UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-35155
BOINGO WIRELESS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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95-4856877 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
10960 Wilshire Blvd., Suite 800 |
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Los Angeles, California |
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90024 |
(Address of principal executive offices) |
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(Zip Code) |
(310) 586-5180
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ |
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Accelerated filer ☒ |
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Non-accelerated filer ☐ |
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Smaller Reporting Company ☐ |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 31, 2014, there were 36,086,026 shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
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3 | |
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4 | |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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5 |
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6 | |
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7 | |
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8 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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34 | ||
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34 | ||
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37 |
2
PART I — FINANCIAL INFORMATION
Boingo Wireless, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
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September 30, |
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December 31, |
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2014 |
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2013 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
4,030 |
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$ |
27,338 |
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Restricted cash |
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115 |
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545 |
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Marketable securities |
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17,261 |
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32,962 |
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Accounts receivable, net |
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23,913 |
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16,326 |
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Prepaid expenses and other current assets |
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3,667 |
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2,566 |
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Deferred tax assets |
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1,192 |
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1,192 |
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Total current assets |
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50,178 |
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80,929 |
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Property and equipment, net |
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106,118 |
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67,560 |
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Goodwill |
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42,403 |
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42,403 |
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Intangible assets, net |
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20,585 |
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23,413 |
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Other assets |
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1,398 |
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1,210 |
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Total assets |
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$ |
220,682 |
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$ |
215,515 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
10,856 |
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$ |
11,642 |
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Accrued expenses and other liabilities |
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20,083 |
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17,055 |
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Deferred revenue |
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25,478 |
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19,292 |
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Total current liabilities |
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56,417 |
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47,989 |
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Deferred revenue, net of current portion |
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27,223 |
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21,591 |
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Deferred tax liabilities |
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3,646 |
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3,369 |
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Other liabilities |
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1,153 |
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2,133 |
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Total liabilities |
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88,439 |
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75,082 |
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Commitments and contingencies (Note 9) |
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Stockholders’ equity: |
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Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued and outstanding |
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— |
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— |
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Common stock, $0.0001 par value; 100,000 shares authorized; 36,056 and 35,226 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively |
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4 |
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4 |
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Additional paid-in capital |
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187,935 |
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182,927 |
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Accumulated deficit |
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(56,360) |
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(43,363) |
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Accumulated other comprehensive loss |
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(214) |
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— |
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Total common stockholders’ equity |
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131,365 |
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139,568 |
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Non-controlling interests |
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878 |
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865 |
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Total stockholders’ equity |
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132,243 |
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140,433 |
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Total liabilities and stockholders’ equity |
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$ |
220,682 |
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$ |
215,515 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Boingo Wireless, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Revenue |
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$ |
30,822 |
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$ |
28,607 |
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$ |
85,670 |
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$ |
77,980 |
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Costs and operating expenses: |
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Network access |
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15,058 |
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13,670 |
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41,230 |
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34,375 |
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Network operations |
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6,245 |
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4,495 |
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17,862 |
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13,199 |
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Development and technology |
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3,965 |
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2,622 |
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10,805 |
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8,484 |
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Selling and marketing |
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3,778 |
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3,294 |
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11,629 |
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10,106 |
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General and administrative |
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4,304 |
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3,201 |
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13,344 |
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11,502 |
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Amortization of intangible assets |
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959 |
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541 |
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2,812 |
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1,456 |
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Total costs and operating expenses |
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34,309 |
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27,823 |
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97,682 |
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79,122 |
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(Loss) income from operations |
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(3,487) |
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784 |
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(12,012) |
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(1,142) |
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Interest and other income (expense), net |
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11 |
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(2) |
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12 |
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70 |
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(Loss) income before income taxes |
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(3,476) |
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782 |
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(12,000) |
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(1,072) |
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Income tax expense (benefit) |
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75 |
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258 |
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378 |
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(382) |
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Net (loss) income |
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(3,551) |
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524 |
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(12,378) |
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(690) |
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Net income attributable to non-controlling interests |
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264 |
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170 |
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619 |
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476 |
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Net (loss) income attributable to common stockholders |
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$ |
(3,815) |
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$ |
354 |
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$ |
(12,997) |
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$ |
(1,166) |
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Net (loss) income per share attributable to common stockholders: |
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Basic |
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$ |
(0.11) |
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$ |
0.01 |
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$ |
(0.36) |
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$ |
(0.03) |
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Diluted |
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$ |
(0.11) |
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$ |
0.01 |
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$ |
(0.36) |
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$ |
(0.03) |
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Weighted average shares used in computing net (loss) income per share attributable to common stockholders: |
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Basic |
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35,881 |
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35,593 |
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35,619 |
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35,620 |
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Diluted |
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35,881 |
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37,129 |
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35,619 |
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35,620 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Net (loss) income |
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$ |
(3,551) |
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$ |
524 |
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$ |
(12,378) |
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$ |
(690) |
Other comprehensive loss, net of tax |
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Foreign currency translation adjustments |
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(197) |
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— |
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(197) |
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— |
Comprehensive (loss) income |
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(3,748) |
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524 |
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(12,575) |
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(690) |
Comprehensive loss attributable to non-controlling interest |
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281 |
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170 |
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636 |
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476 |
Comprehensive (loss) income attributable to common stockholders |
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$ |
(4,029) |
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$ |
354 |
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$ |
(13,211) |
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$ |
(1,166) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Boingo Wireless, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
(In thousands)
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Accumulated |
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Common |
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Common |
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Additional |
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Other |
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Non- |
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Total |
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|||||
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Stock |
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Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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controlling |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Interests |
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Equity |
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Balance at December 31, 2013 |
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35,226 |
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$ |
4 |
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$ |
182,927 |
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$ |
(43,363) |
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$ |
— |
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$ |
865 |
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$ |
140,433 |
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Issuance of common stock under stock incentive plans |
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830 |
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— |
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|
860 |
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— |
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— |
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— |
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|
860 |
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Shares withheld for taxes |
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— |
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— |
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(1,413) |
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— |
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— |
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— |
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(1,413) |
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Stock-based compensation expense |
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— |
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— |
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5,501 |
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— |
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— |
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— |
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|
5,501 |
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Excess tax benefit from stock-based compensation |
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— |
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— |
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60 |
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— |
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— |
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— |
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|
60 |
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Non-controlling interests distributions |
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— |
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— |
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— |
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— |
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— |
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(623) |
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|
(623) |
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Net (loss) income |
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— |
|
|
— |
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|
— |
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|
(12,997) |
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|
— |
|
|
619 |
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(12,378) |
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Other comprehensive loss |
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— |
|
|
— |
|
|
— |
|
|
— |
|
|
(214) |
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|
17 |
|
|
(197) |
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Balance at September 30, 2014 |
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36,056 |
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$ |
4 |
|
$ |
187,935 |
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$ |
(56,360) |
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$ |
(214) |
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$ |
878 |
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$ |
132,243 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Boingo Wireless, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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Nine Months Ended |
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September 30, |
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||||
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2014 |
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2013 |
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Cash flows from operating activities |
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Net loss |
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$ |
(12,378) |
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$ |
(690) |
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Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities: |
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Depreciation and amortization of property and equipment |
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19,650 |
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13,611 |
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Amortization of intangible assets |
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2,812 |
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1,456 |
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Impairment loss |
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|
406 |
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— |
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Stock-based compensation |
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5,210 |
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3,199 |
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Excess tax benefits from stock-based compensation |
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(60) |
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(1,796) |
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Change in fair value of contingent consideration |
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(358) |
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— |
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Change in deferred income taxes |
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|
277 |
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|
5 |
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Changes in operating assets and liabilities, net of effect of acquisition: |
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Accounts receivable |
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(7,609) |
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|
(2,057) |
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Prepaid expenses and other assets |
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(1,246) |
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(296) |
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Accounts payable |
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1,234 |
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(509) |
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Accrued expenses and other liabilities |
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(1,118) |
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(1,695) |
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Deferred revenue |
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|
11,818 |
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|
1,332 |
|
Net cash provided by operating activities |
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|
18,638 |
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|
12,560 |
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Cash flows from investing activities |
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Decrease in restricted cash |
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|
430 |
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— |
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Purchases of marketable securities |
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(27,156) |
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|
(33,399) |
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Proceeds from sales of marketable securities |
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|
42,857 |
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|
38,464 |
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Purchases of property and equipment |
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(55,021) |
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|
(19,150) |
|
Payments for business acquisition, net of cash acquired |
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(147) |
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|
(4,874) |
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Net cash used in investing activities |
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(39,037) |
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|
(18,959) |
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Cash flows from financing activities |
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|
|
|
Excess tax benefits from stock-based compensation |
|
|
60 |
|
|
1,796 |
|
Proceeds from exercise of stock options |
|
|
860 |
|
|
540 |
|
Repurchase and retirement of common stock |
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|
— |
|
|
(2,556) |
|
Payments of capital leases and notes payable |
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|
(544) |
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|
(96) |
|
Payments of acquired notes payable and financed liabilities |
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|
— |
|
|
(6,079) |
|
Payment of contingent consideration and other acquisition related consideration |
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|
(1,255) |
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|
— |
|
Payments of withholding tax on net issuance of restricted stock units |
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|
(1,413) |
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|
— |
|
Payments to non-controlling interests |
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|
(623) |
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|
(598) |
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Net cash used in financing activities |
|
|
(2,915) |
|
|
(6,993) |
|
Effect of exchange rates on cash |
|
|
6 |
|
|
— |
|
Net decrease in cash and cash equivalents |
|
|
(23,308) |
|
|
(13,392) |
|
Cash and cash equivalents at beginning of period |
|
|
27,338 |
|
|
58,138 |
|
Cash and cash equivalents at end of period |
|
$ |
4,030 |
|
$ |
44,746 |
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
Property and equipment costs in accounts payable, accrued expenses and other liabilities |
|
$ |
13,272 |
|
$ |
4,679 |
|
Acquisition of equipment under capital leases |
|
|
361 |
|
|
— |
|
Assets acquired in business acquisition |
|
|
— |
|
|
17,317 |
|
Liabilities assumed in business acquisition |
|
|
— |
|
|
12,443 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Boingo Wireless, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except shares and per share amounts)
1. The business
Boingo Wireless, Inc. and its subsidiaries (collectively “we, “us”, “our” or “the Company”) is a leading global provider of mobile Internet solutions for smartphones, tablet computers, laptops, and other wireless-enabled consumer devices. The Company has more than a million small cell networks for cellular distributed antenna system (“DAS”) and Wi-Fi access that reach more than one billion consumers annually. Boingo Wireless, Inc. was incorporated on April 16, 2001 in the State of Delaware. We have a diverse monetization model that enables us to generate revenues from wholesale partnerships, retail sales, and advertising across these small cell networks. Wholesale offerings include Wi-Fi roaming, private label Wi-Fi, location based services, and DAS, which are cellular extension networks. Retail products include Wi-Fi subscriptions and day passes that provide access to more than one million commercial hotspots worldwide, and Internet Protocol television (“IPTV”) services and residential broadband for military barracks. Advertising revenue is driven by Wi-Fi sponsorships at airports, hotels, cafes and restaurants, and public spaces. Our customers include some of the world’s largest carriers, telecommunications service providers and global consumer brands, as well as Internet savvy consumers on the go and troops stationed at military bases.
2. Summary of significant accounting policies
Basis of presentation
The accompanying interim unaudited condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2014 and 2013 are unaudited. The unaudited interim condensed consolidated financial information has been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2013 contained in our annual report on Form 10-K filed with the SEC on March 17, 2014. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results of operations and cash flows for the three and nine months ended September 30, 2014 and 2013, and our financial position as of September 30, 2014. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. Interim results are not necessarily indicative of the results to be expected for an entire year or any other future year or interim period.
Principles of consolidation
The unaudited condensed consolidated financial statements include our accounts and the accounts of our majority owned subsidiaries. We consolidate our 70% ownership of Concourse Communications Detroit, LLC, our 70% ownership of Chicago Concourse Development Group, LLC and our 75% ownership of Boingo Holding Participacoes Ltda. in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. Other parties’ interests in consolidated entities are reported as non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.
Business combinations
The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of
8
an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
The Company performs valuations of assets acquired and liabilities assumed for a business acquisition and allocates the purchase price to its respective net tangible and intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, royalty rates and selection of comparable companies. The Company engages the assistance of valuation specialists in concluding on fair values of assets and liabilities assumed in a business combination.
Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expenses in the condensed consolidated statements of operations. There were no significant transaction costs associated with business combinations for the three and nine months ended September 30, 2014. There were no significant transaction costs associated with business combinations for the three months ended September 30, 2013. Transaction costs associated with business combinations were $192 for the nine months ended September 30, 2013.
Segment and geographical information
We operate as one reportable segment; a service provider of mobile Internet solutions across our managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablet computers and other wireless-enabled consumer devices. This single segment is consistent with the internal organization structure and the manner in which operations are reviewed and managed by our Chief Executive Officer, the chief operating decision maker.
Revenue is predominately generated and all significant long-lived tangible assets are held in the U.S. We do not disclose sales by geographic area because to do so would be impracticable. The following is a summary of our revenue by primary revenue source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
$ |
15,138 |
|
$ |
14,328 |
|
$ |
39,133 |
|
$ |
38,222 |
|
Retail subscription |
|
|
8,426 |
|
|
8,860 |
|
|
24,881 |
|
|
25,658 |
|
Retail single-use |
|
|
2,661 |
|
|
2,386 |
|
|
8,027 |
|
|
7,802 |
|
Advertising and other |
|
|
4,597 |
|
|
3,033 |
|
|
13,629 |
|
|
6,298 |
|
Total revenue |
|
$ |
30,822 |
|
$ |
28,607 |
|
$ |
85,670 |
|
$ |
77,980 |
|
Marketable securities
Our marketable securities consist of available-for-sale securities with original maturities exceeding three months. In accordance with FASB ASC 320, Investments—Debt and Equity Securities, we have classified securities, which have readily determinable fair values and are highly liquid, as short-term because such securities are expected to be realized within a one-year period. At September 30, 2014 and December 31, 2013, we had $17,261 and $32,962, respectively, in marketable securities.
Marketable securities are reported at fair value with the related unrealized gains and losses reported as other comprehensive income (loss) until realized or until a determination is made that an other-than-temporary decline in market value has occurred. No significant unrealized gains and losses have been reported during the periods presented. Factors considered by us in assessing whether an other-than-temporary impairment has occurred include the nature of the investment, whether the decline in fair value is attributable to specific adverse conditions affecting the investment, the financial condition of the investee, the severity and the duration of the impairment and whether we have the ability to hold the investment to maturity. When it is determined that an other-than-temporary impairment has occurred, the investment is
9
written down to its market value at the end of the period in which it is determined that an other-than-temporary decline has occurred. The cost of marketable securities sold is based upon the specific identification method. Any realized gains or losses on the sale of investments are reflected as a component of interest and other income (expense), net.
For the nine months ended September 30, 2014 and 2013, we had no significant realized gains or losses from investments in marketable securities classified as available-for-sale. As of September 30, 2014 and December 31, 2013, we had no unrealized gains or losses in accumulated other comprehensive loss.
Revenue recognition
We generate revenue from several sources including: (i) platform service arrangements with wholesale customers that provide software licensing, network access, and professional services fees, (ii) wholesale customers that are telecom operators under long-term contracts for access to our DAS at our managed and operated locations, (iii) retail customers under subscription plans for month-to-month network access that automatically renew, and retail single-use access from sales of hourly, daily or other single-use access plans, and (iv) display advertisements and sponsorships on our walled garden sign-in pages. Software licensed by our wholesale platform services customers can only be used during the term of the service arrangements and has no utility to them upon termination of the service arrangement.
We recognize revenue when an arrangement exists, services have been rendered, fees are fixed or determinable, no significant obligations remain related to the earned fees and collection of the related receivable is reasonably assured.
Services provided to wholesale partners under platform service arrangements generally contain several elements including: (i) a term license to use our software to access our Wi-Fi network, (ii) access fees for network usage, and (iii) professional services for software integration and customization and to maintain the Wi-Fi service. The term license, monthly minimum network access fees and professional services are billed on a monthly basis based upon predetermined fixed rates. Once the term license for integration and customization are delivered, the fees from the arrangement are recognized ratably over the remaining term of the platform service arrangement. The initial term of platform service license agreements is generally between one to five years and the agreements generally contain renewal clauses. Revenue for network access fees in excess of the monthly minimum amounts is recognized when earned. All elements within existing platform service arrangements are generally delivered and earned concurrently throughout the term of the respective service arrangement.
Revenue generated from access to our DAS networks consists of build-out fees and recurring access fees under certain long-term contracts with telecom operators. Build-out fees paid upfront are generally deferred and recognized ratably over the term of the estimated customer relationship period, once the build-out is complete. Minimum monthly access fees for usage of the DAS networks are non-cancellable and generally escalate on an annual basis. These minimum monthly access fees are recognized ratably over the term of the telecom operator agreement. The initial term of our contracts with telecom operators and wholesale partners generally range from two to ten years and the agreements generally contain renewal clauses. Revenue from network access fees in excess of the monthly minimums is recognized when earned.
In instances where the minimum monthly network access fees escalate over the term of the wholesale service arrangement, an unbilled receivable is recognized when performance is within our control and when we have reasonable assurance that the unbilled receivable balance will be collected.
We adopted the provisions of Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), on a prospective basis on January 1, 2011. For multiple-deliverable arrangements entered into prior to January 1, 2011 that are accounted for under ASC 605-25, Revenue Recognition—Multiple- Deliverable Revenue Arrangements, we defer recognition of revenue for the full arrangement and recognize all revenue ratably over the wholesale service period for platform service arrangements and the term of the estimated customer relationship period for DAS arrangements, because we do not have evidence of fair value for the undelivered elements in the arrangement. For multiple-deliverable arrangements entered into or materially modified after January 1, 2011 that are accounted for under ASC 605-25, we evaluate whether or not separate units of accounting exist and then allocate the arrangement consideration to all units of accounting based on the relative selling price method using estimated selling prices because vendor specific objective evidence and third party evidence is not
10
available. We recognize the revenue associated with the separate units of accounting upon completion of such services or ratably over the wholesale service period for platform service arrangements and the term of the estimated customer relationship period for DAS arrangements.
Subscription fees from retail customers are paid monthly in advance and revenue is deferred for the portions of monthly recurring subscription fees collected in advance. We provide refunds for our Wi-Fi and IPTV services on a case-by-case basis. These amounts are not significant and are recorded as contra-revenue in the period the refunds are made. Subscription fee revenue is recognized ratably over the subscription period. Revenue generated from retail single-use access is recognized when earned.
Advertising revenue is generated from advertisements on our managed and operated or partner networks. In determining whether an arrangement exists, we ensure that a binding arrangement is in place, such as a standard insertion order or a fully executed customer-specific agreement. Obligations pursuant to our advertising revenue arrangements typically include a minimum number of units or the satisfaction of certain performance criteria. Advertising and other revenue is recognized when the services are performed.
Foreign currency translation
Our Brazilian subsidiary uses the Brazilian Real as its functional currency. Assets and liabilities of our Brazilian subsidiary are translated to U.S. dollars at period-end rates of exchange, and revenues and expenses are translated at average exchange rates prevailing for each month. The resulting translation adjustments are made directly to a separate component of other comprehensive loss, which is reflected in stockholders’ equity in our condensed consolidated balance sheet. As of September 30, 2014 and December 31, 2013, the Company had $(214) and $0, respectively, of cumulative foreign currency translation adjustments, net of tax in accumulated other comprehensive loss.
Some of our subsidiaries also enter into transactions and have monetary assets and liabilities that are denominated in a currency other than the entities’ respective functional currencies. Gains and losses from the revaluation of foreign currency transactions and monetary assets and liabilities are included in the condensed consolidated statements of operations.
Recent accounting pronouncements
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which explicitly requires management to assess an entity’s ability to continue as a going concern in connection with each annual and interim period. Management will assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. Disclosures will be required if conditions give rise to substantial doubt. The standard will be effective for the first annual period ending after December 15, 2016. Early adoption is permitted. We are currently evaluating the expected impact of this new standard.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is intended to improve and converge the financial reporting requirements for revenue from contracts with customers between U.S. GAAP and International Accounting Standards. In accordance with this new standard, an entity would recognize revenue to depict the transfer of promised goods or services. The standard establishes a five-step model and related application guidance, which will replace most existing revenue recognition guidance in U.S. GAAP. The standard will be effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is not permitted. An entity may choose to adopt the new standard either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the new standard. We are currently evaluating the expected impact of this new standard on our reporting of revenue contracts in our consolidated financial statements.
11
3. Acquisitions
Electronic Media Systems, Inc. and Advanced Wireless Group, LLC
On October 31, 2013, we acquired all outstanding stock of Electronic Media Systems, Inc. and all membership interests in its subsidiary, Advanced Wireless Group, LLC, not otherwise owned by Electronic Media Systems, Inc. such that we are now the beneficial owner of all membership interests of Advanced Wireless, Group, LLC (collectively, “AWG”). AWG operated public Wi-Fi in seventeen U.S. airports including Los Angeles International, Charlotte/Douglas International, Miami International, Minneapolis- St. Paul International, Detroit Metropolitan Airport, and Boston’s Logan International. We have included the operating results of AWG in our condensed consolidated financial statements since the date of acquisition.
The acquisition has been accounted for under the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $17,527, which includes cash paid at closing, net equity adjustments, holdback consideration to be paid and the fair value of additional contingent consideration that would be due and payable upon the successful extension of a specified airport Wi-Fi contract. On July 29, 2014, we paid $147 to the previous AWG shareholders as settlement for the net equity adjustments that were not finalized as of the acquisition date.
The fair value of the contingent consideration is based on Level 3 inputs, which are discussed in Note 6. Further changes in the fair value of the contingent consideration are recorded through operating (loss) income. On July 29, 2014, we paid the contingent consideration in the amount of $1,000 to the previous AWG shareholders. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is primarily not deductible for tax purposes. The goodwill arising from the AWG acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining AWG with us.
The contingent consideration was valued at the date of acquisition using a discount rate of 3.1%. The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, with-and-without and replacement cost methods using discount rates ranging from 12.0% to 14.0% and royalty rates of 0.5%.
During the nine months ended September 30, 2014, we finalized our purchase price allocation, which was preliminary as of December 31, 2013 due to estimated net equity adjustments and the filing of AWG’s final short period 2013 tax returns, both of which impacted the final purchase price allocation. As these purchase accounting adjustments were finalized during the measurement period, we retrospectively adjusted the provisional amounts recognized at the acquisition date to reflect the new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. As a result, goodwill decreased by $28, accrued expenses and other liabilities increased by $147, and accumulated deficit increased by $175 as of December 31, 2013 as compared to the audited consolidated financial statements contained in our annual report on Form 10-K filed with the SEC on March 17, 2014. The increase in accumulated deficit was the result of the valuation allowance that was established by the Company against its deferred tax assets as of December 31, 2013. The final purchase price allocation resulted in a $175 decrease in deferred tax liabilities and goodwill; accordingly, the Company had to increase the valuation allowance for deferred tax assets by $175, resulting in additional deferred tax expense for the year ended December 31, 2013.
12
The amortizable intangible assets are being amortized straight-line over their estimated useful lives. The following summarizes the final purchase price allocation:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Estimated Fair |
|
Estimated Useful |
|
|
|
|
Value |
|
Life (years) |
|
|
Consideration: |
|
|
|
|
|
|
Cash paid |
|
$ |
14,800 |
|
|
|
Net equity adjustments |
|
|
147 |
|
|
|
Holdback consideration |
|
|
1,600 |
|
|
|
Contingent consideration |
|
|
980 |
|
|
|
Total consideration |
|
$ |
17,527 |
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
Cash |
|
$ |
215 |
|
|
|
Restricted cash |
|
|
515 |
|
|
|
Accounts receivable |
|
|
988 |
|
|
|
Other current assets |
|
|
609 |
|
|
|
Property and equipment |
|
|
2,297 |
|
|
|
Accounts payable |
|
|
(563) |
|
|
|
Accrued expenses |
|
|
(515) |
|
|
|
Other current liabilities |
|
|
(134) |
|
|
|
Capital lease obligations |
|
|
(932) |
|
|
|
Other non-current liabilities |
|
|
(130) |
|
|
|
Deferred tax liabilities |
|
|
(3,386) |
|
|
|
Net tangible liabilities acquired |
|
|
(1,036) |
|
|
|
Existing airport contracts and relationships |
|
|
4,700 |
|
6.7 |
|
Technology |
|
|
270 |
|
6.0 |
|
Trademark and tradename |
|
|
120 |
|
3.0 |
|
Non-compete agreement |
|
|
3,590 |
|
5.0 |
|
Goodwill |
|
|
9,883 |
|
|
|
Total purchase price |
|
$ |
17,527 |
|
|
|
Endeka Group, Inc.
On February 22, 2013, we acquired all outstanding stock of Endeka Group, Inc. (“Endeka”). Endeka is a provider of commercial wireless broadband and IPTV services at certain military bases, as well as Wi-Fi services to certain federal law enforcement training facilities. We acquired Endeka because Endeka’s portfolio of venues and management team are natural additions to our managed network business. We have included the operating results of Endeka in our condensed consolidated financial statements since the date of acquisition.
The acquisition has been accounted for under the acquisition method of accounting in accordance with FASB ASC 805. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $6,498, which includes cash paid at closing, holdback consideration to be paid and the fair value of additional contingent consideration comprised of two components: (i) a payment (“Build Payment”) if the amount of the capital expenditures incurred for the substantial completion of a specified build project is less than a target; and (ii) a payment (“Milestone Payment”) based on revenue generated by certain contracts in fiscal year 2014. There is no maximum to the contingent consideration payments for the Milestone Payment. We do not expect to make any payments associated with the Build Payment. The Milestone Payment will be paid on or around February 28, 2015.
13
The fair value of the contingent consideration is based on Level 3 inputs. Further changes in the fair value of the contingent consideration are recorded through operating (loss) income. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is not deductible for tax purposes. The goodwill arising from the Endeka acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining Endeka with us.
The contingent consideration was valued at the date of acquisition using a discounted cash flow method with probability weighted cash flows and a discount rate of 50.5%. The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, and replacement cost methods using discount rates ranging from 40.0% to 50.0% and royalty rates ranging from 0.5% to 1.5%, where applicable.
The amortizable intangible assets are being amortized straight-line over their estimated useful lives. The following summarizes the final purchase price allocation:
|
|
|
|
|
|
|
|
|
Estimated Fair |
|
Estimated Useful |
|
|
|
|
Value |
|
Life (years) |
|
|
Consideration: |
|
|
|
|
|
|
Cash paid |
|
$ |
4,894 |
|
|
|
Holdback consideration |
|
|
275 |
|
|
|
Contingent consideration |
|
|
1,329 |
|
|
|
Total consideration |
|
$ |
6,498 |
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
Cash |
|
$ |
20 |
|
|
|
Other current assets |
|
|
44 |
|
|
|
Property and equipment |
|
|
4,617 |
|
|
|
Other assets |
|
|
12 |
|
|
|
Accounts payable |
|
|
(992) |
|
|
|
Other current liabilities |
|
|
(211) |
|
|
|
Notes payable and financed liabilities |
|
|
(6,476) |
|
|
|
Deferred tax liabilities |
|
|
(2,637) |
|
|
|
Net tangible liabilities acquired |
|
|
(5,623) |
|
|
|
Existing customer contracts and relationships |
|
|
4,770 |
|
10.0 |
|
Technology |
|
|
930 |
|
6.0 |
|
Trademark and tradename |
|
|
300 |
|
10.0 |
|
Non-compete agreement |
|
|
250 |
|
2.0 |
|
Other intangibles |
|
|
95 |
|
10.0 |
|
Goodwill |
|
|
5,776 |
|
|
|
Total purchase price |
|
$ |
6,498 |
|
|
|
During the nine months ended September 30, 2014, we paid the holdback consideration in the amount of $275 to the previous Endeka shareholders.
Pro forma results
The following table presents the unaudited pro forma results of the Company for the three and nine months ended September 30, 2013 as if the acquisitions of AWG and Endeka had occurred on January 1, 2012. These results are not intended to reflect the actual operations of the Company had the acquisitions occurred on January 1, 2012. We did
14
not record any incremental income taxes for pro forma net income (loss) because we established a valuation allowance in 2013.
