Exhibit 10.5
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FRANCHISE AGREEMENT
Between
THE CITY OF NEW YORK
and
NATIONAL FIBER NETWORK, INC.
Franchise for Local High-Capacity
Telecommunications Services
Dated: December 20, 1993
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APPENDICES
Appendix A . . . . . . District
Appendix B . . . . . . Examples and guidelines for the application of the Gross
Revenue definition
Appendix C . . . . . . Initial Backbone
Appendix D . . . . . . Telecommunications Services the franchisee intends (as
of the Effective Date) to offer and additional
Telecommunications Services authorized to be offered by
the franchisee
Appendix E . . . . . . Services to be provided to the City, and related
obligations
Appendix F . . . . . . Investigations Clause
Appendix G . . . . . . Ownership and Control of franchisee as of the Effective
Date and any approved mortgages, pledges and leases
Appendix H . . . . . . XxxXxxxx Principles
TABLE OF CONTENTS
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SECTION 1 -- DEFINED TERMS.....................................................2
SECTION 2 -- GRANT OF AUTHORITY................................................6
2.1 Term...............................................................6
2.2 Certain Actions by the Company Before Execution....................6
2.3 Nature of Franchise, Effect of Termination and Renewal.............7
2.3.1 Nature of Franchise..........................................7
2.3.2 Effect of Termination........................................7
2.3.3 Renewal......................................................7
2.4 Conditions and Limitations on Franchise............................8
2.4.1 Not Exclusive................................................8
2.4.2 Construction of System.......................................8
2.4.3 Public Works and Improvements................................8
2.4.4 No Waiver....................................................9
2.4.5 No Release...................................................9
2.5 Renegotiation of Agreement.........................................9
SECTION 3 -- SERVICE..........................................................10
3.1 No Interference...................................................10
3.2 No Monopoly.......................................................10
3.3 No Discrimination.................................................10
3.4 Service...........................................................10
SECTION 4 -- TARIFF FILINGS...................................................10
4.1 Tariffs...........................................................10
SECTION 5 -- CONSTRUCTION AND TECHNICAL REQUIREMENTS..........................11
5.1 General Requirement...............................................11
5.2 Quality...........................................................11
5.3 Licenses and Permits..............................................11
5.4 Relocation of the System..........................................11
5.4.1 New Grades or Lines.........................................11
5.4.2 City Authority to Move Wires................................12
5.4.3 Company Required to Move Wires..............................12
5.5 Protect Structures................................................12
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5.6 No Obstruction....................................................12
5.7 Safety Precautions................................................12
5.8 Performance Bond/Security Fund....................................13
5.8.1 General Requirement.........................................13
5.8.2 Indemnification.............................................13
5.8.3 Other Purposes..............................................13
5.8.4 Withdrawals from the Performance Bond/Security Fund.........14
5.8.5 Notice of Withdrawals.......................................14
5.8.6 Replenishment...............................................15
5.8.7 Not a Limit on Liability....................................15
5.8.8 Form........................................................15
SECTION 6 -- EMPLOYMENT AND PURCHASING........................................16
6.1 Right to Bargain Collectively.....................................16
6.2 Local Preference..................................................16
6.3 City Vendors......................................................16
6.4 Executive Order No. 50............................................16
6.5 Enforcement.......................................................17
SECTION 7 -- COMPENSATION AND OTHER PAYMENTS..................................17
7.1 Compensation......................................................17
7.1.1 Compensation................................................17
7.1.2 Timing......................................................18
7.1.3 Records and Audits..........................................19
7.1.4 Reservation of Rights.......................................19
7.1.5 Ordinary Business Expense...................................19
7.2 Other Payments....................................................19
7.2.1 Franchising Costs...........................................19
7.2.2 Future Costs................................................19
7.3 No Credits or Deductions..........................................20
7.4 Interest on Late Payments.........................................21
7.5 Method of Payment.................................................21
7.6 Continuing Obligation and Holdover................................21
SECTION 8 -- OVERSIGHT AND REGULATION.........................................21
8.1 Confidentiality...................................................21
8.2 Oversight.........................................................22
8.3 Notification to City..............................................22
8.4 Regulation by City................................................22
8.5 Reports...........................................................22
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8.5.1 Status Reports..............................................22
8.5.2 Financial Reports...........................................23
8.5.3 Additional Reports..........................................23
8.5.4 Additional Information and Reports..........................23
8.6 Additional Filings................................................23
8.7 Books and Records/Audit...........................................23
8.7.1 Books and Records.................................................23
8.7.2 Right of Inspection.........................................24
8.7.3 Protection from Disclosure..................................25
8.8 Compliance With "Investigations Clause............................25
SECTION 9 -- RESTRICTIONS AGAINST
ASSIGNMENT AND OTHER TRANSFERS...................................25
9.1 Transfer of Interest..............................................25
9.2 Transfer of Control or Stock......................................25
9.3 Petition..........................................................26
9.4 Consideration of the Petition.....................................26
9.5 Conditions........................................................26
9.6 Permitted Encumbrances............................................27
9.7 Consent Not a Waiver..............................................27
9.8 Petitions From Persons Other Than the Company
Seeking Control Over the Company................................27
SECTION 10 -- LIABILITY AND INSURANCE.........................................28
10.1 Liability and Indemnity...........................................28
10.1.1 Company...................................................28
10.1.2 No Liability for Public Work, etc.........................28
10.1.3 No Liability for Damages..................................28
10.1.4 Defense of Claim, etc.....................................29
10.2 Insurance.........................................................29
10.2.1 Specifications............................................29
10.2.2 Maintenance...............................................29
10.2.3 Adjusted Insurance Coverage...............................30
10.2.4 Liability Not Limited.....................................30
SECTION 11 -- SPECIFIC RIGHTS AND REMEDIES....................................30
11.1 Non Exclusive.....................................................30
11.2 Default...........................................................31
11.2.1 Events of Default.........................................31
11.2.2 Cure Procedures...........................................31
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11.2.3 Remedies of the City......................................32
11.3 Termination.......................................................32
11.3.1 Termination Events........................................32
11.3.2 Rights Upon Termination...................................33
11.3.3 Price.....................................................34
11.3.4 Company's Obligations.....................................35
11.4 Removal...........................................................36
11.4.1 Discretion of DTE.........................................36
11.4.2 Failure to Commence Removal...............................36
11.4.3 No Condemnation...........................................37
11.5 Return of Performance Bond/Security Fund..........................37
11.6 Other provisions..................................................37
SECTION 12 -- SUBSEQUENT ACTION...............................................38
12.1 Compensation......................................................38
12.2 Procedure for Subsequent Invalidity...............................38
12.2.1 Declaration of Invalidity or Injunction...................38
12.2.2 Continued Compliance......................................38
12.2.3 Negotiations to Amend Agreement...........................39
SECTION 13 -- MISCELLANEOUS...................................................39
13.1 Appendices........................................................39
13.2 Action Taken by City..............................................39
13.3 Entire Agreement..................................................40
13.4 Delays and Failures Beyond Control of Company.....................40
13.5 Notices...........................................................40
13.6 General Representations, Warranties and
Covenants of the Company........................................41
13.6.1 Organization, Standing and Power..........................41
13.6.2 Authorization; Non Contravention..........................41
13.6.3 Consent...................................................42
13.6.4 Compliance with Law.......................................42
13.6.5 Litigation; Investigations................................42
13.6.6 Fees......................................................43
13.6.7 Criminal Acts.............................................43
13.6.8 Misrepresentation.........................................43
13.7 Additional Covenants..............................................43
13.7.1 Compliance with laws; Licenses and Permits................43
13.7.2 Criminal Acts.............................................44
13.7.3 Maintain Existence........................................44
13.7.4 Condition of System.......................................45
13.8 Binding Effect....................................................45
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13.9 No Waiver; Cumulative Remedies....................................45
13.10 No Opposition.....................................................45
13.11 Partial Invalidity................................................46
13.12 Headings..........................................................46
13.13 No Agency.........................................................46
13.14 Governing Law.....................................................46
13.15 Survival of Representations and Warranties........................46
13.16 Delegation of City Rights.........................................46
13.17 Claims Under Agreement............................................47
13.18 Modification......................................................47
13.19 Maintain Office...................................................47
13.20 Service of Process................................................47
13.21 Compliance With Certain City Requirements.........................48
13.22 Matching Provision................................................48
13.23 Joint Services....................................................49
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THIS AGREEMENT, dated as of the 20th day of December, 1993 (the
"Effective Date"), is by and between THE CITY OF NEW YORK (as defined in Section
I hereof, the "City") and NATIONAL FIBER NETWORK, INC., whose principal place of
business is located at 000-00 00xx Xxxx, Xxxxxxxxxx, Xxx Xxxx (as defined in
Section 1 hereof, the "Company").
W I T N E S S E T H :
WHEREAS, the New York City Department of Telecommunications and
Energy (as defined in Section 1 hereof, "DTE"), on behalf of the City, has the
authority to grant franchises involving the occupation or use of the Inalienable
Property (as defined in Section 1 hereof) of the City in connection with the
provision of Telecommunications Services (as defined in Section 1 hereof),
including renewals thereof; and
WHEREAS, the Company has submitted to DTE its proposal in response
to a Request for Proposals issued by DTE pursuant to Resolution No. 404 (adopted
by the New York City Council on March 26, 1992); and
WHEREAS, on December 6, 1993 the New York City Franchise and
Concession Review Committee (as defined in Section 1 hereof, the "FCRC") held a
public hearing on the Company's petition for a franchise to install cable, wire,
fiber optic telecommunications cable or other transmission medium that may be
used in lieu of cable, wire or fiber optic telecommunications cable for the same
purposes and related equipment and facilities on, over, and under the City's
Inalienable Property to be used in providing Telecommunications Services, which
was a full public proceeding affording due process in compliance with the
requirements of Chapter 14 of the City Charter; and
WHEREAS, at said hearing, the FCRC reviewed the Company's financial,
legal and technical ability to carry out its obligations pursuant to this
Agreement; reviewed the Company's plan for constructing, operating, maintaining
and upgrading the System (as defined in Section 1 hereof); and determined that
this Agreement granting the Company a nonexclusive franchise complies with all
applicable City laws and regulations; and
WHEREAS, DTE reviewed the proposed action for its potential
environmental impacts and determined that this action is properly classified as
a "Type II" action, pursuant to Executive Order 91, City Environmental Review,
August 24, 1977; and
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WHEREAS, the New York City Department of City Planning determined,
as evidenced in its letter dated April 23, 1992, that the proposed
franchise would have no land use impacts and that review pursuant to Section
197c of the New York City Charter (the "City Charter") would not be necessary;
and
WHEREAS, the City intends to exercise the full scope of its
municipal powers, including both its police power and contracting authority, to
promote the public interest, to enhance the health, welfare and safety of the
public, and to stimulate commerce by assuring the widespread availability of
reliable high-capacity telecommunications services; and, in pursuit of these
goals, among other purposes, desires to maximize the availability of such
Telecommunications Services and to develop innovative uses by the City and its
institutions of such Services.
NOW, THEREFORE, in consideration of the foregoing clauses, which
clauses are hereby made a part of this Agreement, the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
parties hereby covenant and agree as follows:
SECTION 1 -- DEFINED TERMS
For purposes of this Agreement, the following terms, phrases, words,
and their derivatives shall have the meanings set forth in this Section, unless
the context clearly indicates that another meaning is intended.
1.1 "Affiliated Person" means each Person who falls into one or more
of the following categories: (ii) each Person having, directly or indirectly, a
Controlling Interest in the Company; (ii) each Person in which the Company has,
directly or indirectly, a Controlling interest; (iii) each officer, director,
general partner, limited partner holding an interest of five percent (5%) or
more joint venturer or joint venture partner of the Company; and (iv) each
Person, directly or indirectly, controlling, controlled by or under common
Control with the Company; provided that "Affiliated Person" shall in no event
mean the City, any limited partner holding an interest of less than five percent
(5%) of the Company or any creditor of the Company solely by virtue of its
status as a creditor and which is not otherwise an Affiliated Person.
1.2 "Agreement" means this agreement, together with the Appendices
attached hereto and all amendments, modifications or renewals hereof or thereof.
1.3 "City" means the City of New York or, as appropriate in the case
of specific provisions of this Agreement, any board, bureau, authority, agency,
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commission department or any other entity of the City of New York, or any
authorized officer, official, employee or agent thereof or any successor
thereto.
1.4 "Commissioner" means the Commissioner of DTE, or his or her
designee, or any successor in function to the Commissioner.
1.5 "Company" means National Fiber Network, Inc., a corporation
organized and existing under the laws of the State of Delaware, whose principal
place of business is located at 000-00 00xx Xxxx, Xxxxxxxxxx, Xxx Xxxx.
1.6 "Comptroller" means the Comptroller of the City, the
Comptroller's designee, or any successor in function to the Comptroller.
1.7 "Control" or "Controlling Interest* means actual working control
in whatever manner exercised, including, without limitation, working control
through ownership, management, debt instruments or negative control, as the case
may be, of the System or of the Company. A rebuttable presumption of the
existence of Control or a Controlling Interest shall arise from the beneficial
ownership, directly or indirectly, by any Person, or group of Persons acting in
concert, of more than five percent (5%) of any Person (which Person or group of
Persons is hereinafter referred to as "Controlling Person"). "Control" or
"Controlling Interest" as used herein may be held simultaneously by more than
one Person or group of Persons.
1.8 "Customer" means any Person lawfully receiving any Service
provided by the Company by means of the System.
1.9 "DTE" means the Department of Telecommunications and Energy of
the City of New York or any successor thereto.
1.10 "District" means the City of New York, unless a smaller area is
depicted in Appendix A to this Agreement.
1.11 "Effective Date" means December 20, 1993.
1.12 "FCC" means the Federal Communications Commission, or any
successor thereto.
1.13 "FCRC" means the Franchise and Concession Review Committee
ofthe City of New York, or any successor thereto.
1.14 "Fiber" means fiber optic telecommunications cable or other
transmission medium that may be used in lieu thereof for the same purposes.
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1.15 "Franchise Area" means the District.
