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Staff Report
To: Board of Directors
From: Alan Harry, Director of Telecommunications Services
Date: May 3, 2004
Subject: Broadband Business Implementation— Consideration of Consultant
Agreement; Broadband Business Case
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,
a number of business cases have been developed to ensure that the proposed Fiber
Network District will pay for itself. Over the course of the projects planning stage three
cases have been prepared. The latest, and most encompassing, has been prepared and
consistently updated by Rick Kaufman of Aggregate Networks. Prior to the preparation of
business cases developed by Navigant and Vectren the District entered into a Consultant
Agreement which described the way in which each firm would be compensated for services
rendered. However, in the case of Aggregate Networks, an Agreement has not yet come
before the Board for action.
History
Throughout the broadband planning process staff has enlisted the support of consulting
firms for various services, including the preparation of business cases to ensure that the
proposed broadband division was well thought out, and would be self sustaining. Staff has
used various types of business cases to evaluate the financial viability of providing
broadband services, and has most recently been assisted by Aggregate Networks.
As you are aware, the District originally hired Aggregate Networks to assist in locating the
funding necessary to construct a fiber to the user network, and to act as the leader of our
financing team. While working through the process of locating firms such as the District's
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Placement Agent Riviere Jenison Securities, Aggregate Networks agreed to create a model
that would analyze the financial impacts of customer churn, revenue and expenditure
fluctuations, and debt service. Once completed, this model became the Business Case we
are using today.
New Information
As Aggregate Networks worked to prepare and update the District's Business Case, it was
the understanding that upon the successful funding of the District's FTTU network, that
Aggregate, like other consultants associated with the network's financing, would be
compensated for their work. It was not until recently that staff became aware that an
additional Consultant Agreement would be required.
Attached for your review is a Consultant Agreement between the District and Aggregate
Networks for the preparation of a financial analysis that includes (1) base, worst and best
case scenarios; (2)twenty-four month and twelve year projections; (3) annual net incomes
and cash flows; (4) estimated capital costs and sources; (5) estimated operating costs and
sources; and (6) estimated revenues and sources. The consulting fee for Services as
described is $150,000 payable on the placement date out of proceeds of the securities.
Recommendation
It is recommended that the board authorize the District Manager to enter into an agreement
with Aggregate Networks for services as detailed in the attached "Consultant Agreement".
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CONSULTANT AGREEMENT
THIS AGREEMENT, made this day of , 2004, by and between
AGGREGATE NETWORKS ("Consultant") and TRUCKEE DONNER PUBLIC UTILITY
DISTRICT ("District").
WITNESSETH:
WHEREAS, District wishes to retain Consultant as an independent contractor to perform certain
consulting services, and Consultant wishes to perform the services requested by District pursuant
to this Agreement, with all work to be performed and the parties' agreement to be governed by
the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties
agree as follows:
1. Scope of Work. Consultant agrees to perform the services listed in Schedule A
hereto (the Services).
2. Billing Rates. Work performed by Consultant under this Agreement will be
billed as set forth in Schedule B hereto. Except as otherwise provided under this
Agreement, including but not limited to Schedule B, Consultant shall bear all
costs incurred in performing work under this Agreement.
3. Access. District shall grant Consultant access to its facilities and employees as
necessary for conducting the Services.
4. Term/Termination. This Agreement shall continue in effect for one hundred(]00)
days after the execution of this Agreement or until terminated by either party upon thirty
days (30) written notice to the other party. This Agreement may be extended or renewed
upon mutual agreement of the parties. Any obligations accruing pursuant to Section 2
above shall survive any such termination.
5. Relationship of Parties. The parties understand that Consultant is an independent
contractor with respect to District and not an employee of District. District will not
provide fringe benefits, including health insurance benefits, paid vacation,or any other
employee benefit,for the benefit of Consultant or any employee of Consultant.
6. Ownershi op f Property. District owns and will own certain inventions(patentable or
unpatentable),ideas,confidential information,trade secrets, know-how,trademarks,
copyrights and mask works relating to its business and operations(collectively,the
"Property"). Consultant acknowledges that District is the sole owner of the Property and that
Consultant will acquire no rights in the Property by virtue of the Agreement or otherwise.
Consultant agrees not to take any action challenging or opposing,on any ground
whatsoever,the ownership or validity of the Property or District's rights therein.
7. Consultant's Duties in the Event of Termination. In the event of the termination of
this Agreement, Consultant shall immediately deliver to District. all prototypes,
notebooks, documents, memoranda, reports, files,books, keys, correspondence, lists,
disks, and other written graphic or computer records relating to the Property or to
District's business and operations, as well as any Property belonging to District which are
in the Consultant's possession or control, in good condition. In addition, Consultant shall
deliver to District any and all work product that Consultant produced for District and for
which DISTRICT has paid Consultant to develop.