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||
|
|
September 30, 2013 |
|
September 30, 2013 |
|
||
|
|
|
|
|
|
|
|
Revenue |
|
$ |
30,804 |
|
$ |
84,995 |
|
Net income (loss) |
|
$ |
88 |
|
$ |
(2,375) |
|
4. Cash and cash equivalents
Cash and cash equivalents consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
2014 |
|
2013 |
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
|
Cash |
|
$ |
2,078 |
|
$ |
3,655 |
|
Money market accounts |
|
|
1,952 |
|
|
23,683 |
|
Total cash and cash equivalents |
|
$ |
4,030 |
|
$ |
27,338 |
|
For the nine months ended September 30, 2014 and 2013, interest income was $105 and $145, respectively, which is included in interest and other income (expense), net in the accompanying condensed consolidated statements of operations.
5. Property and equipment
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
2014 |
|
2013 |
|
||
Leasehold improvements |
|
$ |
129,403 |
|
$ |
97,462 |
|
Construction in progress |
|
|
36,163 |
|
|
18,157 |
|
Computer equipment |
|
|
8,539 |
|
|
7,372 |
|
Software |
|
|
14,905 |
|
|
10,452 |
|
Office equipment |
|
|
419 |
|
|
412 |
|
Total property and equipment |
|
|
189,429 |
|
|
133,855 |
|
Less: accumulated depreciation and amortization |
|
|
(83,311) |
|
|
(66,295) |
|
Total property and equipment, net |
|
$ |
106,118 |
|
$ |
67,560 |
|
Depreciation and amortization of property and equipment is allocated as follows in the accompanying condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network access |
|
$ |
5,027 |
|
$ |
3,058 |
|
$ |
13,400 |
|
$ |
9,140 |
|
Network operations |
|
|
1,370 |
|
|
1,116 |
|
|
3,739 |
|
|
2,932 |
|
Development and technology |
|
|
852 |
|
|
507 |
|
|
2,331 |
|
|
1,395 |
|
General and administrative |
|
|
86 |
|
|
63 |
|
|
180 |
|
|
144 |
|
Total depreciation and amortization of property and equipment |
|
$ |
7,335 |
|
$ |
4,744 |
|
$ |
19,650 |
|
$ |
13,611 |
|
15
During the three and nine months ended September 30, 2014, the Company recognized $406 of impairment losses, which is included within development and technology expenses in the accompanying condensed consolidated statements of operations, related to a change in the use of certain software developed for internal use that indicated that the carrying value of those assets will not be recoverable.
6. Fair value measurement
ASC 820 establishes a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require us to use present value and other valuation techniques in the determination of fair value (Level 3). The following table sets forth our financial assets and liabilities that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2014 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts |
|
$ |
1,952 |
|
$ |
— |
|
$ |
— |
|
$ |
1,952 |
|
Marketable securities |
|
|
— |
|
|
17,261 |
|
|
— |
|
|
17,261 |
|
Total assets |
|
$ |
1,952 |
|
$ |
17,261 |
|
$ |
— |
|
$ |
19,213 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
— |
|
$ |
— |
|
$ |
584 |
|
$ |
584 |
|
Total liabilities |
|
$ |
— |
|
$ |
— |
|
$ |
584 |
|
$ |
584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts |
|
$ |
23,683 |
|
$ |
— |
|
$ |
— |
|
$ |
23,683 |
|
Marketable securities |
|
|
— |
|
|
32,962 |
|
|
— |
|
|
32,962 |
|
Total assets |
|
$ |
23,683 |
|
$ |
32,962 |
|
$ |
— |
|
$ |
56,645 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
— |
|
$ |
— |
|
$ |
1,942 |
|
$ |
1,942 |
|
Total liabilities |
|
$ |
— |
|
$ |
— |
|
$ |
1,942 |
|
$ |
1,942 |
|
Our marketable securities utilize Level 2 inputs and consist primarily of corporate securities which include commercial paper and corporate debt instruments including notes issued by foreign or domestic corporations which pay in U.S. dollars and carry a rating of A or better. We have evaluated the various types of securities in our investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Due to variations in trading volumes and the lack of quoted market prices in active markets, our fixed maturities are classified as Level 2 securities. The fair value of our fixed maturity marketable securities is derived through the use of a third party pricing source using recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data.
The Company used the income approach to value the contingent consideration as of September 30, 2014. The contingent consideration used a discounted cash flow method with probability weighted cash flows for Endeka. The following table presents a reconciliation of the beginning and ending amounts related to the fair value of contingent consideration, categorized as Level 3:
|
|
|
|
|
Beginning balance, January 1, 2014 |
|
$ |
1,942 |
|
Payment of contingent consideration |
|
|
(1,000) |
|
Change in fair value |
|
|
(358) |
|
Ending balance, September 30, 2014 |
|
$ |
584 |
|
16
7. Accrued expenses and other liabilities
Accrued expenses and other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
2014 |
|
2013 |
|
||
Revenue share |
|
$ |
3,959 |
|
$ |
4,598 |
|
Salaries and wages |
|
|
2,217 |
|
|
3,024 |
|
Accrued for construction-in-progress |
|
|
7,824 |
|
|
2,717 |
|
Accrued partner network |
|
|
802 |
|
|
736 |
|
Deferred rent |
|
|
806 |
|
|
853 |
|
Holdback liabilities |
|
|
1,600 |
|
|
1,875 |
|
Contingent consideration |
|
|
584 |
|
|
980 |
|
Other |
|
|
2,291 |
|
|
2,272 |
|
Total accrued expenses and other liabilities |
|
$ |
20,083 |
|
$ |
17,055 |
|
8. Income taxes
We calculate our interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period in which the change occurs.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment, including the expected operating income (loss) for the year, projections of the proportion of income (loss) earned and taxed in various states, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or as the tax environment changes.
Income tax expense (benefit) of $378 and $(382) reflects an effective tax rate of (3.1%) and 35.6% for the nine months ended September 30, 2014 and 2013, respectively. Our effective tax rate differs from the statutory rate primarily due to our valuation allowance for the nine months ended September 30, 2014. Our effective tax rate differs from the statutory rate primarily due to benefits from disqualifying dispositions of incentive stock options and non-tax deductible transaction costs related to the acquisition of Endeka for the nine months ended September 30, 2013. At September 30, 2014, we have net deferred tax liabilities of $2,454, which include net operating loss carry-forwards. As of September 30, 2014 and December 31, 2013, we had $461 and $445, respectively, of uncertain tax positions, $106 of which is a reduction to deferred tax assets, which is presented net of uncertain tax positions, in the accompanying condensed consolidated balance sheets. We accrue interest and penalties related to unrecognized tax benefits as a component of income taxes. As of September 30, 2014 and December 31, 2013, we have accrued $69 and $53, respectively, for related interest, net of federal income tax benefits, and penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2014 was $286.
We are subject to taxation in the United States and in various states. Our tax years 2011 and forward are subject to examination by the IRS and our tax years 2009 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income. We are currently subject to examination by the IRS for our 2011 tax year. Although the ultimate outcome is unknown, we believe that any adjustments that may result from the examination is not likely to have a material, adverse effect on our condensed consolidated results of operations, financial position or cash flows.
17
9. Commitments and contingencies
Letters of credit
We have entered into Letter of Credit Authorization agreements (collectively, “Letters of Credit”) with Silicon Valley Bank. The Letters of Credit are irrevocable and serve as performance guarantees that will allow our customers to draw upon the available funds if we are in default. As of September 30, 2014, we have Letters of Credit totaling $3,307 that are scheduled to expire over the next thirteen-month period. There have been no drafts drawn under these Letters of Credit as of September 30, 2014. Subsequent to September 30, 2014, the Company increased the value of one Letter of Credit by $1,789.
Legal proceedings
From time to time, we may be subject to claims, suits, investigations and proceedings arising out of the normal course of business. We are not currently a party to any litigation that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.
10. Stock incentive plans
In March 2011, our board of directors approved the 2011 Equity Incentive Plan (“2011 Plan”). The 2011 Plan provides for the grant of incentive and nonstatutory stock options, stock appreciation rights, restricted shares of our common stock, stock units, and performance cash awards. As of January 1 of each year, the number of shares of common stock reserved for issuance under our stock incentive plan shall automatically be increased by a number equal to the lesser of (a) 4.5% of the total number of shares of common stock then outstanding, (b) 3,000,000 shares of common stock and (c) as determined by our board of directors. As of September 30, 2014, 8,693,162 shares of common stock are reserved for issuance.
No further awards will be made under our Amended and Restated 2001 Stock Incentive Plan (“2001 Plan”), and it will be terminated. Options outstanding under the 2001 Plan will continue to be governed by their existing terms.
Stock-based compensation expense is allocated as follows on the accompanying condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network operations |
|
$ |
344 |
|
$ |
241 |
|
$ |
983 |
|
$ |
638 |
|
Development and technology |
|
|
118 |
|
|
143 |
|
|
378 |
|
|
242 |
|
Selling and marketing |
|
|
396 |
|
|
301 |
|
|
1,132 |
|
|
759 |
|
General and administrative |
|
|
984 |
|
|
667 |
|
|
2,717 |
|
|
1,560 |
|
Total stock-based compensation |
|
$ |
1,842 |
|
$ |
1,352 |
|
$ |
5,210 |
|
$ |
3,199 |
|
We capitalized $130 and $291 of stock-based compensation expense during the three and nine months ended September 30, 2014, respectively.
Stock option awards
We grant stock option awards to both employees and non-employee directors. The grant date for these awards is the same as the measurement date. The stock option awards generally vest over a four year service period with 25% vesting when the individual completes 12 months of continuous service and the balance vesting monthly thereafter subject to continuous service on each vesting date. These awards are valued as of the measurement date and the stock-based compensation expense, net of estimated and actual forfeitures, is recognized on a straight-line basis over the requisite service period.
18
A summary of the stock option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
Weighted |
|
Average |
|
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
|
||
|
|
Number of |
|
Exercise |
|
Contract |
|
Intrinsic |
|
||
|
|
Options (000’s) |
|
Price |
|
Life (years) |
|
Value |
|
||
Outstanding at December 31, 2013 |
|
4,955 |
|
$ |
6.31 |
|
6.6 |
|
$ |
9,535 |
|
Granted |
|
203 |
|
|
5.99 |
|
|
|
|
|
|
Exercised |
|
(344) |
|
|
2.50 |
|
|
|
|
|
|
Canceled/forfeited |
|
(346) |
|
|
7.88 |
|
|
|
|
|
|
Outstanding at September 30, 2014 |
|
4,468 |
|
$ |
6.47 |
|
6.0 |
|
$ |
9,919 |
|
Vested, exercisable and expected to vest at September 30, 2014 |
|
4,373 |
|
$ |
6.45 |
|
6.0 |
|
$ |
9,870 |
|
Exercisable at September 30, 2014 |
|
2,899 |
|
$ |
5.44 |
|
4.9 |
|
$ |
9,252 |
|
The significant assumptions used for newly-issued stock option grants for the nine months ended September 30, 2014 were an expected term of 6.25 years, an expected volatility of 48.6%, a risk free interest rate of 1.8% and no expected dividends. The weighted average grant date fair value for stock option grants for the nine months ended September 30, 2014 was $2.92.
Restricted stock unit awards
We grant time-based restricted stock units (“RSU”) to executive and non-executive personnel and non-employee directors. The time-based RSUs granted to executive and non-executive personnel generally vest over a two to three year period subject to continuous service on each vesting date. The time-based RSUs for our non-employee directors generally vest over a one year period for existing members and 25% per year over a four-year period for new members subject to continuous service on each vesting date.
During the nine months ended September 30, 2014, we granted performance-based RSUs to executive personnel. These awards vest subject to certain performance objectives based on the Company’s annual revenue growth achieved during the specified performance period and certain long-term service conditions. The maximum number of RSUs that may vest is determined based on actual Company achievement with one-third of the performance-based RSUs vesting when the individual completes 12 months of continuous service and the balance vesting over a series of eight successive equal quarterly installments thereafter subject to continuous service on each vesting date. We recognize stock-based compensation expense for performance-based RSUs when we believe that it is probable that the performance objectives will be met.
A summary of the nonvested RSU activity under the 2011 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
Number of Shares |
|
Grant-Date Fair |
|
|
|
|
(000’s) |
|
Value |
|
|
Nonvested at December 31, 2013 |
|
753 |
|
$ |
6.22 |
|
Granted |
|
1,610 |
|
$ |
5.97 |
|
Vested |
|
(707) |
|
$ |
6.39 |
|
Forfeited |
|
(106) |
|
$ |
6.04 |
|
Nonvested at September 30, 2014 |
|
1,550 |
|
$ |
5.90 |
|
During the nine months ended September 30, 2014, 707,468 shares of time-based RSUs vested. The Company issued 485,671 shares and the remaining shares were withheld to pay minimum statutory federal, state, and local employment payroll taxes on those vested awards.
19
11. Net (loss) income per share attributable to common stockholders
The following table sets forth the computation of basic and diluted net (loss) income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
(in thousands) |
|
||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders, basic and diluted |
|
$ |
(3,815) |
|
$ |
354 |
|
$ |
(12,997) |
|
$ |
(1,166) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common stock, basic |
|
|
35,881 |
|
|
35,593 |
|
|
35,619 |
|
|
35,620 |
|
Dilutive effect of stock options |
|
|
— |
|
|
1,347 |
|
|
— |
|
|
— |
|
Dilutive effect of RSUs |
|
|
— |
|
|
189 |
|
|
— |
|
|
— |
|
Weighted average common stock, dilutive |
|
|
35,881 |
|
|
37,129 |
|
|
35,619 |
|
|
35,620 |
|
Net (loss) income per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.11) |
|
$ |
0.01 |
|
$ |
(0.36) |
|
$ |
(0.03) |
|
Diluted |
|
$ |
(0.11) |
|
$ |
0.01 |
|
$ |
(0.36) |
|
$ |
(0.03) |
|
For the three months ended September 30, 2013, 3,086,287 options to purchase common stock were not included in the computation of diluted net income per share as the inclusion would have been anti-dilutive. For the nine months ended September 30, 2013, we excluded all stock options and RSUs from the computation of diluted net loss per share due to the net loss for the period. For the three and nine months ended September 30, 2014, we excluded all stock options and RSUs from the computation of diluted net loss per share due to the net loss for the period as the inclusion would be anti-dilutive.
On April 1, 2013, the Company approved a stock repurchase program to repurchase up to $10,000 of the Company’s common stock in the open market, exclusive of any commissions, markups or expenses. The stock repurchased will be retired and will resume the status of authorized but unissued shares of common stock. The Company did not repurchase any of our common stock during the nine months ended September 30, 2014. During the nine months ended September 30, 2013, we repurchased and retired approximately 362,000 shares under this program for approximately $2,541, excluding commissions paid, or an average price per share of $7.02. As of September 30, 2014, the remaining approved amount for repurchases was approximately $5,180.
20
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and the section titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities Exchange Commission on March 17, 2014.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; revenues; metrics; operating expenses; market trends, including those in the markets in which we compete; operating and marketing efficiencies; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing; competition; strategies; and new business initiatives, products, services, and features. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and additional factors that accompany the related forward-looking statements in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview
Boingo helps the world stay connected.
We have established a global footprint of small cell networks that provide high-speed, high-bandwidth wireless Internet service to smartphones, tablet computers, laptops, and other wireless-enabled devices. Small cells are low-powered radio access nodes that operate in licensed and unlicensed spectrum that have a range of 10 meters to 1 to 2 kilometers. These small cell networks cover more than a million distributed antenna system (“DAS”) and Wi-Fi locations and reach more than one billion consumers annually. With the proliferation of mobile Internet-enabled wireless devices, and growth of high-bandwidth usage from streaming media and smartphone apps, we expect these small cells to play a significant role in helping meet the ever-increasing data demands of connected consumers who are accustomed to the benefits of broadband performance at home and work and are seeking the same applications, performance and availability on-the-go.
Our small cell networks include DAS and Wi-Fi networks that we manage and operate ourselves, which we refer to as our “managed and operated” locations, as well as Wi-Fi networks managed and operated by third-parties with whom we contract for access, which we refer to as our “roaming” networks. Our managed and operated locations are typically located in large venues with big audiences, such as airports, stadiums, arenas, universities, convention centers, shopping malls, and military bases where we install a wireless network infrastructure and generally have exclusive multi-year agreements. Our roaming networks comprise more than one million commercial Wi-Fi hotspots in over 100
21
countries around the world. We also sell advertising and sponsorships on other Wi-Fi networks that are not part of our network on behalf of the network owner.
We generate revenue through wholesale partnerships, retail sales, and advertising and sponsorships. We have direct customer relationships with users who have purchased our mobile Internet services, and we also provide mobile Internet access and solutions to our partners, which include telecom operators, cable companies, technology companies, enterprise software and services companies, and communications service providers to allow their millions of users to connect to the mobile Internet through hotspots in our network. Our software solution—which provides one-click access to our global footprint of hotspots—has been rebranded for wholesale partners, in addition to being marketed under the Boingo brand. In combination with our back-end system infrastructure, it creates a global roaming solution for operators, carriers and other service providers.
We generate wholesale revenue from telecom operators that pay us build-out fees and recurring access fees so that their cellular customers may use our DAS networks at locations where we manage and operate the wireless network. In addition, our partners pay us usage-based Wi-Fi network access and software licensing fees to allow their customers’ access to our footprint worldwide.
We generate revenue from individual users purchasing month-to-month retail subscription plans that automatically renew hotspot specific single-use access to our network, or residential broadband and Internet Protocol television (“IPTV”) services in military barracks. As of September 30, 2014 and 2013, we had approximately 286,000 and 313,000 subscribers, respectively.
We also generate revenue from advertisers that seek to reach our users with sponsored access, promotional programs and online display advertising at locations where we manage and operate the Wi-Fi network and locations where we solely provide authorized access to a partner’s Wi-Fi network through sponsored access and promotional programs.
We believe we are the leading global provider of commercial mobile Wi-Fi Internet solutions and indoor DAS services for carriers. Key elements of our strategy are to:
· |
expand our footprint of managed and operated and aggregated networks; |
· |
leverage our neutral-host business model to accelerate wholesale roaming and carrier offload partnerships; |
· |
maximize advertising and sponsorship sell-through for our inventory of advertising-enabled networks; and |
· |
increase our brand awareness. |
Reconciliation of Non-GAAP Financial Measures
We define Adjusted EBITDA as net (loss) income attributable to common stockholders plus depreciation and amortization of property and equipment, income tax expense (benefit), amortization of intangible assets, stock-based compensation expense, non-controlling interests and interest and other (income) expense, net.
We believe that Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:
· |
Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with other companies, many of which use similar non-generally
22 |
accepted accounting principles in the United States (“GAAP”) financial measures to supplement their GAAP results; and |
· |
it is useful to exclude non-cash charges, such as depreciation and amortization of property and equipment, amortization of intangible assets and stock-based compensation, from Adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations, and these expenses can vary significantly between periods as a result of full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards. |
We use Adjusted EBITDA in conjunction with traditional GAAP measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.
We do not place undue reliance on Adjusted EBITDA as our only measure of operating performance. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do.
We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net (loss) income attributable to common stockholders.
The following provides a reconciliation of net (loss) income attributable to common stockholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
(unaudited) |
|
||||||||||
|
|
(in thousands) |
|
||||||||||
Net (loss) income attributable to common stockholders |
|
$ |
(3,815) |
|
$ |
354 |
|
$ |
(12,997) |
|
$ |
(1,166) |
|
Depreciation and amortization of property and equipment |
|
|
7,335 |
|
|
4,744 |
|
|
19,650 |
|
|
13,611 |
|
Income tax expense (benefit) |
|
|
75 |
|
|
258 |
|
|
378 |
|
|
(382) |
|
Amortization of intangible assets |
|
|
959 |
|
|
541 |
|
|
2,812 |
|
|
1,456 |
|
Stock-based compensation expense |
|
|
1,842 |
|
|
1,352 |
|
|
5,210 |
|
|
3,199 |
|
Non-controlling interests |
|
|
264 |
|
|
170 |
|
|
619 |
|
|
476 |
|
Interest and other (income) expense, net |
|
|
(11) |
|
|
2 |
|
|
(12) |
|
|
(70) |
|
Adjusted EBITDA |
|
$ |
6,649 |
|
$ |
7,421 |
|
$ |
15,660 |
|
$ |
17,124 |
|
23
Results of Operations
The following tables set forth our results of operations for the specified periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
(unaudited) |
|
||||||||||
|
|
(in thousands) |
|
||||||||||
Consolidated Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
30,822 |
|
$ |
28,607 |
|
$ |
85,670 |
|
$ |
77,980 |
|
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Network access |
|
|
15,058 |
|
|
13,670 |
|
|
41,230 |
|
|
34,375 |
|
Network operations |
|
|
6,245 |
|
|
4,495 |
|
|
17,862 |
|
|
13,199 |
|
Development and technology |
|
|
3,965 |
|
|
2,622 |
|
|
10,805 |
|
|
8,484 |
|
Selling and marketing |
|
|
3,778 |
|
|
3,294 |
|
|
11,629 |
|
|
10,106 |
|
General and administrative |
|
|
4,304 |
|
|
3,201 |
|
|
13,344 |
|
|
11,502 |
|
Amortization of intangible assets |
|
|
959 |
|
|
541 |
|
|
2,812 |
|
|
1,456 |
|
Total costs and operating expenses |
|
|
34,309 |
|
|
27,823 |
|
|
97,682 |
|
|
79,122 |
|
(Loss) income from operations |
|
|
(3,487) |
|
|
784 |
|
|
(12,012) |
|
|
(1,142) |
|
Interest and other income (expense), net |
|
|
11 |
|
|
(2) |
|
|
12 |
|
|
70 |
|
(Loss) income before income taxes |
|
|
(3,476) |
|
|
782 |
|
|
(12,000) |
|
|
(1,072) |
|
Income tax expense (benefit) |
|
|
75 |
|
|
258 |
|
|
378 |
|
|
(382) |
|
Net (loss) income |
|
|
(3,551) |
|
|
524 |
|
|
(12,378) |
|
|
(690) |
|
Net income attributable to non-controlling interests |
|
|
264 |
|
|
170 |
|
|
619 |
|
|
476 |
|
Net (loss) income attributable to common stockholders |
|
$ |
(3,815) |
|
$ |
354 |
|
$ |
(12,997) |
|
$ |
(1,166) |
|
Depreciation and amortization expense included in costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
(unaudited) |
|
||||||||||
|
|
(in thousands) |
|
||||||||||
Network access |
|
$ |
5,027 |
|
$ |
3,058 |
|
$ |
13,400 |
|
$ |
9,140 |
|
Network operations |
|
|
1,370 |
|
|
1,116 |
|
|
3,739 |
|
|
2,932 |
|
Development and technology |
|
|
852 |
|
|
507 |
|
|
2,331 |
|
|
1,395 |
|
General and administrative |
|
|
86 |
|
|
63 |
|
|
180 |
|
|
144 |
|
Total (1) |
|
$ |
7,335 |
|
$ |
4,744 |
|
$ |
19,650 |
|
$ |
13,611 |
|
(1) |
The $2.6 million and $6.0 million increase in depreciation and amortization expense of property and equipment for the three and nine months ended September 30, 2014 compared to the three and nine months ended September 30, 2013, respectively, is primarily due to increased depreciation and amortization expense from our increased fixed assets from our DAS build-out projects, Wi-Fi networks, and software development in 2013 and 2014. |
24
Stock-based compensation expense included in costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
September 30, |
|
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
|
(unaudited) |
|
||||||||||
|
|
(in thousands) |
|
||||||||||
Network operations |
|
$ |
344 |
|
$ |
241 |
|
$ |
983 |
|
$ |
638 |
|
Development and technology |
|
|
118 |
|
|
143 |
|
|
378 |
|
|
242 |
|
Selling and marketing |
|
|
396 |
|
|
301 |
|
|
1,132 |
|
|
759 |
|
General and administrative |
|
|
984 |
|
|
667 |
|
|
2,717 |
|
|
1,560 |
|
Total (2) |
|
$ |
1,842 |
|
$ |
1,352 |
|
$ |
5,210 |
|
$ |
3,199 |
|
(2) |
The $0.5 million increase in stock-based compensation expense for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 is due primarily to $0.5 million of additional stock-based compensation expense related to the stock options and restricted stock units (“RSU”) issued in 2013 and 2014. |
The $2.0 million increase in stock-based compensation expense for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 is due primarily to $2.5 million of additional stock-based compensation expense related to the stock options and restricted stock units (“RSU”) issued in 2013 and 2014, which was partially offset by $0.5 million of additional reductions recorded in 2013 for employees who left the Company during 2013.
The following table sets forth our results of operations for the specified periods as a percentage of our revenue for those periods.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||
|
|
September 30, |
|
September 30, |
|
||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
(unaudited) |
|
||||||
|
|
(as a percentage of revenue) |
|
||||||
Consolidated Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
Revenue |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
Network access |
|
48.9 |
|
47.8 |
|
48.1 |
|
44.1 |
|
Network operations |
|
20.3 |
|
15.7 |
|
20.8 |
|
16.9 |
|
Development and technology |
|
12.9 |
|
9.2 |
|
12.6 |
|
10.9 |
|
Selling and marketing |
|
12.3 |
|
11.5 |
|
13.6 |
|
13.0 |
|
General and administrative |
|
14.0 |
|
11.2 |
|
15.6 |
|
14.7 |
|
Amortization of intangible assets |
|
3.1 |
|
1.9 |
|
3.3 |
|
1.9 |
|
Total costs and operating expenses |
|
111.3 |
|
97.3 |
|
114.0 |
|
101.5 |
|
(Loss) income from operations |
|
(11.3) |
|
2.7 |
|
(14.0) |
|
(1.5) |
|
Interest and other income (expense), net |
|
0.0 |
|
(0.0) |
|
0.0 |
|
0.1 |
|
(Loss) income before income taxes |
|
(11.3) |
|
2.7 |
|
(14.0) |
|
(1.4) |
|
Income tax expense (benefit) |
|
0.2 |
|
0.9 |
|
0.4 |
|
(0.5) |
|
Net (loss) income |
|
(11.5) |
|
1.8 |
|
(14.4) |
|
(0.9) |
|
Net income attributable to non-controlling interests |
|
0.9 |
|
0.6 |
|
0.7 |
|
0.6 |
|
Net (loss) income attributable to common stockholders |
|
(12.4) |
% |
1.2 |
% |
(15.2) |
% |
(1.5) |
% |
25
Three Months ended September 30, 2014 and 2013
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2014 |
|
2013 |
|
Change |
|
% Change |
|
|||
|
|
(unaudited) |
|
|||||||||
|
|
(in thousands, except churn data and percentages) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
$ |
15,138 |
|
$ |
14,328 |
|
$ |
810 |
|
5.7 |
% |
Retail subscription |
|
|
8,426 |
|
|
8,860 |
|
|
(434) |
|
(4.9) |
% |
Retail single-use |
|
|
2,661 |
|
|
2,386 |
|
|
275 |
|
11.5 |
% |
Advertising and other |
|
|
4,597 |
|
|
3,033 |
|
|
1,564 |
|
51.6 |
% |
Total revenue |
|
$ |
30,822 |
|
$ |
28,607 |
|
$ |
2,215 |
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key business metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers |
|
|
286 |
|
|
313 |
|
|
(27) |
|
(8.6) |
% |
Monthly churn |
|
|
11.4 |
% |
|
10.2 |
% |
|
1.2 |
% |
11.8 |
% |
Connects |
|
|
21,902 |
|
|
10,895 |
|
|
11,007 |
|
101.0 |
% |
DAS nodes |
|
|
8.1 |
|
|
5.9 |
|
|
2.2 |
|
37.3 |
% |
There are four key metrics that we use to monitor results and activity in the business as follows:
Subscribers. This metric represents the number of paying retail customers who are on a recurring month-to-month subscription plan at a given period end.
Monthly churn. This metric shows the number of subscribers who canceled their subscriptions in a given month, expressed as a percentage of the average subscribers in that month. The churn in a given period is the average monthly churn in that period. This measure is one indicator of the longevity of our subscribers. Some of our customers who cancel subscriptions maintain accounts for single-use access.
Connects. This metric shows how often individuals connect to our non-military global Wi-Fi network in a given period. The connects include retail and wholesale customers in both customer pay locations and customer free locations where we are a paid service provider or receive sponsorship or promotional fees. We count each connect as a single connect regardless of how many times the individual accesses the network at a given venue during their 24 hour period. This measure is an indicator of paid activity throughout our network.