1.16 "Gross Revenue" shall include all revenue, as determined in
accordance with generally accepted accounting principles, that is received
directly or indirectly by the Company or by any Affiliated Person from or in
connection with any Telecommunications Services provided in accordance with this
Agreement which originate in and/or terminate in or transit the City (which
shall include a proportional allocation, which allocation shall be fair and
equitable, of revenues received by, or that should have been received by, the
Company, any Affiliated Person or any other Person for Service utilizing any
part of the System, provided, however, that such proportional allocation shall
in no case be less than the fair market value for such Service). The Company
shall, within two years following the Effective Date, submit to the City for the
City's review and approval the method by which such allocation is to be made,
and such approval by the City shall not be unreasonably withheld. If the City's
decision becomes subject to court review, the court shall undertake its review
consistent with the standards established in this Section 1.16. The revenues
described in this paragraph shall include, without limitation, the value of any
free Services provided by the Company (provided, however, that the value of any
free Service provided hereunder to the City pursuant to Section 7.1.1(b) or
Appendix E or to any other governmental entity shall not constitute Gross
Revenue); the fair market value of any nonmonetary transactions between the
Company and any Person other than Affiliated Person, but not less than the
customary prices paid in connection with equivalent transactions, viewing all
components of the transactions taken as a whole; the fair market value of any
nonmonetary transactions between the Company and any Affiliated Person but not
less than the customary prices paid in connection with equivalent transactions,
considering the entirety of all transactions taken as a whole, conducted with
Persons who are not Affiliated Persons; and any revenue received by the Company
or by any Affiliated Person, as reasonably determined from time to time by the
City through any means which is intended to have the effect of evading the
payment of compensation that would otherwise be paid to the City for the
franchise granted herein. Gross Revenue shall also include revenue derived from
the sale or lease of equipment and/or facilities provided by the Company or any
Affiliated Person if such facilities and/or equipment are required for and
integrated with the Services provided by the Company within the District, except
that Gross Revenue shall not include revenue from the sale of equipment that is
readily available for sale in the consumer retail market. Gross Revenue shall
not include: (i) actual payments made to interconnecting telecommunications
service providers outside the boundaries of New York City for services provided
outside the boundaries of New York City; (ii) taxes collected to pay to
legitimate taxing authorities; (iii) any revenues that are already included in
the calculation of franchise fees payable to the City under any other franchise
agreement between (a) the City and (b) the Company or any Affiliated Person,
provided that any services other than "cable service," as defined in the Cable
Communications Policy Act of 1984 as amended by the Cable Television Consumer
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Protection and Competition Act of 1992, 47 U.S.C. ss. 521 et seq., shall be
considered to be provided under the franchise granted herein; (iv) any free
Services required by this Agreement; (v) the revenue of any Person (including,
without limitation, a supplier of services) to the extent that such revenue is
also included in Gross Revenue of the Company; (vi) the revenue of the Company
or any Affiliated Person received directly from the sale of any merchandise,
goods or other non-Telecommunications Services that are sold through any Service
distributed over the System (other than that portion of such revenue which
represents or can be attributed to a customer fee or other payment for the use
of the System for the sale of such merchandise, goods or non-Telecommunications
Services, which portion shall be included in Gross Revenue), provided, however,
that the foregoing exclusion from Gross Revenue shall in no way be deemed to
exclude from Gross Revenue any revenue derived from the sale or lease of
equipment and/or facilities provided by the Company or any Affiliated Person if
such facilities and/or equipment are required for and Integrated with the
Services provided by the Company; (vii) Investment income; (viii) the revenue of
any Affiliated Person which represents standard and reasonable amounts paid by
the Company to the Affiliated Person for ordinary and necessary business
expenses of the Company, including, without limitation, professional service
fees and insurance or bond premiums; (ix) advertising commissions deducted by
advertising agencies before advertising revenues are paid over to the Company;
(x) any amount billed to customers and collected by the Company or any
Affiliated Person on behalf of any non-Affiliated telecommunications provider
for services provided by such provider to such customers, where such amount is
passed through in its entirety by the Company or Affiliated Person to such
provider; (xi) the value of any use of the System by the Company or any
Affiliated Person for wholly Internal administrative purposes, including the
distribution of cable programming from one Affiliated Person to another
Affiliated Person, provided that such Affiliated Persons ace substantially owned
by the Company or its parent; (xii) to the extent consistent with generally
accepted accounting principles, consistently applied, bad debt writeoffs; and
(xiii) the value of short-term promotional Services. Appendix B herein sets
forth examples and guidelines for the application of the foregoing definition.
1.17 "Inalienable Property" means the rights of the City in and to
its waterfront, ferries, wharf property, bridges, land under water, public
landings, wharves, docks, streets, avenues, highways, parks, waters, waterways
and all other public places.
1.18 "Initial Backbone" means the backbone depicted in Appendix C to
this Agreement.
1.19 "Mayor" means the chief executive officer of the City, the
Mayor's designee, or any successor to the executive powers of the present Mayor.
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1.20 "Person" shall mean any natural person or any association,
firm, Partnership, joint venture, corporation, or other legally recognized
entity, whether for profit or not for profit, but shall not mean the City.
1.21 "PSC" means the New York State Public Service Commission, or
any successor thereto.
1.22 "Service or "Telecommunications Service(s)" means any
telecommunications services provided by the Company within the District which
the Company is authorized to provide under applicable federal, state and local
law, and any equipment and/or facilities required for and integrated with the
Services provided by the Company within the District, except that these terms do
not include "cable service" as defined in the Cable Communications Policy Act of
1984, as amended by the Cable Television Consumer Protection and Competition Act
of 1992 (47 U.S.C. ss. 521 et seq.), and do not include "mobile
telecommunications services" as defined in the authorizing resolution adopted by
the New York City Council on May 23, 1991 (Resolution 985).
1.23 "Signal" means any transmission of electronic, electrical or
radio frequency energy or optical information.
1.24 "System" or "Telecommunications System" means the
telecommunications system which is to be constructed, operated and maintained by
the Company pursuant to this Agreement, including, without limitation, all real
property and interests in real property, all tangible and intangible personal
property, buildings, offices, furniture, Customer lists, cables, wires, optical
fibers, amplifiers and all other electronic devices, equipment and facilities
used in connection therewith and all rights, contracts and understandings with
regard to any matter related thereto.
SECTION 2 -- GRANT OF AUTHORITY
2.1 Term. This Agreement, and the franchise granted hereunder, shall
commence upon the Effective Date, and shall continue for a period of fifteen
(15) years from the Effective Date, unless this Agreement is earlier terminated
upon the earliest to occur of: (a) a revocation of the franchise, as provided by
Section 11.3 hereof, or (b) the expiration of the term of the franchise by
acceleration, or otherwise. The period of time that this Agreement remains in
effect is herein referred to as the "Term."
2.2 Certain Actions by the Company Before Execution. Prior to the
execution of this Agreement, the Company has satisfied certain conditions to the
City's execution of this Agreement by delivering to DTE the following: (a)
evidence that it has deposited with the Comptroller the Performance
Bond/Security Fund required
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pursuant to Section 5.8 hereof; (b) a certificate of liability insurance,
pursuant to Section 10.2 hereof, with a copy to the Comptroller; (c) an opinion
of the Company's counsel dated as of the Effective Date opining that this
Agreement has been duly authorized, executed and delivered by the Company and is
a binding obligation of the Company and opining as to such other matters as the
City has requested; (d) the questionnaires required in connection with the
City's Vendor Information Exchange System ("VENDEX"), provided that favorable
completion of the appropriate review in connection therewith shall be a
condition subsequent to the effectiveness of this Agreement; (e) evidence that
the Company has paid the initial portion of its pro rata share of the City's
franchising costs pursuant to Section 7.2.1 herein; and (f) certified copies of
the Company's organizational and governing documents, as amended to date,
pursuant to Section 13.6.1 herein.
2.3 Nature of Franchise, Effect of Termination and Renewal.
2.3.1 Nature of Franchise. (a) The City hereby grants the
Company, subject to the terms and conditions of this Agreement, a nonexclusive
franchise providing the right and consent to install, operate, repair, maintain,
remove and replace cable, wire, Fiber or other transmission medium that may be
used in lieu of cable, wire or Fiber for the same purposes and related equipment
and facilities on, over and under the Inalienable Property of the City in order
to provide Telecommunications Services which originate and/or terminate in or
transit the Franchise Area.
(b) The Telecommunications Services the Company intends
(as of the Effective Date) to offer and the Telecommunications Systems the
Company intends (as of the Effective Date) to construct, operate and maintain,
are set forth on Appendix D to this Agreement.
(c) Before offering or providing any Telecommunications
Services pursuant to this franchise, the Company shall obtain any and all
regulatory approvals, permits, authorizations or licenses for the offering or
provision of such Telecommunications Services from the appropriate federal,
state and local authorities, if required, and shall submit to DTE upon the
written request of the City evidence of all such approvals, permits,
authorizations or licenses.
2.3.2 Effect of Termination. Upon termination of this
Agreement, the franchise shall expire; all rights of the Company in the
franchise shall cease, with no value allocable to the franchise itself; and the
rights of the City and the Company to the System or any pact thereof, shall be
determined as provided in Sections 11.3 through 11.6 hereof. The termination of
this Agreement and the franchise granted hereunder shall not, for any reason,
operate as a waiver or release of any obligation of the Company or any other
Person, as applicable, for any liability (i) pursuant to Section 10.1 hereof,
which arose or arises out of any act or failure to act
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required hereunder prior to the termination; (ii) which exists pursuant to
Sections 7, "Compensation," 8.7.2, "Right of Inspection," 11.3 through 11.6,
"Termination," 13.14, "Governing Law" and 13.17, "Claims under Agreement,"
hereof; and (iii) to maintain in full force and effect the Performance
Bond/Security Fund and coverage under the liability insurance policies required
under and in accordance with Sections 5.8 and 10.2 hereof.
2.3.3 Renewal. This Agreement does not grant to the Company
any right to renewal of this Agreement or the franchise granted hereunder, and
there shall be no such right. The Company may submit a written petition to the
City to renew this Agreement and the franchise granted hereunder not later than
twelve (12) months nor more than eighteen (18) months before the expiration of
the Term. Nonetheless, the City shall not be obligated to renew this Agreement
or the franchise granted hereunder.
2.4 Conditions and Limitations on Franchise.
2.4.1 Not Exclusive. Nothing in this Agreement shall affect
the right of the City to grant to any Person a franchise, consent or right to
occupy and use Inalienable Property of the City, or any part thereof, for the
Construction, operation and/or maintenance of a system to provide
telecommunications services in the City for any purpose, or the right of the
City to construct, operate and/or maintain a system to provide
telecommunications services in the City or to acquire and operate the System
pursuant to this Agreement, except that the City shall not use any services,
equipment, cable, wire, Fiber or other transmission medium provided by the
Company pursuant to this Agreement to offer or provide services to
non-governmental entities in competition with the Company.
2.4.2 Construction of System. (a) The Company is authorized to
install cable, wire, Fiber or other transmission medium that may be used in lieu
of cable, wire or Fiber for the same purposes, or related equipment and
facilities at any location on, over or under the Inalienable Property of the
City within the Franchise Area at any time during the Term, without further
approval of DTE, subject to the terms and conditions of this Agreement. The
Company shall use its best efforts to coordinate its construction schedule with
the appropriate City agencies, including, without limitations the appropriate
Borough Engineer and the office of Construction, to minimize unnecessary
disruption.
(b) The Company agrees to commence construction of the
Initial Backbone as soon as feasible after the Effective Date and in any event
no later than four (4) months after the Effective Date, subject to the timely
issuance of necessary permits and licenses, which will be diligently pursued by
the Company. The Company agrees to substantially complete the installation of
the Initial Backbone within
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nineteen (19) months after the date of commencement of construction of the
Initial Backbone, subject to the timely issuance of necessary permits and
licenses, which will be diligently pursued by the Company.
(c) The company shall obtain all construction, building
or other permits or approvals necessary before installing such cable, wire,
Fiber or other transmission medium that may be used in lieu of cable, wire or
Fiber for the same purposes, or related equipment and facilities. The Company
shall provide copies of any such permits and approvals to DTE upon request.
2.4.3 Public Works and Improvements. Nothing in this Agreement
shall abrogate the right of the City to perform any public works or public
improvements of any description. In the event that the System interferes with
the construction, operation, maintenance, repair or removal of such public works
or public improvements, the Company shall, at its own cost and expense, promptly
protect or alter or relocate the System, or any part thereof, as directed by the
City. In the event that the Company refuses or neglects to so protect, alter or
relocate all or part of the System, the City shall have the right to break
through, remove, alter, or relocate all or any part of the System without any
liability to the Company, and the Company shall pay to the City the costs
incurred in connection with such breaking through, removal, alteration or
relocation.
2.4.4 No Waiver. Nothing in this Agreement shall be construed
as a waiver of any codes, ordinances or regulations of the City or of the City's
right to require the Company or Persons utilizing the System to secure the
appropriate permits or authorizations for such use, provided that no fee or
charge may be imposed upon the Company for any such permit or authorization,
other than the standard fees or charges generally applicable to all Persons for
such permits or authorizations. Any such standard fee or charge shall not be an
offset against the compensation the Company is required to pay to the City
pursuant to Section 7 of this Agreement.
2.4.5 No Release. Nothing in this Agreement shall be construed
as a waiver or release of the rights of the City in and to the Inalienable
Property of the City. In the event that all or part of the Inalienable Property
within the Franchise Area is eliminated, discontinued, closed or demapped, all
rights and privileges granted pursuant to this Agreement with respect to said
Inalienable Property or any part thereof so eliminated, discontinued, closed or
demapped, shall cease upon the effective date of such elimination,
discontinuance, closing or demapping. If said elimination, discontinuance,
closing or demapping is undertaken for the benefit of any private Person, the
City shall make reasonable efforts to condition its consent to said elimination,
discontinuance, closing or demapping on the agreement of said private Person to
(i) grant the Company the right to continue to occupy and use said
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Inalienable Property or (ii) reimburse the Company for the reasonable costs of
relocating the affected part of the System.
2.5 Renegotiation of Agreement. (a) Each party shall have the right,
any one time Following the date seven (7) years after the Effective Date and
upon six (6) months notice to the other party, to require the renegotiation of
the terms of Sections 7 and 8 hereof based an changes in technological,
regulatory or market conditions that have occurred since the Effective Date,
provided, however, that any renegotiated terms shall apply only prospectively to
any contracts entered into by the Company with customers following the effective
date of the renegotiated terms. The parties shall, during renegotiation of said
Sections under this Section 2.5, negotiate in good faith.
(b) If, despite such good faith negotiations, the
parties fail to reach an agreement that is reasonably acceptable to both parties
within a reasonable period, then either party shall have the right, by notice to
the other, that the term of this Agreement and the franchise granted hereunder
shall be accelerated and shall terminate on the date which is one half of the
number of days between the date of such notice and January 1, 2009.
(c) The parties' rights pursuant to this Section 2.5
shall be cumulative and shall be in addition to and not in derogation of all
other rights reserved under other provisions of this Agreement.
SECTION 3 -- SERVICE
3.1 No Interference. In the operation of the System, the Company
shall not interfere with the technical operation of any other telecommunications
system in the City.