8. Confidentiality. District hereby authorizes and consents to Consultant sharing
any and all relevant information required to procure financing on behalf of
District Except for the above stated reason, Consultant agrees that Consultant and
its employees, representatives, or partners will not at any time or in any manner,
either directly or indirectly, use any information for Consultant's own benefit, or
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divulge, disclose, or communicate in any manner any information to any third
party without the prior written consent of District
a. District agrees that its employees, representatives, or partners will not at
any time or in any manner, either directly or indirectly,use any proprietary information
of Consultant's for its benefit, or divulge, disclose, or communicate in any manner any
information to any third party without the prior written consent of Consultant. In order
for any information to be deemed confidential or proprietary under this Agreement, either
party must stamp or mark"Confidential"or"Proprietary"on the actual document.
9. Indemnification. Consultant and District agree to indemnify and hold each other
harmless from all claims, losses, expenses, fees including attorney fees, costs, and
judgments that may be asserted against the other that result from the acts or omissions of
their employees, if any, and agents. Notwithstanding the foregoing, neither party shall be
obligated to indemnify the other party for that party's sole negligence.
10. Assignment. Consultant 's obligations under this Agreement may not be assigned or
transferred to any other person, firm, or corporation without the prior written consent of
DISTRICT
11. Confidentiality After Termination. The confidentiality provisions of this Agreement
shall remain in full force and effect after the termination of this Agreement for a period of
three (3)years.
12. Non Exclusivity. Nothing in this agreement limits or prohibits Consultants from
marketing to, engaging, consulting to, or working on a similar basis with any other entity.
13. Right to Publicize. Consultant shall have the right to name DISTRICT as a client of
Consultant for marketing and promotional purposes limited to the confidentiality terms of
this agreement
14. Notices. All notices required or permitted under this Agreement shall be in writing and
shall be deemed delivered when delivered in person or deposited in the United States
mail,postage prepaid, addressed as follows:
IF for DISTRICT :
PO Box 34019
Truckee, CA 96160
Attention: Mr. Alan Harry
IF for Consultant:
Aggregate Networks
1801 N. Mill St.
Suite D
Naperville,Illinois 60563
Attention: Mr. Laurance P.Lewis
Such address may be changed from time to time by either party by providing written
notice to the other in the manner set forth above.
15. Entire Agreement. This Agreement contains the entire agreement of the parties and
there are no other promises or conditions in any other agreement whether oral or written.
This Agreement supersedes any prior written or oral agreements between the parties.
16. Amendment. This Agreement may be modified or amended if the amendment is made
in writing and is signed by both parties.
IT Severability. if any provision of this Agreement shall be held to be invalid or
unenforceable for any reason, the remaining provisions shall continue to be valid and
enforceable. If a court finds that any provision of this Agreement is invalid or
unenforceable,but that by limiting such provision it would become valid and enforceable,
then such provision shall be deemed to be written, construed, and enforced as so limited.
18. Waiver of Contractual Rinht. The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver or limitation of that party's right to
subsequently enforce and compel strict compliance with every provision of this
Agreement.
19. Venue. It is understood by both parties to this Agreement that the venue for resolving
any disputes which arise under this Agreement shall be Nevada County, California. The
Parties agree to mediate any dispute or claim arising between them out of this
Agreement or any resulting transaction before resorting to court action. Mediation
fees, if any, shall be divided equally between the Parties. If either Party
commences a court action based on a dispute or claim to which this paragraph
applies without first attempting to resolve the matter through mediation, then that
Party shall not be entitled to recover attorney's fees, even if it would otherwise be
available to that Party in any such court action.
20. Insurance. Consultant is responsible for carrying the appropriate and necessary levels of
Errors & Omissions insurance, commercial general liability insurance and auto insurance.
Consultant shall submit certificates of insurance or a reasonable facsimile thereof to
District within fifteen (15) days of their request.
21. Applicable Law. The laws of the State of California shall govern this Agreement.
22. Attorney's Rees. In the event of any litigation by either party to enforce or defend
its rights under this Agreement, the prevailing party, in addition to all other relief
awarded by the court, shall be entitled to reasonable attorneys'fees.
Agreed to as of the date first written above:
Truckee Donner P.U.D.
By:
Name:
Title:
AGGREGATE NETWORKS,INC.
By:
Name:
Title:
23.
SCHEDULE "A"
SCOPE OF SERVICES
Financial Analysis
Consultant will provide a financial analysis that includes (1) base, worst and best case
scenarios; (2) twenty-four month and twelve year projections; (3) annual net incomes and
cash flows; (4) estimated capital costs and sources; (5) estimated operating costs and
sources; and(6) estimated revenues and sources.
The financial model includes information on a specific proposed project as well as basic
financial parameters from the District, which produces cost and revenue forecasts and
cost-to-benefit ratios from a number of different perspectives. The model computes the
cash flows from each aspect of the project over a twelve-year time span. Bottom-up
estimates of operation and maintenance and incremental investment costs are computed
as well as staffing and overhead factors.