DAS nodes. This metric represents the number of active DAS nodes as of the end of the period. A DAS node is a single communications endpoint, typically an antenna, which transmits or receives radio frequency signals wirelessly. This measure is an indicator of the reach of our DAS network.
Total revenue. Total revenue increased $2.2 million or 7.7%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013.
Wholesale. Wholesale revenue increased $0.8 million, or 5.7%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, due to a $0.5 million increase in DAS access fees from our telecom operators, a $0.2 million increase in partner usage-based fees, and a $0.2 million increase in our wholesale service provider revenues. The increase was partially offset by a $0.2 decrease in revenues related to new build-out projects in our managed and operated locations. Wholesale revenue for the three months ended September 30, 2014 includes $0.7 million from a Wi-Fi build-out project.
Retail subscription. Retail subscription revenue decreased $0.4 million, or 4.9%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. The decrease is primarily due a decrease in our average monthly subscribers which was partially offset by a 2.0% increase in our average monthly
26
revenue per subscriber for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013.
Retail single-use. Retail single-use revenue increased $0.3 million, or 11.5%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. Retail single-use revenue includes $0.6 million of revenues related to the venues acquired from Electronic Media Systems, Inc. and Advanced Wireless Group, LLC (collectively, “AWG”) in October 2013.
Advertising and other. Advertising and other revenue increased $1.6 million, or 51.6%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013 primarily due to a $2.0 million increase in advertising sales at our managed and operated locations, which includes $1.7 million of advertising sales at the venues acquired from AWG in October 2013.
Costs and Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2014 |
|
2013 |
|
Change |
|
% Change |
|
|||
|
|
(unaudited) |
|
|||||||||
|
|
(in thousands, except percentages) |
|
|||||||||
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Network access |
|
$ |
15,058 |
|
$ |
13,670 |
|
$ |
1,388 |
|
10.2 |
% |
Network operations |
|
|
6,245 |
|
|
4,495 |
|
|
1,750 |
|
38.9 |
% |
Development and technology |
|
|
3,965 |
|
|
2,622 |
|
|
1,343 |
|
51.2 |
% |
Selling and marketing |
|
|
3,778 |
|
|
3,294 |
|
|
484 |
|
14.7 |
% |
General and administrative |
|
|
4,304 |
|
|
3,201 |
|
|
1,103 |
|
34.5 |
% |
Amortization of intangible assets |
|
|
959 |
|
|
541 |
|
|
418 |
|
77.3 |
% |
Total costs and operating expenses |
|
$ |
34,309 |
|
$ |
27,823 |
|
$ |
6,486 |
|
23.3 |
% |
Network access. Network access costs increased $1.4 million, or 10.2%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. The increase is primarily due to a $2.0 million increase in depreciation expense, a $1.9 million increase in revenue share paid to venues in our managed and operated locations, and a $0.9 million increase in internet connectivity expenses. The increases were partially offset by a $2.5 million decrease in other direct costs and a $0.9 million decrease from customer usage at partner venues.
Network operations. Network operations expenses increased $1.8 million, or 38.9%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, due to a $1.0 million increase in personnel related expenses primarily resulting from increased headcount, a $0.3 million increase in depreciation expense, a $0.2 million increase in network maintenance expense, and a $0.3 million increase in other operating expenses.
Development and technology. Development and technology expenses increased $1.3 million, or 51.2% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, due to a $0.4 million impairment loss related to a change in the use of certain software developed for internal use, a $0.3 million increase in depreciation expense, a $0.2 million increase in hardware and software maintenance expenses, and a $0.4 million increase in other operating expenses for the three months ended September 30, 2014.
Selling and marketing. Selling and marketing expenses increased $0.5 million, or 14.7%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, due primarily to a $0.6 million increase in personnel related expenses primarily resulting from increased headcount.
General and administrative. General and administrative expenses increased $1.1 million, or 34.5%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, due to a $0.6 million increase in personnel related expenses, inclusive of a $0.3 million increase in stock-based compensation expenses, a $0.2 million increase in consulting expenses, and a $0.3 million increase in other operating expense.
27
Amortization of intangible assets. Amortization of intangible assets expense increased $0.4 million, or 77.3%, for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, primarily due to our acquisition of AWG in October 2013.
Interest and Other Income (Expense), Net
Interest and other income (expense), net, remained essentially unchanged for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013.
Income Tax Expense
We had income tax expense of $0.1 million for the three months ended September 30, 2014 compared to $0.3 million for the three months ended September 30, 2013. Our effective tax rate decreased to (2.2%) for the three months ended September 30, 2014 compared to 33.0% for the three months ended September 30, 2013 due primarily to the valuation allowance we established at year-end in 2013.
Non-controlling Interests
Non-controlling interests remained essentially unchanged for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013.
Net (Loss) Income Attributable to Common Stockholders
We generated a net loss for the three months ended September 30, 2014 as compared to net income for the three months ended September 30, 2013, primarily as a result of the $6.5 million increase in costs and operating expenses which was partially offset by the $2.2 million increase in revenues and the $0.2 million decrease in income tax expense. We generated a diluted net loss per share for the three months ended September 30, 2014 primarily as a result of our net loss.
Adjusted EBITDA
Adjusted EBITDA was $6.7 million for the three months ended September 30, 2014, down 10.4% from the $7.4 million recorded in the three months ended September 30, 2013. As a percent of revenue, Adjusted EBITDA was 21.6% for the three months ended September 30, 2014, down from 25.9% of revenue for the three months ended September 30, 2013. The Adjusted EBITDA decrease was due primarily to the $4.2 million increase in our net loss attributable to common stockholders and a $0.2 million decrease in income tax expense for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. The decrease was partially offset by a $3.0 million increase in depreciation and amortization expense, a $0.5 million increase in stock-based compensation expenses and a $0.1 million increase in non-controlling interest for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.
28
Nine Months ended September 30, 2014 and 2013
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2014 |
|
2013 |
|
Change |
|
% Change |
|
|||
|
|
(unaudited) |
|
|||||||||
|
|
(in thousands, except churn data) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
$ |
39,133 |
|
$ |
38,222 |
|
$ |
911 |
|
2.4 |
% |
Retail subscription |
|
|
24,881 |
|
|
25,658 |
|
|
(777) |
|
(3.0) |
% |
Retail single-use |
|
|
8,027 |
|
|
7,802 |
|
|
225 |
|
2.9 |
% |
Advertising and other |
|
|
13,629 |
|
|
6,298 |
|
|
7,331 |
|
116.4 |
% |
Total revenue |
|
$ |
85,670 |
|
$ |
77,980 |
|
$ |
7,690 |
|
9.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key business metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers |
|
|
286 |
|
|
313 |
|
|
(27) |
|
(8.6) |
% |
Monthly churn |
|
|
11.5 |
% |
|
10.1 |
% |
|
1.4 |
% |
13.9 |
% |
Connects |
|
|
59,694 |
|
|
28,391 |
|
|
31,303 |
|
110.3 |
% |
DAS nodes |
|
|
8.1 |
|
|
5.9 |
|
|
2.2 |
|
37.3 |
% |
Total revenue. Total revenue increased $7.7 million or 9.9%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.
Wholesale. Wholesale revenue increased $0.9 million, or 2.4%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, due to a $2.8 million increase in revenues related to new build-out projects in our managed and operated locations, which includes $0.7 million of revenue related to a Wi-Fi build-out project, a $1.1 million increase in DAS access fees from our telecom operators, and a $0.4 million increase in our wholesale service provider revenues. The increases were partially offset by a $3.4 million decrease in partner usage-based fees.
Retail subscription. Retail subscription revenue decreased $0.8 million, or 3.0%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. The decrease is primarily due to a decrease in our average monthly subscribers for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.
Retail single-use. Retail single-use revenue remained essentially unchanged for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. Retail single-use revenue includes $1.8 million of revenues related to the venues acquired from AWG in October 2013.
Advertising and other. Advertising and other revenue increased $7.3 million, or 116.4%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013 due primarily to an $8.0 million increase in advertising sales at our managed and operated locations, which includes $5.2 million of advertising sales at the venues acquired from AWG in October 2013. The increase was partially offset by a $0.7 million decrease in other revenues.
29
Costs and Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2014 |
|
2013 |
|
Change |
|
% Change |
|
|||
|
|
(unaudited) |
|
|||||||||
|
|
(in thousands, except percentages) |
|
|||||||||
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Network access |
|
$ |
41,230 |
|
$ |
34,375 |
|
$ |
6,855 |
|
19.9 |
% |
Network operations |
|
|
17,862 |
|
|
13,199 |
|
|
4,663 |
|
35.3 |
% |
Development and technology |
|
|
10,805 |
|
|
8,484 |
|
|
2,321 |
|
27.4 |
% |
Selling and marketing |
|
|
11,629 |
|
|
10,106 |
|
|
1,523 |
|
15.1 |
% |
General and administrative |
|
|
13,344 |
|
|
11,502 |
|
|
1,842 |
|
16.0 |
% |
Amortization of intangible assets |
|
|
2,812 |
|
|
1,456 |
|
|
1,356 |
|
93.1 |
% |
Total costs and operating expenses |
|
$ |
97,682 |
|
$ |
79,122 |
|
$ |
18,560 |
|
23.5 |
% |
Network access. Network access costs increased $6.9 million, or 19.9%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. The increase is primarily due to a $5.2 million increase in revenue share paid to venues in our managed and operated locations, a $4.3 million increase in depreciation expense and a $2.1 million increase in internet connectivity expenses. The increases were partially offset by a $2.7 million decrease in other direct costs, which includes $0.4 million of costs related to a Wi-Fi build out project, and a $2.1 million decrease from customer usage at partner venues.
Network operations. Network operations expenses increased $4.7 million, or 35.3%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, due to a $2.9 million increase in personnel related expenses primarily resulting from increased headcount, a $0.8 million increase in depreciation expense, a $0.3 million increase in network maintenance expenses, a $0.2 million increase in travel and entertainment expenses, a $0.2 million increase in hardware and software expenses and a $0.3 million increase in other operating expenses.
Development and technology. Development and technology expenses increased $2.3 million, or 27.4% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, due to a $0.9 million increase in depreciation expense, a $0.7 million increase in hardware and software maintenance expenses, a $0.4 million impairment loss related to a change in the use of certain software developed for internal use, a $0.2 million increase in technology service expenses, and a $0.5 million increase in other operating expenses for the nine months ended September 30, 2014. The increases were partially offset by a $0.4 million decrease in personnel related expenses.
Selling and marketing. Selling and marketing expenses increased $1.5 million, or 15.1%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, due primarily to a $2.0 million increase in personnel related expenses primarily resulting from increased headcount. The increase was partially offset by a $0.5 million decrease in marketing related expenses.
General and administrative. General and administrative expenses increased $1.8 million, or 16.0%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, due primarily to a $1.8 million increase in personnel related expenses, inclusive of a $1.2 million increase in stock-based compensation expenses, and a $0.2 million increase in consulting expenses. The increase was partially offset by a $0.2 million decrease in other operating expenses.
Amortization of intangible assets. Amortization of intangible assets expense increased $1.4 million, or 93.1%, for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, primarily due to our acquisitions of Endeka Group, Inc. and AWG in February 2013 and October 2013, respectively.
Interest and Other Income, Net
Interest and other income, net, remained essentially unchanged for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.
30
Income Tax Expense (Benefit)
We had income tax expense of $0.4 million for the nine months ended September 30, 2014 compared to income tax benefit of $0.4 million for the nine months ended September 30, 2013. Our effective tax rate decreased to (3.1)% for the nine months ended September 30, 2014 compared to 35.6% for the nine months ended September 30, 2013 due primarily to the valuation allowance we established at year end in 2013.
Non-controlling Interests
Non-controlling interests remained essentially unchanged for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.
Net Loss Attributable to Common Stockholders
Our net loss for the nine months ended September 30, 2014 increased as compared to the nine months ended September 30, 2013, primarily as a result of the $18.6 million increase in costs and operating expenses and the $0.8 million decrease in income tax benefits, which was partially offset by the $7.7 million increase in revenues. Our diluted net loss per share increased primarily as a result of the increase in our net loss.
Adjusted EBITDA
Adjusted EBITDA was $15.7 million for the nine months ended September 30, 2014, down 8.6% from the $17.1 million recorded in the nine months ended September 30, 2013. As a percent of revenue, Adjusted EBITDA was 18.3% for the nine months ended September 30, 2014, down from 22.0% of revenue for the nine months ended September 30, 2013. The Adjusted EBITDA decrease was due primarily to the $11.8 million increase in our net loss attributable to common stockholders for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. The decrease was partially offset by a $7.4 million increase in depreciation and amortization expense, a $2.0 million increase in stock-based compensation expenses, a $0.8 million decrease in income tax benefits, and a $0.1 million increase in non-controlling interest.
Liquidity and Capital Resources
We have financed our operations primarily through cash provided by operating activities. Our primary sources of liquidity as of September 30, 2014 consisted of $4.0 million of cash and cash equivalents and $17.3 million of marketable securities.
Our principal uses of liquidity have been to fund our operations, working capital requirements, capital expenditures and acquisitions. Our capital expenditures in the nine months ended September 30, 2014 were $55.0 million, of which $27.6 million will be reimbursed through revenue for DAS build-out projects from our telecom operators.
We believe that our existing cash and cash equivalents, working capital and our cash flow from operations will be sufficient to fund our operations for at least the next 12 months. However, we are currently seeking debt financing to assist in funding our capital requirements and any potential acquisitions and believe we will be successful in securing such additional debt financing in the near term. There can be no assurance, however, that future industry-specific or other developments, general economic trends, or other matters will not adversely affect our operations or our ability to meet our future cash requirements. Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of our managed and operated location expansion efforts, the timing and extent of spending to support product development efforts, the timing of introductions of new solutions and enhancements to existing solutions and the continuing market acceptance of our solutions. We expect our capital expenditures for the remainder of 2014 will range from $10 million to $15 million, excluding capital expenditures for DAS build-out projects which are reimbursed through revenue from our telecom operator customers. The majority of our remaining 2014 capital expenditures will be used to build out residential broadband and IPTV networks for troops stationed on military bases pursuant to our contracts with the U.S. government. The investment of these resources will occur in advance of
31
experiencing any direct benefit from them including generation of revenues. The U.S. government may modify, curtail or terminate its contracts with us, either at its convenience or for default based on performance. Any such modification, curtailment, or termination of one or more of our government contracts could have a material adverse effect on our earnings, cash flow and/or financial position. Additional funds may not be available on terms favorable to us, or at all.
The following table sets forth cash flow data for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
2014 |
|
2013 |
|
||
|
|
(unaudited) |
|
||||
|
|
(in thousands) |
|
||||
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
18,638 |
|
$ |
12,560 |
|
Net cash used in investing activities |
|
|
(39,037) |
|
|
(18,959) |
|
Net cash used in financing activities |
|
|
(2,915) |
|
|
(6,993) |
|
Net Cash Provided by Operating Activities
For the nine months ended September 30, 2014, we generated $18.6 million of net cash from operating activities, an increase of $6.1 million from the prior year comparative period. The increase is primarily due to a $6.3 million change in our operating assets and liabilities, net of effect of acquisition, a $7.4 million increase in depreciation and amortization expenses, a $1.7 million decrease in excess windfall tax benefits from stock option exercises, a $2.0 million increase in stock-based compensation expenses, a $0.3 million decrease in our deferred tax liabilities, and a $0.4 million increase in impairment losses. The increases were partially offset by the $11.7 million increase in our net loss and the $0.4 million change in fair value for our contingent consideration liabilities.
Net Cash Used in Investing Activities
For the nine months ended September 30, 2014, we used $39.0 million in investing activities, an increase of $20.1 million from the prior year comparative period. This increase is primarily due to a $35.9 million increase in purchases of property and equipment and $0.1 million of cash paid for net equity adjustments for the acquisition of AWG. The increase was partially offset by a $10.6 million increase in cash provided by net proceeds from net sales of marketable securities, $4.9 million of cash used for the acquisition of Endeka during the nine months ended September 30, 2013, and a $0.4 million decrease in restricted cash.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2014, we used $2.9 million in financing activities, a decrease of $4.1 million from the prior year comparative period. This decrease is primarily due to $6.1 million of cash used for payment of certain assumed liabilities related to the acquisition of Endeka and $2.6 million of cash used for the repurchase of stock during the nine months ended September 30, 2013, and $0.3 million increase in proceeds from exercise of stock options during the nine months ended September 30, 2014 as compared to the comparative prior year period. The decreases were partially offset by the $1.7 million decrease in excess windfall tax benefits from stock option exercises, $1.4 million in cash used to pay minimum statutory taxes related to our time-based RSUs that vested during the nine months ended September 30, 2014, $1.3 million in cash used to pay contingent liabilities and other acquisition related consideration during the nine months ended September 30, 2014, and a $0.4 million increase in cash paid for capital leases and notes payable.
Contractual Obligations and Commitments
During August 2014, we entered into a lease amendment to expand the amount of space leased and extend the term of the lease for our corporate headquarters in Los Angeles, California.
32
The following table sets forth our contractual obligations and commitments as of September 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period |
|
|||||||||||||
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
More than |
|
||
|
|
Total |
|
1 Year |
|
2 - 3 Years |
|
4 - 5 Years |
|
5 Years |
|
|||||
|
|
(in thousands) |
|
|||||||||||||
Venue revenue share minimums(1) |
|
$ |
44,373 |
|
$ |
8,285 |
|
$ |
14,108 |
|
$ |
8,387 |
|
$ |
13,593 |
|
Operating leases for office space(2) |
|
|
36,731 |
|
|
2,222 |
|
|
6,113 |
|
|
6,022 |
|
|
22,374 |
|
Open purchase commitments(3) |
|
|
8,224 |
|
|
8,224 |
|
|
— |
|
|
— |
|
|
— |
|
Contingent consideration(4) |
|
|
584 |
|
|
584 |
|
|
— |
|
|
— |
|
|
— |
|
Unrecognized tax benefits(5) |
|
|
286 |
|
|
— |
|
|
286 |
|
|
— |
|
|
— |
|
Capital leases for equipment and software(6) |
|
|
1,161 |
|
|
507 |
|
|
571 |
|
|
83 |
|
|
— |
|
Total |
|
$ |
91,359 |
|
$ |
19,822 |
|
$ |
21,078 |
|
$ |
14,492 |
|
$ |
35,967 |
|
(1) |
Payments under exclusive long‑term, non‑ cancellable contracts to provide wireless communications network access to venues such as airports. Expense is recorded on a straight‑line basis over the term of the lease. |
(2) |
Office space under non‑cancellable operating leases. |
(3) |
Open purchase commitments are for the purchase of property and equipment, supplies and services. They are not recorded as liabilities on our consolidated balance sheet as of September 30, 2014 as we have not received the related goods or services. |
(4) |
Contingent consideration related to business acquisitions (refer to Note 3 to the accompanying condensed consolidated financial statements included in Part I, Item 1). |
(5) |
The unrecognized tax benefits are related to uncertain tax positions taken in our income tax return that would impact the effective tax rate or additional paid-in capital, if recognized (refer to Note 8 to the accompanying condensed consolidated financial statements included in Part I, Item 1). |
(6) |
Leased equipment, primarily for data communication and database software, under non‑cancellable capital leases. |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements and we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided for the year ended December 31, 2013 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our annual report on Form 10-K filed by us with the SEC on March 17, 2014.
Recently Issued Accounting Standards
Information regarding recent accounting pronouncements is contained in Note 2 “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements included in Part I, Item 1, which is incorporated herein by this reference.
33
Item 3.Quantitative and Qualitative Disclosure about Market Risk
Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings.
We have established guidelines relative to the diversification and maturities of investments to maintain safety and liquidity. These guidelines are reviewed periodically and may be modified depending on market conditions. Although investments may be subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. At September 30, 2014, our market risk sensitive instruments consisted of marketable securities available-for-sale, which are comprised of highly rated short-term corporate bonds.
Marketable securities available-for-sale are carried at fair value and are intended for use in meeting our ongoing liquidity needs. Unrealized gains and losses on available-for-sale securities, which are deemed to be temporary, are reported as a separate component of stockholders’ equity, net of tax. Unrealized gains and losses on available-for-sale securities have not been significant. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization, along with realized gains and losses is included in interest and other income (expense), net.
We are exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies, of which the most significant to our operations for the nine months ended September 30, 2014 was the Brazilian Real. We are primarily exposed to foreign currency fluctuations related to the operations of our subsidiary in Brazil whose financial statements are not denominated in the U.S. Dollar. Currently, we do not enter into currency forward exchange or option contracts to hedge foreign currency exposures.
Item 4.Controls and Procedures
Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of September 30, 2014, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting. During the three months ended September 30, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The information set forth in Note 9 “Commitments and Contingencies,” to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, is incorporated herein by this reference.
34
Certain Factors Affecting Boingo Wireless, Inc.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, which we incorporate by reference into this Quarterly Report on Form 10-Q, which could materially affect our business, results of operations, cash flows, or financial condition. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results. There have been no material changes in the risk factors contained in our Annual Report on Form 10-K.
35
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q:
Exhibit |
|
|
|
Incorporated by Reference |
|
Filed |
||||
No. |
|
Description |
|
Form |
|
Date |
|
Number |
|
Herewith |
3.2 |
|
Amended and Restated Certificate of Incorporation. |
|
S-1 |
|
03/21/2011 |
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
Amended and Restated Bylaws. |
|
S-1 |
|
03/21/2011 |
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
Lease Amendment dated August 19, 2014 between CA-10960 Wilshire Limited Partnership and Registrant. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
10.2* |
|
Supplemental Agreement, dated June 30, 2002 between the Port Authority of New York and New Jersey and New York Telecom Partners, LLC. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
10.3* |
|
Supplemental Agreement, dated November 30, 2006 between the Port Authority of New York and New Jersey and New York Telecom Partners, LLC. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
10.4* |
|
Supplemental Agreement, dated July 21, 2014 between the Port Authority of New York and New Jersey and New York Telecom Partners, LLC. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Certification of David Hagan, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
Certification of Peter Hovenier, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
Certification of David Hagan, Chief Executive Officer, and Peter Hovenier, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
101† |
|
The following financial information from the Quarterly Report on Form 10-Q of Boingo Wireless, Inc. for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2014 and December 31, 2013 for Boingo Wireless, Inc.; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 for Boingo Wireless, Inc.; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2014 and 2013 for Boingo Wireless, Inc; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 for Boingo Wireless, Inc.; (v) Condensed Consolidated Statements of Equity for Boingo Wireless, Inc.; and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. |
*Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Form 10-Q and submitted separately to the Securities and Exchange Commission.
†Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
36
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
BOINGO WIRELESS, INC. |
||
|
|
|
|
Date: November 10, 2014 |
By: |
/s/ DAVID HAGAN |
|
|
|
David Hagan |
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
BOINGO WIRELESS, INC. |
||
|
|
|
|
Date: November 10, 2014 |
By: |
/s/ PETER HOVENIER |
|
|
|
Peter Hovenier |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Accounting Officer) |
37
SECOND AMENDMENT
THIS SECOND AMENDMENT (this “Second Amendment”) is made and entered into as of August 19, 2014, by and between CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and BOINGO WIRELESS, INC., a Delaware corporation (“Tenant”).
RECITALS
A.Landlord and Tenant are parties to that certain lease dated February 3, 2012 (the “Original Lease”), as previously amended by First Amendment dated December 26, 2012 (the “First Amendment”) and Notice of Lease Term Dates dated August 7, 2013 (re: First Amendment) (“NLTD” as collectively referred to herein with the Original Lease and the First Amendment as the “Current Lease”). Pursuant to the Current Lease, Landlord has leased to Tenant space currently containing approximately 26,983 rentable square feet (the “Existing Premises”) described as Suite Nos. 120 and 800 on the 1st and 8th floors of the building commonly known as 10960 Wilshire Boulevard located at 10960 Wilshire Boulevard, Los Angeles, California (the “Building”).
B.The Current Lease will expire by its terms on February 28, 2018 (the “Existing Expiration Date”), and the parties wish to extend the term of the Current Lease on the following terms and conditions.
C.The parties wish to relocate the Premises (defined in the Current Lease) from the Existing Premises to the space containing approximately 51,972 rentable square feet comprised of: (i) 25,986 rentable square feet described as Suite No. 2300 on the 23rd floor of the Building and shown on Exhibit A attached hereto, and (ii) 25,986 rentable square feet described as Suite No. 2400 on the 24th floor of the Building and shown on Exhibit A-1 attached hereto (individually and collectively, the “Substitution Space”), on the following terms and conditions.
NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
1.Extension. The term of the Current Lease is hereby extended through April 30, 2026 (the “Extended Expiration Date”). The portion of the term of the Lease beginning March 1, 2018 (the “Extension Date”) and ending on the Extended Expiration Date shall be referred to herein as the “Extended Term”.
2.Substitution.
2.1.Substitution Term. From and after the Substitution Effective Date (defined in Section 2.1.A below), the “Premises” shall be the Substitution Space, subject to the terms hereof (the “Substitution”) and all references in the Current Lease, as amended by this Second Amendment, to the “Premises” shall mean and refer to the Substitution Space. The term of the Lease for the Substitution Space (the “Substitution Term”) shall commence on the Substitution Effective Date and, unless sooner terminated in accordance with the Lease, end on the Extended Expiration Date. From and after the Substitution Effective Date, the Substitution Space shall be subject to all the terms and conditions of the Lease except as provided herein. Except as may be expressly provided herein, (a) Tenant shall not be entitled to receive, with respect to the Substitution Space, any allowance, free rent or other financial concession granted with respect to the Existing Premises, and (b) no representation or warranty made by Landlord with respect to the Existing Premises shall apply to the Substitution Space.
A.Substitution Effective Date; Interim Period. As used herein, “Substitution Effective Date” means the earlier to occur of (i) July 1, 2015, subject to Substitution Delays (defined in Exhibit B) (the
“Outside Substitution Effective Date”), or (ii) the date on which Tenant first conducts business in the Substitution Space. For purposes of clarification, it is agreed that Tenant shall not be obligated to take possession of the Substitution Space for the purposes of conducting business therein prior to the Outside Substitution Effective Date, even if the Tenant Improvement Work (defined in Exhibit B) is completed prior to the Outside Substitution Effective Date. However, if the Tenant Improvement Work is completed prior to July 1, 2015 and Tenant, in its sole discretion, elects to occupy the Substitution Space for the purpose of conducting business prior to July 1, 2015, then the Substitution Effective Date shall occur as set forth in subsection 2.1.A (ii) above and Tenant shall concurrently vacate the Existing Premises as provided in Section 2.2 below. In addition, in such event, and notwithstanding the Substitution, Tenant shall pay Base Rent and Tenant’s Pro Rata Share of Taxes and Expenses for the Substitution Space during the Interim Period (hereinafter defined) based on the monthly Base Rent rate, Tenant’s Pro Rata Share, Base Year and other terms and conditions that would have been in effect for the Existing Premises during the Interim Period. For purposes hereof, the “Interim Period” shall mean the period beginning on the Substitution Effective Date as determined in accordance with subsection 2.1.(A)(ii) above and ending on June 30, 2015. Within six (6) months following the Substitution Effective Date, Landlord shall deliver to Tenant a Notice of Lease Term Dates, in the form as set forth in Exhibit C attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord within fifteen (15) Business Days of receipt thereof (provided that if said notice is not factually correct, then Tenant shall make such changes as are necessary to make the notice factually correct and shall thereafter execute and return such notice to Landlord within such fifteen (15) Business Day period).
B.Beneficial Occupancy. Tenant shall be permitted to have possession of the Substitution Space for the construction of the Tenant Improvement Work and Tenant’s installation of its furniture fixtures and equipment during the period commencing upon the Delivery Date (hereinafter defined) and ending on the Substitution Effective Date (the “Beneficial Occupancy Period”). Possession of the Substitution Space during the Beneficial Occupancy Period shall be subject to the terms and conditions of this Lease; provided that Tenant shall not be required to pay Base Rent or Tenant’s Pro Rata Share of Expenses and Taxes for the Substitution Space during the Beneficial Occupancy Period. For purposes hereof, the “Delivery Date” shall mean the date on which Landlord provides Tenant with possession of the Substitution Space free from occupancy by any third party. Landlord hereby represents that the Substitution Space is currently vacant and that Landlord shall deliver the Substitution Space to Tenant within 5 days after the later of: (i) the full and final execution of this Second Amendment; (ii) Landlord’s receipt of the Letter of Credit in accordance with Section 4 below; and (iii) evidence of insurance from Tenant with respect to the Substitution Space as required under this Lease; provided, however, in the event the Delivery Date does not occur within sixty (60) days of the day on which the last of items (i)-(iii) are satisfied (the “Outside Delivery Date”), in addition to the Abated Base Rent (as defined in Section 3, below), Tenant shall receive an extra day of abatement of Base Rent for each day in the period beginning on the Outside Delivery Date and ending on the Delivery Date, which shall be applied immediately following the period of Abated Base Rent; provided that the Outside Delivery Date shall be postponed on a day-for-day basis by the number of days that the Delivery Date is delayed beyond the Outside Delivery Date due to event of force majeure. In addition, in the event the Delivery Date does not occur on or before the date occurring thirty (30) days after the Outside Delivery Date, Tenant shall also have a right to terminate this Second Amendment by delivery of written notice to Landlord on or prior to the occurrence of the Delivery Date.
