or liabilities (collectively "Claims") any Indemnified Party may incur or become subject to in
any way arising out of or in connection with this engagement and/or rendering of services
hereunder, provided however, that no Indemnified Party shall be indemnified against Claims that
are finally judicially determined to have (i)resulted from bad faith, willful misconduct or
negligence of such Indemnified Party, or (ii) losses resulting from any settlement entered into by
an Indemnified Party without the written consent of Truckee (which consent shall not be
unreasonably withheld).
(b) Expenses. In addition to any fees payable to Barton Creek hereunder and
regardless of whether a purchase or sale of the Securities is consummated, Truckee hereby
agrees, from time to time and promptly upon request, to reimburse Barton Creek for all out of-
pocket-expenses incurred by Barton Creek in connection with, or arising out of, its activities and
those of its affiliates under or contemplated by this Agreement (such expenses primarily to
consist of travel and accommodation expenses and fees and expenses paid to outside contractors
approved by Truckee); provided that the approval of Truckee shall be required for any such
expense that equals or exceeds $I5,000.
In addition to the out-of-pocket expenses identified in the preceding paragraph and,
regardless of whether a placement of the Securities is consummated, Truckee shall also be
responsible for fees and expenses incurred in connection with the proposed placement, including,
but not limited to, such amounts incident to the performance of Barton Creek's obligations under
this Agreement and the Placement Agreement, including without limitation, those relating to:
(i) the preparation and printing of any Disclosure Document and transaction documents used in
connection with the structuring and placement of the Securities; (ii) the fees and expenses
charged by any rating agency requested by Truckee or Barton Creek to rate the Securities;
(iii) the fees and expenses of any third party credit enhancer, independent accountant and trustee
Truckee Donner Public Utility District
September 17, 2003
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and each of their respective counsel; (iv) the fees and disbursements of transaction counsel for
services provided in connection with this Agreement and the transactions contemplated hereby
and thereby; and (v) the fees and disbursements of Barton Creek's counsel for services provided
in connection with this Agreement, the Placement Agreement and the transactions contemplated
hereby; provided that the approval of Truckee shall be required for the expenses set forth in
clauses (i), (ii) and (iii) above.
(e) Approval of Offering Material. Truckee and Barton Creek shall have the right to
review and approve every form of letter, circular, notice or other written communication from
Truckee or any other person acting on its behalf (including Barton Creek) to any offeree or
purchaser in connection with the offer and placement of the Securities ("Offering Materials").
(d) Preparation of Offering Material. Truckee understands that a Disclosure
Document will be required for the issuance of the Securities and that Truckee shall be solely
responsible for the information provided by Truckee to be included in the Disclosure Document.
(e) Informatiom Confidentiality. Truckee agrees to furnish Barton Creek with such
information as Barton Creek reasonably requests in connection with its engagement hereunder.
Truckee represents, warrants, and agrees that any such information provided by Truckee to
Barton Creek any rating agency or their respective representatives; agents and counsel will be
true, complete and accurate in all material respects. Truckee shall advise Barton Creek
immediately of the occurrence of any event or other change, which results in such information
failing to conform to the preceding representation and warranty. Truckee recognizes and
acknowledges that Barton Creek (a)will be using and relying solely on such information
provided by Truckee and other information available from generally recognized public sources in
performing the services contemplated hereunder; (b) will not independently verify the accuracy
or completeness of such information, except as otherwise provided for herein; (c) does not
assume responsibility for the accuracy or completeness thereof; and (d) will make appropriate
disclaimers consistent with the foregoing.