Deliverables
Economic Analysis
Risk Analysis
Debt Service Coverage Analysis
Portfolio Analysis
Statement of Cash Flow
Balance Sheet Statement
SCHEDULE `B"
BILLING RATES
The consulting fee for Services as set forth in Schedule A shall be $150,000
payable on the Placement Date out of proceeds of the Securities. It is understood and
agreed that no additional compensation shall be payable by District to Consultant as
provided in this Agreement.
t
Staff Report
To: Board of Directors
From: Alan Harry, Director of Telecommunications Services
Date: May 3, 2004
Subject: Broadband Business Planning - Consideration of Consultant Agreement with
Aggregate Networks
Summary
One of the integral pieces of the District's proposal to construct a Broadband system within its service
area is that of project financing. In that California State law requires that each business unit within a
Public Utility District be self-supporting, the District's proposed Broadband operations will require its
own financing mechanism, as well as a revenue stream to repay any and all debts associated with
the project.
History
In January of 2003 the Board authorized staff to extend its contract with Aggregate Networks to
continue as the District's lead financial consultant in financing the construction of a Fiber to the User
network. At your Special Meeting of April 28, 2004, General Manager Peter Holzmeister reported
that Aggregate Networks has maintained a high level of effort in leading the District's financing team,
and that their original contract, and amendments had expired.
New Information
To date Aggregate Networks has met its agreed upon deliverables, has located and assisted the
District in contracting with Rivier Jenison Securities as the District's Placement Agent, and is involved
daily in the preparation of information necessary for the successful financing of the District's FTTU
project.
Recommendation
The District continues to require the assistance of Aggregate Networks as Network financing is
completed, and through the first year of operation. As such, it is recommended that the Contract
with Aggregate Networks be extended through April 10, 2005.
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Attached find "Deliverables and Schedules Extending Aggregate Networks' Engagement
with Truckee Donner PUD" for your review.
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EXTENSION AND AMENDMENT TO THE CONSULTING AGREEMENT BY
AND BETWEEN AGGREGATE NETWORKS AND T.D.P.U.D.
This Extension and Amendment("Amendment') dated this_day of
2004, shall extend the existing Consulting Agreement("Agreement') as previously
amended, by and between Aggregate Networks ("Consultant") and Truckee Donner
Public Utility District ("T.D.P.U.D.") dated May 11, 2003 and which ran through
September 10`h, 2003,per Section 3 of the Agreement.
NOW THEREFORE, the Agreement is amended as follows:
The Agreement shall be extended for nineteen (19) months from October I O'h, 2003 until
April 1 Oth, 2005. The monthly fee from October 2003 through May 2004 shall be ten
thousand dollars ($10,000). Following the close of financing, estimated to be June 2004
through April I O'h, 2005, the fee shall be $5,000, All other terns and conditions of the
Agreement shall remain in full force and effect.
Furthermore, this Addendum redefines the schedule of"deliverables" to T.D.P.U.D. as
originally contained in the Agreement as Exhibit"A" and Exhibit `B". The Exhibits are
updated and redefined to correspond to the next phase of effort to identify and place
financing for T.D.P.U.D.
IN WITNESS WHEREOF, the parties hereto have executed this Extension and
Amendment of the Consulting Agreement as of the date first written above.
Truckee Donner P.U.D.
By:
Name:
Title:
AGGREGATE NETWORKS,LLC
By:
Name:
Title:
EXHIBIT "A"
The scope of services set forth in this Exhibit A is intended to complete the financing of
the broadband system. These tasks will be completed by May of 2004. Aggregate
Networks will act as financial advisor to the District providing advice with regard to final
terms of financing and review of financing documentation. Aggregate Networks will
coordinate the work of other finance team members, arrange for and participate in
planning meetings and routine conference calls, generate to do lists and timelines,
facilitate resolution of problems. Aggregate Networks will be expected to deal with
unanticipated situations that cannot be spelled out in advance.
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EXHIBIT`B"
Following the placement of securities Aggregate Networks will focus on the items below:
Strategic
- High level monitoring and review of the direction of the broadband business unit
Tactical
- Monitor start-up operations in relation to overall strategic and financial plan
- Monitor the economic and operating performance of the broadband business unit.
Legal & Regulatory Compliance
- Assist TDPUD with LAFCo presentation and approval
- Assist in the application for all necessary and proper Federal licenses, permits and
approvals for broadband services
- Create abstracts of all relevant contracts and notice dates (renewal,termination &
notice dates)
Financial
- Monitor continuing status of required financial reporting
Aggregate Networks will facilitate and assist with any of the above action items. However,
Aggregate Networks is not obligated to deliver all of the enumerated services. Only those
services deemed necessary or desirable for the project will be performed.
TDPUD shall indemnify Aggregate Networks for all acts in furtherance of the project, except gross
negligence.
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