2.2.Existing Premises. Subject to the terms hereof, effective as of the Existing Premises Expiration Date (defined below), the term of the Current Lease shall expire with respect to the Existing Premises with the same force and effect as if such term were, by the provisions of the Current Lease, fixed to expire with respect to the Existing Premises on the Existing Premises Expiration Date. As used herein, “Existing Premises Expiration Date” means the Substitution Effective Date. Without limiting the foregoing:
A.Tenant shall surrender the Existing Premises to Landlord in accordance with its current “as is” condition, normal wear and tear excepted, on or before the Existing Premises Expiration Date. Prior to the Existing Premises Expiration Date, Tenant shall remove all of its furniture, equipment, files and other personal property from the Existing Premises in accordance with the terms and conditions of the Current Lease.
B.Tenant shall remain liable for all Rent and other amounts payable under the Lease with respect to the Existing Premises for the period up to and including the Existing Premises Expiration Date, even though billings for such amounts may occur after the Existing Premises Expiration Date.
C.Other than as provided in A, above, Tenant shall have no obligation to comply with any restoration obligations with respect to the Existing Premises as set forth in the Current Lease, including, without limitation, the obligation to remove any Required Removables (defined Article 8 of the Current Lease).
D.If Tenant fails to surrender any portion of the Existing Premises on or before the Existing Premises Expiration Date, Tenant’s tenancy with respect to the Existing Premises shall be subject to Section 25 of the Original Lease. Notwithstanding the foregoing, Tenant shall have a period of ten (10) days after the Existing Premises Expiration Date (the “Move Out Period”) in which to complete its vacation of the Existing Premises and Tenant shall not be required to pay any Rent (holdover or otherwise) for the Existing Premises during the Move Out Period. Other than the waiver of Tenant’s obligation to pay Rent for the Existing Premises during the Move Out Period, Tenant’s occupancy of the Existing Premises during the Move Out Period shall be subject to all of the terms and conditions of the Lease.
E.Any other rights or obligations of Landlord or Tenant under the Current Lease relating to the Existing Premises that, in the absence of the Substitution, would have survived the expiration date of the Current Lease shall survive the Existing Premises Expiration Date.
2.3Extension of Move Out Period. Notwithstanding anything herein to the contrary, if: (i) Tenant submits the Approved Construction Drawings (defined in Section 2.3 of the Exhibit B attached hereto) for the issuance of Permits (defined in Section 2.4 of the Exhibit B attached hereto) by no later than March 1, 2015; and (ii) the Substantial Completion of the Tenant Improvement Work (as defined in Section 4.3.1 of Exhibit B attached hereto) does not occur by the Outside Substitution Effective Date as a direct result of Governmental Delays (hereinafter defined) (collectively the “Move Out Extension Conditions”), then the Move Out Period shall be extended by the number of days of Governmental Delays. In such event, in addition to the use permitted under Section 2.2 D above, Tenant shall be permitted to use the Existing Premises for the Permitted Use (defined in Section 1.11 of the Original Lease) during the Move Out Period. For example, if the Move Out Extension Conditions are satisfied and Substantial Completion of the Tenant Improvement Work is delayed for ten (10) days as a direct result of Governmental Delays, then the Move Out Period shall be increased from ten (10) days to twenty (20) days. For purposes hereof, “Governmental Delays” shall mean the inability to secure permits for a period in excess of period normally be required to secure permits after submission of reasonably required documentation or inability to secure governmental inspections beyond the time period that would normally be required to secure such inspections on an objective basis by any other person or entity constructing improvements comparable to the Tenant Improvement Work. If Tenant contends that a Governmental Delay has occurred, Tenant shall promptly notify Landlord in writing of the event that constitutes such Governmental Delay. For the purposes of clarity, it is agreed that: (i) Governmental Delays shall extend the Move Out Period but
shall not be considered to be Substitution Delays that extend the Substitution Effective Date; and (ii) during the Move Out Period, as the same may be extended, Tenant shall pay Rent for the Substitution Space (subject to the Abated Base Rent) in accordance with this Second Amendment, but shall not be required to pay Rent for the Existing Premises.
3.Base Rent. With respect to the Substitution Space during the Substitution Term, the schedule of Base Rent shall be as follows:
Period During Substitution Term |
Annual Rate Per Square Foot (rounded to the nearest 100th of a dollar)
|
Monthly Base Rent |
Interim Period (if any) |
Per Section 2.1.A above |
Per Section 2.1.A above |
July 1, 2015 (as extended by Substitution Delays) through June 30, 2016 |
$51.60 |
$223,479.60 |
July 1, 2016 through June 30, 2017 |
$53.15 |
$230,192.65 |
July 1, 2017 through June 30, 2018 |
$54.74 |
$237,078.94 |
July 1, 2018 through June 30, 2019 |
$56.38 |
$244,181.78 |
July 1, 2019 through June 30, 2020 |
$58.08 |
$251,544.48 |
July 1, 2020 through June 30, 2021 |
$59.82 |
$259,080.42 |
July 1, 2021 through June 30, 2022 |
$61.61 |
$266,832.91 |
July 1, 2022 through June 30, 2023 |
$63.46 |
$274,845.26 |
July 1, 2023 through June 30, 2024 |
$65.37 |
$283,117.47 |
July 1, 2024 through June 30, 2025 |
$67.33 |
$291,606.23 |
July 1, 2025 through April 30, 2026 |
$69.35 |
$300,354.85 |
All such Base Rent shall be payable by Tenant in accordance with the terms of the Current Lease.
BASE RENT ABATEMENT. Notwithstanding anything in this Section of the Second Amendment to the contrary, Tenant shall be entitled to an abatement of Base Rent in the amount of $223,479.60 per month applicable to the first 10 consecutive full calendar months of the Substitution Term. The total amount of Base Rent abated in accordance with the foregoing shall equal $2,234,796.00 (the "Abated Base Rent"). Only Base Rent shall be abated, and all Additional Rent (as defined in Section 4 of the Original Lease) and other costs and charges specified in this Second Amendment and/or the Current Lease shall remain as due and payable pursuant to the provisions of this Second Amendment and/or the Current Lease.
Notwithstanding the foregoing, upon written notice to Tenant from time to time (a “Purchase Notice”), Landlord shall have the right to purchase, by check or wire transfer of available funds, all or any part (in whole-month increments only) of the Abated Base Rent that had not previously been applied as a credit against Base Rent. Landlord’s Purchase Notice shall set forth the month(s) of abatement that Landlord elects to purchase and the total Abated Base Rent that Landlord elects to purchase (the “Purchase Amount”). The Purchase Amount to be paid by Landlord shall be paid simultaneously with the giving of such notice. Upon payment of the Purchase Amount by Landlord to Tenant, the Abated Base Rent shall be reduced by an amount equal to the Purchase Amount. Upon request by Landlord, Landlord and Tenant shall enter into an amendment to the Lease to reflect the Purchase Amount paid by Landlord and the corresponding reduction of the Abated Base Rent.
4.Letter of Credit.
4.1Pursuant to the terms of Section II., LETTER OF CREDIT of EXHIBIT F, “ADDITIONAL PROVISIONS” of the Original Lease, within sixty (60) days after mutual execution and delivery of this Second Amendment, Tenant shall deliver to Landlord a Letter of Credit (defined in Section II.A of Exhibit F of the Original Lease) in the amount of $2,000,000.00 (“LC Amount”). Such Letter of Credit is to be provided by way of either: (i) an amendment to the existing letter of credit currently held by Landlord under the Current Lease in the amount of $210,848.62 (the “Existing Letter of Credit”), or (ii) a new Letter of Credit in substitution of the Existing Letter of Credit. If Tenant elects to satisfy its obligations under this Section 4 by providing a new Letter of Credit in the amount of $2,000,000.00, Landlord shall return the Existing Letter of Credit to Tenant within 5 Business Days after Landlord’s receipt of such new Letter of Credit. Notwithstanding anything to the contrary herein or in the Current Lease, if the LC Reductions Conditions (as defined below) are satisfied, Tenant may reduce the LC Amount so that the reduced LC Amount will be as follows (I) $1,340,000.00 effective as of the first day of the 43rd full calendar month of the Substitution Term, and (II) $680,000.00 effective as of the first day of the 85th full calendar month of the Substitution Term; provided, however, if Tenant is not entitled to reduce the LC Amount as of a particular reduction effective date due to Tenant’s failure to satisfy the LC Reduction Conditions described above, then any subsequent reduction(s) Tenant is entitled to hereunder shall be reduced by the amount of the reduction Tenant would have been entitled to had Tenant satisfied the LC Reduction Conditions necessary for such earlier reduction. As used herein, the “LC Reduction Conditions” shall mean that, during the 42-month period immediately preceding the effective date of any reduction of the LC Amount, no Default (as defined in Section 18 of the Original Lease) has occurred under the Lease which remains uncured following any applicable cure period. Any reduction in the LC Amount shall be accomplished by Tenant providing Landlord with a substitute Letter of Credit in the reduced amount or an amendment to the existing Letter of Credit reflecting the reduced amount.
4.2Notwithstanding Section 4.1 above to the contrary, if, at any time, Tenant’s credit rating improves from its level as of the date of this Second Amendment to a Moody’s Credit Rating of Baa3 (the “Baa3 Credit Rating”) or better, then upon a written request to Landlord along with reasonable written evidence of the improved credit rating (a “LC Reduction Notice”) and provided that, at such time, no Default has occurred under the Lease which remains uncured following any applicable cure period, the then required LC Amount shall then be reduced to the next scheduled reduced LC Amount as provided in Section 4.1, above and, provided that Tenant also has the Baa3 Credit Rating or better at the time of any scheduled future
reductions, such future LC Amount under Section 4.1 above shall also be reduced by one-third (1/3). Any reduction in the LC Amount shall be accomplished by Tenant providing Landlord with a substitute Letter of Credit in the reduced amount or an amendment to the existing Letter of Credit reflecting the reduced amount. For example:
if Tenant properly provides Landlord with a LC Reduction Notice at any time during which the scheduled LC Amount is $2,000,000.00, then the reduction schedule set forth in Section 4.1 above shall be amended to be as follows (I) $1,340,000.00 effective as of the date of the LC Reduction Notice, and (II) provided that Tenant provides proof of a Baa3Credit Rating or better as of such date, $893,333.33 effective as of the first day of the 43rd full calendar month of the Substitution Term, and (III) provided that Tenant provides proof of a Baa3 Credit Rating or better as of such date, $453,333.33 effective as of the first day of the 85th full calendar month of the Substitution Term. Accordingly, under such example, if Tenant’s Moody’s Credit Rating is below the Baa3 Credit Rating as of the as of the first day of the 43rd full calendar month of the Substitution Term, the LC Amount shall not reduce to $893,333.33 as of the first day of the 43rd month of the Substitution Term but, instead, shall remain at $1,340,000.00 until the next scheduled reduction as of the first day of the 85th full calendar month. Likewise, if Tenant’s Moody’s Credit Rating is below the Baa3 Credit Rating as of the as of the first day of the 85th full calendar month of the Substitution Term, the LC Amount shall not reduce to $453,333.33 as of the first day of the 85th month of the Substitution Term but, instead, shall reduce to $680,000.00.
if Tenant properly provides Landlord with a LC Reduction Notice at any time after the first day of the 43rd calendar month of the Substitution Term during which the scheduled LC Amount is $1,340,000.00, the reduction schedule set forth in Section 4.1 above shall be amended to be as follows (I) $893,333.33 effective as of the date of the LC Reduction Notice, and (II) Tenant provides proof of a Baa3Credit Rating or better as of such date, $453,333.33 effective as of the first day of the 85th full calendar month of the Substitution Term. Accordingly, under such example, if Tenant’s Moody’s Credit Rating is below the Baa3 Credit Rating as of the as of the first day of the first day of the 85th full calendar month of the Substitution Term, the LC Amount shall not reduce to $453,333.33 as of the first day of the 85th month of the Substitution Term but, instead, shall reduce to $680,000.00 and remain at such amount for the remainder of the Substitution Term.
5.Tenant’s Pro Rata Share. With respect to the Substitution Space during the Substitution Term, Tenant’s Pro Rata Share shall be 8.7260%.
6.Expenses and Taxes. With respect to the Substitution Space during the Substitution Term, Tenant shall pay for Tenant’s Pro Rata Share of Expenses and Taxes in accordance with the terms of the Lease; provided that: (i) the Base Year for Expenses and Taxes shall be 2015; and (ii) Tenant’s obligation to pay for Tenant’s Pro Rata Share of Expenses and Taxes for the Interim Period, if any, shall be pursuant to Section 2.1.A above.
7.Improvements to Substitution Space.
7.1Condition and Configuration of Substitution Space. Tenant acknowledges that it has inspected the Substitution Space and agrees to accept it in its existing condition and configuration, without any representation by Landlord regarding its condition or configuration and without any obligation on the part of Landlord to perform or pay for any alteration or improvement, except as may be otherwise expressly provided in this Second
Amendment. Landlord agrees that the Base Building Systems (defined in Section 9.02 of the Original Lease) existing in or serving the Substitution Space on the Delivery Date shall be in good working order and condition. If such Base Building Systems are not in good working order and condition as of the Delivery Date, Landlord shall be responsible for repairing or restoring same at Landlord’s sole cost and expense and not to be deducted from the Allowance.
7.2Responsibility for Improvements to Substitution Space. Tenant shall be entitled to perform improvements to the Substitution Space, and to receive an allowance from Landlord for such improvements, in accordance with Exhibit B attached hereto.
8.Parking. During the Substitution Term, Tenant shall be obligated to lease no less than 156 non-reserved parking spaces (the “Non-Reserved Parking Spaces”) in the parking facility servicing the Building (“Parking Facility”). In addition, Tenant shall have the right, but not the obligation, to lease up to an additional 52 non-reserved spaces (the “Excess Spaces”). All or any of the Excess Spaces leased by Tenant may, at Landlord’s option, be located in either the Parking Facility and/or the parking facilities located at 10940 Wilshire and 10880 Wilshire. The Non-Reserved Parking Spaces and Excess Spaces are sometimes collectively referred to as the “parking spaces”. Prior to the Substitution Effective Date, Tenant shall notify Landlord in writing of the number of parking spaces which Tenant initially elects to use during the Substitution Term. Thereafter, Tenant may increase or decrease the number of parking spaces (subject to the minimum and maximum amounts) to be used by Tenant pursuant to this Section 8 upon a minimum of 30 days prior written notice to Landlord (60 days for Excess Spaces). During the Substitution Term, Tenant shall pay in advance, concurrent with Tenant's payment of monthly Base Rent, the prevailing monthly charges established from time to time for parking in the Parking Facility and parking facilities located at 10940 Wilshire and 10880 Wilshire, as applicable. No deductions from the monthly charge shall be made for days on which the Parking Facility is not used by Tenant. Tenant may, from time to time request additional parking spaces, and if Landlord shall provide the same, such parking spaces shall be provided and used on a month-to-month basis, and otherwise on the foregoing terms and provisions, and at such prevailing monthly parking charges as shall be established from time to time. During the Substitution Term, Tenant will have the right to buy visitor validations at a discount of 20% of current parking rates when purchasing a minimum of $2,500.00 worth of validations. Such parking validations shall be used only for visitors and vendors. This right will be personal and non-transferable (except in connection with a Permitted Transfer as defined in Section 11.04 of the Original Lease).
Tenant’s parking rights set forth herein are in lieu of parking rights previously granted to Tenant in Section 2 of Exhibit G to the Original Lease and Section 7.1 of the First Amendment.
9.Representations. Tenant represents and warrants that, as of the date hereof and the Existing Premises Expiration Date: (a) Tenant is the rightful owner of all of the Tenant’s interest in the Lease; and (b) Tenant has not made any disposition, assignment, sublease, or conveyance of the Current Lease or Tenant’s interest therein with respect to the Existing Premises that relates to any period after the Existing Premises Expiration Date. Landlord and Tenant hereby represent and warrant to the other that, as of the date of this Second Amendment: (a) there exist no breaches or defaults under the Current Lease by Landlord or Tenant; and (b) there exists no events or circumstances which, given the passage of time, would constitute a default under the Current Lease by either Landlord or Tenant.
10.Signage:
10.1During the Substitution Term, Tenant shall retain its right to have a Panel on the Monument Sign in accordance with Section XIV (MONUMENT SIGNAGE) OF Exhibit F to the Original Lease, provided that: (i) the references to 65% in Sections XIV A and C shall be amended to be “32.5%”; (ii) the references to 35% in Sections XIV A and C shall remain the same, but shall be calculated based on the rentable square footage
of the Premises as increased by this Second Amendment; and (iii) so long as the Panel Transfer Conditions (hereinafter defined) are satisfied, Tenant shall have the right to transfer its right to have its name on a Panel on the Monument Sign to any sublease or assignee of all or any portion of the Premises (and such sublease or assignment shall not trigger Landlord’s right to remove the Panel in accordance with Section XIV.C). For purposes hereof, the “Panel Transfer Conditions” are: (a) the assignee or sublessee is a Fortune 1000 company; (b) at least 2 years are left on the Extended Term (as the same may hereafter be extended) on the date of such assignment or sublease; and (c) the Panel to be installed for such assignee or sublessee does not contain a name or logo which relates to an entity which is of a character or reputation, or is associated with a political faction or orientation, which is inconsistent with the quality of the Building, or which would otherwise reasonably offend a landlord of a Comparable Building (defined in Section 1.17 of the Original Lease), or which would cause Landlord to be in violation of another lease at the Building or which would give a tenant at the Building the right to terminate its lease. In addition, during the Substitution Term: (I) subsection 26.10 of the Original Lease shall be amended to increase the number of directory lines from 5 to 10; (II) subsection 26.11 of the Original Lease shall be amended to change the reference to “8th floor of the Building” to “23rd and 24th floors of the Building”; and (III) Tenant shall be entitled to install any signage it desires within the Substitution Space without the consent of Landlord; provided that no such signage shall be placed on or against any exterior window of the Building, on or against any elevator door or shall otherwise be visible from the exterior Common Areas of the Property.
10.2Exterior Garage Signage.
A.So long as (i) Tenant is currently in occupancy of at least 65% of the Premises; (ii) Tenant has not assigned the Lease or sublet more than 35% of the Premises other than pursuant to Permitted Transfers and/or Pre-Approved Transfers; and (iii) Tenant obtains all necessary governmental permits and approvals, then Tenant shall have the right to install with contractors approved by Landlord, for Tenant's benefit and at Tenant's cost, exterior signage (the "Garage Sign") identifying Tenant's presence in the Building on the exterior of the parking garage in the approximate location shown on Exhibit D hereto. In the event that (A) the initial plans and specifications for the Garage Sign are not submitted to Landlord for its approval (as provided below) within 180 days following the execution of this Second Amendment, and /or (ii) the plans and specifications for the Garage Sign are not submitted to the City of Los Angeles for any required permits within forty-five (45) days after Landlord’s approval thereof has been received, and/or (iii) Tenant does not install the Garage Sign within sixty (60) days after receiving all necessary permits and approvals from the City of Los Angeles (subject to extension due to any Force Majeure Delay or Landlord Caused Delay arising after such approval), Tenant right to install the Garage Sign shall be null, void and of no further force and effect. Following installation of the Garage Sign, Tenant shall be liable for of all costs related to the maintenance, repair and replacement of the Garage Sign. Notwithstanding the foregoing, Landlord shall have the right to maintain the Garage Sign with contractors reasonably selected by Landlord provided that such contractors are competitively-priced and to bill Tenant for the actual, reasonable, out-of-pocket cost thereof as Additional Rent. Tenant use of the Garage Sign shall be free of charge.
B.Tenant must obtain Landlord’s written consent to any proposed Garage Sign prior to its fabrication and installation, which consent shall not be unreasonably withheld or delayed. Landlord reserves the right to withhold consent to any Garage Sign in its reasonable judgment. To obtain Landlord’s consent, Tenant shall submit design drawings to Landlord, showing the type and sizes of all lettering; the colors, finishes and types of materials used. Notwithstanding the foregoing, Landlord hereby approves, in concept, of the proposed Garage Sign as shown on Exhibit D; provided, however, Landlord acknowledges and agrees that the Garage Sign on Exhibit D is a concept only and, subject to Landlord’s reasonable approval (as provided above), Tenant shall have the right to change and modify the type (but not size) of all lettering, the colors, finishes and types of materials used on Exhibit D in developing the actual Garage Sign plans and specifications.
C.If during the Term (and any extensions thereof) (a) Tenant fails to continuously occupy not less than 65% of the Premises; or (b) Tenant assigns the Lease or sublets more than 35% of the Premises other than pursuant to Permitted Transfers and/or Pre-Approved Transfers, then Tenant's rights granted herein will terminate and Landlord may remove any Garage Sign at Tenant's cost; provided that such contractors are competitively priced and Tenant’s reimbursement obligation shall be limited to Landlord’s actual, reasonable, out-of-pocket cost.
11.Other Pertinent Provisions. Landlord and Tenant agree that, effective as of the date of this Second Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Current Lease shall be amended in the following additional respects:
11.1.California Public Resources Code § 25402.10. If Tenant (or any party claiming by, through or under Tenant) pays directly to the provider for any energy consumed at the Property, Tenant, promptly upon request, shall deliver to Landlord (or, at Landlord’s option, execute and deliver to Landlord an instrument enabling Landlord to obtain from such provider) any data about such consumption that Landlord, in its reasonable judgment, is required to disclose to a prospective buyer, tenant or mortgage lender under California Public Resources Code § 25402.10 or any similar law.
11.2.California Civil Code Section 1938. Pursuant to California Civil Code § 1938, Landlord hereby states that the Existing Premises and the Substitution Space have not undergone inspection by a Certified Access Specialist (CASp) (defined in California Civil Code § 55.52).
11.3.No Options. The parties hereto acknowledge and agree that during the Substitution Term Tenant shall have no rights to extend the term of the Lease, or expand, terminate or contract the Premises. The parties agree that Section X (RENEWAL OPTION) of Exhibit F of the Original Lease and Section XII (RIGHT OF FIRST OFFER) of Exhibit F of the Original Lease are hereby deleted in their entirety and are of no further force and effect.
11.4.After Hours HVAC Service. During the Substitution Term, in lieu of Landlord’s obligation to provide free after-hours HVAC service under Section 7.01 of the Original Lease, Landlord shall provide the original Tenant only (and to any entity pursuant to a Permitted Transfer), on a non-cumulative basis, with up to 120 hours per year (on a calendar year basis, prorated for any partial calendar year) of after-hours HVAC service. In no event shall Tenant be entitled to carry-over any unused portion of such 120 hours per year of free after hours HVAC service from year to year during the Substitution Term.
11.5Notwithstanding anything to the contrary in the Current Lease, but subject to Landlord's reasonable regulations, restrictions and guidelines, to the extent that Tenant needs access to such Building Service Areas (hereinafter defined) to conduct its business in the Building in an efficient manner, Tenant's rights to the Premises include Tenant's non-exclusive right to use and access (i) the risers, vertical shafts, flues, conduits and the electrical and telephone rooms within the Building for Tenant's effective and efficient use of the Premises for the uses permitted hereunder, and (ii) the walls and floors around, above and below the Premises to install and service wire, conduit and cable that service Tenant's equipment in the Premises in accordance with, and subject to, the other terms and provisions of this Lease and Landlord's and other tenant’s needs with respect to such areas. The areas referred to in (i) and (ii) of the preceding sentence are sometimes referred to as the “Building Service Areas”. Tenant acknowledges and agrees that Landlord's reasonable regulations, restrictions and guidelines with respect to the Building Service Areas include, without limitation: (x) the right to lock and secure any risers, vertical shafts, flues, conduits, electrical rooms and telephone rooms, it being agreed that Landlord shall not be obligated to provide Tenant with a key to any such areas; and (y) the right to prohibit Tenant from placing any equipment, supplies or other personal property in any electrical room and telephone room. In no event shall Building Service Areas include any janitorial closets or space that is leased to another tenant of the Building. In addition, Tenant’s right to access any Building Service Areas that
are accessible only through the space of another tenant of the Building shall be subject to the approval of such other tenant.
11.6Notwithstanding anything to the contrary in the Current Lease, Landlord shall comply with all Laws relating to the Base Building and Common Areas, provided that compliance with such Laws is not the express responsibility of Tenant under this Lease, and provided further that Landlord’s failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy (or its legal equivalent) for the Premises, would adversely affect Tenant’s access to and from the Premises or would unreasonably and materially affect the safety of Tenant’s employees or create a significant health hazard for Tenant’s employees. Landlord shall be permitted to include in Expenses any costs or expenses incurred by Landlord pursuant to the preceding sentence to the extent consistent with the terms of Exhibit B attached to the Original Lease. Without limiting the foregoing, if any Hazardous Material exists in the Building or on the Property, Landlord, at its sole costs and expense, shall take such removal, remediation or other action with respect to such Hazardous Material as may be required by applicable Law as and to the extent interpreted and enforced from time to time. Landlord shall perform its obligations under this Section in a prompt and diligent manner in compliance with applicable Laws. Notwithstanding anything herein to the contrary, except when the existence of such violation would materially delay Tenant’s performance of the Tenant Improvement Work, Landlord shall have the right to contest any such obligations in good faith, including the right to a waiver or deferment of compliance, the right to assert any and all defenses allowed by law and the right to receive an extension of any variance or grandfathering previously enjoyed by or benefiting Landlord.
11.7Notwithstanding anything to the contrary in the Current Lease, as part of the Building services under Section 7 of the Original Lease, freight elevator service shall be available of the use by Tenant, subject to reasonable and non-discriminatory scheduling with Landlord.
11.8During any such time as Tenant is permitted to abate Base Rent and Tenant’s Pro Rata Share of Expenses and Taxes pursuant to Section 7.03 of the Original Lease, it shall not be required to pay for any parking spaces (to the extent not actually utilized by Tenant).
11.9Except as otherwise provided in the Current Lease: (a) Landlord shall supply all utilities and services to be supplied to Tenant under the Lease at actual cost (as defined below); provided that the foregoing shall not be construed to limit Landlord’s right to negotiate a separate fee (which may include a commercially reasonable profit component) with Tenant for any services that Landlord is not obligated to provide to Tenant under the Lease, including, without limitation, any general contractor, construction management and repair and maintenance services that Landlord provides to Tenant at Tenant’s request, nor shall it limit Landlord’s right to charge commercially reasonable fees (which may include a commercially reasonable profit component) for property management and other services provided directly by Landlord and its affiliates (subject to any applicable exclusions from Expenses set forth in the Current Lease); and (b) if Tenant uses water or other services or utilities: (i) that are not required to be provided by Landlord pursuant to the Current Lease; or (ii) that are in excess of the capacities that are required to be supplied by Landlord pursuant to the Current Lease, Tenant shall pay to Landlord the actual cost incurred by Landlord in providing such excess services or consumption. As used herein, “actual cost” shall mean the actual cost charged by third party providers and/or the cost of installation, operation (but not including utility charges to the extent separately metered to the Premises and paid by Tenant), and maintenance and reasonable depreciation of equipment which is installed in order to supply such consumption, together with a charge for overhead or administration, to the extent Landlord incurs additional expenses not already included in Operating Expenses. To the extent the salary of personnel providing services to Tenant is included in Operating Expenses, actual cost shall not include and Tenant shall not be required to pay an additional amount for use of such personnel (except to the extent such personnel is utilized by Tenant on an overtime basis or for services not covered by such personnel’s stated job description and Landlord incurs additional expenses as a result thereof). To the extent not included within Operating
Expenses, Tenant shall pay the amounts payable by Tenant to Landlord under this Section to Landlord within thirty (30) days following receipt of a bill therefor.