Except as required by law or as contemplated in connection with the purpose and terms
of this Agreement, Barton Creek hereby agrees to use commercially reasonable efforts to keep
confidential any non-public information provided to it by Truckee in connection with the
transactions and the services to be provided hereunder and under the transaction documents and
the Placement Agreement (the "Confidential Information"). Notwithstanding anything herein to
the contrary, Barton Creek may disclose Confidential Information to its affiliates, agents, and
advisors whenever Barton Creek determines that such disclosure is necessary or advisable in
connection with providing the services contemplated hereunder; provided that Barton Creek
agrees to instruct such affiliates, agents and advisors to keep all such non-public information
confidential, except to the extent required by law or as necessary or advisable in connection with
providing the service contemplated hereunder. The foregoing restrictions shall not apply to any
information that: (a) constitutes readily ascertainable public information; (b) is or becomes
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generally available to the public through no fault of the party to whom it was revealed; (e) was
available to Barton Creek on a non-confidential basis prior to its disclosure by Truckee;
(d) becomes available to Barton Creek on a non-confidential basis from a third party who Barton
Creek has no reason to believe is under any obligation of confidentiality to Truckee; (e) is
required to be disclosed by applicable law, regulation or legal process; (f)is developed separate
and apart from any disclosure by Truckee or (g) is necessary or appropriate disclosure to third
parties within the context of this Agreement.
Except as required by law, any advice or written materials rendered by Barton Creek
pursuant to its engagement hereunder, shall be treated as confidential by Truckee and any of its
affiliates, and any of their directors, officers, agents, or other representatives, and such advice
shall not be disclosed to any third party without the prior written consent of Barton Creek;
provided that Truckee may disclose such information to a third party consultant if such
disclosure is not in violation of any applicable laws and such third party agrees in writing to be
bound by the confidentiality provisions herein applicable to Truckee. If Truckee any of its
affiliates or any of their directors, officers, agents, or other representatives is legally required to
make disclosure of such advice or to make any legally required public announcement or filing in
which Barton Creek's name appears, Truckee shall first notify Barton Creek of such
requirement.
(f) Coo eration. To enable Barton Creek to effectively and adequately perform its
obligations under this Agreement, Truckee undertakes and agrees, in good faith, to cooperate and
to cause its agents, principals, officers, employees and representatives to cooperate with Barton
Creek to the fullest extent that shall be necessary or appropriate (I) to prepare, negotiate and
complete the documentation for the Transaction; (2) to furnish information required by Barton
Creek in connection with its engagement hereunder on a timely basis; (3) to keep Barton Creek
informed of all developments relating to Truckee and the Transaction contemplated hereby;
(4) to issue and place the Securities in a manner that complies with an exemption from the
registration requirements of the Securities Act; and (5) to complete the Transaction contemplated
hereby, including, but not limited to, the timely review and comment on any documentation and
attending meetings and conferences in connection therewith.
(g) Entire Agreement and Governing Law. This Agreement incorporates the entire
understanding of the parties and supersedes all previous agreements between Barton Creek,
Truckee and any of its subsidiaries and affiliates with respect to the subject matter hereof. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
CONFLICTS OF LAW PROVISIONS CONTAINED THEREIN. ANY LEGAL ACTIONS OR
PROCEEDINGS WITH RESPECT TO THIS AGREEMENT SHALL BE BROUGHT IN THE 5
COURTS OF THE STATE OF CALIFORNIA LOCATED IN THE CITY OF L_______1 OR
IN THE UNITED STATES DISTRICT COURT FOR [ , CALIFORNIA], WHICH
COURTS SHALL HAVE EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF
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SUCH MATTERS, TRUCKEE AND BARTON CREEK CONSENT TO THE JURISDICTION
AND VENUE OF SUCH COURTS AND PERSONAL SERVICE WITH RESPECT
THERETO. EACH OF BARTON CREEK AND TRUCKEE WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY PROCEEDING IN ANY WAY ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(h) Limitation on Advice. For the avoidance of doubt, the duties and responsibilities
of Barton Creek shall not include (i) giving tax, legal, regulatory, accountancy or other
professional expert or technical advice or services; or (ii) giving general financial or strategic
advice unrelated to the placement of the Securities. Truckee confirms and agrees that it will rely
on its own counsel, accountants and other similar professional, expert and technical advisors for
the type of advice specified in the preceding sentence.