3.2 No Monopoly. If, at any time during the Term, it is finally
determined by a court of competent jurisdiction (not subject to further appeal)
that the distribution or provision of any Service in the District by the Company
or any Affiliated Person, or any other action in connection with the operation
of the System, has tended to create or has created a monopoly or a restraint of
trade in violation of law, such determination shall be deemed to be an Event of
Default under this Agreement. In such event, in addition to pursuing any of the
actions set forth in Section 11.2 hereof, DTE may issue a directive to correct
such conditions, consistent with this Agreement and the determination of the
court, without following the procedural requirements of Sections 11.2.2 and
11.2.3 hereof.
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3.3 No Discrimination. The Company shall not discriminate in the
provision of Services on the basis of race, creed, color, national origin, sex,
age, handicap, marital status, or real or perceived sexual orientation.
3.4 Service. The Company agrees to market its Services on the System
throughout the Term. In the event the Company, with the consent of the City,
sells or otherwise transfers the System or Control thereof to any Person, the
City or the City's assignee, or in the event the franchise terminates, the
Company shall transfer the System in an orderly, manner in order to maintain
continuity of Service to the City and to other Customers.
SECTION 4 -- TARIFF FILINGS
4.1 Tariffs. The Company shall provide annually to DTE a list of all
and any tariffs or tariff applications, and all amendments or modifications
thereof, that the Company has filed with any federal, state or local regulatory
authorities or other governmental agencies within the previous twelve (12)
months with respect to Telecommunications Services offered within the District
through, over or by use of the System. Each entry on this list must be in a
form, and provide sufficient detail, to allow DTE to readily identify the
services to which the tariffs and tariff applications apply, and must show the
date of each tariff and tariff application and such other information as DTE may
thereafter request. Upon the request of DTE, the Company shall promptly but in
no case later than 10 business days following the request deliver to DTE a
complete copy of any tariff or tariff application.
SECTION 5 --
CONSTRUCTION AND TECHNICAL REQUIREMENTS
5.1 General Requirement. The Company agrees to comply with each of
the terms set forth in this Section governing construction and technical
requirements for its System, in addition to any other requirements or procedures
specified by the Commissioner.
5.2 Quality. All work involved in the construction, operation,
maintenance, repair, upgrade and removal of the System shall be performed in a
safe, thorough and reliable manner using materials of good and durable quality.
If, at any time, it is determined by the City or any other agency or authority
of competent jurisdiction that any part of the System, including, without
limitation, any means used to distribute Signals over or within the System, is
harmful to the public health or safety, then the Company shall, at its own cost
and expense, promptly correct all such conditions.
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5.3 Licenses and Permits. The Company shall have the sole
responsibility for obtaining, at its own cost and expense, all permits, licenses
or other forms of approval or authorization necessary to construct operate,
maintain, upgrade or repair the System, including but not limited to any
necessary approvals from Persons to use private property, easements, poles and
conduits. The Company shall obtain any required permit, license, approval or
authorization prior to the commencement of the activity for which the permit,
license, approval or authorization is required.
5.4 Relocation of the System.
5.4.1 New Grades or Lines. If the grades or lines of any
Inalienable Property within the Franchise Area are changed at any time during
the Term in a manner affecting the System, then the Company shall, at its own
cost and expense and upon reasonable notice by the City, promptly protect or
promptly alter or relocate the System, or part thereof, so as to conform with
such new grades or lines. In the event that the Company unreasonably refuses or
neglects to so protect, alter or relocate all or part of the System, the City
shall have the right to break through, remove, alter or relocate such part of
the System without any liability to the Company, and the Company shall pay to
the City the costs incurred in connection with such breaking through, removal,
alteration or relocation.
5.4.2 City Authority to Move Wires. The City may, at any time,
in case of fire, disaster or other emergency, as determined by the City in its
reasonable discretion, cut or move any other optical fibers, wires, cable,
amplifiers, appliances or other parts of the System on, over or under the
Inalienable Property of the City in which event the City shall not be liable
therefor to the Company. The City shall notify the Company in writing prior to,
if practicable, but in any event as soon as possible and in no case later than
the next business day following any action taken under this Section 5.4.2.
5.4.3 Company Required to Move Wires. The Company shall upon
prior written notice by the City or any Person holding a permit to move any
structure, and within the time that is reasonable under the circumstances,
temporarily move its wires to permit the moving of said structure. The Company
may impose a reasonable charge on any Person other than the City for any such
movement of its wires.
5.5 Protect Structures. In connection with the construction,
operation, maintenance, repair, upgrade or removal of the System, the Company
shall, at its own cost and expense, protect any and all existing structures
belonging to the City and all designated landmarks, as well as all other
structures within any designated landmark district. The Company shall obtain the
prior approval of the City before altering any water main, sewerage or drainage
system, or any other municipal structure
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one over or under the Inalienable Property of the City required because of the
presence of the System. Any such alteration shall be made by the Company, at its
own cost and expense and in a manner prescribed by the City. The Company agrees
that it shall be liable, at its own cost and expense, to replace or repair and
restore to its prior condition in a manner as may be reasonably specified by the
City, any municipal structure or any other Inalienable Property of the City
involved in the construction, operation, maintenance, repair, upgrade or removal
of the System that may become disturbed or damaged as a result of any work
thereon by or on behalf of the Company pursuant to this Agreement.
5.6 No Obstruction. In connection with the construction, operation
maintenance, upgrade, repair or removal of the System, the Company shall not
unreasonably obstruct the Inalienable Property of the City, subways, railways,
passenger travel, river navigation, or other traffic to, from or within the
Franchise Area without the prior consent of the appropriate authorities.
5.7 Safety Precautions. The Company shall, at its own cost and
expense, undertake all necessary and appropriate efforts to prevent accidents at
its work sites, including the placing and maintenance of proper guards, fences,
barricades, security personnel and suitable and sufficient lighting.
5.8 Performance Bond/Security Fund.
5.8.1 General Requirement. Prior to the execution of this
Agreement, the Company has deposited with the Comptroller an irrevocable,
unconditional letter of credit and surety bond which together total two million
dollars ($2,000,000). Such $2,000,000 constitutes the Company's Performance
Bond/ Security Fund. A minimum of one million dollars ($1,000,000) of this
amount shall be in the form of a surety bond, and the Company may, at its
discretion, further increase the proportion of the Performance Bond/Security
Fund that is in the form of a surety bond so long as at least two hundred fifty
thousand dollars ($250,000) of the Performance Bond/Security Fund remains in the
form of a letter of credit. The total amount of the Performance Bond/Security
Fund may be reduced to one million dollars ($1,000,000), which must consist of
at least a two hundred fifty thousand dollar ($250,000) letter of credit,
following the date 30 days after completion by the Company of the Initial
Backbone. Throughout the Term, and for one hundred twenty (120) days thereafter,
unless the City notifies the Company that a reasonable longer period shall
apply, the Company shall maintain the Performance Bond/Security Fund in the
amount specified in this Section 5.8. At any time during the Term, the City may,
acting reasonably, require the Company to increase the amount of the Performance
Bond/Security Fund if it finds that new risk factors exist, such as an increase
in the amount of compensation payments to be made pursuant to Section 7.1 hereof
or the failure of the Company to perform any of its obligations pursuant to this
Agreement,
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which reasonably necessitate an increase in the amount of the Performance
Bond/Security Fund.
5.8.2 Indemnification. The Performance Bond/Security Fund
shall indemnity the City, up to the full face amount of the Performance
Bond/Security Fund, for: (i) the cost to continue any construction of the
portion of the System being constructed for the City pursuant to Section
7.1.1(b) herein and Appendix E hereof; (ii) the cost of maintaining operation of
the System following a termination of this Agreement in excess of all net
revenue actually received through the continued operation of the System during
said period; (iii) any loss or damage to any municipal structure or other
Inalienable Property of the City during the course of any construction of the
System; (iv) any other costs, or loss or damage actually incurred by the City as
a result of the Company's failure to perform its obligations pursuant to this
Agreement; and (v) the removal of all or any part of the System from the
Inalienable Property of the City, as authorized by this Agreement.
5.8.3 Other Purposes. The Performance Bond/Security Fund shall
also serve as security for:
(a) the faithful performance by the Company of all
terms, conditions and obligations of this Agreement;
(b) any expenditure, damage, or loss incurred by the
City occasioned by the Company's failure to comply with all rules, regulations,
orders, permits and other directives of the City and the Commissioner issued
pursuant to this Agreement;
(c) payment of compensation set forth in Section 7
hereof;
(d) the payment of premiums for the liability insurance
required pursuant to Section 10 hereof;
(e) the removal of the System from the Inalienable
Property of the City at the termination of the Agreement, at the election of the
City, pursuant to Section 11.4 hereof;
(f) the payment to the City of any amounts for which the
Company is liable pursuant to Section 10.1.1 hereof which are not paid by the
Company's insurance;
(g) the payment of any other amounts which become due to
the City pursuant to this Agreement or law;
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(h) the timely renewal of the letter of credit that
constitutes the Performance Bond/Security Fund; and
(i) any costs, losses or damages, incurred by the City
as a result of a default of the Company's obligations under this Agreement.
5.8.4 Withdrawals from the Performance Bond/Security Fund. In
accordance with the procedures set forth in Sections 5.8.5, 11.2 and 11.3, the
Comptroller, upon the direction of the Commissioner, may make withdrawals from
the Performance Bond/Security Fund and pay to the City such amounts for the
satisfaction of obligations under Section 5.8.2 hereof, or for the purposes
specified in Section 5.8.3 hereof. Withdrawals from the Performance
Bond/Security Fund shall not be deemed a cure of the default(s) that led to such
withdrawals. The City may not seek recourse against the Performance
Bond/Security Fund for any costs or damages for which the City has previously
been compensated through a withdrawal from the Performance Bond/Security Fund or
otherwise by the Company.
5.8.5 Notice of Withdrawals. Within one (1) week after any
withdrawals from the Performance Bond/Security Fund, the Comptroller shall
notify the Company of the date and amount thereof, provided, however, that the
City shall not make any withdrawals by reason of any breach for which the
Company has not been given notice. The withdrawal of amounts from the
Performance Bond/Security Fund shall constitute a credit against the amount of
the applicable liability of the Company to the City but only to the extent of
said withdrawal.
5.8.6 Replenishment. Within thirty (30) days after receipt of
notice from the Comptroller that any amount has been withdrawn from the
Performance Bond/Security Fund letter of credit, as provided in Section 5.8
hereof, the Company shall restore the Performance Bond/Security Fund to the
amount specified in Section 5.8.1 hereof, provided that, if a court finally
determines that said withdrawal by the City was improper, the City shall refund
the improperly withdrawn amount to the Performance Bond/Security Fund or to the
Company such that the balance in the Performance Bond/ Security Fund shall not
exceed the amount specified in Section 5.8.1 hereof. In case of such an improper
withdrawal, the Company shall receive any interest accrued on the amount
improperly withdrawn from the time of withdrawal to the time of refund to the
Fund. If the Company has not made the required restoration to the Performance
Bond/ Security Fund within such thirty (30) day period, interest on said amount
shall accrue at the rate specified in Section 7.4 hereof, to commence at the
completion of such 30-day period. The Comptroller may withdraw from the
Performance Bond/Security Fund and pay to the City such interest periodically up
to the date on which the Company makes the required principal payment, provided
that the Company shall not be obligated to pay such interest with such principal
payment to the extent such interest has been already withdrawn by the
Comptroller.
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5.8.7 Not a Limit on Liability. The obligation to perform and
the liability of the Company pursuant to this Agreement shall not be limited by
the acceptance of the Performance Bond/Security Fund required by this Section
5.8.
5.8.8 Form. The Performance Bond/Security Fund does, and any
replacement bond shall, contain the following endorsement: "It is hereby
understood and agreed that this bond may not be canceled or not renewed by the
surety nor the intention to cancel or not to renew be stated by the surety until
ninety (90) days after completion of construction of the System and,
notwithstanding the foregoing, shall in no case be canceled or not renewed by
the surety until at least ninety (90) days' written notice to the City of
surety's intention to cancel or not renew this bond." Notwithstanding the
preceding, the letter of credit portion of the Performance Bond/Security Fund
shall not be canceled or not renewed by the issuer until at least sixty (60)
days, notice to the City of the issuer's intention to cancel or not renew the
letter of credit.
SECTION 6 -- EMPLOYMENT AND PURCHASING
6.1 Right to Bargain Collectively. The Company agrees to recognize
the right of its employees to bargain collectively through representatives of
their own choosing in accordance with applicable law. The Company shall
recognize and deal with the representatives duly designated or selected by a
majority of its employees for the purpose of collective bargaining with respect
to rates of pay, wages, hours of employment or any other terms, conditions or
privileges of employment. The Company shall not dominate, interfere with,
participate in the management or control or, or give financial support to any
union or association of its employees.
6.2 Local Preference. The Company shall, at its own cost and
expense, develop and maintain a plan for the recruitment, education, training
and employment of residents of the City, for the opportunities to be created by
the construction, operation, marketing and maintenance of the System. Such
recruitment activities shall include provisions for the posting of employment
and training opportunities at appropriate City agencies responsible for
encouraging employment of City residents. Such plan shall be designed so as to
ensure the promotion of equal employment opportunity for all qualified Persons
employed by, or seeking employment with, the Company. Such plan shall be updated
from time to time as the City deems reasonably necessary. The Company shall,
throughout the Term, implement such plan, at its own cost and expense, by
ensuring, to the maximum feasible extent, the recruitment, education, training,
and employment of City residents.
6.3 City Vendors. To the maximum feasible extent, after taking into
account price and quality considerations, the Company shall utilize vendors
located in
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the City in connection with the construction, operation, marketing and
maintenance of the System. The Company shall, after taking into account price
and quality considerations, in the purchase of comparable materials, equipment,
services or supplies of any nature, give effect to a preference for such items
which are assembled, manufactured, or otherwise produced, in whole or in part,
within the City.
6.4 Executive Order No. 50. The Company agrees to comply in all
respects with the provisions of the Mayor's Executive Order No. 50 (April 25,
1980) and all rules and regulations promulgated thereunder, as such Order or
regulations may be amended, modified or succeeded throughout the Term.
Notwithstanding that Executive Order No. 50 may not apply on its face to the
Company as a franchisee of the City, the Company shall comply in all respects
with the provisions of such order and successor and replacement laws, orders and
regulations adopted following the Effective Date. As required by said Executive
Order No. 50, the provisions of Sections 50.30 and 50.31 of the Final Rule
implementing said Order are incorporated herein by this reference. The Company
agrees to make a reasonable inquiry and to engage in reasonable monitoring
efforts to ensure compliance with all unions to ensure that all contractors and
subcontractors comply with the required contractual language in Section 6.5. The
Company shall not contract with and shall discontinue any contract entered into
after the Effective Date with any union, contractor or subcontractor that
refuses to agree to or fails to comply with the contractual language in Section
6.5.