11.10Notwithstanding anything to the contrary in the Current Lease, Tenant shall not responsible for complying with the Identification Requirements with respect to Lines existing in the Substitution Space as of the Delivery Date. Landlord acknowledges and agrees that: (A) the Substitution Space currently contains an internal staircase connecting the 23rd and 24th floors of the Building and Tenant shall have no obligation to remove such staircase (or any replacement staircase installed following the removal of such existing internal staircase) at the expiration or earlier termination of the Substitution Term; (B) if Tenant, as part of the Tenant Improvement Work or any Alterations during the Substitution Term, eliminates the multi-tenant corridor on the 23rd floor of the Substitution Space, Tenant shall have no obligation to restore such multi-tenant corridor at the expiration or earlier termination of the Substitution Term; and (C) at the end of the Extended Term (as may be extended), Tenant shall only be required to remove those portions of the Tenant Improvement Work to the extent the same comprise non-typical general office improvements are designated by Landlord as Required Removables under Section 8 of the Original Lease in connection with its approval of such Tenant Improvement Work.
11.11Notwithstanding anything to the contrary in the Current Lease, Tenant, at its sole cost and expense, may coordinate the Tenant’s Security System to provide that the Building system and the Tenant’s Security System will operate on the same type of key card, so that Tenant’s employees are able to use a single card for both systems, but shall not otherwise integrate the Tenant’s Security System with the systems of the Building (provided that Tenant acknowledges that Landlord shall have the right to alter and/or replace the card key access system for the Building as deemed necessary or desirable by Landlord, without liability to Tenant, and Landlord shall not be obligated to modify the Building security system to accomplish the intent of this Section 11.11).
11.12Notwithstanding anything to the contrary in the Current Lease: (a) during the Substitution Term, and without limitation to any other rights granted to Tenant under the Current Lease, Tenant shall have the right to (i) transfer to any Permitted Transferee to which the Lease is assigned all renewal rights, rights of first offer, signage rights, rooftop rights, assignment and subletting rights and parking rights contained in the Lease, provided that Tenant shall not have the right to transfer its signage rights to a Permitted Transferee if the identification of any such Permitted Transferee would have a negative affect on the reputation of the Building or Property or the market value of any space therein, and (ii) the right to transfer to any sublessee or assignee that is not a Permitted Transferee, any of Tenant's parking rights; (b) all rights in the Current Lease pursuant to which Landlord has to recapture the Premises in connection with an assignment or sublease are hereby deleted in their entirety including, without limitation, Section 11.02(c) of the Original Lease and all of Section 11.02 of the Original Lease after the fourth (4th) sentence thereof; and (c) the Pre-Approved Transfer shall apply to a sublease of up to a total of 8,000 rentable square feet.
11.13Notwithstanding anything to the contrary in the Current Lease, all of Tenant's Property, including furniture (whether bolted or otherwise), furnishings, business machines and equipment and trade fixtures (whether or not affixed to the Premises), signs, communications equipment, moveable partitions, security equipment, networking equipment and viewing screens, a/v and video equipment, built-in television sets or projection screens, generator, telecommunications equipment, seating, projectors and other items bolted in place, free-standing cabinet work, chillers, computer systems, furnishings, blowers, uninterrupted power supply machinery and equipment and other articles of personal property or other property unique to Tenant’s operations and owned by Tenant or installed or placed by Tenant in the Premises, including the Tenant HVAC System: (i) shall remain Tenant's property; and (ii) may be removed by Tenant at any time during the Term (provided that Tenant repairs and damage resulting therefrom).
11.14Notwithstanding anything to the contrary in the Current Lease, whenever in the Lease a payment is required to be made by one party to the other, but a specific date for payment is not set forth or a specific number of days within which payment is to be made is not set forth, or the words “immediately,” “promptly,” and/or “on demand,” or their equivalent, are used to specify when such payment is due, then such payment shall be due 30 days after the date that the party which is entitled to such payment sends notice to the other party demanding such payment.
11.15Notwithstanding anything to the contrary in the Current Lease, except (i) for matters for which there is a standard of consent or discretion specifically set forth in the Lease, (ii) matters which could have an adverse effect on the Building Structure or the Base Building Systems, or which could affect the exterior appearance of the Building, or (iii) matters covered by Sections 18 and 19 (Events of Default and Remedies) of the Original Lease (collectively, the "Excepted Matters"), any time the consent of Landlord or Tenant is required under the Lease, such consent shall not be unreasonably withheld or delayed, and, except with regard to the Excepted Matters, whenever the Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make an allocation or other determination, Landlord and Tenant shall act reasonably and in good faith.
11.16Notwithstanding anything to the contrary in the Current Lease: (a) Landlord shall refund any overpayment of Expense Excess and/or Tax Excess to Tenant within 30 days following the date of the Statement or, so long as the sufficient Term remains to fully credit such amount, credit such overpayment against the Rent next due under the Lease; (b) in the event Landlord fails to deliver the Statement within 3 months following receipt of notice from Tenant that such statement is past due, Tenant may elect to seek specific performance of such obligation; (c) Expenses shall not include (i) costs incurred in connection with the original construction of the Building or in connection with any major change in the Building, such as adding or deleting floors, (ii) any bad debt loss, rent loss, or reserves for bad debts or rent loss or any reserves of any kind, (iii) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Property unless such wages and benefits are prorated to reflect time spent on operating and managing the Property vis-à-vis time spent on matters unrelated to operating and managing the Property; provided, that in no event shall Expenses for purposes of the Lease include wages and/or benefits attributable to personnel above the level of Property general manager or Property director of engineering, (iv) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Expenses as a capital cost, except equipment not affixed to the Property which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Property, (v) all items and services for which Tenant or any other tenant in the Property reimburses Landlord, provided that Landlord shall use commercially reasonable efforts to collect such reimbursable amounts, or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement, (vi) costs for after-hours HVAC usage by other tenants of the Building, and (vii) in the event that Landlord separately charges Tenant for after-hours or above Building standard electricity, then the cost of providing after-hours or above Building standard electricity to other tenants in the Building shall not be included as an Expense; (viii) if Landlord does not carry earthquake insurance for the Property during the Base Year but subsequently obtains earthquake insurance for the Property during the Substitution Term, then from and after the date upon which Landlord obtains such earthquake insurance and continuing throughout the period during which Landlord maintains such insurance, Expenses for the Base Year shall be deemed to be increased by the amount of the premium Landlord would have incurred had Landlord maintained such insurance for the same period of time during the Base Year as such insurance is maintained by Landlord during such subsequent calendar year; (ix) Landlord shall (a) not make a profit by charging items to Expenses that are otherwise also charged separately to others and (b) Landlord shall not collect Expenses from Tenant and all other tenants/occupants in the Property in an amount in excess of what Landlord incurred for the items included in Expenses; and (x) tax refunds shall be deducted from Taxes in the calendar year to which such refund is applicable.
12.Miscellaneous.
12.1.This Second Amendment and the attached exhibits, which are hereby incorporated into and made a part of this Second Amendment, set forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements.
12.2Except as herein modified or amended, the provisions, conditions and terms of the Current Lease shall remain unchanged and in full force and effect.
12.3In the case of any inconsistency between the provisions of the Current Lease and this Second Amendment, the provisions of this Second Amendment shall govern and control.
12.4Submission of this Second Amendment by Landlord is not an offer to enter into this Second Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Second Amendment until Landlord has executed and delivered it to Tenant.
12.5Capitalized terms used but not defined in this Second Amendment shall have the meanings given in the Current Lease. As used herein and in the Current Lease, all references to the “Lease” shall mean and refer to the Current Lease, as amended by this Second Amendment
12.6Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers (other than Cresa) claiming to have represented Tenant in connection with this Second Amendment. Landlord shall indemnify and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Landlord in connection with this Second Amendment. Tenant acknowledges that any assistance rendered by any agent or employee of any affiliate of Landlord in connection with this Second Amendment has been made as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant. Landlord shall pay a commission to Cresa Partners in connection with this Second Amendment pursuant to the terms of a separate agreement entered into by and between Landlord and Cresa Partners.
12.7Both Landlord and Tenant hereby represent and warrant to the other party that each person executing this Second Amendment on its behalf is duly authorized and empowered to execute it, and does so as the act of and on behalf of such party, as indicated below.
12.8This Second Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original for all purposes, but all of which together shall constitute one and the same instrument.
12.9Landlord represents and warrants to Tenant that, as of the date of this Second Amendment, there are no mortgages or deeds of trust encumbering the Building and/or Property. Further, Landlord hereby represents and warrants to Tenant that, as of the date of this Second Amendment, other than a leasehold as created by that certain lease, executed by Pacific Lighting Properties, Inc., as Lessor and Tishman Westwood Corporation, as Lessee, as referenced in the document entitled “Memorandum of Lease”, which was recorded March 25, 1968 as Instrument No. 2898 in Book M-2809 Page 475, for the term and upon and subject to all the provisions contained in said document, in said lease, and in all amendments thereto, as Parcel 2, there are no ground or underlying leases covering the whole or any portion of the Property. Within five (5) Business Days following the full execution and delivery of this Lease by Landlord and Tenant, Landlord shall cause the fee owner of the Property to provide a
commercially reasonable recognition, non-disturbance and attornment agreement in favor of Tenant in the form attached hereto as Exhibit E and deliver the same to Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Second Amendment as of the day and year first above written.
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LANDLORD: |
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CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited partnership |
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EOP Owner GP L.L.C., a Delaware limited liability company, its general partner |
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/s/ Frank Campbell |
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Name: |
Frank Campbell |
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Market Managing Director |
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TENANT: |
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BOINGO WIRELESS, INC., a Delaware corporation |
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/s/ Peter Hovenier |
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Name: |
Peter Hovenier |
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Title: |
CFO |
EXHIBIT A
OUTLINE AND LOCATION OF SUBSTITUTION SPACE-23rd FLOOR
EXHIBIT A-1
OUTLINE AND LOCATION OF SUBSTITUTION SPACE-24th FLOOR
EXHIBIT B
WORK LETTER
As used in this Exhibit B (this “Work Letter”), the following terms shall have the following meanings: “Agreement” means the Current Lease and Second Amendment of which this Work Letter is a part. “Tenant Improvements” means all improvements to be constructed in the Substitution Space pursuant to this Work Letter. “Tenant Improvement Work” means the design and construction of the Tenant Improvements, together with any related work (including demolition) that is necessary to construct the Tenant Improvements, including without limitation, Allowance Items.
1ALLOWANCE.
1.1Allowance. Tenant shall be entitled to a one-time tenant improvement allowance (the “Allowance”) in the amount of $3,378,180.00 (i.e., $65.00 per rentable square foot of the Substitution Space) to be applied toward the (a) Allowance Items (defined in Section 1.2 below), (b) the cost of purchasing, installing and/or placing deposits on signage, security systems, cabling, furniture, fixtures, and equipment to be used in or serving the Substitution Space by Tenant, and cabling, and/or (c) moving costs; provided that any portion of the Allowance that is applied toward moving costs shall not exceed, in the aggregate, $259,860.00 (i.e., $5.00 per rentable square foot of the Substitution Space). Tenant, by written notice to Landlord (the “Allowance Notice”), shall advise Landlord of the manner in which Tenant desires to apply the Allowance. Any portion of the Allowance that is applied toward the cost of the Tenant Improvement Work shall be disbursed to Tenant in accordance with Section 1.2 below. Any portion of the Allowance that is applied toward the cost of moving or purchasing, placing deposits on and/or installing signage, security systems, cabling and furniture, fixtures, and/or equipment to be used in or serving the Substitution Space shall be disbursed to Tenant within 30 days after receipt of invoices from Tenant with respect to Tenant's actual costs of moving and purchasing, placing deposits on and/or installing the signage, security systems, cabling or furniture, fixtures, and/or equipment to be used in or serving the Substitution Space as described above; provided that Tenant shall also be required to provide Landlord the documentation set forth in Section 1.2 below with respect to any items that relate to work of a type for which a mechanics lien could be potentially be filed. Tenant shall be responsible for all costs associated with the Tenant Improvement Work, including the costs of the Allowance Items, to the extent such costs exceed the lesser of (a) the Allowance, or (b) the aggregate amount that Landlord is required to disburse for such purpose pursuant to this Work Letter. Notwithstanding any contrary provision of this Agreement, if Tenant fails to use the entire Allowance by December 31, 2016 (subject to Substitution Delays), the unused amount shall revert to Landlord and Tenant shall have no further rights with respect thereto. Notwithstanding anything to the contrary contained herein, if Landlord fails to timely fund any monthly payment of the Allowance within the time period set forth above in this Section 1.1, Tenant shall be entitled to deliver written notice ("Payment Notice") thereof to Landlord. If Landlord still fails to fulfill any such obligation within 10 Business Days after Landlord's receipt of the Payment Notice from Tenant and if Landlord fails to deliver written notice to Tenant within such 10 Business Day period explaining Landlord's reasons that the amounts described in Tenant's Payment Notice are not due and payable by Landlord ("Refusal Notice"), Tenant shall be entitled to fund such amount(s) itself and to offset such amount(s), together with interest at the rate of 6% from the date of payment by Tenant until the date of offset, against Tenant's first obligations to pay Base Rent during the Term. If Landlord delivers a Refusal Notice, and if Landlord and Tenant are not able to agree on the amounts to be so paid by Landlord, if any, within 10 Business Days after Tenant's receipt of a Refusal Notice, Landlord or Tenant may elect to have such dispute resolved by binding arbitration before a retired judge of the Superior Court of the State of California under the auspices of JAMS/ENDISPUTE (or any successor to such organization) in Los Angeles County, California, according to the then rules of commercial arbitration of such organization. If Tenant prevails in any such arbitration, Tenant shall be entitled to offset the
amount determined to be payable by Landlord in such proceeding together with interest at the rate of 6% from the date of payment to the date of offset.
1.2Disbursement of Allowance.
1.2.1Allowance Items. Except as otherwise provided in this Work Letter, the Allowance shall be disbursed by Landlord only for the following items (the “Allowance Items”): (a) the fees and reimbursable expenses of the project manager, Architect (defined in Section 2.1 below) and the Engineers (defined in Section 2.1 below), and any actual out-of-pocket fees reasonably incurred by Landlord for review of the Plans (defined in Section 2.1 below) by Landlord’s third party consultants (provided that Landlord shall not be entitled to charge Tenant for any non-third consultant fees incurred by Landlord or Landlord’s managing agent in connection with Landlord’s review of the Plans); (b) plan-check, permit and license fees relating to performance of the Tenant Improvement Work; (c) the cost of labor, materials and performing the Tenant Improvement Work, including construction costs, low voltage cabling (wiring), HVAC systems air rebalancing, after hours HVAC charges, testing and inspection costs, hoisting and trash removal costs, and contractors’ fees and general conditions and the cost of insurance required to be provided by or for the benefit of the contractor and payable by Tenant; (d) the cost of any change to the base, shell or core of the Substitution Space or Building required by the Plans (including if such change is due to the fact that such work is prepared on an unoccupied basis), including all direct project management, architectural and/or engineering fees and expenses incurred in connection therewith; (e) the cost of any change to the Plans or Tenant Improvement Work required by Law unless such cost is Landlord’s responsibility under this Lease; (f) sales and use taxes; (g) the Coordination Fee (defined below); and (h) all other costs expended by Landlord and approved in advance in writing by the Tenant in connection with the performance of the Tenant Improvement Work, including any third party review costs.
1.2.2Disbursement. Subject to the provisions of this Work Letter, and provided that Landlord shall have no obligation to make any disbursement of the Allowance until such time as Landlord has received a Letter of Credit in the LC Amount in accordance with Section 4.1 of the Second Amendment, Landlord shall make monthly disbursements of the Allowance for Allowance Items and shall authorize the release of monies for Tenant’s benefit as follows:
1.2.2.1Monthly Disbursements. On or before the tenth (10th) day of each calendar month during the design and construction of the Tenant Improvement Work, Tenant shall deliver to Landlord: (i) a request for payment of the Contractor (defined in Section 3.1 below), approved by Tenant, in AIA G-702/G-703 format or another format reasonably requested by Landlord, showing the schedule of values, by trade, of percentage of completion of the Tenant Improvement Work, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of Tenant’s Agents (defined in Section 3.1.2 below) for labor rendered and materials delivered to the Substitution Space; (iii) executed conditional mechanic’s lien releases from all of Tenant’s Agents (along with unconditional mechanic’s lien releases with respect to payments made pursuant to Tenant’s prior submission hereunder) which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Sections 8132-8138; and (iv) all other information reasonably requested by Landlord. Tenant’s request for payment shall be deemed Tenant’s acceptance and approval of the work furnished vis-a-vis Landlord only and/or the materials supplied as set forth in Tenant’s payment request (as between Landlord and Tenant). Thereafter, Landlord shall deliver a check to Tenant, made to the Contractor or the Tenant, as applicable, in the amount of the lesser of (a) the amount requested by Tenant pursuant to the preceding sentence, less a 10% retention (the aggregate amount of such retentions to be known as the “Final Retention”), or (b) the amount of any remaining portion of the Allowance (not including the Final Retention), provided that Landlord does not reasonably dispute any request for payment based on any work creating a TI Design Problem. In any event, Landlord shall pay to Tenant the undisputed portion in accordance with the foregoing pending resolution of the dispute. Landlord’s payment of
such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as described in Tenant’s payment request.
1.2.2.2Final Retention. Subject to the provisions of this Work Letter, a check for the Final Retention shall be delivered by Landlord to Tenant following the latest to occur of (a) the completion of the Tenant Improvement Work; (b) Tenant’s delivery to Landlord of (i) properly executed unconditional mechanic’s lien releases in compliance with California Civil Code Sections 8134 and 8138, (ii) a certificate from the Architect, in a form reasonably acceptable to Landlord, certifying that the Tenant Improvement Work has been substantially completed, and (iii) evidence that all required governmental approvals required for Tenant to legally occupy the Substitution Space have been obtained; (c) Tenant’s performance of its obligations under clause (a) of the third sentence of Section 3.3 below; or (d) Tenant’s compliance with Landlord’s standard “close-out” requirements regarding city approvals, closeout tasks, the general contractor, financial close-out matters, and tenant vendors.
2PLANS.
2.1Selection of Architect/Plans. Tenant shall retain an architect/space planner subject to the reasonable approval of Landlord (the “Architect”) and the engineering consultants subject to the reasonable approval of Landlord (the “Engineers”), which approvals shall be granted or denied within 5 Business Days after written request (and shall be deemed approved if no reply is given within said 5 Business Day period and such failure to reply continues for an additional 2 Business Day period after Landlord’s receipt of a second written request for approval from Tenant), to prepare all architectural plans for the Substitution Space and all engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life-safety, and sprinkler work in the Substitution Space. Landlord hereby approves of Gensler, RAPT or Aref & Associates as Tenant’s Architect should Tenant select them. The plans and drawings to be prepared by the Architect and the Engineers hereunder shall be referred to herein collectively as the “Plans.” All Plans shall (a) comply with the drawing format and specifications reasonably required by Landlord, and (b) be subject to Landlord’s approval, which shall not be unreasonably withheld, shall be granted or denied within the applicable time periods set forth herein and shall not be denied except for reasons that may constitute a TI Design Problem. Tenant shall cause the Architect to verify, in the field, the dimensions and conditions as shown on the relevant portions of the base Building plans, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Plans and approval of the Approved Construction Drawings shall be for its sole benefit and shall not create or imply any obligation on the part of Landlord to review the same for Tenant’s benefit, whether with respect to quality, design, compliance with Law or any other matter. Accordingly, notwithstanding any review of the Plans by Landlord or any of its space planners, architects, engineers or other consultants, and notwithstanding any advice or assistance that may be rendered to Tenant by Landlord or any such consultant, Landlord shall not be liable for any error or omission in the Plans or have any other liability relating thereto except to the extent of any requirements by Landlord. Without limiting the foregoing, Tenant shall be responsible for ensuring (x) that all elements of the design of the Plans comply with Law and are otherwise suitable for Tenant’s use of the Substitution Space, and (y) that no Tenant Improvement impairs any system or structural component of the Building, and Landlord’s approval of the Construction Drawings (defined in Section 2.3 below) shall not relieve Tenant from such responsibility. Landlord agrees that its approval of any Plans shall not be withheld unless such plans or the Initial Alterations create a TI Design Problem (as defined below). A “TI Design Problem” is defined as, and will be deemed to exist if Tenant's plans or any Tenant Improvement Work may (a) affect the exterior appearance of the Substitution Space or Building; (b) adversely affect the Building’s structure; (c) adversely affect the Building’s systems; (d) unreasonably interfere with any other occupant’s normal and customary office operation, (e) adversely affect the certificate of occupancy issued for the Building, or (f) fail to comply with applicable Laws. Landlord acknowledges that the Tenant Improvement Work may be performed in multiple phases and this Tenant Work Letter shall be applicable to each such phase.
2.2Space Plan. Tenant shall cause the Architect to prepare a space plan for the Tenant Improvement Work, including a layout and designation of all offices, rooms and other partitioning, and equipment to be contained in the Substitution Space, together with their intended use (the “Space Plan”), and shall deliver four (4) copies of the Space Plan, signed by Tenant, to Landlord for its approval (subject to the limitations set forth in Section 2.1 above). Landlord shall provide Tenant with notice approving or reasonably disapproving the Space Plan within 5 Business Days after the later of Landlord’s receipt thereof provided that Landlord may only disapprove a Space Plan for a TI Design Problem. If Landlord fails to respond within such 5 Business Day period and such failure to reply continues for an additional 2 Business Day period after Landlord’s receipt of a second written request for approval from Tenant, the Space Plan shall be deemed approved by Landlord. If Landlord disapproves the Space Plan because it contains a TI Design Problem, Landlord’s notice of disapproval shall describe with reasonable specificity the basis for such disapproval and the changes that would be necessary to resolve Landlord’s objections. If Landlord disapproves the Space Plan as provided above, Tenant shall cause the Space Plan to be modified and resubmitted to Landlord for its approval. Such procedure shall be repeated as necessary until Landlord has approved the Space Plan. Landlord acknowledges and agrees that, notwithstanding anything to the contrary contained in this Work Letter, Tenant shall be entitled to submit all plans for the Tenant Improvement Work, including demolition and preliminary construction work, Space Plans and Construction Drawings, in increments and the terms herein for approval of plans shall apply independently to each such increment.
2.3Construction Drawings. After Landlord approves the Space Plan, Tenant shall cause the Architect and the Engineers to complete the architectural, engineering and final architectural working drawings for the Tenant Improvement Work in a form that is sufficient to enable subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Construction Drawings”), and shall deliver four (4) copies of the Construction Drawings, signed by Tenant, to Landlord for its approval (subject to the limitations set forth in Section 2.1 above). Notwithstanding the foregoing, at Tenant’s option, the Construction Drawings may be prepared in two phases (first the architectural drawings, then engineering drawings consistent with the previously provided architectural drawings), provided that each phase shall be subject to Landlord’s approval. Landlord shall provide Tenant with notice approving or reasonably disapproving the Construction Drawings (or the applicable component thereof) within 10 Business Days after Landlord’s receipt thereof. If Landlord fails to respond within such 10 Business Day period and such failure to reply continues for an additional 3 Business Day period after Landlord’s receipt of a second written request for approval from Tenant, the Construction Drawings shall be deemed approved by Landlord. If Landlord disapproves the Construction Drawings (or any component thereof) because they contain a TI Design Problem, Landlord’s notice of disapproval shall describe with reasonable specificity the basis for such disapproval (i.e., the TI Design Problems) and the changes that would be necessary to resolve Landlord’s objections. If Landlord disapproves the Construction Drawings (or any component thereof because they contain a TI Design Problem), Tenant shall cause the Construction Drawings to be modified and resubmitted to Landlord for its approval. Such procedure shall be repeated as necessary until Landlord has approved the Construction Drawings (or the applicable component thereof). Tenant shall not commence the Tenant Improvement Work until after the Construction Drawings are approved by Landlord as provided herein. No revision which could create a TI Design Problem may be made to the approved Construction Drawings (the “Approved Construction Drawings”) without Landlord’s prior consent, which shall not be unreasonably withheld, and shall be granted or denied within 2 Business Days or deemed approved.
2.4Permits. Tenant shall submit the Approved Construction Drawings to the appropriate municipal authorities and otherwise apply for and obtain from such authorities all applicable building permits necessary to allow the Contractor to commence and complete the performance of the Tenant Improvement Work (the “Permits”). Tenant shall coordinate with Landlord in order to allow Landlord, at its option, to take part in all phases of the permitting process and shall supply Landlord, as soon as possible, with all plan check numbers and dates of submittal. Notwithstanding any contrary provision of this Section 2.4, Tenant, and not
Landlord or its consultants, shall be responsible for obtaining any Permit or certificate of occupancy; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any Permit or certificate of occupancy; provided, further, that Landlord shall be responsible for any Property and Building violations of applicable Laws to the extent required by Article 5 of the Lease. Tenant shall not commence construction until all required Permits for each applicable portion of the Tenant Improvement Work are obtained. Notwithstanding anything to the contrary contained herein, Tenant shall be able to submit separately for demolition permits and complete the demolition prior to submitting the Approved Construction Drawings for permits and/or obtaining the permits for the Approved Construction Drawings.
2.5Change Orders. In the event Tenant desires to change the Approved Construction Drawings with respect to any matter involving the Building’s systems or structure or any matter that could potentially create a TI Design Problem, Tenant shall deliver written notice (the "Drawing Change Notice") of the same to Landlord, setting forth in detail the changes (the "Tenant Change") Tenant desires to make to the Approved Construction Drawings. Landlord shall, no later than (A) 7 Business Days after receipt of a Drawing Change Notice to the extent the modification would reasonably require material engineering or architectural review (e.g., any change which could reasonably cause a TI Design Problem), or (B) five (5) Business Days after receipt of any other Drawing Change Notice, either (i) approve the Tenant Change, or (ii) disapprove the Tenant Change and deliver written notice to Tenant specifying in reasonably sufficient detail the reasons for Landlord's disapproval; provided, however, that Landlord may only disapprove of the Tenant Change if the Tenant Change creates a TI Design Problem. If Landlord fails to timely respond to Tenant within any applicable response period referenced herein for Landlord's approval of the Tenant Change, then Tenant shall deliver a second notice requesting Landlord’s response to such Tenant Change and if Landlord thereafter fails to respond within 3 Business Days, Landlord’s approval shall be deemed granted. Any additional costs which arise in connection with such Tenant Change shall be paid by Tenant; provided, however, that to the extent the Allowance has not been depleted, such payment shall be made out of the Allowance, subject to the terms of this Work Letter for the disbursement of the Allowance.
3CONSTRUCTION.
3.1Selection of Contractors.
3.1.1The Contractor. Tenant shall retain a general contractor (the “Contractor”) to perform the Tenant Improvement Work, subject to Landlord’s reasonable consent, which shall be granted or denied within 5 Business Days. For purposes of this Section 3.1.1, Landlord’s approval of a proposed general contractor shall not be considered unreasonably withheld if such general contractor (a) does not have trade references reasonably acceptable to Landlord, (b) does not maintain insurance as required under the terms of the Lease, (c) does not provide current financial statements reasonably acceptable to Landlord, or (d) is not licensed as a contractor in the state/municipality in which the Substitution Space is located. Tenant acknowledges that the foregoing is not an exclusive list of the reasons why Landlord may reasonably disapprove a proposed general contractor.
3.1.2Tenant’s Agents. All subcontractors, laborers, materialmen and suppliers used by Tenant and working on-site (such subcontractors, laborers, materialmen, and suppliers, together with the Contractor, to be referred to herein collectively as “Tenant’s Agents”) are subject to approval by Landlord. Such approval shall not be unreasonably withheld and shall be granted or denied within 5 Business Days; provided, however, that Landlord shall require Tenant to retain Landlord’s designated subcontractor for Fire/Life Safety work (provided the same are reasonably available and competitively priced); and Landlord shall require that union contractors be used for mechanical, electrical or plumbing work and work covered by the carpenters union.
3.2Construction.