(i) No Provision to Finance/Relationship of Partners. Truckee acknowledges that
this Agreement in no way constitutes a commitment by Barton Creek or any of its affiliates to
provide or arrange any financing of the Underlying Assets, other than the evaluation and
potential structuring of the Transaction. Truckee hereby agrees that Barton Creek is being
engaged hereunder solely to provide the services described herein to Truckee and that Barton
Creek is acting as independent contractor and not acting as an agent, representative, partner or
fiduciary of, and shall not have any duty or liability to any third party in connection with its
engagement hereunder, all of which are hereby expressly waived. The parties further agree that
neither this Agreement nor any other operation hereunder shall create a general or limited
partnership, association, or joint venture relationship between the parties.
0) Other Customers. In connection with the engagement of Barton Creek contained
herein, Truckee is hereby advised (and hereby agrees) that other entities with conflicting interests
are, or may become at any time in the future, customers of Barton Creek or any of its affiliates,
and that Barton Creek or any of its affiliates may be providing financing, underwriting, or other
services to such entities or persons. Notwithstanding the proceeding, Barton Creek
acknowledges that it will not act on behalf of any other entity, in connection with this Agreement
and the transactions and services contemplated hereby without the prior written consent of
Truckee.
(k) Exclusivity. Truckee understands that the relationship with Barton Creek set forth
herein shall be exclusive. To that end, in addition to and notwithstanding the foregoing, neither
Truckee nor any person acting on its behalf will, directly or indirectly (except through Barton
Creek), sell or offer, or attempt or offer to sell or dispose of or solicit any offer to buy, or
otherwise approach or negotiate in respect of any of the Securities or otherwise finance the
Underlying Assets, and neither Truckee nor any person acting on its behalf has previously done
any of the foregoing. As used in this letter agreement, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act of 1933, as amended (the "Act").
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Truckee shall promptly refer to Barton Creek all offers, inquiries and proposals relating to the
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purchase or financing of the Securities or the Underlying Assets during the term of this
Agreement.
(1) Termination. The term of this Agreement shall commence on the date this
Agreement is countersigned by you and shall continue until the earlier of the Placement Date or
July 1, 2004 (the "Stated Term"). This engagement may be terminated prior to expiration of the
Stated Term, for cause or without cause, by Truckee or by Barton Creek by written notice to the
other party at any time and without continuing obligation to Truckee or Barton Creek; provided,
however, that the provisions set forth in Sections 3(a) and 3(b) shall survive any such termination
other than a For Cause Tenmination. The provisions of Sections 2, to the extent that Securities
have been placed or sold prior to such termination or expiration; 6(a); 6(b) and 6(e) shall survive
any termination of this Agreement or expiration of the Stated Term.
(m) Amendment. This Agreement cannot be amended or otherwise modified except
in writing executed by the parties hereto.
(n) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute one and the same instrument.
(o) Severability. If any provision of this Agreement is determined to be invalid or
unenforceable by any court of competent jurisdiction or any governmental authority, such
provision shall be treated as severable and be ineffective to the extent of such invalidity or
unenforceability, and such provision shall neither invalidate nor render unenforceable any other
provision of this Agreement, whether similar or not. Upon such determination, such invalid or
unenforceable provision shall be modified or amended, if possible, in a manner to affect the
intent of the parties and accomplish the purpose of this Agreement.
[Signature Pages Follows]
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We are delighted to accept this engagement and look forward to working with you on this
assignment. Please confirm that the foregoing is in accordance with your understanding by
signing and returning to us the enclosed duplicate of this Agreement.
Very truly yours,
BARTON CREEK LTD.
By:
Name:
Title:
Accepted and Agreed to as of September 2003:
TRUCKEE DONNER
PUBLIC UTILITY DISTRICT
By:
Peter Holzmeister
General Manager
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