6.5 Enforcement. The Company shall take steps to ensure that the
requirements of Section 6.4 hereof are adhered to by each union with which the
Company deals, each officer, employee, agent, contractor or subcontractor of the
Company, and each Person performing work pursuant to this Agreement with respect
to the System for, on behalf of, or at the discretion of, the Company. The
requirements of Section 6.4 hereof shall apply to every contract relating to the
System between the Company and: (i) any union; (ii) any contractor; (iii) any
subcontractor; or (iv) any Person with which any of the foregoing Persons has a
relationship in connection with any aspect of the System. To comply with the
obligations of this Section 6.5, the Company shall include, in all contracts
described in the foregoing sentence which are entered into following the
Effective Date (which shall include any renewals, amendments and modifications,
of existing contracts), the following language, stating that such party: "has
received a copy of Section 6.4 of a certain agreement by and between the City of
New York and the Company dated as of December 20, 1993, granting to the Company
a nonexclusive franchise providing the right and consent to install cable, wire,
Fiber or other transmission medium that may be used in lieu of cable, wire or
Fiber for the same purposes and related equipment and facilities on, over and
under the Inalienable Property of the City within the Franchise Area to provide
Telecommunications Services and agrees to comply with each term, condition and
requirement of Section 6.4 of such agreement, which terms, conditions and
requirements are deemed to be incorporated herein by this reference."
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SECTION 7 --
COMPENSATION AND OTHER PAYMENTS
7.1 Compensation.
7.1.1 Compensation. As compensation for the franchise, the
Company shall have the following obligations:
(a) Franchise Fee. The Company's obligation to pay
franchise fees shall commence on the Completion Date. For purposes of this
Section 7.1, the Completion Date shall be the earlier of the date of completion
of the Initial Backbone or January 1, 1995. Commencing on the Completion Date,
the Company shall pay to the City the following percentage of Gross Revenue each
year during the Term:
First year following Completion Date ..........................Ten Percent (10%)
Second year following Completion Date..........................Ten Percent (10%)
Third year following Completion Date............................Six Percent (6%)
Fourth year following Completion Date
and each year thereafter
through the end of the Term..............................Five Percent (5%)
During each year of the Term following the Completion Date, the
Company's compensation payments pursuant to this Section 7.1.1(a) shall not be
less than $200,000.00 (two hundred thousand dollars). To the extent that the sum
of all payments pursuant to this Section 7.1.1(a) with respect to any year is
less than said minimum payment, then the Company's compensation payment to be
made within forty-five (45) days of the last day of December of said year
pursuant to Section 7.1.2 shall include an amount which brings the total amount
paid with respect to said year up to said minimum payment.
(b) Services to City. The Company shall provide services
to the City, and observe its other obligations as specified in Appendix E to
this Agreement. The Company expressly acknowledges and agrees that neither the
provision of Services to the City nor the satisfaction of other obligations
specified in Appendix E to this Agreement shall be chargeable against the
franchisee fees to be paid to the City by the Company pursuant to Section
7.1.1(a) hereof.
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7.1.2 Timing. (a) All payments made pursuant to Section
7.1.1(a) hereof shall be made on a quarterly basis within forty-five (45) days
of the close of each calendar quarter. The Company shall in good faith estimate
each quarterly payment based on anticipated revenues for that quarter.
(b) Within sixty (60) days following the end of the
calendar year, the Company shall calculate the exact fee due to the City
pursuant to Section 7.1.1(a) hereof for said calendar year. Should the total
calculated franchise fee for the year exceed the estimated quarterly payments
made by the Company for the year, the Company shall, within the 60-day period
following the end of the calendar year, remit to the City any balance due.
Should the estimated quarterly payments made by the Company for the year exceed
the total calculated franchise fee for the year, the City will remit the
overpayment within thirty (30) days following notice from the Company of the
balance due.
(c) In no case shall the estimated quarterly payments to
be paid pursuant to paragraph (a) of this Section 7.1.2 be less than one-fourth
(1/4) of the total calculated franchise fee based on Section 7.1.1(a) hereof for
the preceding calendar year.
7.1.3 Records and Audits. The Company shall keep comprehensive
itemized records of all revenues received and of all Services provided, in
sufficient detail to enable the City to determine whether all compensation owed
to the City pursuant to Section 7.1 is being paid to the City.
7.1.4 Reservation of Rights. No acceptance of any compensation
payment by the City shall be construed as an accord and satisfaction that the
amount paid is in fact the correct amount, nor shall such acceptance of any
payment be construed as a release of any claim that the City may have for
further or additional sums payable under the provisions of this Agreement. All
amounts paid shall be subject to audit and recomputation by the City.
7.1.5 Ordinary Business Expense. Nothing contained in this
Section 7.1 or elsewhere in this Agreement is intended to prevent the Company
from treating the compensation and other payments that it may pay pursuant to
this Agreement as an ordinary expense of doing business and, accordingly, from
deducting said payments from gross income in any City, state, or federal income
tax return.
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7.2 Other Payments.
7.2.1 Franchising Costs. The Company has, prior to the
execution of this Agreement, paid a portion of the Company's pro rata share of
costs incurred by the City for the services of third parties (including, without
limitation, attorneys and other consultants) in connection with the award of
this franchise. Within thirty (30) days after receipt of an itemized and
detailed invoice for services rendered, the Company shall pay to DTE, or at the
direction of the Commissioner to a third party, the Company's pro rata share of
all remaining reasonable costs and expenses incurred by the City for the
services of third parties (including, without limitation, attorneys and other
consultants) in connection with the award of this franchise. The Company
expressly agrees that the payments referred to in this Section 7.2.1 are in
addition to and not in lieu of, and shall not be offset against, the
compensation to be paid to the City by the Company pursuant to Section 7.1
hereof.
7.2.2 Future Costs. The Company shall pay to the City or to
third parties, at the direction of the Commissioner, an amount equal to the
reasonable costs and expenses which the City incurs for the services of third
parties (including but not limited to attorneys and other consultants) in
connection with any renewal or Company initiated renegotiation, transfer,
amendment or other modification of this Agreement or the franchise, provided,
however, that in the case of renewal only, the parties shall agree upon a
reasonable financial cap at the outset of negotiations. However, in the event
the City brings any action for termination or for enforcement of this Agreement
against the Company and the Company finally prevails, then the Company shall
have no obligation to reimburse the City or pay any sums directly to third
parties, at the direction of the City, pursuant to this Section with respect to
such termination or enforcement. In the event the Company contests the charges,
it shall pay any uncontested amounts. The Commissioner shall review the
contested charges and the services rendered and shall reasonably determine
whether such charges are reasonable for the services rendered. The Company
expressly agrees that the payments made pursuant to this Section 7.2 are in
addition to and not in lieu of, and shall not be offset against, the
compensation to be paid to the City by the Company pursuant to Section 7.1
hereof.
7.3 No Credits or Deductions. (a) The Company expressly acknowledges
and agrees that:
(i) The compensation and other payments to be made or
Services to be provided pursuant to this Section 7 shall not be deemed to
be in the nature of a tax, and shall be in addition to any and all taxes
or other fees or charges which the Company or any Affiliated Person shall
be required to pay to the City or to any state or federal agency or
authority, all of which shall be separate and distinct obligations of the
Company; and
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(ii) The Company expressly relinquishes and waives its
rights and the rights of any Affiliated Person to a deduction or other
credit pursuant to Section 626 of the New York State Real Property Tax Law
and any successor or amendment thereto, and to any subsequent law, rule,
regulation, or order which would purport to permit any of the acts
prohibited by this Section 7.3; and
(iii) Neither the Company nor any Affiliated Person
shall have or make any claim for any deduction or other credit of all or
any part of the amount of the compensation or other payments to be made or
Services to be provided pursuant to this Agreement from or against any
City or other governmental taxes of general applicability or other fees or
charges which the Company or any Affiliated Person is required to pay to
the City or other governmental agency; and
(iv) Neither the Company nor any Affiliated Person shall
apply or seek to apply all or any part of the amount of the compensation
or other payments to be made or Services to be provided pursuant to this
Agreement as a deduction or other credit from or against any City or other
government taxes of general applicability (other than income taxes) or
other fees or charges, each of which shall be deemed to be separate and
distinct obligations of the Company and the Affiliated Persons; and
(v) Neither the Company nor any Affiliated Person shall
apply or seek to apply all or any part of the amount of any City or other
governmental taxes or other fees or charges of general applicability as a
deduction or other credit from or against any of the compensation or other
payments to be made or Services to be provided pursuant to this Agreement,
each of which shall be deemed to be separate and distinct obligations of
the Company and the Affiliated Persons.
(b) In any situation where the Company believes the
effect of this Section 7.3 is unduly harming, in a manner inconsistent with the
intent of this Section 7.3, an Affiliated Person of the Company, the Company may
petition the City for relief, and such relief shall not be unreasonably
withheld.
7.4 Interest on Late Payments. In the event that any payment
required by this Agreement is not actually received by the City on or before the
applicable date fixed in this Agreement, interest thereon shall accrue from such
date until received at a rate equal to the rate of interest then in effect
charged by the City for late payments of real estate taxes.
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7.5 Method of Payment. Except as provided elsewhere in this
Agreement, all payments made by the Company to the City pursuant to this
Agreement shall be made to the City's Department of Finance, with a copy to DTE.
7.6 Continuing Obligation and Holdover. (a) In the event the Company
continues to operate all or any part of the System after the Term, then the
Company shall continue to comply with all applicable provisions of this
Agreement, including, without limitation, all compensation and other payment
provisions of this Agreement, throughout the period of such continued operation,
provided that any such continued operation shall in no way be construed as a
renewal or other extension of this Agreement or the franchise granted pursuant
to this Agreement, nor as a limitation on the remedies, if any, available to the
City as a result of such continued operation after the Term, including, but not
limited to, damages and restitution.
(b) In the event this Agreement terminates for any
reason whatsoever and the Company falls to cease providing Service over the
System, the City, in addition to all other remedies available to it under this
Agreement or by law, shall be entitled to receive all payments it is entitled to
receive under this Agreement including, but not limited to, the compensation set
forth in Section 7.
SECTION 8 -- OVERSIGHT AND REGULATION
8.1 Confidentiality. The City shall protect from disclosure
confidential, proprietary information of the Company submitted to the City
pursuant to this Agreement in accordance with applicable law, provided that the
Company notifies the City of, and clearly labels the information which the
Company deems to be confidential, proprietary information. Such notification and
labeling shall be the sole responsibility of the Company.
8.2 Oversight. DTE shall have the right to oversee, regulate and
inspect periodically the construction, maintenance, operation and upgrade of the
System, and any part thereof, in accordance with the provisions of this
Agreement and applicable law. The Company shall establish and maintain
managerial and operational records, standards, procedures and controls to enable
the Company to prove, in reasonable detail, to the satisfaction of the City at
all time throughout the Term, that the Company is in compliance times throughout
with this Agreement. The Company shall retain such records for not less than six
(6) years following their creation, and for such additional period as DTE may
direct.
8.3 Notification to City. (a) The Company shall, on an annual basis,
provide DTE with a report describing the Services offered and classes of
customers served by the Company during the previous twelve months. Further, such
Report shall
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describe the Company's plans for the coming twelve months with regard to new
Services that the Company reasonably anticipates might be offered or new classes
of customers that the Company reasonably anticipates might be served.
Notwithstanding the requirements of this Section 8.3(a), the Company shall
provide to the City, upon the City's request, any additional information that
the City reasonably deems necessary during the Term.
(b) The Company shall also, on an annual basis, provide
DTE with a Report describing any construction or installation of cable, wire,
Fiber or other transmission medium that may be used in lieu of cable, wire or
Fiber for the same purposes, or related equipment and facilities, in any areas
outside of the Initial Backbone, that has occurred during the previous twelve
months. Such Report shall also describe the Company's reasonably anticipated
plans for such construction and installation for the coming twelve months.
Notwithstanding the requirements of this Section 8.3(b), the Company shall
provide to the City, upon the City's request, any additional information that
the City reasonably deems necessary during the Term. It is not anticipated that
confidential information will be required under this Section 8.3(b).
8.4 Regulation by City. To the full extent permitted by applicable
law either now or in the future, the City reserves the right to adopt or issue
such rules, regulations, orders, or other directives governing
telecommunications that are consistent with the terms of this Agreement and that
it finds necessary or appropriate in the lawful exercise of its police powers,
and the Company expressly agrees to comply with all such lawful rules,
regulations, orders, or other directives.
8.5 Reports.
8.5.1 Status Reports. The Company shall submit to DTE reports
describing, in detail, the status of the construction of the Initial Backbone
every six (6) months from the Effective Date until its substantial completion.
The Company shall, upon substantial completion of the Initial Backbone, notify
the Commissioner in writing.
8.5.2 Financial Reports. The Company shall submit to the
Comptroller and DTE not later than three (3) months after the end of each annual
fiscal period, a copy of the Company's annual financial statements for such
period which statements shall be signed by the Chief Financial Officer of the
Company, provided, however, that the Comptroller may also require such
statements to be audited and certified by an independent certified public
accountant in accordance with generally accepted accounting principles. Such
statements shall be accurate and complete.
8.5.3 Additional Reports. The Company shall submit to DTE
every twelve months commencing with the date twelve (12) months after the
Effective
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Date, a report describing the Company's compliance with its obligations under
Sections 6.2 and 6.3 hereof. Such report shall be accurate and complete.
8.5.4 Additional Information and Reports. Upon the request of
the Commissioner, one Company shall promptly submit to DTE any information or
report reasonably related to the Company's obligations under this Agreement, its
business and operations, or those of any Affiliated Person, with respect to the
System or its operation, or any Service distributed over the System, in such
form and containing such information as the Commissioner shall specify. Such
information or report shall be accurate and complete.
8.6 Additional Filings. The Company shall provide annually to DTE a
list of any and all material communications, public reports, petitions or other
filings, either received from or submitted to any municipal, county, state or
federal agency or official (and any response thereto submitted by or received by
the Company), which in any way materially affects the operation of the System or
any Service or the Company's representations and warranties set forth herein,
but not including tax returns or other filings which are confidential. Upon the
request of DTE, the Company shall promptly, but in no case later than ten (10)
business days following the request, deliver to DTE a complete copy of any item
on said list.
8.7 Books and Records/Audit.
8.7.1 Books and Records. Throughout the Term, the Company
shall maintain complete and accurate books of account and records of the
business, ownership, and operations of the Company with respect to the System in
a manner that allows the City at all times to determine whether the Company is
in compliance with the Agreement. Should the City reasonably determine that the
records are not being maintained in such a manner, the Company shall alter the
manner in which the books and/or records are maintained so that the Company
comes into compliance with this Section. All financial books and records which
are maintained in accordance with the regulations of the PSC and generally
accepted accounting principles shall be deemed to be acceptable under this
Section. The Company shall also maintain and provide such additional books and
records as the Comptroller or the Commissioner deem reasonably necessary to
ensure proper accounting of all payments due the City.