3.2.1Construction Contract; Final Costs. Tenant shall not enter into a construction contract with the Contractor (the “Contract”) unless it complies with Section 3.2.3 below and a copy thereof has been provided to Landlord. Before commencing construction of the Tenant Improvement Work, Tenant shall deliver to Landlord a detailed breakdown of the schedule of values, by trade, of the final costs that will be or have been incurred, as set forth more particularly in Section 1.2.1 above, in connection with the performance of the Tenant Improvement Work and that form the basis for the amount of the Contract (the “Final Costs”). If the Final Costs exceed the Allowance, then Landlord shall only be required to pay the pro-rata share of any request for payment of the Allowance equal to the product of such Allowance divided by the Final Costs; provided, however, if, after initially being determined, the Final Costs increase, such pro-rata share shall be adjusted accordingly in accordance with the foregoing formula. The portion of any request for payment that exceeds Landlord’s pro rata share (referred to herein as “Tenant’s Share”) shall be paid by Tenant directly to the Contractor or other Tenant Agent that is entitled to receive such payment. Notwithstanding the foregoing, Landlord’s obligation to disburse the Final Retention shall be as set forth in Section 1.2.2.2.
3.2.2Landlord’s General Conditions for Tenant Improvement Work. The Tenant Improvement Work shall be performed in a good and workmanlike manner and in substantial accordance with the Approved Construction Drawings. Tenant shall submit to Landlord schedules of all work relating to the Tenant Improvement Work, whereupon Landlord, within 5 Business Days, shall inform Tenant of any reasonably necessary changes thereto, and Tenant shall cause Tenant’s Agents to adhere to such corrected schedule. Tenant shall abide by all commercially reasonable and non-discriminatory rules established by Landlord relating to the performance of the Tenant Improvement Work, including rules relating to the use of freight, loading dock and service elevators; any required shutdown of utilities (including life-safety systems); storage of materials; and coordination of work with other tenants’ contractors. Landlord shall be entitled to receive a fee equal to 2% of the Allowance (the “Coordination Fee”) for supervision or oversight of the Tenant Improvement Work regardless of whether Tenant requests that Landlord enter into the contract for the Tenant Improvement Work with Contractor.
3.2.3Warranty of Contractor. Tenant shall cause the Contractor to agree to be responsible for (a) the repair, replacement and/or removal, without additional charge, of any portion of the Tenant Improvement Work that is or becomes defective, in workmanship, materials or otherwise, on or before the date occurring one (1) year after the completion of the Tenant Improvement Work; and (b) the repair of any damage to the Building and/or Common Areas resulting from such repair, replacement and/or removal; provided that Contractors obligations under this Section 3.2.3 shall not be construed to waive, limit or modify Tenant’s rights under Section 15 of the Original Lease. Such agreement shall be expressly set forth in the Contract and, by its terms, shall inure to the benefit of both Landlord and Tenant as their respective interests may appear, and shall be enforceable by either Landlord or Tenant. Upon Landlord’s request, Tenant shall provide Landlord with any assignment or other assurance that may be necessary to enable Landlord to enforce such agreement directly against the Contractor.
3.2.4Insurance Requirements. Tenant or Contractor shall carry “Builder’s All Risk” insurance in an amount reasonably approved by Landlord covering the Tenant Improvement Work, together with such other insurance as Landlord may reasonably require.
3.2.5Compliance. The Tenant Improvement Work shall comply in all respects with (i) all applicable Laws; (ii) all applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) all applicable building material manufacturer’s specifications. Without limiting the foregoing, if, as a result of Tenant’s performance of the Tenant Improvement Work, Landlord becomes required under Law to perform any inspection or give any notice relating to the Substitution Space or the Tenant Improvement Work, or to ensure that the Tenant Improvement
Work is performed in any particular manner, Tenant shall comply with such requirement on Landlord’s behalf and promptly thereafter provide Landlord with reasonable documentation of such compliance unless such compliance is Landlord’s obligation under this Lease.
3.2.6Inspection by Landlord. Notwithstanding any contrary provision of the Lease, Landlord, at any time without notice to Tenant, may enter the Substitution Space to inspect the Tenant Improvement Work. Neither Landlord’s performance of such inspection nor its failure to perform such inspection shall result in a waiver of any of Landlord’s rights hereunder or be deemed to imply Landlord’s approval of the Tenant Improvement Work. If, by notice to Tenant, Landlord reasonably identifies any defect in the Tenant Improvement Work which creates a TI Design Problem or possess a potential danger to persons on Property, Tenant shall promptly cause the Contractor to correct such defect at no expense to Landlord.
3.2.7Meetings. Tenant shall hold regularly scheduled meetings with the Architect and the Contractor regarding the progress of the preparation of Plans, the obtaining of the Permits, and the performance of the Tenant Improvement Work. Tenant shall provide Landlord with at least three (3) business days’ prior notice of such meetings including time and location. Landlord may attend such meetings, and, upon Landlord’s request, Tenant shall cause Tenant’s Agents to attend such meetings. Tenant shall cause minutes of such meetings to be prepared and copies thereof to be delivered promptly to Landlord. One such meeting per month shall include a review of the Contractor’s current request for payment.
3.2.8Parking and Other Services. During the period of design and construction of the Tenant Improvement Work and installation of Tenant’s furniture, fixtures and equipment and Tenant’s move into the Substitution Space, Tenant shall not be required to pay for, and Landlord shall not deduct from the Allowance, any charges for (1) contractor, subcontractor, consultants, and architect parking (subject, however, to commercially reasonable availability), or (2) the use of freight elevator (subject to scheduling with Landlord), restrooms, loading docks, security (except to the extent additional security personnel are required in connection with Tenant’s activities, including after-hours use of the freight elevator, in which event Tenant shall be responsible for the actual cost of such additional security personnel), or utilities (except to the extent Tenant requires HVAC outside of Normal Construction Hours [which are from 8:00 a.m. to 6:00 p.m., Mondays through Fridays, and from 9:00 a.m. to 1:00 p.m., Saturdays] and on Holidays, in which event Tenant shall reimburse Landlord at the prevailing hourly rate for such after-hours HVAC service).
3.2.9Common Areas. Notwithstanding any contrary provision of this Work Letter, Tenant shall not be required to pay (and there shall be no deduction from the Allowance) for any costs incurred by Landlord in connection with any construction in the Common Areas of the Building which is required for such Common Areas to comply with the building code of the City of Los Angeles, unless such work is required as a result of any non-general office improvements which are being installed or constructed in the Substitution Space as a part of the Tenant Improvement Work. Landlord and Tenant acknowledge and agree the restrooms, elevator lobbies and corridors on the 23rd and 24th floors of the Building are part of the Substitution Space and not Common Areas.
3.3Tenant’s Covenants. Within 10 days after completing the Tenant Improvement Work, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located, in accordance with California Civil Code § 3093 or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation but Tenant shall not be in default for failing to do so. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s expense. Within 60 days after completing the Tenant Improvement Work, (a) Tenant shall cause the Architect and the Contractor to (i) provide the record set of the Approved Construction Drawings which shall be marked as necessary to reflect all changes made to the Approved Construction Drawings during the course of construction, (ii) certify to the best of their knowledge that the record set of plans are true and correct, which certification shall survive the expiration or termination of the Lease, and (iii) deliver to Landlord
two (2) CD ROMS of such updated drawings in accordance with Landlord’s CAD Format Requirements (defined below); and (b) Tenant shall deliver to Landlord copies of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Substitution Space. For purposes hereof, “Landlord’s CAD Format Requirements” shall mean (w) the version is no later than current Autodesk version of AutoCAD plus the most recent release version, (x) files must be unlocked and fully accessible (no “cad-lock”, read-only, password protected or “signature” files), (y) files must be in “.dwg” format, and (z) if the data was electronically in a non-Autodesk product, then files must be converted into “‘dwg” files when given to Landlord.
4.MISCELLANEOUS. Notwithstanding any contrary provision of this Agreement, if Tenant defaults under this Agreement (beyond all applicable notice and cure periods) before the Tenant Improvement Work is completed, then (a) Landlord’s obligations under this Work Letter shall be excused, and Landlord may cause the Contractor to cease performance of the Tenant Improvement Work, until such default is cured, and (b) Tenant shall be responsible for any resulting delay in the completion of the Tenant Improvement Work. This Work Letter shall not apply to any space other than the Substitution Space.
4.1Bonding. Notwithstanding anything to the contrary set forth in this Lease, Tenant shall not be required to obtain or provide any completion or performance bond in connection with any Tenant Improvement Work performed by or on behalf of Tenant pursuant to the terms of this Work Letter.
4.2Hazardous Materials Costs. Landlord agrees to bear any increased costs in the design or construction of the Tenant Improvement Work directly resulting from any Hazardous Materials in the Substitution Space (provided such Hazardous Materials are not introduced by Tenant) and shall reimburse to Tenant, any additional, actual, documented and reasonable hard costs incurred by Tenant as a result of the presence of Hazardous Materials in the Substitution Space (provided such Hazardous Materials are not introduced by Tenant or the Tenant Related Parties). Landlord and Tenant agree that they shall follow the recommendations of a mutually acceptable licensed third-party Hazardous Material contractor with respect to each decision of whether any asbestos or other Hazardous Materials, or any particular portion thereof, should be removed, encapsulated, abandoned in place or otherwise treated.
4.3Substitution Delays. If the "Substantial Completion of the Tenant Improvement Work", as that term is defined below, is delayed beyond July 1, 2015 as a direct result of one or more “Substitution Delay,” as that term is defined below, the Outside Substitution Effective Date shall be extended on a day-for-day basis by the lesser of: (i) the number of actual days of Substitution Delay; or (ii) the number of days in the period beginning on July 1, 2015 and ending on the date of Substantial Completion of the Tenant Improvement Work. As used herein, the term "Substitution Delay" shall mean only a "Force Majeure Delay" or a "Landlord Caused Delay," as those terms are defined below in this Section 4.3. Solely for purposes of this Work Letter and in determining a Substitution Delay, the term "Force Majeure Delay" shall mean only an actual delay resulting from fire, wind, damage or destruction to the Buildings or Property, explosion, casualty, flood, hurricane, tornado, the elements, acts of God or the public enemy, strikes, sabotage, war, invasion, insurrection, rebellion, civil unrest, riots, or earthquakes, failure of utilities, inability to secure labor or materials or reasonable substitutions therefor. A “Landlord Caused Delay” shall mean actual delays to the extent resulting from the acts or omissions of Landlord or the Landlord Parties, including, without limitation, (i) except to the extent Landlord's approval under this Work Letter is deemed granted pursuant to the terms of this Work Letter, failure of Landlord to timely approve or disapprove the Space Plan, Construction Drawings, any Tenant Change, or any other plans or specifications for the Tenant Improvement Work within the time periods set forth in this Work Letter or the Lease, as applicable, or otherwise within a reasonable period of time; (ii) material and unreasonable interference by Landlord, its agents, or the Landlord Related Parties (except as otherwise allowed under this Work Letter) with the Substantial Completion of the Tenant Improvement Work and which objectively preclude or delay the construction of tenant improvements in the Building or any portion thereof, which interference relates to access by Tenant, or Tenant’s agents to the Building or any reasonably necessary
Building facilities (including loading docks and freight elevators) or service and utilities (including temporary power and parking areas as provided herein) on a twenty-four (24) hour per day, seven (7) days per week, basis; (iii) a material breach by Landlord of a provision of this Work Letter or as specifically provided in this Work Letter; (iv) Landlord's failure to maintain a temporary or permanent certificate of occupancy or its alternative for the Building by the date of execution of this Lease; (v) Landlord's failure to deliver possession of the Substitution Space to Tenant in accordance with Section 2.1 B of the Second Amendment to which this Work Letter is a part; and (vi) delays due to the acts or failures to act of Landlord, its agents, employees or contractors, including Landlord’s failure to perform the Landlord Electrical Work (hereinafter defined) in a timely manner in accordance with a work schedule to be mutually agreed upon by Landlord and Tenant.
4.3.1.Determination of a Substitution Delay. If Tenant contends that a Landlord Caused Delay has occurred, Tenant shall notify Landlord in writing of the event that constitutes such Landlord Caused Delay (the "Delay Notice"). If such actions, inaction or circumstance described in the Delay Notice are not cured by Landlord within two (2) Business Days of Landlord's receipt of the Delay Notice and if such action, inaction or circumstance otherwise qualify as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing as of the date of Landlord's receipt of the Delay Notice and ending as of the date such delay ends. If Tenant contends that a Force Majeure Delay has occurred, Tenant shall immediately notify Landlord in writing of the event that constitutes such Force Majeure Delay (also a "Delay Notice").
4.3.2Definition of Substantial Completion of the Tenant Improvement Work. For purposes of this Section 4.3, "Substantial Completion of the Tenant Improvement Work" shall mean the issuance of a temporary certificate of occupancy for the subject space (or its legal equivalent allowing occupancy of such space) (the "C of O") and completion of construction of the Tenant Improvement Work in the Substitution Space pursuant to the Approved Construction Drawings, including any furniture, fixtures, work stations, built-in furniture or equipment necessary to obtain the C of O, with the exception of (i) any punch list items, (ii) any furniture, fixtures, work stations, built-in furniture or equipment not required to obtain the C of O (even if the same requires installation or electrification by Tenant's agents) and (iii) any tenant improvement finish items and materials which are selected by Tenant but which are not available within a reasonable time (given the Outside Substitution Effective Date of July 1, 2015).
4.4Landlord Electrical Work. Notwithstanding anything to the contrary in the Second Amendment or this Work Letter, Landlord shall complete the following items in a good and workmanlike manner (collectively, the “Landlord Electrical Work”): replace the existing electrical panels serving the Substitution Space with: (i) two (2) 120 – 208 volt panels and one (1) 277 volt panel for the 23rd floor of the Substitution Space; and (ii) two (2) 120 – 208 volt panels and one (1) 277 volt panel for the 24th floor of the Substitution Space. Notwithstanding any contrary provision of this Agreement, the Landlord Electrical Work shall be performed at Landlord’s expense and shall not be deemed Tenant Improvements, Tenant Improvement Work or an Allowance Item.
EXHIBIT C
10960 WILSHIRE BOULEVARD
CONFIRMATION LETTER
_____________________, 2014
BOINGO WIRELESS, INC.
10960 Wilshire Boulevard
Suite No. 2300
Los Angeles, California
Re:Second Amendment to Office Lease (the “Second Amendment”) dated August ___, 2014, between CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited liability partnership (“Landlord”), and BOINGO WIRELESS, INC., a Delaware corporation (“Tenant”), concerning Suites 2300 and 2400 on the 23rd and 24th floors of the building located at 10960 Wilshire Boulevard, Los Angeles, California (the “Premises”).
Lease ID: _____________________________
Business Unit Number: __________________
Dear _________________:
In accordance with the Second Amendment, Tenant accepts possession of the Premises and confirms the following:
1.The Substitution Effective Date is _____________ and the Extended Expiration Date is _______________.
2.The exact number of rentable square feet within the Substitution Space is _________ square feet.
3.Tenant’s Share, based upon the exact number of rentable square feet within the Substitution Space, is ____________%.
Please acknowledge the foregoing by signing all three (3) counterparts of this letter in the space provided below and returning two (2) fully executed counterparts to my attention. Please note that, pursuant to Section 2.1(A) of the Second Amendment, if Tenant fails to execute and return (or, by notice to Landlord, reasonably object to) this letter within fifteen (15) business days after receiving it, Tenant shall be deemed to have executed and returned it without exception.
Agreed and Accepted as of , 2014. |
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BOINGO WIRELESS, INC., |
CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited liability partnership |
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EXHIBIT D
GARAGE SIGN
EXHIBIT E
FORM OF RECOGNITION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Recognition, Non-Disturbance and Attornment Agreement (this "Agreement") is made as of ____________, 2014, by and between CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited partnership ("Ground Lessor"), and BOINGO WIRELESS, INC., a Delaware corporation ("Tenant").
WHEREAS, under a certain Ground Lease dated as of March 1, 1968 (as subsequently amended, the "Ground Lease"), Ground Lessor's predecessor-in-interest (Pacific Lighting Properties, Inc., a California corporation), did lease, let, and demise the property (hereinafter called the "Property") located at 10960 Wilshire Boulevard, Los Angeles, California, as described in the Ground Lease, to Tishman Westwood Corp., a California corporation ("Original Landlord"), as predecessor-in-interest to CA-10960 WILSHIRE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), for the period of time and upon the covenants, terms, and conditions therein stated; and
WHEREAS, under a certain lease dated as of February 3, 2012 (“Original Lease”), as amended by that certain First Amendment dated December 26, 2012 (“First Amendment”) and that certain Second Amendment dated August __, 2014 (the “Second Amendment” and collectively hereinafter referred to with the Original Lease and the First Amendment as the "Lease"), Landlord did lease, let, and demise a portion of Property (the "Premises") to Tenant for the period of time and upon the covenants, terms, and conditions therein stated; and
WHEREAS, Ground Lessor has consented to the Lease; and
WHEREAS, as of the date hereof, Ground Lessor and Landlord are the same or affiliated entities, Ground Lessor being an entity controlled by, controlling or under common control with Landlord (as such, "Affiliates"); and
WHEREAS, Ground Lessor is willing to agree that in the event of a "Recognized Lease Termination," as that term is defined in Section 1 of this Agreement, Tenant shall be entitled to remain in occupancy of the Premises upon the covenants, terms, and conditions set forth herein below.
NOW, THEREFORE, in consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, each to the other, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree, covenant, and warrant as follows.
1.Upon the occurrence of a "Recognized Lease Termination," as that term is defined, below, so long as the Lease is then in full force and effect and the original tenant named herein (the "Original Tenant") or an affiliate of Original Tenant pursuant to the terms and conditions of Section 11.04 of the Original Lease (an "Affiliate") is not in default thereunder, beyond any applicable notice and cure period set forth therein, Ground Lessor and Tenant hereby acknowledge and agree that (a) subject to the terms of this Agreement and the "Direct Lease," as that term is defined, below, Ground Lessor shall not disturb Tenant's possession of the Premises, and (b) the Lease shall immediately thereafter automatically be deemed a direct lease between Ground
Lessor and Tenant (a "Direct Lease") upon all the terms and conditions (including, without limitation, the rent) set forth in the Lease as if Ground Lessor were the originally named Landlord, provided that, unless the same was assigned or otherwise transferred to Ground Lessor by Landlord (an assignment/transfer which shall be deemed to have occurred to the extent that Ground Lessor and Landlord are, at the time of any Recognized Lease Termination, Affiliates), Tenant shall deliver to Ground Lessor within ten (10) business days following written demand by Ground Lessor a letter of credit in an amount equal to any "letter of credit" or other security otherwise due under the Lease. In the event of a Recognized Lease Termination, Tenant shall continue to accept the Premises in its then-existing, as-is condition; provided, however, Tenant shall remain entitled to any unpaid tenant improvement allowance in connection with Tenant's construction of its Tenant Improvement Work pursuant to the terms and conditions of Exhibit B attached to the Second Amendment; provided further, however, that the foregoing shall in no way be deemed to alter or amend Ground Lessor's ongoing obligations, if any, to repair, maintain and operate the Building pursuant to the terms of the Direct Lease (the "Ongoing LL Obligations"). In the event that Tenant shall be in default under the Lease (beyond any applicable notice and cure periods) at the time of a Recognized Lease Termination, Ground Lessor may, at its sole option, waive such default as a contingency to the foregoing terms of this Section 1. For purposes of this Agreement, a "Recognized Lease Termination" shall mean (A) a termination of the Ground Lease due to a default by Landlord, or (B) a voluntary termination of the Ground Lease by mutual agreement of Ground Lessor and Landlord, or (C) the expiration of the existing term of the Ground Lease to the extent Landlord has not extended the term of the Ground Lease pursuant to the express terms and conditions thereof. The rights contained in this Agreement shall apply to the Original Tenant or its Affiliate only, and not any other assignee, sublessee or transferee of Original Tenant's interest in the Lease.
2.Except with regard to events of casualty damage or condemnation, for which the express terms and conditions of Sections 16 and 17 of the Original Lease shall control, Tenant otherwise agrees that in the event of any act or omission by Landlord under the Lease which would give Tenant the right, either immediately or after a period of time, to terminate the Lease, whether or not set forth in the Lease, Tenant will not exercise any such right to terminate until (i) it shall have given written notice of the act or omission to Ground Lessor, and (ii) if the default by Landlord is of a nature which can be cured by the Ground Lessor, and if the Ground Lessor is proceeding with diligence to cure such default, Tenant shall have given the Ground Lessor the time periods set forth in the Lease for Ground Lessor's cure of such default, in order to cure such default, provided that any such cure period shall not commence to run until Ground Lessor's receipt of written notice from Tenant of such default.
3.Upon the creation of a Direct Lease in accordance with the terms thereof, Tenant will, subject to the term hereof, immediately thereafter make all payments due under the Lease directly to Ground Lessor.
4.Notwithstanding anything contained herein to the contrary, upon the creation of a Direct Lease in accordance with the terms hereof, Ground Lessor and its respective assignees shall not be:
(a)Liable for any act or omission of Landlord, or its successors or assigns, except to the extent (i) of any Ongoing LL Obligations, (ii) Ground Lessor and Landlord are, as of the date of the Recognized Lease Termination, Affiliates.
(b)Subject to any offsets or defenses which Tenant might have as to Landlord, or its successors or assigns, or to any claims for damages against Landlord, or its successors or assigns; provided, however, (i) Ground Lessor shall satisfy any unpaid tenant improvement allowance obligations in connection with Tenant's construction of its Tenant Improvement Work pursuant to the terms and conditions of Exhibit B attached to the Second Amendment, (ii) Ground Lessor shall satisfy any Ongoing LL Obligations, and (iii) the restrictions set forth in this item (b), above, shall not apply to the extent Ground Lessor and Landlord are, as of the date of the Recognized Lease Termination, Affiliates.
(c)Required or obligated to credit Tenant with any rent or additional rent paid by Tenant to Landlord, except to the extent actually received by Ground Lessor from Landlord (actual receipt of which shall be deemed to have occurred to the extent that Ground Lessor and Landlord are, at the time of any Recognized Lease Termination, Affiliates).
(d)Unless the same was assigned or otherwise transferred to Ground Lessor by Landlord (an assignment/transfer which shall be deemed to have occurred to the extent that Ground Lessor and Landlord are, at the time of any Recognized Lease Termination, Affiliates), bound to or liable for refund of all or any part of any security deposit deposited by Tenant with Landlord.
(e)Liable to Tenant under the Lease.
(f)Liable to Tenant under the Lease in connection with any event or circumstance occurring prior to the commencement of the Direct Lease, except to the extent of any Ongoing LL Obligations.
5.Tenant covenants and agrees for the benefit and reliance of Ground Lessor that it will not, without the express written consent of Ground Lessor, cancel, terminate, modify, alter, amend or surrender the Lease, except as permitted by law and the express provisions of the Lease.
6.Ground Lessor and Tenant hereby agree as follows:
(a)Except as specifically set forth in this Agreement, that neither this Agreement, nor anything to the contrary in the aforesaid Lease or in any modifications or amendments thereto shall, prior to the creation of a Direct Lease in accordance with the terms hereof, operate to give rise to or create any liability of Ground Lessor to Tenant or give rise to or create direct contractual privity of any kind between Ground Lessor and Tenant. In connection with the foregoing, Ground Lessor, its successors and assigns, shall be responsible to Tenant for performance of only those covenants and obligations of the Lease accruing after the creation of a Direct Lease as set forth herein (except to the extent of any Ongoing LL Obligations), and Ground Lessor's obligations to Tenant shall be further limited as provided in the Lease and this Agreement, provided that the foregoing shall not be a waiver of any of Tenant's rights under the Lease as to any events which occur prior to the creation of such Direct Lease in accordance with the terms hereof, and give rise to a default by Ground Lessor under the Lease after the creation of such Direct Lease in accordance with the terms hereof.
(b)Upon Ground Lessor's written request of Tenant given at any time after the creation of a Direct Lease in accordance with the terms hereof, Tenant (as tenant) agrees to execute a lease of the Premises with Ground Lessor or its successor (as ground lessor) (the exact wording of which shall be negotiated by the parties in good faith) upon the terms and conditions set forth herein.
(c)Ground Lessor shall provide written notice to Tenant promptly upon the occurrence of a Recognized Lease Termination.
7.Any notices to Tenant or Ground Lessor hereunder shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, by nationally recognized overnight courier or by personal delivery, addressed as follows:
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CA-10960 WILSHIRE LIMITED PARTNERSHIP c/o Equity Office 10880 Wilshire Boulevard Suite 1010 Los Angeles, CA 90024 Attention: Property Manager
CA-10960 WILSHIRE LIMITED PARTNERSHIP c/o Equity Office Two North Riverside Plaza Suite 2100 Chicago, IL 60606 Attn: Managing Counsel
and
Equity Office Two North Riverside Plaza Suite 2100 Chicago, IL 60606 Attn: Lease Administration
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CA-10960 WILSHIRE LIMITED PARTNERSHIP c/o Equity Office Two North Riverside Plaza Suite 2100 Chicago, IL 60606 Attn: Managing Counsel
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Equity Office Two North Riverside Plaza Suite 2100 Chicago, IL 60606 Attn: Lease Administration |
or as to each party, to such other address as the party may designate by a notice given in accordance with the requirements contained in this Section 7.
8.This Agreement contains the entire agreement between the parties hereto. No variations, modifications or changes herein or hereof shall be binding upon any party hereto unless set forth in a document duly executed by or on behalf of such party.
9.This instrument may be executed in multiple counterparts, all of which shall be deemed originals and with the same effect as if all parties hereto had signed the same document. All of such counterparts shall be construed together and shall constitute one instrument, but in making proof, it shall only be necessary to produce one such counterpart executed by the party against whom it is being enforced.
10.Whenever used herein, the singular number shall include the plural, the plural the singular, and the use of any gender shall include all genders. The words, "Ground Lessor" and "Tenant" shall include their heirs, executors, administrators, beneficiaries, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
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Title: |
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Supplement No. 2
SUPPLEMENTAL AGREEMENT
THIS AGREEMENT, made as of June 30, 2002 by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called the “Port Authority”) and NEW YORK TELECOM PARTNERS, LLC (hereinafter called the “Permittee”),
WITNESSETH, That:
WHEREAS, the Port Authority and the Permittee heretofore and as of August 26, 1999 entered into an agreement identified by the above Port Authority Agreement Number (which agreement, as the same may have heretofore been supplemented and amended is hereinafter called the “TNAS Agreement”) covering certain privileges and obligations with respect to the installation, operation and maintenance of a wireless telecommunications network access system (“TNAS System”) at Port Authority facilities designated in the Agreement; and
WHEREAS, in addition to the privileges and obligations granted to and imposed on the Permittee under the TNAS Agreement with respect to the TNAS System, the TNAS Agreement grants the Permittee the non-exclusive right to install radio transmission towers (“Monopoles”) at locations at Port Authority Facilities as and to the extent approved by the Port Authority in its sole and absolute discretion and provides that the Permittee may mount exterior antennas on such Ancillary Towers or on other towers or components of the TNAS System as and to the extent approved by the Port Authority in its sole and absolute discretion; and
WHEREAS, the Port Authority and the Permittee desire to amend the TNAS Agreement to provide for the Permittee’s implementation of the non-exclusive right to install, operate and maintain Monopoles at the Port Authority’s Port Newark facility (“Site”), to provide also for the Permittee’s mounting of exterior antennas on the Monopoles and on certain rooftop locations at the Site and to otherwise amend the TNAS Agreement;
NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, and effective as of the date first set forth above except as otherwise provided below, the Port Authority and the Lessee hereby agree as follows:
CONFIDENTIAL TREATMENT REQUESTED
1.(a)Effective from and after July 1, 2002, the Port Authority hereby approves the Permittee’s proposed implementation of its non-exclusive right to install Monopoles at the Site, and to mount exterior antennas on the Monopoles and on certain designated rooftops (“Related Improvements”) at the Site, subject to approval by the Port Authority of the Permittee’s Construction Application(s) and plans and specifications covering all design, construction and installation work with respect to all proposed Monopoles and all Related Improvements at the Site. The Monopoles and Related Improvements are sometimes hereinafter collectively referred to as the “Monopole System.” The installation, operation and maintenance of the Monopole System are sometimes hereinafter collectively referred to as the “Monopole System Operations.” In no event shall the Monopole System be deemed to include any proprietary Carrier User equipment utilized by any Carrier User in connection with Monopole System Operations. Capitalized terms used in this Supplemental Agreement but not herein defined shall have the meanings ascribed to such terms in the TNAS Agreement.
(b)For all purposes of the TNAS Agreement except as hereinafter expressly provided, effective from and after July 1, 2002, the “System,” described in subparagraph (a)(i) of Section 2 of the TNAS Agreement, shall be deemed to incorporate and include the Monopole System, and the Site, which is a Port Authority Facility, shall be deemed to be a Covered Facility.
2.(a)The Monopole System shall be installed, operated and maintained on a non-discriminatory basis up to the design capacity of the Monopole System at a particular Covered Facility, including but not limited to the Site, in accordance with the terms, provisions and conditions of the form of Schedule 2.8(i) attached hereto and hereby made a part hereof. The parties to this Agreement hereby agree that effective as of July 1, 2002 Schedule 2.8(i) shall be incorporated into and become a part of the form of Carrier Access Agreement attached as Exhibit D to the TNAS Agreement. The Permittee will not amend the form of Schedule 2.8(i) without the prior written consent of the Port Authority. In the event the Permittee desires to conduct Monopole System Operations at Port Authority Facilities in addition to the Site, the parties hereto may amend this Supplemental Agreement by letter agreement(s) identifying such additional Port Authority Facilities and expressly providing that the terms, provisions and conditions of Schedule 2.8(i), except as may otherwise be provided in such letter agreement, shall be applicable to all Monopole System
CONFIDENTIAL TREATMENT REQUESTED
Operations at such additional Port Authority Facilities, which, upon the commencement of Monopole System Operations at such Port Authority Facilities, shall be deemed to be Covered Facilities. The Port Authority hereby agrees that nothing set forth in the form of Schedule 2.8(i) attached hereto shall constitute a violation of Section 32 of the TNAS Agreement. In the event of any conflict between the terms and provisions of this Supplemental Agreement and the terms and provisions of Schedule 2.8(i), the terms and provisions of this Supplemental Agreement shall prevail, except as otherwise expressly provided herein.
(b)The limitation on service by third party telecommunications service providers set forth in the first sentence of Section 17 of the TNAS Agreement shall not be applicable to the Site or to any other Port Authority Facility which shall subsequently be designated a Covered Facility with respect to the Monopole System.
(c)In addition to the rights granted to the Permittee pursuant to paragraph (b) of Section 19 of the TNAS Agreement with respect to the use of the TNAS System, the Permittee may also, in the course of its business and the conduct of its operations under this Agreement, permit the use of the Monopole System by Carrier Users for the purposes described in paragraph (b) of Section 2 of the TNAS Agreement. Whether or not expressly set forth therein, all agreements between the Permittee and Carrier Users with respect to the use of the Monopole System shall be subject to the terms and conditions of this Agreement.
3.The Port Authority hereby consents to the Schedule 2.8(i) executed on behalf of [*] by its agent, [*], a copy of which has heretofore been delivered to the Port Authority. The Permittee shall prepare and submit to the Port Authority contemporaneously with its submission of the Construction Application referred to in paragraph 6, below, a “Summary Basis of Design” of the Monopole System, to include all relevant technical standards for and attributes and features of the said Monopole System, and generally in the form of the Summary Basis of Design of the TNAS System annexed as Exhibit B to the TNAS Agreement. The Summary Basis of Design may describe the particular Monopole System installation proposed by [*].
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
4.The term of the permission granted to the Permittee to operate the Monopole System shall commence on the date the Port Authority issues final approval of the Permittee’s Construction Application and complete plans and specifications for the Monopole System (the said date hereinafter referred to as the “Commencement Date”) and shall, unless sooner terminated, expire on August 26, 2014. Subject to and in accordance with the provisions of Sections 4 and 34 of the TNAS Agreement, the Permittee shall have the right to extend the term of the permission granted under this Agreement with respect to Monopole System Operations. In the event the Permittee shall extend the term of the permission granted hereunder, the provisions of paragraph III of Section 5 of the TNAS Agreement shall be applicable and in full force and effect during the “Renewal Term” of such permission.
5.The Permittee and the Port Authority hereby confirm that the annual “Access Fee” set forth in Schedule 2.8(i) and required to be paid by [*] shall comprise “Gross Receipts,” and that the annual Access Fee required to be paid by each subsequent Carrier User that executes Schedule 2.8(i) shall comprise “Tower Gross Receipts” as defined in the TNAS Agreement for purposes of the calculation of the Additional Fee under paragraph III of Section 5 of the TNAS Agreement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
6.(a)Section 7 of the TNAS Agreement shall not be applicable to the “Construction Work” (as hereinafter defined) to be performed by the Permittee in connection with the Monopole System; in lieu thereof, the provisions of this paragraph 6 shall govern the Construction Work in all respects. Notwithstanding the following provisions of this paragraph 6, the Port Authority acknowledges that the construction and installation work with respect to the Monopole System at the Site may, in fact, be performed by [*], as contemplated by the provisions of Schedule 2.8(i). Except as otherwise expressly provided in Schedule 2.8(i), the Permittee shall perform, at its sole cost and expense, all installation work required to prepare the Site for the Permittee’s Monopole System Operations, including the installation of the monopole and all transmitters, receivers, and other equipment at the Site and the construction of all associated improvements at the Site appurtenant to the operation of the Monopole System, provided however that the Permittee shall have no obligations with respect to the installation of proprietary Carrier User equipment for the exclusive use of individual Carrier Users (the work described in this paragraph 6 hereinafter referred to as the “Construction Work").
(b)(i)The Permittee shall be responsible at its sole expense for retaining all architectural, engineering and other technical consultants and services as may be directed by the Port Authority and for developing, completing and submitting procedures for the installation of all equipment and the construction of all improvements appurtenant to the operation of the Monopole System. Prior to retaining any licensed architect, professional engineer or other technical consultant in connection with the Construction Work, the name or names of said licensed architect, professional engineer or other technical consultant shall be submitted to the Port Authority for its approval. The Port Authority shall have the right to disapprove any licensed architect, professional engineer or other technical consultant who may be unacceptable to it and shall approve in advance the Permittee’s contract with each such licensed architect, professional engineer or other technical consultant.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
(ii)(1)Prior to the commencement of any Construction Work at the Site, the Permittee shall submit to the Port Authority for its approval a Tenant Alteration Application (hereinafter called the “Construction Application”), in the form supplied by the Port Authority, and containing such terms and conditions as the Port Authority may include, setting forth in detail by appropriate plans and specifications the Construction Work the Permittee proposes to perform at the Site and the manner of and time periods for performing such work. The data to be supplied by the Permittee shall identify separately each of the items constituting the Construction Work and shall describe in detail the improvements, fixtures, equipment, and systems to be installed by the Permittee. The plans and specifications to be submitted by the Permittee shall be in sufficient detail for a contractor to perform the Construction Work and shall bear the seal of a licensed architect or professional engineer who shall be responsible for the administration of the Construction Work in accordance with the Port Authority's requirements. In connection with the review by the Port Authority of the Permittee's submission under this Section, the Permittee shall submit to the Port Authority, at the Port Authority's request, such additional data, detail or information as the Port Authority may require for such review. Following the Port Authority's receipt of the Permittee's Construction Application, the Port Authority shall give its written approval or rejection thereof, or shall request such modifications thereto as the Port Authority may find necessary or appropriate. The Permittee shall not engage any contractor or permit the use of any subcontractor unless and until each such contractor or subcontractor, and the contract such contractor or subcontractor is operating under, have been approved by the Port Authority. The Permittee shall include in any such contract or subcontract such provisions as are required pursuant to the provisions of this Agreement and the Construction Application approved by the Port Authority, including, without limitation thereto, provisions regarding labor harmony.
(2)The Port Authority shall review the Construction Application and all plans and specifications submitted by the Permittee therewith and will furnish its comments regarding the same to the Permittee within fifteen (15) business days after its receipt thereof. The Port Authority will also review and comment on any corrected, modified or amended plans and specifications resubmitted to the Port Authority by the Permittee within fifteen (15) business days after receipt of any such
CONFIDENTIAL TREATMENT REQUESTED
resubmission. The Permittee hereby agrees that the Port Authority shall have no responsibility, liability or obligation to the Permittee in the event the Port Authority fails to respond to any such submission or resubmission of the Construction Application by the Permittee within the time periods set forth above, including any obligation to provide a reimbursement, rent credit or other rent concession.
(iii)(1)The Permittee hereby assumes the risk of loss or damage to all of the Construction Work prior to the completion thereof and the risk of loss or damage to all property of the Port Authority, its lessees and permittees arising out of or in connection with the Construction Work. In the event of any such loss or damage, the Permittee shall forthwith repair, replace and make good the Construction Work and the property of the Port Authority, its lessees and permittees. The Permittee shall, and shall require each of its contractors to indemnify the Port Authority and its Commissioners, officers, agents and employees from and against all claims and demands, just or unjust, by third persons (including the Commissioners,
officers, agents and employees of the Port Authority) against the Port Authority and its Commissioners, officers, agents and employees, arising or alleged to arise out of the performance of the Construction Work or based upon any of the risks assumed by the Permittee in this Agreement or any breach hereof, and for all loss and expense incurred by it and by them in the defense, settlement or satisfaction thereof, including without limitation thereto, claims and demands for death, for personal injury or for property damage, direct or consequential, whether they arise from acts or omissions of the Permittee, any contractors of the Permittee, the Port Authority, third persons, or from acts of God or the public enemy, or otherwise, excepting only claims and demands which result solely from the gross negligence or willful misconduct of the Port Authority subsequent to commencement of the Construction Work; provided however, the Permittee shall not be required to indemnify the Port Authority where indemnity would be precluded by Section 5-322.1 of the General Obligations Law of the State of New York. The Permittee shall cause each such contractor and subcontractor to obtain and maintain in force such insurance coverage and performance bonds as the Port Authority may specify, including, without limitation, a contractual liability endorsement to cover the indemnity obligations assumed by the Permittee pursuant to the provisions of this paragraph.
CONFIDENTIAL TREATMENT REQUESTED
(2)If so directed, the Permittee shall at its own expense defend any suit based upon any claim or demand described in subparagraph (1) above (even if such suit, claim or demand is groundless, false or fraudulent), and in handling such it shall not, without obtaining express advance permission from the General Counsel of the Port Authority, raise any defense involving in any way the jurisdiction of the tribunal over the person of the Port Authority, the immunity of the Port Authority, its Commissioners, officers, agents or employees, the governmental nature of the Port Authority or the provision of any statutes respecting suits against the Port Authority. The Permittee shall not be liable for any fees and expenses of separate counsel representing the Port Authority, other than the reasonable costs of investigation. The Permittee shall not be liable for any settlement of any action, proceeding or suit, which settlement is effected by the Port Authority without the prior written consent of the Permittee, which shall not be unreasonably withheld. If the Permittee shall not grant its consent as provided above, such action, proceeding or suit shall thereafter be defended by the Permittee, at its sole cost and expense, subject to the limitations set forth above in this subparagraph (2).
(iv)The Construction Work shall be performed by the Permittee in accordance with the Construction Application and final plans and specifications approved by the Port Authority, shall be subject to inspection by the Port Authority during the progress of the Construction Work and after the completion thereof, and the Permittee, upon direction from the Port Authority to do so, shall stop the performance of any portion of the Construction Work which is not being performed in accordance with the above and redo or replace at its own expense any Construction Work not done in accordance therewith. The Permittee shall also supply the Port Authority with “as-built” drawings in such form and number as are reasonably requested by the Port Authority, and the Permittee shall keep said drawings current during the term of the permission granted under this Agreement. No changes or modifications to any Construction Work shall be made without the prior consent of the Port Authority.
(v)The Permittee shall pay or cause to be paid all claims lawfully made against it by its contractors, subcontractors, material suppliers and workers, and all claims lawfully made against it by other third persons arising out of or in connection with or because of the performance of the Construction Work, and shall cause its contractors and subcontractors to pay all such
CONFIDENTIAL TREATMENT REQUESTED
claims lawfully made against them, provided however, that nothing herein contained shall be construed to limit the right of the Permittee to contest any claim of a contractor, subcontractor, material supplier or worker or other person, and no such claim shall be considered to be an obligation of the Permittee within the meaning of this paragraph unless and until the same shall have been finally adjudicated. The Permittee shall use commercially reasonable efforts to resolve any such claims and shall keep the Port Authority fully informed of its actions with respect thereto. Without limiting the generality of the foregoing, all of the Permittee’s construction contracts shall provide as follows: “If (1) the Contractor fails to perform any of its obligations under this Contract, including its obligation to pay any claims lawfully made against it by any material supplier, subcontractor, worker or any other third person which arises out of or in connection with the performance of this Contract, (2) any claim (just or unjust) which arises out of or in connection with this Contract is made against the Permittee, or (3) any subcontractor under this Contract fails to pay any claims lawfully made against it by any material supplier, subcontractor, worker or any other third person which arise out of or in connection with this Contract or if in the Permittee’s opinion any of the aforesaid contingencies is likely to arise, then the Permittee shall have the right, in its discretion, to withhold out of any payment (final or otherwise and even though such payments have already been certified as due) such sums as the Permittee may deem ample to protect it against delay or loss or to assume the payment of just claims of third persons, and to apply such sums as the Permittee may deem proper to secure such protection or to satisfy such claims. All sums so applied shall be deducted from the Contractor’s compensation. Omission by the Permittee to withhold out of any payment, final or otherwise, a sum for any of the above contingencies, even though such contingency has occurred at the time of payment, shall not be deemed to indicate that the Permittee does not intend to exercise its right with respect to such contingency. Neither the above provisions for the rights of the Permittee to withhold and apply monies nor any exercise or attempted exercise of, or omission to exercise, such right by the Permittee shall create any obligation of any kind to such material suppliers, subcontractors, workers or other third persons. Until actual payment is made to the Contractor, its right to any amount to be paid under this Contract (even though such payments have already been certified as due) shall be subordinate to the rights of the Permittee under this provision.”
CONFIDENTIAL TREATMENT REQUESTED
(c)(i)The Permittee shall not commence any Construction Work prior to the Commencement Date and until the Construction Application and plans and specifications covering such work have been finally approved by the Port Authority. The Permittee recognizes that its obligation to pay fees, including, without limitation, the Additional Fee, provided for in this Agreement by reference to the TNAS Agreement shall commence on the Commencement Date and the Permittee’s payment of the Additional Fee shall be made in accordance with the provisions of paragraph III of section 5 of the TNAS Agreement.
(ii)The Permittee shall submit a Construction Application for the Construction Work at the Site within thirty (30) days following execution of this Agreement. The Permittee shall commence the performance of the Construction Work at the Site within fifteen (15) days following the approval of the Construction Application and shall diligently pursue the completion of the Construction Work.
(d)The Permittee shall be solely responsible for the plans and specifications used by it and for the adequacy or sufficiency of such plans and specifications, and all the improvements, fixtures, and equipment depicted thereon or covered thereby, regardless of the consent thereto or approval thereof by the Port Authority or the incorporation therein of any Port Authority requirements or recommendations. The Port Authority shall have no obligation or liability in connection with the performance of any of the Construction Work or for the contracts for the performance thereof entered into by the Permittee. The Permittee hereby releases and discharges the Port Authority, its Commissioners, officers, representatives and employees of and from any and all liability, claims for damages or losses of any kind, whether legal or equitable, or from any action or cause of action arising out of or in connection with the performance of any of the Construction Work pursuant to the contracts between the Permittee and its contractors except for any of the foregoing caused solely by the gross negligence or willful misconduct of the Port Authority. The Permittee shall use commercially reasonable efforts to make arrangements for the extension to the Port Authority of all warranties extended or available to the Permittee in connection with the Construction Work.
(e)The Permittee understands that there may be other communications and utility lines and conduits located in portions of the Site where the Permittee will operate the Monopole System.
CONFIDENTIAL TREATMENT REQUESTED
The Port Authority will use commercially reasonable efforts to make available to the Permittee its records to the extent the same are available in an effort to identify to the Permittee the location of such communication and utility lines which may interfere with the Construction Work proposed by the Permittee. The Port Authority hereby disclaims any warranty or representation to the Permittee that such records are accurate. The Permittee agrees to design the Construction Work so as to eliminate or minimize the need for relocation of any such communications and utility lines.
(f)Upon completion of the Construction Work at the Site, the Permittee shall supply the Port Authority with a certificate signed by a responsible officer of the Permittee and by the licensed architect or professional engineer who sealed the Permittee's plans pursuant to the provisions of this Section, certifying that all of the Construction Work has been performed in accordance with the approved plans and specifications covering such work, in accordance with the provisions of this Agreement and in compliance with all applicable laws, ordinances, governmental rules, regulations and orders. The Port Authority will inspect the Construction Work at the Site and if the same has been completed as certified by the Permittee and the Permittee’s licensed architect or professional engineer, the Port Authority shall deliver a certificate to such effect to the Permittee within twenty (20) business days following the Port Authority’s receipt of such certification, subject to the condition that all risks thereafter with respect to the construction and installation of the Construction Work and, as between the Permittee and the Port Authority, any liability therefor for negligence or other reason shall be borne by the Permittee. The Permittee shall not use or permit the use of the Site for the purposes set forth in this Agreement or conduct Monopole System Operations until such certificate is received from Port Authority.
7.(a)Upon the expiration or termination of this Agreement, the Permittee covenants and agrees to yield and deliver the Monopole System peaceably to the Port Authority free and clear of any claim of ownership by the Permittee, including title to Monopole System software licenses, equipment warranties and service contracts, without any further act or deed by the Permittee. The Permittee shall promptly execute and deliver assignments, bills of sale and all other documents necessary or convenient in order to evidence the rights of the Port Authority therein, including title to Monopole System software licenses, equipment warranties and service contracts. Upon the expiration or termination of this
CONFIDENTIAL TREATMENT REQUESTED
Agreement, the Permittee shall deliver the Monopole System to the Port Authority promptly and in good condition, such reasonable wear excepted as would not adversely affect or interfere with its proper operation under this Agreement.
(b)The Permittee shall have the right at any time during the term of the permission under this Agreement to remove a portion or portions of the Monopole System consisting of equipment or other personal property from the Site, provided that the Permittee shall install suitable replacements therefor as is necessary for Monopole System Operations.
8.(a)The Permittee recognizes that it is a special consideration for the Port Authority's entering into this Agreement that the Permittee, without in any way limiting or modifying its obligations with respect to any other provision of the TNAS Agreement, hereby confirms that all the obligations assumed by the Permittee pursuant to Section 46 of the TNAS Agreement, including all references therein to objectionable interference, are fully applicable to Monopole System Operations, provided however that the obligation of the Port Authority contained in the second sentence of paragraph (b) of Section 46 shall not be applicable to any communications activity conducted by the Port Authority or by a third party pursuant to agreement with the Port Authority as of the date of this agreement.
(b)The Permittee hereby represents and warrants that the provisions of subparagraph (b)(ii)(1) of Section 25 of the TNAS Agreement are fully applicable with respect to the negotiation and execution of this Agreement as a supplement to the TNAS Agreement and that no approval by or consultation with the “Project Lender” (as defined in said Section 25) shall be required in order to authorize or permit the Permittee to negotiate and enter into this Agreement with the Port Authority.
9.The Permittee represents and warrants that no broker has been concerned in the negotiation of this Agreement on behalf of the Permittee or the implementation of the Monopole System hereunder and that there is no broker who is or may be entitled to be paid a commission in connection therewith. The Permittee shall indemnify and save harmless the Port Authority of and from any and all claims for commission or brokerage made by any and all persons, firms or corporations whatsoever for services in connection with the negotiation and execution of this Agreement or the implementation of the Monopole System hereunder.
CONFIDENTIAL TREATMENT REQUESTED
10.Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof, shall be charged personally by the Permittee with any liability, or held liable to it under any term or provision of this Agreement or because of its execution or attempted execution or because of any breach thereof.
11.As hereby amended, all of the terms, covenants, provisions, conditions and agreements of the TNAS Agreement shall be and remain in full force and effect.
12.This Agreement and the TNAS Agreement which it amends constitute the entire agreement between the Port Authority and the Permittee on the subject matter and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of both the Port Authority and the Permittee. The Permittee agrees that no representations or warranties shall be binding upon the Port Authority unless expressed in writing in the TNAS Agreement or in this Agreement.
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the Port Authority and the Permittee have executed these presents, as of the date first above written.
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THE PORT AUTHORITY OF NEW YORK |
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AND NEW JERSEY |
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CONFIDENTIAL TREATMENT REQUESTED
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NEW YORK TELECOM PARTNERS, LCC |
ATTEST: |
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Title: |
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CONFIDENTIAL TREATMENT REQUESTED
(Port Authority Acknowledgment)
STATE OF NEW YORK)
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COUNTY OF NEW YORK)
On the day of , 2003, before me personally came , to me known, who, being by me duly sworn, did depose and say that he resides at
; that he is the of The Port Authority of New York and New Jersey, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Commissioners of said corporation; and that he signed his name thereto by like order.
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CONFIDENTIAL TREATMENT REQUESTED
(Limited Liability Company Acknowledgment)
STATE OF)
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COUNTY OF)
On the day of , 2003, before me personally came
, to me known, who, being by me duly sworn, did depose and say that he resides at
; that he is the of New York Telecom Partners, LLC, a Delaware limited liability company, the limited liability company described in and which executed the foregoing instrument; that he executed the same for and on behalf of said limited liability company; and that he is duly authorized and empowered to do so.
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CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 2.8(i)
(Co-Location Sites - Monopoles and Rooftops)
(Port Newark Monopole/Rooftop Site)
Covered Facility: |
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Monopole/Rooftop at Port Newark (the "Site"). |
Access Fee: |
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[*] annually (net/net/net) per Carrier per Site for voice carriers. Payable quarterly in advance. Amount increases by three percent (3%) (compounded) on each Anniversary of the Covered Facility Acceptance Date. |
Base Term: |
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Covered Facility Acceptance Date to August 26, 2014 |
Renewal Option: |
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Two, five-year renewal options in accordance with Section 4.2 of Carrier Access Agreement. |
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Construction Date: |
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Construction Period: |
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Estimated to be within [*]. |
Project Installation and Costs: |
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* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
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* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
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Design and Installation Approval: |
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The Carrier shall prepare and submit, at the Carrier's sole cost and expense, all design documents for NYTP's review and approval. No changes to [any Carrier Equipment or to a Monopole and Related Improvements] [or] [any Rooftop Equipment], and no additional Carrier Equipment or other improvements of any kind, shall be permitted at the Site without the Carrier first submitting the design and installation plans for such changes or additions to NYTP for its review and approval. At no time shall any antennae or other transmitting or receiving devices be mounted, directed, or used at the Site in a manner that would permit wireless communications to be transmitted between (i) such antennae or other transmitting or receiving devices; (ii) wireless communications equipment or devices being used at any other Port Authority Facility; and (iii) equipment that would divert coverage from an existing PA facility (i.e. Newark Airport). |
Maintenance and Repairs: |
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The Participating Carriers shall, at their sole cost and expense, keep and maintain the Site in a neat and orderly condition. The Participating Carriers shall not permit any waste, damage or injury to the Site or any improvements thereon. All maintenance and repair work at the Site (other than that relating solely to a Participating Carrier's individual Carrier Equipment) shall be accomplished, at NYTP's discretion, either (i) by NYTP, in which event all Participating Carriers shall reimburse NYTP on a pro rata basis for the costs of all such maintenance and repairs, or (ii) directly by the Participating Carriers on a pro rata basis. NYTP shall, upon the request of a Participating Carrier, determine what maintenance and repairs are necessary or appropriate at a Site and shall assist the Participating Carriers in the engagement of contractors to perform such work. Appropriate evidence of maintenance and repair costs for a Site shall be maintained by the party or parties causing the work to be performed. If NYTP elects to perform maintenance and repair work, the costs for such work shall be paid by the Participating Carriers within ten (10) days of presentation of an invoice by NYTP. Neither NYTP nor the Port Authority shall have any obligation to maintain or safeguard the Site, any improvements thereon, or any Carrier Equipment. |
Insurance: |
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[*] |
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
Indemnification: |
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The Carrier shall indemnify and save NYTP and the Port Authority harmless from all claims (including costs and expenses of defending against such claims) arising from the Site and any improvements thereon or from any breach of this Schedule 2.8(i) by the Carrier, or any negligent act, negligent omission or intentional tort of the Carrier or the Carrier's agents, employees, contractors, invitees or licensees occurring during the term of this Schedule 2.8(i), or any action or omission of the Carrier that causes NYTP to have any liability or obligation to the Port Authority under the TNAS Agreement. |
Access; Non-Exclusive Rights: |
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The Carrier acknowledges that the Carriers' rights at the Site are non-exclusive. Each other Participating Carrier shall have the right to participate, at any time, at a Site in accordance with the terms of the Carrier Access Agreement and this Schedule 2.8(i). NYTP and the Port Authority shall have at all times the right to access and inspect the Site and all improvements. |
Relocation, Renovation, Demolition: |
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NYTP and the Port Authority shall have at all times the right to request the Carrier to relocate and/or remove [the Monopole and Related Improvements] [Rooftop Equipment] for public safety reasons. Such relocation and/or removal shall be accomplished in accordance with Section 8.4 of the Carrier Access Agreement. |
Site Conditions: |
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NYTP and the Port Authority make no representation or warranty to the Carrier, either express or implied, as to the use, operation, safety, environmental condition, title or fitness for a particular purpose of the Site, and the Carrier's use of the Site shall be on an "as is, where is" basis. The Carrier shall inspect the Site and become familiar with the conditions of the Site. Neither NYTP nor the Port Authority is obligated to alter, improve, remediate or otherwise perform any work or undertake any obligation with respect to the Site, |
Utilities: |
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[*] |
Compliance With Laws: |
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The access to, and installation, maintenance and operation of, all Carrier Equipment and all other improvements at the Site must at all times be in strict compliance with all technical standards and all applicable federal, state and local laws, ordinances, and regulations. The Carrier shall obtain and maintain, at its expense, such licenses, permits or other approvals required for the Carrier's use of the Site, if any. |
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
Liens: |
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The Carrier shall keep the Site free from any liens arising from any work performed, materials furnished or obligations incurred by or at the request of the Carrier. If any lien is filed against the Site as a result of the acts or omissions of the Carrier or its employees, agents or contractors, the Carrier must discharge the lien or bond the lien in a manner reasonably satisfactory to NYTP within thirty (30) days after the Carrier or NYTP receives written notice from any party that a lien has been filed. If the Carrier fails to discharge or bond any lien within such period, then, in addition to any other right or remedy of NYTP, NYTP may, at NYTP's election, discharge the lien and the Carrier shall reimburse NYTP, within ten (10) days of demand, any amount paid by NYTP for the discharge of such lien and all fees, legal expenses and all other costs and expenses of NYTP incurred in connection with any such lien. |
Monopole and Related Improvements Upon Expiration or Termination: |
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For Monopole installations - The Monopole and all Related Improvements at the Site shall be the property of the Participating Carriers until the expiration of the term (including any renewal periods) of this Schedule 2.8(1) or the termination of the Carrier's rights hereunder in accordance with the Carrier Access Agreement; at that time the Monopole and all Related Improvements at the Site shall remain at their existing location and become the property of the Port Authority without payment by the Port Authority. Notwithstanding the foregoing, upon the expiration of the term (including any renewal periods) of this Schedule 2.8(i) or the termination of all Participating Carriers' rights under their respective Carrier Access Agreements, NYTP or the Port Authority may require the Participating Carriers to remove the Monopole and Related Improvements, in which event the Participating Carriers, at their sole cost and expense, shall remove the Monopole and Related Improvements, and repair and restore any damage to the ground area of the Site caused by the installation or removal. |
Carrier Status: |
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[*] |
Other Terms and Conditions: |
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* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
The undersigned, intending to be legally bound hereby, agree that this Schedule 2.8(i) shall be incorporated in, become part of and be governed by the [Amended and Restated] Carrier Access Agreement between New York Telecom Partners, LLC and [*]dated 12/21/99, as amended.