8.7.2 Right of Inspection. The Commissioner and the
Comptroller, or their designate representatives, shall have the right to
inspect, examine or audit during normal business hours and upon reasonable
notice to the Company under the circumstances, all documents, records or other
information which pertain to the Company or any Affiliated Person with respect
to the System, its operation, its employment and purchasing practices, Services
distributed over the System, and with respect to the Company's obligations
pursuant to this Agreement. All such documents
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shall be made available within New York City or in such other place that the
City may agree upon in writing in order to facilitate said inspection,
examination, or audit, provided, however, that if such documents are located
outside of the City, then the Company shall pay the reasonable expenses incurred
by the Commissioner, the Comptroller or their designated representatives in
traveling to such location. All of such documents shall be retained by the
Company for a minimum of six (6) years following termination of this Agreement.
Access by the City to any of the documents covered by this Section 8.7.2 shall
not be denied by the Company on grounds that such documents are alleged by the
Company to contain confidential, proprietary or privileged information, provided
that this requirement shall not be deemed to constitute a waiver of the
Company's right to assert that confidential, proprietary or privileged
information contained in such documents should not be disclosed, subject to
Section 8.1 hereof. In order to determine the validity of such assertion and
withholding by the Company, the City agrees to review the alleged proprietary
information, and/or a log of the documents believed by the Company to be
privileged reflecting sufficient information to establish the privilege claimed,
at the Company's premises and, in connection with such review, to limit access
to the alleged proprietary information to those individuals who require the
information in the exercise of the City's rights under this Agreement. If the
Corporation Counsel of the City concurs with the Company's assertion regarding
the proprietary nature of such information, the City will hold such information
in confidence to the extent authorized by and in accordance with applicable law
and will not remove from the Company's premises the proprietary portion of any
document or other intangible thing that contains such proprietary information.
If the Corporation Counsel of the City concurs with the Company's assertion
regarding the privileged nature of such information, then the Company will not
be required to disclose such information. If the Corporation Counsel of the City
does not concur with such assertions, then the Company shall promptly provide
such documents, including the alleged proprietary or privileged portion thereof,
to the City, provided that the Company shall not be required to provide the
proprietary or privileged portion thereof during the pendency of any court
challenge to such provision.
8.7.3 Protection from Disclosure. In accordance with
applicable law, the City shall protect from disclosure any confidential,
proprietary information required to be made available to the City pursuant to
Sections 8.7.1 and 8.7.2, provided that the Company notifies the City of, and
clearly labels the information which the Company deems to be confidential,
proprietary information. Such notification and labeling shall be the sole
responsibility of the Company.
8.8 Compliance With "Investigations Clause." The Company agrees to
comply in all respects with the City's "Investigations Clause," a copy of which
is attached at Appendix F hereto.
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SECTION 9 -- RESTRICTIONS AGAINST
ASSIGNMENT AND OTHER TRANSFERS
9.1 Transfer of Interest. Except as provided in Section 9.6 hereof
and Appendix G hereto, and excepting conveyances and leases of real or personal
property in the ordinary course of the operation of the System (but not
excepting leases which by their size or nature are the functional equivalent of
transfers of the System), neither the franchise granted herein nor any rights or
obligations of the Company in the System or pursuant to this Agreement shall be
encumbered, assigned, sold, transferred, pledged, leased, sublet, or mortgaged
in any manner, in whole or in part, to any Person, nor shall title therein,
either legal or equitable, or any right or interest therein, pass to or vest in
any Person, either by act of the Company, by act of any Person holding Control
of or any interest in the Company or the System or the franchise granted herein,
by operation of law, or otherwise, without the prior written consent of the City
pursuant to the procedures set forth in this Section 9, provided that the City
shall consider any such action in accordance with its usual procedural rules.
9.2 Transfer of Control or Stock. A complete description of the
ownership and Control of the Company as of the Effective Date is set forth in
Appendix G to this Agreement. Notwithstanding any other provision of this
Agreement, except as provided in Section 9.6 hereof or as set forth in on
Appendix G, no change in Control of or any interest in the Company, the System
or the franchise granted herein shall occur after the Effective Date, by act of
the Company, by act of any Person holding Control of the Company the System or
the franchise granted herein, by operation of law, or otherwise, without the
prior written consent of the City granted pursuant to the procedures set forth
in this Section 9. The requirements of Section 9.3 hereof shall also apply
whenever any change is proposed of five percent (5%) or more of the ownership or
Control of the Company, the System, the franchise granted herein or of any
Person holding Control of the Company or in the System or in the franchise (but
nothing herein shall be construed as suggesting that a proposed change of less
than five percent (5%) does not require consent of the City (acting pursuant to
the procedures set forth in this Section 9) if it would in fact result in a
change in Control of the Company, the System or the franchise granted herein),
and any other event which could result in a change in ownership or Control of
the Company, regardless of the manner in which such ownership or control is
evidenced (e.g., stock, bonds, debt instruments or other indicia of ownership or
Control).
9.3 Petition. The Company shall promptly notify the Commissioner of
any proposed action requiring the consent of the City pursuant to Sections 9.1
or 9.2 hereof or to which this Section 9.3 applies by submitting to the
Commissioner, with a copy to the Corporation Counsel, a petition requesting the
submission by the Commissioner of such petition to the FCRC and approval thereof
by the FCRC or requesting a determination that no such submission and approval
is required and its
27
argument why such submission and approval is not required. Each petition shall
fully describe the proposed action and shall be accompanied by a justification
for the action and, if applicable, the Company's argument as to why such action
would not involve a change in Control of the Company, the System or the
franchise, and such additional supporting information as the Commissioner and/or
the FCRC may reasonably require in order to review and evaluate the proposed
action. The Commissioner shall expeditiously review the petition and shall (a)
notify the Company in writing if the Commissioner determines that the submission
by the Commissioner and the approval of the FCRC is not required or (b) if the
Commissioner determines that such submission and approval is required, either
(i) notify the Company that the Commissioner does not approve the proposed
action and therefore will not submit the petition to the FCRC, or (ii) submit
the petition to the FCRC for its approval.
9.4 Consideration of the Petition. DTE, and the FCRC, as the case
may be, may take such actions as it deems appropriate in considering the
petition and determining whether consent is needed or should be granted. In
considering the petition, DTE and the FCRC, as the case may be, may inquire
into: (i) the qualifications of each Person involved in the proposed action,
(ii) all matters relevant to whether the relevant Person(s) will adhere to all
applicable provisions of this Agreement, (iii) the effect of the proposed action
on competition; and (iv) all other matters it deems relevant in evaluating tho
petition, including whether the Company executed this Agreement under a good
faith belief that it would itself carry out the obligations of the Company
hereunder. After receipt of a petition, the FCRC may, as it deems necessary or
appropriate, schedule a public hearing on the petition. Further, DTE and the
FCRC may review the Company's performance under the terms and conditions of this
Agreement. The Company shall provide all requested assistance to DTE and the
FCRC in connection with any such inquiry and, as appropriate, shall secure the
cooperation and assistance of all Persons involved in said action.
9.5 Conditions. As a condition to the granting of any consent
required by this Section 9, the Commissioner and/or the FCRC may: (i) upon a
determination that the Company did not execute this Agreement under a good faith
belief that it would itself carry out the obligations of the Company pursuant to
this Agreement, require the Company or any Affiliated Person to pay to the City
part or all of the profits earned or to be earned by such Person in connection
with, upon the completion of, or as a result of, any of the actions described in
Sections 9.1 or 9.2 hereof with respect to any of such actions which occur
within four (4) years after the Effective Date; and (ii) require that each
Person involved in any action described in Sections 9.1 or 9.2 hereof shall
execute an Agreement, in a form and containing such conditions as may be
specified by the City, providing that such Person assumes and agrees to be bound
by all applicable provisions of this Agreement and such other conditions which
the City deems necessary or appropriate in the circumstances. The execution of
such agreement by such Person(s) shall in no way relieve the Company or
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any other transferor involved in any action described in Sections 9.1 or 9.2
hereof, of its obligations pursuant to this Agreement.
9.6 Permitted Encumbrances. Nothing in this Section 9 shall be deem
to prohibit any assignment, pledge, lease, sublease, mortgage, or other transfer
of all or any part of the System, or any right or interest therein, for
financing purposes, provided that each such assignment, pledge, lease, sublease,
mortgage, or other transfer shall be subject to the rights of the City pursuant
to this Agreement and applicable law. The consent of the City shall not be
required with respect to any transfer to, or taking of possession by, any
banking or lending institution which is a secured creditor of the Company of all
or any part of the System pursuant to the rights of such secured creditor under
Article 9 of the Uniform Commercial Code, as in effect in the State of New York,
and, to the extent that the collateral consists of real property, under the New
York Real Property Law; provided, further that, the City's rights are in no way
adversely affected or diminished.
9.7 Consent Not a Waiver. The grant or waiver of any one or more of
such consents shall not render unnecessary any subsequent consent, nor shall the
grant of any such consent constitute a waiver of any other rights of the City,
as required in this Section 9.
9.8 Petitions From Persons Other Than the Company Seeking Control
Over the Company. Notwithstanding the foregoing, DTE reserves the right, on a
case by case basis, to accept, hear and/or grant petitions for the transfer of
Control of the Company, the System or the franchise granted herein from Persons
seeking to obtain Control of the Company. The City shall provide the Company
with reasonable notice of any such petitions. The City, its officers, employees,
agents, attorneys, consultants and independent contractors shall not be liable
to the Company or any other Person for exercising its rights herein. The Company
shall be entitled to rely upon publicly filed reports to which it has access in
connection with its determination of the applicability of this Section 9.8,
except to the extent the Company knows or has reason to believe that any such
report is or may be incorrect, or is aware of the information which is the
subject of this Section otherwise than as a result of publicly filed reports.
SECTION 10 -- LIABILITY AND INSURANCE
10.1 Liability and Indemnity.
10.1.1 Company. The Company shall be liable for, and the
Company and each Affiliated Person (not including a limited partner or an
individual shareholder) shall indemnify, defend and hold the City, its officers,
agents, servants, employees, attorneys, consultants and independent contractors
(the "Indemnitees")
29
harmless from, any and all liabilities, suits, obligations, fines, damages,
penalties, claims, costs, charges and expenses (including, without limitation,
reasonable attorneys' fees and disbursements), that may be imposed upon or
incurred by or asserted against any of the Indemnitees arising out of the
construction, operation, maintenance, upgrade, repair or removal of the System
or otherwise arising out of or related to this Agreement; provided, however,
that the foregoing liability and indemnity obligation of the Company pursuant to
this Section 10.1 shall not apply to any willful misconduct or gross negligence
of the City, its officers, employees, servants, agents, attorneys, consultants
or independent contractors. Further, it is a condition of this Agreement that
the City assumes no liability for liabilities, suits, obligations, fines,
damages, penalties, claims, costs, charges and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) to either Persons or
property on account of the same, except as expressly provided herein.
10.1.2 No Liability for Public Work, etc. None of the City,
its officers, agents, servants, employees, attorneys, consultants or independent
contractors shall have any liability to the Company for any damage as a result
of or in connection with the protection, breaking through, movement, removal,
alteration, or relocation of any part of the System by or on behalf of the
Company or the City in connection with any emergency, public work, public
improvement, alteration of any municipal structure, any change in the grade or
line of any Inalienable Property of the City, or the elimination,
discontinuation, closing or demapping of any Inalienable Property of the City,
as provided in Sections 2.4.5 and 5.4 hereof. When reasonably possible, the
Company shall be consulted prior to any such activity and shall be given the
opportunity to perform such work itself, but the City shall have no liability to
the Company in the event it does not so consult the Company. All costs to repair
or replace the System, or parts thereof, damaged or removed as a result of such
activity, shall be borne by the Company; provided, however, that the foregoing
obligation of the Company pursuant to this Section 10.1.2 shall not apply to any
willful misconduct or gross negligence of the City, its officers, employees,
servants, agents, attorneys, consultants or independent contractors.
10.1.3 No Liability for Damages. None of the City, its
officers, agents, servants, employees, attorneys, consultants and independent
contractors shall have any liability to the Company for any special, incidental,
consequential, punitive, or other damages as a result of the proper and lawful
exercise of any right of the City pursuant to this Agreement or applicable law,
including, without limitation, the rights of the City to terminate, amend, or
otherwise modify all or any part of this Agreement or the franchise granted
herein; provided, however, that the foregoing limitation on liability pursuant
to this Section 10.1.3 shall not apply to any willful misconduct or gross
negligence of the City, its officers, employees, servants, attorneys,
consultants or independent contractors.
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10.1.4 Defense of Claim, etc. If any claim, action or
proceeding is made or brought against any of the Indemnitees by reason of any
event to which reference is made in Section 10.1.1 hereof, then upon demand by
the City, the Company shall either resist, defend or satisfy such claim, action
or proceeding in such Indemnitee's name, by the attorneys for, or approved by,
the Company's insurance carrier (if such claim, action or proceeding is covered
by insurance) or by the Company's attorneys. The foregoing notwithstanding, upon
a showing that the Indemnitee reasonably requires additional representation,
such Indemnitee may engage its own attorneys to defend such Indemnitee, or to
assist such Indemnitee in such Indemnitee's defense of such claim, action or
proceeding, as the case may be, and the Company shall pay the reasonable fees
and disbursements of such attorneys of such Indemnitee.
10.2 Insurance.
10.2.1 Specifications. Prior to the execution of this
Agreement, the Company has, at its own cost and expense, obtained and furnished
to DTE, with a copy to the Comptroller, a liability or umbrella insurance policy
taking effect no later than the Effective Date, insuring the Company and the
City, its officers, agents, servants, employees, attorneys, consultants and
independent contractors against each and every form of liability referred to in
Section 10.1 herein, in the minimum combined amount of fifty million Dollars
($50,000,000), covering bodily injury, including death, personal injury and
property damage. Such policy or policies have been issued by companies duly
licensed to do business in the State of New York and acceptable to the
Comptroller, carrying a rating by Best's of not less than A. The foregoing
minimum coverage shall not prohibit the Company from obtaining a liability
insurance policy or policies with coverage in excess of such minimum, provided
that the City shall be named as an additional insured to the full extent of any
limitation contained in any such policy or policies obtained by the Company.
10.2.2 Maintenance. (a) The Company shall continuously
maintain one or more liability insurance policies meeting the requirements in
Section 10.2.1 hereof throughout the Term and thereafter until completion of
removal of the System over, under or on the Inalienable Property of the City to
the extent such removal is required pursuant to this Agreement.
(b) Each such liability insurance policy shall contain
the following endorsement: "It is hereby understood and agreed that this policy
may not be canceled nor the intention not to renew be stated until ninety (90)
days after receipt by the City, by registered mail, of a written notice of such
intent to cancel or not to renew." Within sixty (60) days after receipt by the
City of any said notice, and in no event later than thirty (30) days prior to
any said cancellation, the Company shall obtain and furnish to DTE, with a copy
to the Comptroller, replacement insurance
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policies in a form reasonably acceptable to DTE and the Comptroller together
with evidence demonstrating that the premiums for such insurance have been paid.
10.2.3 Adjusted Insurance Coverage. The Company agrees to
adjust the minimum coverage of the liability insurance policy or policies
required by Section 10.2.1 within three (3) months of notice from the City that
the City has reasonably determined that additional amounts or types of insurance
are being commonly carried with respect to systems of a size and nature similar
to the System or other circumstances have arisen which make it reasonably
prudent to obtain such additional amounts or types of insurance.
10.2.4 Liability Not Limited. The liability of the Company and
any Affiliated Person (not including a limited partner or an individual
shareholder) to the City or any Person for any of the matters which are the
subject of the liability insurance policy or policies required by this Section
10.2 shall not be limited by said insurance policy or policies nor by the
recovery of any amounts thereunder; provided, however, that the City shall in no
case be entitled to duplicative recoveries from different sources.
SECTION 11 -- SPECIFIC RIGHTS AND REMEDIES
11.1 Non Exclusive. The Company agrees that the City shall have the
specific rights and remedies set forth in this Section 11. These rights and
remedies are in addition to and cumulative of any and all other rights or
remedies, existing or implied, now or hereafter available to the City at law or
in equity in order to enforce the provisions of this Agreement. Such rights and
remedies shall not be exclusive, but each and every right and remedy
specifically provided or otherwise existing or given may be exercised from time
to time and as often and in such order as may be deemed expedient by the City,
except as provided herein. The exercise of one or more rights or remedies shall
not be deemed a waiver of the right to exercise at the same time or thereafter
any other right or remedy nor shall any such delay or omission be construed to
be a waiver of or acquiescence to any default. The exercise of any such right or
remedy by the City shall not release the Company from its obligations or any
liability under this Agreement.
11.2 Default.
11.2.1 Events of Default. In addition to any other Event of
Default specified herein, any of the following shall constitute an Event of
Default:
(a) any breach of a provision of the Agreement requiring
the Company (i) to replenish the Performance Bond/Security Fund
32
(Section 5.8.6); (ii) to maintain the Performance Bond/Security Fund (Section
5.8); (iii) to make any payments to the City; (iv) to maintain a liability
insurance policy (Section 10.2); or (v) to provide or furnish information to the
City, that is not cured within thirty (30) days after notice pursuant to Section
11.2.2;
(b) any substantial breach of a material provision of
this Agreement by the Company that is not cured within thirty (30) days after
notice pursuant to Section 11.2.2; or
(c) any persistent failure by the Company to comply with
any of the provisions, terms or conditions of this Agreement or with any rules,
regulations, orders or other directives of the City after having received notice
of a failure to comply.
11.2.2 Cure Procedures. (a) The Commissioner shall notify the
Company, in writing, of any breach under this Agreement, in accordance with
Section 13.5 hereof. The notice shall specify the alleged breach(es) with
reasonable particularity. The Company shall either (i) within the number of days
set forth in the applicable paragraph of Section 11.2.1 hereof, or such longer
period of time as the Commissioner may specify in such notice, cure such alleged
breach(es); or (ii) in a written response submitted to the Commissioner within
fifteen (15) days after the notice of breach, present facts and arguments in
refutation or excuse of such alleged failure. The submission of such a response
shall toll the running of the applicable cure period as provided in Section
11.2.1 hereof. Notwithstanding the preceding, no Event of Default shall exist if
a breach is curable but work to be performed, acts to be done, or conditions to
be removed which cannot, by their nature, reasonably be performed, done or
removed within the cure period provided, so long as the Company shall have
commenced curing the same within the cure period provided and shall diligently
and continuously prosecute the same promptly to completion.
(b) If the Company fails to cure the breach within the
applicable cure period, and fails to submit a response to the Commissioner
pursuant to subparagraph (a) hereof within the period provided herein for
submitting such response, an Event of Default will be deemed to have occurred.
(c) If, after the Company makes a response to the
Commissioner, the Commissioner determines, in his or her reasonable discretion,
that a breach under this Agreement has occurred, the Company shall cure such
breach within the balance of the time period to cure that remained when the
submission was made. If the Company is not able to cure within the remaining
time, the breach will be deemed to be an Event of Default, provided, however,
that no Event of Default shall exist if a breach is curable but work to be
performed, acts to be done, or conditions to be removed which cannot, by their
nature, reasonably be performed, done
33
or removed within the cure period remaining, so long as the Company shall have
commenced curing the same within the cure period provided and shall diligently
and continuously prosecute the same promptly to completion.
11.2.3 Remedies of the City. (a) Upon an Event of Default, DTE
may:
(i) cause a withdrawal from the Performance
Bond/Security Fund for any specified amount due the City under this
Agreement;
(ii) assess money damages from the Company as
compensation for such Event of Default;
(iii) revoke the franchise granted pursuant to this
Agreement by termination of this Agreement;
(iv) accelerate the expiration of the Term by decreasing
the term of the franchise provided in Section 2.1 hereof, provided that
the remaining term of the franchise as accelerated pursuant to this
Section 11.2.3(a)(iv) shall not be less than twelve (12) months;
(v) restrain by injunction, the default or reasonably
anticipated default by the Company of any provision of this Agreement; and
(vi) invoke any other available remedy that would be
permitted by law.
(b) DTE shall give the Company when it determines to pursue
one or more remedies, but nothing herein shall prevent DTE from electing more
than on remedy, simultaneously or consecutively, for any default.
11.3 Termination.
11.3.1 Termination Events. (a) The occurrence of any of the
following shall result in termination of the Agreement:
(i) the occurrence of any event relating to the
financial status of the Company which may reasonably lead to the
foreclosure or other judicial or nonjudicial sale of all or any material
part of the System, and the Company fails to demonstrate to the reasonable
satisfaction of the Commissioner within thirty (30) days after notice that
such event will not lead to such foreclosure or other judicial or
nonjudicial sale;
34
(ii) the condemnation by public authority, other than
the City, or sale or dedication under threat or in lieu of condemnation of
all or substantially all of the System, the effect of which would
materially frustrate or impede the ability of the Company to carry out its
obligations and the purposes of this Agreement and the Company fails to
demonstrate to the reasonable satisfaction of the Commissioner within
thirty (30) days after notice that such condemnation, sale or dedication
would not materially frustrate or impede such ability of the Company;
(iii) if: (A) the Company shall make an assignment of
the Company or the System for the benefit of creditors, shall become and
be adjudicated insolvent, shall petition or apply to any tribunal for, or
consent to, the appointment of, or taking possession by, a receiver,
custodian, liquidator or trustee or similar official pursuant to state or
local laws, ordinances or regulations of or for it or any substantial part
of its property or assets, including all or any part of the System; (B) a
writ or warranty of attachment, execution, distraint, levy, possession or
any similar process shall be issued by any tribunal against all or any
material part of the Company's property or assets; (C) any creditor of the
Company petitions or applies to any tribunal for the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official for the Company or of any material parts of the property
or assets of the Company under the law of any jurisdiction, whether now or
hereinafter in effect, and a final order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings; or (D) any
final order, judgment or decree is entered in any proceedings against the
Company decreeing the voluntary or involuntary dissolution of the Company;
or
(iv) if there shall occur any denial, forfeiture or
revocation by any federal, state or local governmental authority having
regulatory jurisdiction over the Company of any authorization required by
law or the expiration without renewal of any such authorization, and such
events, either individually or in the aggregate, materially jeopardize the
System or its operation, and the Company fails to take steps to obtain or
restore such authorization within thirty (30) days after notice.
(b) In addition, an Event of Default under Section 11.2
herein may result in termination of the Agreement.
11.3.2 Rights Upon Termination. In the event of any
termination of this Agreement, whether pursuant to Section 11.3.1 hereof, by the
expiration of the Term or by revocation of the franchise by DTE, the Company, at
the City's election, shall (a) sell to the City or to the City's designee the
portions of the
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System on, over or under the Inalienable Property of the City and all equipment
necessary for the functioning of such portions of the System; and/or (b) remove
the System, or portions of the System, installed on, over or under the
Inalienable Property of the City at the Company's own cost and expense, pursuant
to Section 11.4 hereof.
11.3.3 Price. (a) The price to be paid to the Company upon an
acquisition pursuant to Section 11.3.2 herein shall be fair value (or, in case
of termination by revocation, an equitable price, determined with due regard to
the injury to the City and its residents) with no value allocable to the
franchise itself, which price shall be the fair value as provided in Section
363(h)(5) of the City Charter, as may be amended, or under any successor
provision. Subject to the limitations found in the next sentence, to the extent
the City effects an acquisition pursuant to Section 11.3.2 herein and
subsequently sells that portion of the System acquired to a third party, and the
amount received by the City from such sale exceeds the price paid by the City to
the Company pursuant to this Section 11.3.3, the City shall pay such excess
amount to the Company after deducting all reasonable expenses incurred by the
City in connection with such acquisition and sale. The preceding sentence shall
apply only in cases where the Agreement has terminated by reason of the
expiration of the full Term or by reason of the occurrence of an event in
Section 11.3.1(a) hereof, and shall not apply in any case where the Agreement
has been terminated for cause. In cases where the Agreement has been terminated
for cause and the City effects an acquisition or transfer of the System for any
reason, and the party acquiring the System acquires it directly from the
Company, then the City shall be entitled to receive from such party any amount
in excess of the price which the City could have received if it had purchased
the System from the Company and subsequently sold the System to such third
party.
(b) The date of valuation for purposes of Section 11.3.2
hereof shall be the date of termination of the Agreement. For the purpose of
determining such valuation, the parties shall select a mutually agreeable
independent appraiser to compute the purchase price in accordance with industry
practice and the aforementioned standards. If they cannot agree on an appraiser
in ten (10) days, the parties will seek an appraiser from the American
Arbitration Association. The appraiser shall be instructed to make the appraisal
as expeditiously as possible, but in no more than sixty (60) days and shall
submit to both parties a written appraisal. The appraiser shall be afforded
access to the Company's books and records, as necessary to make the appraisal.
Notwithstanding the provisions of Section 7.2.2 hereof, the parties shall share
equally the costs and expenses of the appraiser.
(c) The City will notify the Company, within thirty (30)
days after receipt of the appraisal, of its election of rights pursuant to
Section 11.3.2 hereof. If it elects to make the purchase permitted under Section
11.3.2 hereof, it will purchase the same at a closing to occur within a
reasonable time after its election.
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(d) The Company agrees at the request of the City, (i)
to operate the System on behalf of the City pursuant to the provisions of this
Agreement and such additional terms and conditions as are equitable to the City
and the Company for a period of up to four (4) months after the termination of
this Agreement, until the City either elects not to purchase any portion of the
System, or closes on such a purchase, or (ii) to cease all construction and
operational activities in a prompt and workmanlike manner.
11.3.4 Company's Obligations. In the event of any acquisition
of the System by the City or the City's designee pursuant to Section 11.3.2
hereof, the Company shall:
(a) cooperate with the City to effectuate an orderly
transfer of all records and information concerning the System to the City;
(b) promptly execute all appropriate documents to
transfer to the City, subject to any liabilities, title to the System as well as
all contracts, leases, licenses, permits, rights of way, and any other rights,
contracts or understandings necessary to maintain and operate the System, as
appropriate; provided, that such transfers shall be made subject to the rights,
under Article 9 of the Uniform Commercial Code as in effect in the State of New
York and, to the extent that any collateral consists of real property, under the
New York Real Property Law, of banking or any other lending institutions which
are secured creditors or mortgagees of the Company at the time of such
transfers; and provided, that, with respect to such creditors or mortgagees, the
City shall have no obligation following said transfers to pay, pledge, or
otherwise commit in any way any general or any other revenues or funds of the
City, other than the gross operating revenues received by the City from its
operation of the System, in order to repay any amounts outstanding on any debts
secured by the System which remain owing to such creditors or mortgagees; and
provided, finally, that the total of such payments by the City to such creditors
and mortgagees, from the gross operating revenues received by the City from its
operation of the System, shall in no event exceed the lesser of: (1) the fair
market value of the System on the date of the transfer of title to the City or
(2) the outstanding debt owed to such creditors and mortgagees on said date.
Nothing in this Section 11.3 shall be construed to limit the rights of any such
secured creditors to exercise its or their rights as secured creditors or
mortgagees at any time prior to the payment of all amounts due pursuant to the
applicable debt instruments; and
(c) promptly supply the Commissioner with all necessary
records (1) to reflect the City's ownership of the System; and (2) to operate
and maintain the System including, without limitation, all Customer records and
plant and equipment layout documents.
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11.4 Removal.
11.4.1 Discretion of DTE. Upon any termination of Service,
DTE, in its sole discretion, may, but shall not be obligated to, direct the
Company to remove, at the Company's sole cost and expense, all, or any portion
designated by DTE, of the System installed by the Company from the Inalienable
Property of the City in accordance with all applicable requirements of the City
and subject to the following:
(a) this provision shall not apply to buried portions of
the System which, in the opinion of DTE, cannot be removed;
(b) in removing the System, or part thereof, the Company
shall refill and compact, at its own cost and expense, any excavation that shall
be made by it and shall leave, in all material aspects, all Inalienable Property
and other property in as good condition as that prevailing prior to the
Company's removal of the System from Inalienable Property of the City and
without affecting, altering or disturbing in any way any electric, telephone or
other cables, wires, structures or attachments;
(c) the City shall have the right to inspect and approve
the condition of such Inalienable Property after removal and, to the extent that
the City determines that said Inalienable Property and other property have not
been materially as good condition, as that prevailing prior to the Company's
removal of the System, the Company shall be liable to the City for the cost of
restoring the Inalienable Property and other property to said condition;
(d) the Performance Bond/Security Fund, liability
insurance and indemnity provisions of this Agreement shall remain in full force
and effect during the entire period, after removal and associated repair of all
Inalienable Property of the City, and for not less than one hundred twenty (120)
days thereafter; and
(e) removal shall be commenced within thirty (30) days
of the removal order by DTE and shall be substantially completed within twelve
(12) months thereafter including all reasonably associated repair of the
Inalienable Property of the City.
11.4.2 Failure to Commence Removal. If, in the reasonable
judgment of the Commissioner, the Company fails to commence removal of the
System as designated by DTE, within thirty (30) days after DTE's removal order,
or if the Company fails to substantially complete such removal, including all
associated repair of the Inalienable Property of the City, within twelve (12)
months thereafter then, to the extent not inconsistent with applicable law, the
City shall have the right to:
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(a) declare that all rights, title and interest to the
System belong to the City with all rights of ownership, including, but not
limited to the right to connect and use the System or to effect a transfer of
all right, title and interest in the System to another Person for operation; or
(b) authorize removal of the System installed by the
Company on, over or under the Inalienable Property of the City at the Company's
cost and expense, by another Person; and
(c) to the extent consistent with applicable law, any
portion of the Company's System on, over or under the Inalienable Property of
the City designated by DTE for removal and not timely removed by the Company
shall belong to and become the property of the City without payment to the
Company notwithstanding the provisions of Section 11.3.2 hereof, and the Company
shall execute and deliver such documents, as the Commissioner shall request, in
form and substance acceptable to the Commissioner, to evidence such ownership by
the City.
11.4.3 No Condemnation. None of the declaration, connection,
use, transfer or other actions by the City, or the Commissioner under Section
11.4.2 shall constitute a condemnation by the City or a sale or dedication under
threat or in lieu of condemnation.
11.5 Return of Performance Bond/Security Fund. Upon the later of the
date one hundred and twenty (120) days after the termination of this Agreement
for any reason or the date of the completion of removal of the System from and
associated repair of the Inalienable Property of the City pursuant to Section
11.4.1 hereof, the Company shall be entitled to the return of the Performance
Bond/Security Fund deposited pursuant to Section 5.8 hereof, or such portion
thereof as remains on deposit with the Comptroller at said termination, provided
that all offsets necessary (a) to compensate the City pursuant to Sections 5.8.2
and/or 5.8.3 hereof, (b) to cover any costs, loss or damage incurred by the City
as a result of any Event of Default, in the event of termination of this
Agreement by the City pursuant to Section 11.3 hereof, and (c) to reimburse the
City for the cost of removal of the System from the Inalienable Property of the
City pursuant to Section 11.4.2 hereof have been taken by the City.
11.6 Other provisions. The City and the Company shall negotiate in
good faith all other terms and conditions of any such acquisition or transfer,
except that the Company hereby waives its rights, if any, to relocation costs
that may be provided by law and except that, in the event of any acquisition of
the System by the City: (i) the City shall not be required to assume any of the
obligations of any collective bargaining agreements or any other employment
contracts held by the Company or any other obligations of the Company or its
officers, employees, or agents, including, without limitation, any pension or
other retirement, or any insurance obligations; and
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(ii) the City may lease, sell, operate, or otherwise dispose of all or any part
of the System in any manner.
SECTION 12 -- SUBSEQUENT ACTION
12.1 Compensation. In the event that, after the Effective Date any
court, agency, commission, legislative body, or other authority of competent
jurisdiction takes any action or enters any judgment which has a materially
adverse effect, with respect to the City or the Company, on the compensation or
other payments to be made by the Company pursuant to Section 7 of this
Agreement, then the Company and DTE shall enter into negotiations to amend this
Agreement in a manner not inconsistent with any such action or judgment so as to
establish a fair and equitable relationship between the parties. In the event
that either party fails to negotiate in good faith to produce an agreement which
is reasonably acceptable to both parties within a reasonable period, then either
party shall have the right, by notice to the other, to accelerate the term of
this Agreement and the franchise granted hereunder such that the term and the
franchise shall terminate on the date which is one half of the number of days
between the date of such notice and January l, 2009, but in no event shall the
City be permitted to reduce the Term of this franchise by virtue of this Section
12.1 such that the term of this franchise is less than 10 years.
12.2 Procedure for Subsequent Invalidity.
12.2.1 Declaration of Invalidity or Injunction. Except as
provided in Section 12.1 hereof, in the event that, after the Effective Date,
any court, agency, commission, legislative body, or other authority of competent
jurisdiction:
(a) declare this Agreement invalid, in whole or in part,
or
(b) requires the City or the Company either to: (i)
perform any act which is inconsistent with any provision of this Agreement or
(ii) cease performing any act required by any provision of this Agreement, then
the Company or the City, as the case may be, shall promptly notify the other
party in writing of such fact.
12.2.2 Continued Compliance. After the occurrence of the
events described in Section 12.2.1 hereof, the Company and the City shall
continue to comply with all provisions of this Agreement, including the affected
provision, until the validity of the declaration or requirement has been finally
adjudicated or a court orders the Company or the City to comply with such
declaration or order, provided
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that either party may comply with any court order which is not stayed during the
pendency of any appeal leading to said final adjudication.
12.2.3 Negotiations to Amend Agreement. Except as provided in
Section 12.1 hereof, to the extent that any statute, rule, regulation, ordinance
or any other law is enacted, adopted, repealed, amended, modified, changed or
interpreted in any way during the term of this Agreement so as to (a) declare
the Agreement invalid, in whole or in part, or (b) require the Company or City
either to: (i) perform any act which is inconsistent with any provision of this
Agreement, or (ii) cease performing any act required by any provision of this
Agreement, the Company and City shall enter into good faith negotiations so as
to modify this Agreement and/or regulate the System, as applicable, to reflect
such enactment, adoption, repeal, amendment, modification, change or
interpretation and the Company agrees to comply with any such modifications or
regulations arising out of such negotiations. In the event that either party
fails to negotiate in good faith to produce an agreement which is reasonably
acceptable to both parties within a reasonable period, then either party shall
have the right, by notice to the other, to accelerate the term of this Agreement
and the franchise granted hereunder such that the term and the franchise shall
terminate on the date which is one half of the number of days between the date
of such notice and January 1, 2009, but in no event shall the City be permitted
to reduce the Term of this franchise by virtue of this Section 12.2.3 such that
the Term of this franchise is less than 10 years.
SECTION 13 -- MISCELLANEOUS
13.1 Appendices. The Appendices to this Agreement, attached hereto,
and all portions thereof and exhibits thereto, are, except as otherwise
specified in said Appendices, incorporated herein by reference and expressly
made a part of this Agreement. The procedures for approval of any subsequent
amendment or modification to said Appendices shall be the same as those
applicable to any amendment or modification hereof.
13.2 Action Taken by City. Any action to be taken by DTE pursuant to
this Agreement shall be taken in accordance with the applicable provisions of
the City Charter as said Charter may be amended or modified throughout the Term.
Whenever, pursuant to the provisions of this Agreement, the City, the Company,
or any other Person is required or permitted to take any action, including,
without limitation, the making of any request or the granting of any consent,
approval, or authorization, the propriety of said action shall be measured
against the standard of reasonableness such that each such action shall be
undertaken in a reasonable manner, unless this Agreement authorizes the City,
the Company, or other Person to take such action in its sole discretion.
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13.3 Entire Agreement. This Agreement, including all Appendices
hereto, embodies the entire understanding and agreement of the City and the
Company with respect to the subject matter hereof and merges and supersedes all
prior representations, agreements and understandings, whether oral or written,
between the City and the Company with respect to the subject matter hereof,
including, without limitation, all prior drafts of this Agreement and any
Appendix to this Agreement and any and all written or oral statements or
representations by any official, employee, agents, attorney, consultant or
independent contractor of the City or the Company.
13.4 Delays and Failures Beyond Control of Company. Notwith standing
any other provision of this Agreement, the Company shall not be liable for delay
in the performance of or failure to perform, in whole or in part, its
obligations pursuant to this Agreement due to strike, war or act of war (whether
an actual declaration of war is made or not), insurrection, riot, act of public
enemy, accident, fire, flood or other act of God, technical failure where the
Company has exercised all due care in the prevention thereof, or other causes or
events, to the extent that such any such causes or events are beyond the control
of the Company. In the event that any such delay in performance or failure to
perform affects only part of the Company's capacity to perform, the Company
shall perform to the maximum extent it is able to do so and shall take all steps
within its power to correct said cause(s). The Company agrees that in correcting
said cause(s), it shall take all reasonable steps to do so in as expeditious a
manner as possible. The Company shall notify DTE in writing of the occurrence of
an event covered by this Section 13.4 within five (5) business days of the date
upon which the Company learns or should have learned of its occurrence.
13.5 Notices. Every notice, order, petition, document, or other
direction or communication to be served upon the City or the Company shall be in
writing and shall be sufficiently given if sent by registered or certified mail,
return receipt requested. Every such communication to the Company shall be sent
to its office located at 150 00 00xx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000 or to such
other location in New York City as the Company may designate, from time to time.
Every communication from the Company shall be sent to the individual, agency or
department designated in the applicable section of this Agreement, unless it is
to "the City," in which case such communication shall be sent to the
Commissioner of DTE at 00 Xxxx Xxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. A
required copy of each communication from the Company shall be sent to
Corporation Counsel, New York City Law Department, 000 Xxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Chief, Economic Development Division. Except as
otherwise provided herein, the mailing of such notice, direction, or order shall
be equivalent to direct personal notice and shall be deemed to have been given
when mailed. Any notice the Commissioner is required to give to the Company
pursuant to Section 11.2 hereof for which a cure period is ten (10) days at less
must be served by personal delivery, overnight mail service or facsimile
transmission.
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13.6 General Representations, Warranties and Covenants of the
Company. In addition to the representations warranties, and covenants of the
Company to the City set forth elsewhere herein, the Company represents and
warrants to the City and covenants and agrees (which representations,
warranties, covenants and agreements shall not be affected or waived by any
inspection or examination made by or on behalf of the City), that, as of the
Effective Date:
13.6.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly authorized to do business in the State of
New York and in the City. The Company has all requisite power and authority to
own or lease its properties and assets, to conduct its businesses as currently
conducted and to execute, deliver and perform this Agreement and all other
agreements entered into or delivered in connection with or as contemplated
hereby. Certified copies of the Company's organizational and governing
documents, as amended to date, have been delivered to the Commissioner, and are
complete and correct. The Company is qualified to do business and is in good
standing in the State of New York.
13.6.2 Authorization; Non Contravention. The execution,
delivery and performance of this Agreement any ail other agreements, if any,
entered into in connection with the transactions contemplated hereby have been
duly, legally and validly authorized by all necessary action on the part of the
Company and the Company has furnished the City with a certified copy of
authorizations for the execution and delivery of this Agreement. This Agreement
and all other agreements, if any, entered into in connection with the
transactions contemplated hereby have been duly executed and delivered by the
Company and constitute (or upon execution and delivery will constitute) the
valid and binding obligations of the Company, and are enforceable (or upon
execution and delivery will be enforceable) in accordance with their respective
terms. The Company has obtained the requisite authority to authorize, execute
and deliver this Agreement and to consummate the transactions contemplated
hereby and no other proceedings or other actions are necessary on the part of
the Company to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. Neither the execution and
delivery of this Agreement by the Company nor the performance of its obligations
contemplated hereby will:
(a) conflict with, result in a material breach of or
constitute a material default under (or with notice or lapse of time or both
result in a material breach of or constitute a material default under) (i) any
governing document of the Company or to the Company's knowledge, any agreement
among the owners of the Company, or (ii) any statute, regulation, agreement,
judgment, decree, court or administrative order or process or any commitment to
which it (or any of its properties or assets) is subject or bound;
43
(b) result in the creation of, or give any party the
right to create, any material lien, charge, encumbrance or security interest
upon the property and assets of the Company; or
(c) terminate, modify or accelerate, or give any third
party the right to terminate, modify or accelerate any provision or term of any
contract, arrangement, agreement, license agreement or commitments, except for
any event specified in (a) or (b) above which individually or in the aggregate
would not have a material and adverse effect on the business, properties or
financial condition of the Company or the System.
13.6.3 Consent. No consent, approval or authorization of, or
declaration or filing with, any public, governmental or other authority is
required for the valid execution and delivery of this Agreement or any other
agreement or instrument, if any, executed or delivered in connection herewith.
13.6.4 Compliance with Law. The Company certifies that, to the
best of its knowledge after diligent inquiry, it is in compliance with all laws,
ordinances, decrees and governmental rules and regulations applicable to the
System and has filed, has obtained or will file for all government licenses,
permits, and authorizations necessary for the operation, marketing and
maintenance of the System.
13.6.5 Litigation; Investigations. To the best of of the
Company's knowledge after diligent inquiry, except to the extent otherwise
disclosed to the City: (a) there is no civil, criminal, administrative,
arbitration or other proceeding, investigation or claim (including, without
limitation, proceeding with respect to unfair labor practice matters or labor
organization activity matters), pending or threatened against the Company or any
Affiliated Person, at law or in equity, or before any foreign, federal, state,
municipal or other governmental department commission, board, bureau, agency or
instrumentality (including without limitation any matter involving the granting
of a temporary or permanent injunction against the Company or any Affiliated
Person) that is reasonably likely to have a material adverse effect on the
business, operation, properties, assets or financial condition of the Company or
the System, or which questions the validity or prospective validity of this
Agreement, or of any essential element upon which this Agreement depends, or of
any action to be taken by the Company or any Affiliated Person; (b) no
Investigation or review by any governmental entity with respect to the Company
or any Affiliated Person, relating to the System or any of the transactions
contemplated hereby is pending or is threatened against the Company or any
Affiliated Person, nor has any governmental entity indicated to the Company or
any Affiliated Person an intention to conduct the same; and (c) neither the
Company nor any Affiliated Person is subject to any outstanding order, writ,
injunction or decree which materially and adversely affects the business,
operations, properties, assets or financial condition of the System.
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13.6.6 Fees. The Company has paid all franchise, license or
other fees and charges which have become due pursuant to any franchise or permit
to which it is a party and has made adequate provisions for any such fees and
charges which have accrued, except where contested in good faith and by
appropriate proceedings.
13.6.7 Criminal Acts. Neither the Company, nor any Person
holding a Controlling Interest in the Company, nor any director or officer of
the Company nor any employee or agent of the Company nor any Controlling Person,
acting pursuant to the express direction, or with the actual consent of the
foregoing has been convicted (where such conviction is a final, nonappealable
judgment) or has entered a guilty plea with respect to: (A) any criminal
offense, excluding Class B misdemeanors, violations, and traffic infractions as
designated in the New York State Penal Law or their equivalents in other
jurisdictions; or (B) any criminal offense, including, without limitation,
bribery or fraud, arising out of or in connection with (i) this Agreement, (ii)
the award of the franchise granted pursuant to this Agreement, or (iii) any act
to be taken following the Effective Date, pursuant to this Agreement by the
City, its officers employees, or agents.
13.6.8 Misrepresentation. No material misrepresentation has
been made, either oral or written, intentionally or negligently, by or on behalf
of the Company in this Agreement, in connection with any submission to DTE or
the Commissioner, including the Proposal, in connection with the negotiation of
this Agreements for the purposes of this Section, Proposal means the responses
to the City's Request for Proposals for Local High CapaCity Telecommunications
Services submitted to the City by the Company, and any amendments thereto.
13.7 Additional Covenants. Until the termination of this Agreement
and the satisfaction in full by the Company of its obligations under this
Agreement, in consideration of the franchise granted herein, the Company agrees
that it will comply with the following affirmative covenants, unless the City
otherwise consents in writing:
13.7.1 Compliance with laws; Licenses and Permits. The Company
shall comply with: (a) all applicable laws, rules, regulations, orders, writs,
decrees and judgments (including, but not limited to, those of the PSC and FCC
and any other federal or state agency or authority of competent jurisdiction)
affecting this Agreement, the franchise, and the System; and (b) all local laws
and all rules, regulations, orders, or other directives of the City, DTE, and
the Commissioner issued pursuant to and in accordance with this Agreement or
otherwise.
The Company shall have the sole responsibility for obtaining or
causing to be obtained all permits, licenses and other forms of approval or
authorization necessary to construct, operate, maintain, upgrade, repair or
remove the System, or
45
any part thereof. The Company will, prior to any construction, operation, mainte
xxxxx, upgrade, repair or removal of the System, secure all necessary permits,
licenses and authorizations in connection with the construction, operation,
maintenance, upgrade, repair or removal of the System, or any part thereof, and
will file all required registrations, applications, reports and other documents
with the FCC, the PSC and other entities exercising jurisdiction over the
provision of telecommunications services or the construction of delivery systems
therefor, except those which cannot be obtained prior to the date hereof, which
the Company will promptly seek to obtain. The Company will promptly seek to
obtain all leases, easements and equipment rental or other agreements necessary
for the maintenance and operation of the System.
The Company shall not permit to occur, or shall promptly take
corrective action if there shall occur, any event which (a) could result in the
revocation or termination of any such license or authorization, (b) could
materially and adversely affect any rights of the Company, or (c) permits or,
after notice or lapse of time or both, would permit, revocation or termination
of any such license or which materially and adversely affects or reasonably can
be expected to materially and adversely affect the System or any part thereof.
13.7.2 Criminal Acts. The Company shall not permit any of the
convictions or guilty pleas of the types listed in Section 13.6.7 to occur
during the term of this Agreement, arising out of or in connection with (i) this
Agreement, (ii) the award of the franchise granted pursuant to this Agreement,
or (iii) any act to be taken following the Effective Date, pursuant to this
Agreement by the City, its officers, employees, or agents, and it shall be an
Event of Default if any such convictions or guilty pleas shall occur during the
term of this Agreement, provided that the City's right to take enforcement
action under this Agreement in the event of said convictions or guilty pleas
shall arise only with respect to any of the foregoing convictions or guilty
pleas of the Company itself or, with respect to any of the foregoing convictions
or guilty pleas of any of the other Persons specified in Section 13.6.7, if the
Company shall have failed to disassociate itself from, or terminate the
employment of, said Person or Persons within thirty (30) days after the
Commissioner orders such disassociation.
13.7.3 Maintain Existence. The Company will preserve and
maintain its existence, its business, and all of its rights and privileges
necessary or desirable in the normal conduct of said business in the District,
unless any such change shall not have a material and adverse impact on the
Company's ability to construct, operate, maintain and upgrade the System as
provided herein or fulfill the obligations of the Company hereunder. The Company
shall maintain its good standing in its state of organization and continue to
qualify to do business and remain in good standing in the State of New York. The
Company shall conduct business in accordance with its organizational and
governing documents, and shall comply with the material terms of
46
all mortgages, indentures, leases, contracts and other agreements and
instruments binding upon it except where contested in good faith and by
appropriate proceedings.
13.7.4 Condition of System. All of the properties, assets and
equipment used as part of the System will be maintained in good repair, working
order and good condition.
13.8 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted transferees and assigns. All of the provisions of this Agreement shall
apply to the Company, its successors, and assigns.
13.9 No Waiver; Cumulative Remedies. No failure on the part of the
City to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
preclude any other right, except as provided herein, subject to the conditions
and limitations established in this Agreement. The rights and remedies provided
herein are cumulative and not exclusive of any remedies provided by law, and
nothing contained in this Agreement shall impair any of the rights of the City
under applicable law, subject in each case to the terms and conditions of this
Agreement. A waiver of any right or remedy by the City at any one time shall not
affect the exercise of such right or remedy or any other right or other remedy
by the City at any other time. In order for any waiver of the City to be
effective, it must be in writing. The failure of the City to take any action
regarding a default or an Event of Default by the Company shall not be deemed or
construed to constitute a waiver of or otherwise affect the right of the City to
take any action permitted by this Agreement at any other time regarding such
default or Event of Default which has not been cured, or with respect to any
other default or Event of Default by the Company.
13.10 No Opposition. The Company agrees that it shall not oppose the
intervention by the City in any suit, action, or proceeding involving the
Company with respect to the System or its construction, operation, maintenance,
repair or removal, or to any provision of this Agreement. The Company agrees
that it will not, at any time, set up against the City any claim nor institute
against the City any proceeding alleging that, pursuant to any law, rule or
regulation in effect on the Effective Date, a condition or term of this
Agreement is unreasonable, arbitrary, void, or otherwise unenforceable, or that
the City had no power or authority to make such term or condition. By execution
of this Agreement, the Company accepts the validity of the terms and conditions
of this Agreement in their entirety and hereby waives and relinquishes, to the
maximum extent permitted by applicable law, any and all rights it has, in law or
in equity, to assert in any manner at any time or in any forum that this
Agreement, the franchise granted pursuant to this Agreement, the terms and
conditions of this Agreement or the processes and procedures pursuant to which
this Agreement was
47
entered into and the franchise was granted are not consistent with applicable
law in effect on the Effective Date.
13.11 Partial Invalidity. If any section, subsection, sentences
clause, phrase, or other portion of this Agreement is, for any reason, declared
invalid, in whole or in part, by any court, agency, commission, legislative
body, or other authority of competent jurisdiction, such portion shall be deemed
a separate, distinct, and independent portion. Except as provided in Section 12
hereof, such declaration shall not affect the validity of the remaining portions
hereof, which other portions shall continue in full force and effect.
13.12 Headings. The headings contained in this Agreement are to
facilitate reference only, do not form a part of this Agreement, and shall not
in any way affect the construction or interpretation hereof. Terms such as
"hereby," "herein," "hereof," "hereinafter," "hereunder," and "hereto" refer to
this Agreement as a whole and not to the particular sentence or paragraph where
they appear, unless the context otherwise requires. The term "may" is
permissive; the terms "shall" and "will"" are mandatory, not merely directive.
All references to any gender shall be deemed to include both the male and the
female, and any reference by number shall be deemed to include both the singular
and the plural, as the context may require. Terms used in the plural include the
singular, and vice versa, unless the context otherwise requires.
13.13 No Agency. The Company shall conduct the work to be performed
pursuant to this Agreement as an independent contractor and not as an agent of
the City.
13.14 Governing Law. This Agreement shall be deemed to be executed
in the City of New York, State of New York, and shall be governed in all
respects, including validity, interpretation and effect, and construed in
accordance with the laws of the State of New York, as applicable to contracts
entered into and to be performed entirely within that State.
13.15 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
Term.
13.16 Delegation of City Rights. The City reserves the right to
delegate and redelegate, from time to time and to the extent permitted by law,
any of its rights or obligations under this Agreement to any governmental body
or organization, or official of any other governmental body or organization, and
to revoke any such delegation or redelegation. Any such delegation or
redelegation by the City shall be effective upon written notice by the City to
the Company of such delegation or redelegation. Upon receipt of such notice by
the Company, the Company shall be bound by all terms and conditions of the
delegation or redelegation not in conflict with
48
this Agreement. Any such delegation, revocation or redelegation, no matter how
often made, shall not be deemed an amendment to this Agreement or require the
Company's consent.
13.17 Claims Under Agreement. The City and the Company agree that,
except to the extent inconsistent with applicable law, any and all claims
asserted by or against the City arising under this Agreement or related thereto
shall be heard and determined either in a court of the United States located in
New York City ("Federal Court") or in a court of the State of New York located
in the City and County of New York ("New York State Court"). To effect this
Agreement and intent, the Company agrees that:
(a) If the City initiates any action against the Company
in Federal Court or in New York State Court, service of process may be made on
the Company as provided in Section 13.20 hereof;
(b) With respect to any action between the City and the
Company in New York State Court, the Company hereby expressly waives and
relinquishes any rights it might otherwise have (i) to move or dismiss on
grounds of forum non conveniens; (ii) to remove to Federal Court outside of the
City of New York; and (iii) to move for a change of venue to a court of the
State of New York outside New York County;
(c) With respect to any action between the City and the
Company in Federal Court, the Company expressly waives and relinquishes any
right it might otherwise have to move to transfer the action to a United States
Court outside the City of New York; and
(d) If the Company commences any action against the City
in a court located other than in the City and State of New York, then, upon
request of the City, the Company shall either consent to a transfer of the
action to a court of competent jurisdiction located in the City and State of New
York or, if the court where the action is initially brought will not or cannot
transfer the action, the Company shall consent to dismiss such action without
prejudice and may thereafter reinstitute the action in a court of competent
jurisdiction in the City of New York.
13.18 Modification. Except as otherwise provided in this Agreement,
any Appendix to this Agreement or applicable law, no provision of this Agreement
nor any Appendix to this Agreement shall be amended or otherwise modified, in
whole or in part, except by a written instrument, duly executed by the City and
the Company, and approved as required by applicable law.
49
13.19 Maintain Office. The Company agrees to maintain an office in
the City of New York throughout the Term of this Agreement. Such office is
currently located at: 150 00 00xx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000.
13.20 Service of Process. Process may be served either in person,
wherever the Company may be found, or by registered mail addressed to the
Company at its office in the City, or as set forth in Section 13.5 of this
Agreement, to such other location as the Company may provide to the City in
writing, or to the Secretary of State of the State of New York.
13.21 Compliance With Certain City Requirements. The Company agrees
to comply in all respects with the City's "XxxXxxxx Principles", a copy of which
is attached at Appendix B hereto. The Company agrees to comply in all respects
with the City's Vendor Information Exchange System, as the same may be amended
from time to time.
13.22 Matching Provision. (a) In the event that the City grants,
renews or renegotiates one or more franchises(s), agreement(s) or similar
authorization(s), for the provision of local, high capacity telecommunications
services or similar services in the District, and such franchises(s),
agreement(s) or authorization(s) contain provisions imposing lesser obligations
on the grantee(s) thereof than are imposed by the provisions of this Agreement,
the Company may, at any time after the date two years after the Effective Date,
petition the City for a modification of this Agreement.
(b) The City shall consider any petition for
modification pursuant to Section 13.22(a) hereof, and shall grant such
prospective modifications to the extent that the City reasonably determines that
such modification(s) must be granted in order to ensure fair and equal treatment
among the Company and other franchisees, provided that the Company establishes
by a preponderance of the evidence each of the following:
(i) that the Company is in compliance with this
Agreement and the other franchise(s), agreement(s) or authorization(s)
were not granted as a result of the Company's failure to comply, on a
timely basis, with the provisions of this Agreement;
(ii) that the other franchise(s), agreement(s) or
authorization(s) allow substantially similar services to those offered by
the Company under this Agreement;
(iii) that the obligations imposed on the Company under
this Agreement, taken as a whole, place the Company at a substantial
50
competitive disadvantage in relation to the obligations imposed on the
grantee(s) holders of the other franchises(s), agreement(s) or
authorization(s), taken as a whole; and
(iv) that the reason for the City's imposition of or
failure to act with respect to a lesser obligation under the other
franchises(s), agreement(s) or authorization(s) is not due to the
differing nature of the City's regulatory authority with respect to the
other communications systems or justified by the relative benefits, in
whatever form, received by the City due to the operation of other
communications systems.
(c) For the purposes of this Section 13.22, in order to
promote fair comparison, to the extent possible all benefits and burdens shall
be quantified monetarily.
(d) Notwithstanding the two year waiting period in
Section 13.22(a) herein, if any of the other entities (specifically, Cablevision
LightPath, Inc., Time Warner AxS of New York City, L.P., and Urban
Communications Transport Corp.) for which the FCRC approved local high capacity
telecommunications service franchises on December 8, 1993 ultimately enter into
franchise agreements with the City that provide for compensation terms which
materially differ from those approved by the FCRC on December 8, 1993 in a
manner that makes them more favorable to such entities than those provided to
Company in this Agreement, then those more favorable compensation terms will
also be incorporated into this Agreement.
13.23 Joint Services. Notwithstanding any other provision of this
Agreement, in the event the Company provides any Telecommunications Services in
conjunction with, in a joint venture with or in any other arrangement with (the
"Joint Services") any one or more entities that the City has also authorized to
provide local high capacity telecommunications services (the "Other
Franchisees"):
(a) no revenues with respect to Telecommunications Services
being provided by such Other Franchisees, other than Joint Services, shall be
included in the Company's Gross Revenue, so long as the revenues distributed to
or otherwise retained by the Other Franchisees with respect to Joint Services
are subject to the terms of such other Franchisees' own agreements with the
City; and
(b) only those revenues received by the Company with respect
to Joint Services and not distributed to or otherwise retained by the Other
Franchisees shall be included in the Company's Gross Revenue, so long as the
revenues distributed to or otherwise retained by the Other Franchisees with
respect to
51
Joint Services are subject to the terms of such other Franchisees' own
agreements with the City.
-- end of page --
[signatures appear on next page]
52
IN WITNESS WHEREOF, the party of the first part, by its Mayor, duly
authorized by the Charter of the City of New York, has caused the corporate name
of said City to be hereunto signed and the corporate seal of said City to be
hereunto affixed and the party of the second part, by its officers thereunto
duly authorized, has caused its name to be hereunto signed and its seal to be
hereunto affixed as of the date and year first above written.
THE CITY OF NEW YORK
By:
--------------------------------
Mayor
--------------------------------
Date
Approved as to form:
------------------------------
Acting Corporation Counsel
NATIONAL FIBER NETWORK, INC.
By:
--------------------------------
Name:
Title:
(Seal)
Attest:
------------------------
(title)
CITY OF NEW YORK )
) ss:
STATE OF NEW YORK )
I, ______________, a Notary Public in and for the State of New York,
residing therein, duly commissioned and sworn, do hereby certify that
___________________ Mayor of the City of New York, party to the above
instrument, personally appeared before me in said State on the _____ day of
_____________, 1993, the said being personally well known to me and who executed
the foregoing instrument and acknowledged to me that he executed the same as his
free act and deed in his capacity as Mayor of the City of New York.
Given under my hand and seal, this ____ day of ________________,
1993.
--------------------------------
Notary Public
My Commission Expires:
---------------
---------------
CITY OF NEW YORK )
) ss:
STATE OF NEW YORK )
I, ______________, a Notary Public in and for the State of New York,
residing therein, duly commissioned and sworn, do hereby certify that
___________________, __________, ____________, party to the above instrument,
personally appeared before me in said State on the ___ day of _____________,
1993, the said being personally well known to me and who executed the foregoing
instrument and acknowledged to me that he executed the same as his free act and
deed.
Given under my hand and seal, this ____ day of ________________,
1993.
--------------------------------
Notary Public
My Commission Expires:
---------------