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NEW YORK TELECOM PARTNERS, LLC. |
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By: |
/s/ Richard J. DiGeronimo |
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Richard J. DiGeronimo, President |
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Date: |
July 17, 2002 |
[*]
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
[*]
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
[*]
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
[*]
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
Agreement No. AX-713
Supplement No. 3
THIS AGREEMENT, made as of November 30, 2006 by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter called the “Port Authority”) and NEW YORK TELECOM PARTNERS, LLC (hereinafter called the “Permittee”),
WITNESSETH, That:
WHEREAS, the Port Authority and the Permittee heretofore and as of August 26, 1999 entered into an agreement identified by the above Port Authority Agreement Number (which agreement, as the same may have heretofore been supplemented and amended is hereinafter called the “TNAS Agreement”) covering certain privileges and obligations with respect to the installation, operation and maintenance of a wireless telecommunications network access system (“TNAS System”) at Port Authority facilities designated in the Agreement; and
WHEREAS, among the privileges and obligations granted to and imposed on the Permittee under the TNAS Agreement with respect to the TNAS System, the TNAS Agreement grants the Permittee the right to provide unlicensed wireless services that operate in the “Wireless LAN” (iEEE 802.11) service band of the radio frequency spectrum (the “Wi-Fi Service”); and
WHEREAS, the Port Authority and the Permittee desire to amend the TNAS Agreement to provide for the Permittee’s implementation of its right to install, operate and maintain the Wi-Fi Service and to include a separate fee, not currently included in the TNAS Agreement, to be paid by NYTP to the Port Authority for providing the Wi-Fi Service at mutually agreed Port Authority facilities and locations;
NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Port Authority and the Permittee hereby agree as follows:
1. “Wi-Fi Receipts,” as used herein, shall mean all monies received or receivable (unless and until any amount is deemed to be uncollectible in accordance with generally accepted accounting principles) by NYTP for providing the Wi-Fi Services in Port Authority Covered Facilities (as defined in the TNAS Agreement), including but not limited to, [*]. Wi-Fi Receipts shall not include [*]. Wi-Fi Receipts shall not be included in “Gross Receipts” (as such term is defined and used in the TNAS Agreement). |
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
2. The parties hereto hereby acknowledge and confirm that the Permittee will pay to the Port Authority a fee equal to [*] of Wi-Fi Receipts (the “Wi-Fi Fee”). |
3. The Wi-Fi Fee shall constitute an additional component of the Additional Fee (as defined in the TNAS Agreement) and shall be payable quarterly, in arrears, within thirty (30) days following the end of each calendar quarter. The timing and method of such payments shall correspond to the quarterly payment requirements set forth in Article III of Section 5 of the TNAS Agreement, provided however, that notwithstanding anything to the contrary set forth in paragraph (b) of said Article III, payments of the Wi-Fi Fee shall be based on actual results for the calendar quarter for which each payment is made. Each payment shall be accompanied by a general report of the Wi-Fi Receipts for the relevant calendar quarter, separately stating the Wi‑Fi Receipts and the total number of paid “sessions” (including, without limitation, as presently designated by Permittee: “Private Services,” Ad Hoc Paid Sessions,” “Roaming Paid Sessions,” and “Airport Worker Subscriptions”) for each Port Authority Covered Facility at which the Permittee provides Wi-Fi Service. |
4. Payment of the Wi-Fi Fee for calendar year 2006 through the last day of the most recent calendar quarter shall be payable within ten (10) days following the execution of this Agreement. The parties shall continue discussions intended to reach agreement regarding payment to the Port Authority of the unpaid Wi-Fi Fees from calendar year 2005 and periods prior thereto, which Wi-Fi Fees shall be immediately due to the Port Authority upon the mutual agreement of the parties regarding such payment terms. |
5. The Permittee hereby represents and warrants that the provisions of subparagraph (b)(ii)(1) of Section 25 of the TNAS Agreement are fully applicable with respect to the negotiation and execution of this Agreement as a supplement to the TNAS Agreement and that no approval by or consultation with the “Project Lender” (as defined in said Section 25) shall be required in order to authorize or permit the Permittee to negotiate and enter into this Agreement with the Port Authority. |
6. The parties acknowledge that this Agreement memorializes all agreements and understandings between the parties concerning, and constitutes the entire and only understandings or agreements between the parties regarding, the Wi-Fi Fee. |
7. Neither the Commissioners of the Port Authority nor any of them, nor any officer, agent or employee thereof, shall be charged personally by the Permittee with any liability, or held liable to it under any term or provision of this Agreement or because of its execution or attempted execution or because of any breach thereof. |
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL TREATMENT REQUESTED
8. This Agreement and the TNAS Agreement which it amends constitute the entire agreement between the Port Authority and the Permittee on the subject matter and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of both the Port Authority and the Permittee. The Permittee agrees that no representations or warranties shall be binding upon the Port Authority unless expressed in writing in the TNAS Agreement or in this Agreement. All prior or contemporaneous understandings, discussions or agreements regarding the Wi-Fi Fee are expressly superseded by this Agreement |
9. As hereby amended, all of the terms, covenants, provisions, conditions and agreements of the TNAS Agreement shall be and remain in full force and effect. |
IN WITNESS WHEREOF, the Port Authority and the Permittee have executed these presents, as of the date first above written.
ATTEST: |
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THE PORT AUTHORITY OF NEW YORK |
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By: |
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Secretary |
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Title: |
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(Seal) |
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ATTEST: |
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NEW YORK TELECOM PARTNERS, LLC |
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By: |
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Concourse Communications Group, LLC |
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By: |
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Jon Irwin, Chief Operating Officer |
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CONFIDENTIAL TREATMENT REQUESTED
(Port Authority Acknowledgment)
STATE OF NEW YORK)
)ss.:
COUNTY OF NEW YORK)
On the ____ day of ___________________, 201__, before me personally came ______________________________, to me known, who, being by me duly sworn, did depose and say that he resides at _______________________________________________________; that he is the ______________________________ of The Port Authority of New York and New Jersey, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Commissioners of said corporation; and that he signed his name thereto by like order.
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(notarial seal and stamp) |
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(Limited Liability Company Acknowledgment)
STATE OF ____________)
)ss.:
COUNTY OF __________)
On the ____ day of ___________________, 201__, before me personally came ______________________________, to me known, who, being by me duly sworn, did depose and say that he resides at _______________________________________________________; that he is the ______________________________ of New York Telecom Partners, LLC, a Delaware limited liability company, the limited liability company described in and which executed the foregoing instrument; that he executed the same for and on behalf of said limited liability company, and that he is duly authorized and empowered to do so.
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(notarial seal and stamp) |
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 10.4
Agreement No. AX-713 Supplement No. 4
SUPPLEMENTAL AGREEMENT NO. 4 TO
TELECOMMUNICATIONS NETWORK ACCESS AGREEMENT
dated as of August 26, 1999
by and between
THE PORT AUTHORITY OF
NEW YORK AND NEW JERSEY
and
NEW YORK TELECOM PARTNERS, LLC
for Portions of the World Trade Center,
New York, New York
This Supplemental Agreement No. 4 is dated as of July 21, 2014
CONFIDENTIAL TREATMENT REQUESTED
Table of Contents
(continued)
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ARTICLE I |
DEFINITIONS |
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2 | ||
ARTICLE II |
SCOPE OF AGREEMENT |
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9 | ||
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2.1 |
Relationship to TNAS Agreement |
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9 | |
ARTICLE III |
THE SYSTEM |
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10 | ||
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3.1 |
DAS System, Wi-Fi System, Fiber Backbone |
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10 | |
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3.2 |
Periodic Meetings |
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11 | |
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3.3 |
Applicable Provisions of the TNAS Agreement: Port Authority’s Right of Relocation |
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11 | |
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3.4 |
System Upgrades |
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11 | |
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3.5 |
Port Authority Expansion Right |
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12 | |
ARTICLE IV |
PROVISION OF DAS AND WI-FI SERVICE |
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12 | ||
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4.1 |
Permittee’s Service Obligations |
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12 | |
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4.2 |
Resiliency Requirements |
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15 | |
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4.3 |
Times to Report and Repair |
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15 | |
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4.4 |
Remedies for System Failures |
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16 | |
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4.5 |
Applicable Provisions of the TNAS Agreement: Manner of Operation |
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17 | |
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4.6 |
Applicable Provisions of the TNAS Agreement: Objectionable Interference |
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17 | |
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4.7 |
On-Site Staff |
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17 | |
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4.8 |
Applicable Provisions of the TNAS Agreement: Maintenance and Repair |
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17 | |
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4.9 |
Planned Maintenance |
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18 | |
ARTICLE V |
IN-KIND SERVICES |
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18 | ||
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5.1 |
In-Kind Services |
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18 | |
ARTICLE VI |
CARRIER USERS |
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18 | ||
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6.1 |
Carrier User Access to System |
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18 | |
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6.2 |
Standard Access Offering |
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18 | |
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6.3 |
Carrier Agreements |
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19 | |
ARTICLE VII |
SYSTEM CONSTRUCTION AND ALTERATIONS |
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19 | ||
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7.1 |
Applicable Provisions of the TNAS Agreement: Installation Work |
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19 | |
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7.2 |
Port Authority Review of Proposed System Work |
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20 | |
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7.3 |
Initial System Construction Work Schedule |
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20 | |
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7.4 |
Applicable Provisions of the TNAS Agreement: Initial System Capital Cost Reporting |
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22 | |
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7.5 |
Applicable Provisions of the TNAS Agreement: Other Construction |
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22 | |
ARTICLE VIII |
FEES AND EXPENSES |
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23 | ||
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8.1 |
Variable Fees |
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23 | |
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8.2 |
Port Authority Base Infrastructure Costs |
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23 | |
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8.3 |
Infrastructure Reimbursement Credit |
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24 | |
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8.4 |
Port Authority Operating Costs |
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24 |
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CONFIDENTIAL TREATMENT REQUESTED
Table of Contents
(continued)
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8.5 |
System Capital Costs |
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8.6 |
Late Charges |
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26 | |
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8.7 |
Additional Revenue Opportunities |
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26 | |
ARTICLE IX |
UTILITIES |
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27 | ||
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9.1 |
Electricity |
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27 | |
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9.2 |
Heating, Ventilation and Air Conditioning |
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29 | |
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9.3 |
Government Charges |
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30 | |
ARTICLE X |
TRANSFERS |
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31 | ||
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10.1 |
Prohibition on Transfers |
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31 | |
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10.2 |
Carrier Users |
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ARTICLE XI |
TERM, DEFAULT AND TERMINATION |
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11.1 |
Term |
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11.2 |
Non-Curable Terminating Events |
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31 | |
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11.3 |
Schedule Milestone Defaults |
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33 | |
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11.4 |
Major Defaults |
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34 | |
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11.5 |
Other Defaults |
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34 | |
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11.6 |
Default Notices |
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35 | |
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11.7 |
Self-Help |
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35 | |
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11.8 |
Remedies; No Waiver |
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35 | |
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11.9 |
Imputation of Actions of Carrier Users |
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35 | |
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11.10 |
Applicable Provisions of the TNAS Agreement: Force Majeure |
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36 | |
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11.11 |
Termination Without Cause |
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36 | |
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11.12 |
Right of Use Upon Termination |
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36 | |
ARTICLE XII |
SECURITY FOR PERFORMANCE OF PERMITTEE’S OBLIGATIONS |
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37 | ||
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12.1 |
Initial Construction and Reimbursement Obligations |
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37 | |
ARTICLE XIII |
REPORTING |
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37 | ||
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13.1 |
Periodic Reports During Initial Construction |
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37 | |
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13.2 |
Periodic Reports Following Initial Construction |
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38 | |
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13.3 |
Inventory and Depreciation |
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39 | |
ARTICLE XIV |
MISCELLANEOUS |
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39 | ||
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14.1 |
Additional Applicable Provisions of the TNAS Agreement |
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39 | |
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14.2 |
Permittee’s OFAC Representations, Warranties and Covenants |
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41 | |
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14.3 |
Audit Rights |
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42 | |
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14.4 |
No Broker |
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43 | |
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14.5 |
Notices |
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43 | |
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14.6 |
Port Authority Additional Provisions |
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44 | |
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14.7 |
Entire Agreement |
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49 |
ii
CONFIDENTIAL TREATMENT REQUESTED
Table of Contents
(continued)
Schedules and Exhibits:
Schedule 1 |
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List of Additional Insureds |
Schedule 2 |
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Sample DAS System Availability and Downtown Calculation Methodology |
Exhibit A |
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Master Plan |
Exhibit B-1 |
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DAS Designated Coverage Areas |
Exhibit B-2 |
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Temporary System Areas |
Exhibit B-3 |
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Wi-Fi Designated Coverage Areas |
Exhibit C |
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Summary Basis of Design |
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Exhibit D |
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Initial Schedule Milestones |
Exhibit E |
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System Plans and Specifications |
Exhibit F |
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System Site Plan |
iii
CONFIDENTIAL TREATMENT REQUESTED
SUPPLEMENTAL AGREEMENT
This SUPPLEMENTAL AGREEMENT (this “Supplement”) is made as of July 21, 2014 by and between THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (the “Port Authority”) and NEW YORK TELECOM PARTNERS, LLC (the “Permittee”). The Port Authority and the Permittee are sometimes referred to individually as “Party” or together as the “Parties”.
WITNESSETH, that:
WHEREAS, the Port Authority and the Permittee heretofore and as of August 26, 1999 entered into an agreement identified by the Port Authority as Agreement Number AX-713 (the “Original Agreement”), as supplemented and amended by (i) that certain Supplemental Agreement dated as of March 28, 2001 by and between the Port Authority and the Permittee (“Prior Supplement No. 1”), (ii) that certain Supplemental Agreement dated as of June 30, 2002 by and between the Port Authority and the Permittee (“Prior Supplement No. 2”) and (iii) that certain Supplemental Agreement dated as of November 30, 2006 by and between the Port Authority and the Permittee (“Prior Supplement No. 3”; the Original Agreement, Prior Supplement No. 1, Prior Supplement No. 2 and Prior Supplement No. 3 are collectively referred to herein as the “TNAS Agreement”), covering certain privileges and obligations with respect to the installation, operation, and maintenance of a wireless telecommunications network access system at Port Authority facilities, including the certain property then constituting a facility of commerce commonly known as the World Trade Center, all as more particularly described in the TNAS Agreement.
WHEREAS, as a result of the terrorist attacks of September 11, 2001, all of the buildings, structures, and improvements then constituting the World Trade Center were destroyed.
WHEREAS, a master plan for the redevelopment of the World Trade Center (the “Master Plan”) has been developed, which provides for, among other things, the construction of the following buildings and improvements on the World Trade Center site: the property to be commonly known as One World Trade Center, the property to be commonly known as Two World Trade Center (“2 WTC”), the property to be commonly known as Three World Trade Center, the property to be commonly known as Four World Trade Center, the property to be commonly known as the Retail Premises (the “Retail Premises”) and the property to be commonly known as the Transportation Hub (the “Transportation Hub”), all as more specifically identified on the Master Plan attached hereto as Exhibit A.
WHEREAS, in light of the redevelopment of the World Trade Center generally in accordance with the Master Plan, the Port Authority and the Permittee desire to amend and supplement the TNAS Agreement to further and more specifically set forth the rights and obligations of the Parties with respect to the development, installation, operation and maintenance of a multi-wireless service, neutral-host Distributed Antenna System (as more specifically defined herein, the “DAS System”) and Wireless Local Area Network (as more specifically defined herein, the “Wi-Fi System”) across a common fiber backbone (as more specifically defined herein, the “Fiber Backbone”) in certain
1
CONFIDENTIAL TREATMENT REQUESTED
designated areas of the World Trade Center and to otherwise amend and supplement the TNAS Agreement as more specifically set forth in this Supplement. This Supplement is not intended to amend any of the provisions of the TNAS Agreement as to Port Authority facilities other than the World Trade Center.
NOW, THEREFORE, for and in consideration of the covenants and mutual agreements herein contained, and effective as of the Commencement Date, the Port Authority and the Permittee hereby agree as follows:
Whenever used in this Supplement, the following terms shall have the respective meanings specified in this Article I. For the avoidance of doubt, in the event any term defined below is defined differently herein than in the TNAS Agreement, the definition contained in the TNAS Agreement shall apply for purposes of the TNAS Agreement and the definition below shall apply for purposes of this Supplement (except as otherwise specifically provided). Other capitalized terms which are used in this Supplement but not otherwise defined herein shall have the respective meanings given to such terms in the Original Agreement.
1.1“2 WTC” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.2“Allowable Deductions” shall mean, collectively, the DAS Allowable Deductions and the Wi-Fi Allowable Deductions.
1.3“Annual Period” shall mean a calendar year commencing on January 1 and ending on December 31. The period from the date upon which the System or any portion thereof is first operational and capable of providing the DAS Service and/or Wi-Fi Service to the next occurring December 31 shall be the first Annual Period and the next Annual Period from January 1 to December 31 shall be the second Annual Period and so forth. If the date on which the Term of this Supplement ends is other than December 31, the final Annual Period shall be the period from January 1 of the year in which the Term of this Supplement ends to the date on which the Term of this Supplement ends.
1.4“Base Infrastructure Costs Reimbursement” shall have the meaning set forth in Section 8.2.1.
1.5“Base Net Present Value Amount” shall have the meaning set forth in Section 11.11.2.
1.6“Base Unamortized Capital Amount” shall have the meaning set forth in Section 11.11.3.
1.7“Boingo” shall have the meaning set forth in Section 12.1.
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CONFIDENTIAL TREATMENT REQUESTED
1.8“Capital Costs” shall have the meaning set forth in Section 8.5.
1.9“Carrier Agreement” shall have the meaning set forth in Section 6.1.
1.10“Carrier User Alternative Performance Requirement” shall have the meaning set forth in Section 4.1.1(a)(iii).
1.11“Carrier Users” shall mean any current or future wireless services providers offering communications services to the public, including cellular, personal communications service (PCS), specialized mobile radio (SMR), paging, commercial mobile radio service (CMRS), wireless broadband, telematics and wireless data, that hold a valid FCC authorization and which are party to a Carrier Agreement.
1.12“Commencement Date” shall mean the date first set forth above.
1.13[*]
1.14“DAS Capital Costs Recovery” shall have the meaning set forth in Section 8.5.
1.15“DAS Designated Coverage Areas” shall mean those portions of the WTC Site indicated on the plans attached hereto as Exhibit B-1 to which the Permittee is required to design, install, operate, maintain, market and otherwise provide the DAS System.
1.16“DAS Gross Revenues” shall mean all monies or other consideration received or receivable, paid or payable, cash or credit, regardless of collection in the case of the latter (unless any such credit amount is ultimately deemed uncollectible in accordance with generally accepted accounting principles), to or by the Permittee with respect to the DAS System on (i) all sales of merchandise and services, such as advertising and promotional sales, whether retail or wholesale, derived from the operation of the DAS System at the WTC Site regardless of when or where the order therefore is received and (ii) any other receipts, credits, rebates, allowances, or revenues of any type arising out of or in connection with Permittee’s operation of the DAS System at the WTC Site (excluding any monies or other consideration received, paid or payable to or by the Permittee from Wi-Fi off-loading of cellular data or other form of data transmission or information sharing from the DAS System to the Wi-Fi System), including but, not limited to, branding fees, marketing fees, merchandising fees, promotional allowances, retail display allowances and any type of ancillary advertising or product placement fees/allowances and all other transactions, whether placed by telephone, via internet, in person, or by mail (including e-mail) and all charges or other fees charged by the Permittee with respect to the DAS System, without any deductions for credit card discounts or thefts. In addition, any outside contributions for Capital Costs received by the Permittee with respect to the DAS System in excess of the actual amount expended by the Permittee for such Capital Costs shall constitute DAS Gross Revenues, except to the extent any such excess contributions are paid or refunded to the Carrier Users pursuant to the requirements of the applicable Carrier Agreement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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1.17“DAS Net Income” shall mean, for each Annual Period during the Term, the DAS Gross Revenues for such Annual Period less DAS Allowable Deductions for such Annual Period.
1.18“DAS Phase 1 Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-1 as “DAS Phase 1 Areas”.
1.19“DAS Phase 2 Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-1 as “DAS Phase 2 Areas”.
1.20“DAS Phase 3 Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-1 as “DAS Phase 3 Areas”.
1.21“DAS Phase 4 Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-1 as “DAS Phase 4 Areas”.
1.22“DAS Service” shall mean the transmission or reception of wireless telecommunications signals to or from DAS Users.
1.23“DAS System” or “Distributed Antenna System” shall mean a spatially separated network of antennas, fiber optic cable strands and other associated equipment designed to provide radio frequency coverage at the WTC Site within the Designated Coverage Areas for use by multiple Wireless Carriers pursuant to the terms of this Supplement. The terms “DAS System” and “Distributed Antenna System” shall include the Temporary System for the applicable temporary periods contemplated pursuant to this Supplement.
1.24“DAS System Performance Standard” shall mean the Permanent DAS System Performance Standard or the Temporary System Performance Standard, as applicable.
1.25“DAS Users” shall mean the general public, visitors, tenants and other end-user customers of Carrier Users using mobile or portable devices located at or within the WTC Site.
1.26“DAS Variable Fee” shall have the meaning set forth in Section 8.1.1.
1.27“Designated Coverage Areas” shall mean the DAS Designated Coverage Areas and the Wi-Fi Designated Coverage Areas.
1.28“Electricity Consumption and Demand” shall have the meaning set forth in Section 9.1.1.
1.29“FCC” shall mean the Federal Communications Commission.
1.30“Fiber Backbone” shall mean the common fiber optic cable strands used within the DAS System and Wi-Fi System, but shall not include excess fiber capacity deployed by the Permittee in accordance with this Supplement for other purposes.
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1.31“First Additional Base Infrastructure Costs Reimbursement” shall have the meaning set forth in Section 8.2.2.
1.32“Grand Opening Milestone” shall have the meaning set forth on Exhibit D attached hereto.
1.33“Grand Opening Milestone Default” shall mean a failure by the Permittee to meet the Grand Opening Milestone.
1.34“Gross Revenues” shall mean, collectively, the DAS Gross Revenues and the Wi-Fi Gross Revenues.
1.35“HVAC Consumption and Demand” shall have the meaning set forth in Section 9.2.1.
1.36“HVAC Service” shall have the meaning set forth in Section 9.2.
1.37“In-Kind Services” shall have the meaning set forth in Section 5.1.
1.38“Infrastructure Costs Reimbursement” shall have the meaning set forth in Section 8.2.3.
1.39“Infrastructure Reimbursement Credit” shall have the meaning set forth in Section 8.3.
1.40“Initial Schedule Milestone” shall have the meaning set forth in Section 7.3.
1.41“Initial Temporary System Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-2 as “Initial Temporary System Areas”.
1.42“Major Default” shall have the meaning set forth in Section 11.4.
1.43“Major Default Notice” shall have the meaning set forth in Section 11.4.
1.44“Master Plan” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.45“Net Income” shall mean, for each Annual Period during the Term, Gross Revenues for such Annual Period less Allowable Deductions for such Annual Period.
1.46“Non-Curable Default” shall have the meaning set forth in Section 11.2.
1.47“Notice” shall have the meaning set forth in Section 14.5.
1.48“Off-Peak Times” shall mean times that are not Peak Times.
1.49“Other Default” shall have the meaning set forth in Section 11.5.
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1.50“Other Default Notice” shall have the meaning set forth in Section 11.5.
1.51“OFAC” shall have the meaning set forth in Section 14.2.1.
1.52“Original Agreement” shall have the meaning set forth in the introductory paragraphs of this Supplement
1.53“Other Temporary System Areas” shall mean those portions of the DAS Designated Coverage Areas identified on the plans attached hereto as Exhibit B-2 as “Other Temporary System Areas”.
1.54“Party” and “Parties” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.55“Peak Times” shall have the meaning set forth in Section 4.1.1(a)(2).
1.56“Performance Standard Violation” shall have the meaning set forth in Section 4.4.
1.57“Period” shall have the meaning set forth in Section 13.1 or Section 13.2, as applicable.
1.58“Permanent DAS System Performance Standard” shall have the meaning set forth in Section 4.1.1(a)(i).
1.59“Permittee” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.60“Point of Interface” shall mean locations within the WTC Site where System equipment connects with cable and conduit.
1.61“Port Authority” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.62“Port Authority Base Infrastructure Costs” shall have the meaning set forth in Section 8.2.
1.63“Port Authority Dark Fiber” shall have the meaning set forth in Section 3.1.4(a).
1.64“Port Authority Operating Costs” shall have the meaning set forth in Section 8.4.
1.65“Prior Supplement No. 1” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.66“Prior Supplement No. 2” shall have the meaning set forth in the introductory paragraphs of this Supplement.
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1.67“Prior Supplement No. 3” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.68“QAD” shall have the meaning set forth in Section 7.2.2.
1.69“Representative” shall have the meaning set forth in Section 14.2.2.
1.70“Retail Premises” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.71“Retail Schedule Milestone” shall have the meaning set forth in Section 7.3.
1.72“Schedule Milestone Default” shall have the meaning set forth in Section 11.3.
1.73“Second Additional Base Infrastructure Costs Reimbursement” shall have the meaning set forth in Section 8.2.3.
1.74“Signal Level Range” shall have the meaning set forth in Section 4.1.1(a)(1).
1.75“Standard Access Offering” shall have the meaning set forth in Section 6.2.
1.76“Summary Basis of Design” shall mean the summary basis of design attached hereto as Exhibit C.
1.77“Supplement” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.78“System” shall mean the DAS System, Wi-Fi System, and the Fiber Backbone at the WTC Site.
1.79“System Plans and Specifications” shall mean those certain plans and specifications for the System listed on Exhibit E.
1.80“System Performance Standard” shall mean the DAS System Performance Standard and the Wi-Fi System Performance Standard.
1.81“System Operations” shall mean the installation, operation and maintenance of the System as provided in this Supplement.
1.82“System Specifications” shall have the meaning set forth in Section 3.1.
1.83“Temporary System” shall mean the spatially separated network of broadband antennas (known as “donor sites”) installed above grade on masts at the WTC Site for the purposes of communicating with the wireless (WSP) macro sites in the surrounding neighborhood to provide DAS Service to the Temporary System Areas. Such donor sites will be cabled in conduit to the appropriately
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located DAS System repeater room(s) and, in turn, connect to amplified electronic “repeaters” connected to the below-grade DAS System antennas. The Temporary System shall initially be comprised of two (2) donor sites, although more donor sites may be added by good faith agreement of the Parties as necessary to provide DAS Service to the Temporary System Areas.
1.84“Temporary System Areas” shall mean the Initial Temporary System Areas and the Other Temporary System Areas.
1.85“Temporary System Performance Standard” shall have the meaning set forth in Section 4.1.1(a)(ii).
1.86“Term of this Supplement” shall have the meaning set forth in Section 11.1.
1.87“TNAS Agreement” shall have the meaning set forth in the introductory paragraphs of this Supplement, as the same may have been further amended or supplemented as of the Commencement Date.
1.88“Transportation Hub” shall have the meaning set forth in the introductory paragraphs of this Supplement.
1.89“Under Covered Areas” shall have the meaning set forth in Section 4.1.1(a)(1).
1.90“Variable Fees” shall have the meaning set forth in Section 8.1.2.
1.91“Violation Fee” shall have the meaning set forth in Section 4.4.1.
1.92“Wi-Fi” shall mean a wireless signal used to connect interoperable devices such as laptop computers, smart phones and other similar equipment to a local area network.
1.93[*]
1.94“Wi-Fi Capital Costs Recovery” shall have the meaning set forth in Section 8.5.
1.95 “Wi-Fi Designated Coverage Areas” shall mean those portions of the WTC Site indicated on the plans attached hereto as Exhibit B-3 to which the Permittee is required to design, install, operate, maintain, market and otherwise provide the Wi-Fi System.
1.96[*]
1.97“Wi-Fi Net Income” shall mean, for each Annual Period during the Term, the Wi-Fi Gross Revenues for such Annual Period less Wi-Fi Allowable Deductions for such Annual Period.
1.98“Wi-Fi Service” shall mean the transmission or reception of wireless internet signals to or from Wi-Fi Users.
1.99“Wi-Fi System” shall mean the wireless local area network designed, installed, operated, maintained, and marketed by the Permittee at the WTC Site pursuant to the terms of this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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1.100“Wi-Fi System Performance Standard” shall have the meaning set forth in Section 4.1.2(a).
1.101“Wi-Fi Users” shall mean the general public, visitors, tenants and other end-user customers using mobile, portable or computer devices at or within the WTC Site.
1.102“Wi-Fi Variable Fee” shall have the meaning set forth in Section 8.1.2.
1.103“World Trade Center” shall mean that certain parcel of land bounded by and located within the area encompassed by the corner of Vesey Street and West Street moving east toward Church Street, south on Church Street to Liberty Street, west on Liberty Street to Greenwich Street, south on Greenwich Street to Albany Street, west on Albany Street to Washington Street, north on Washington Street to Cedar Street, west on Cedar Street to West Street and north on West Street to Vesey Street, located in the Borough of Manhattan, City, County and State of New York and commonly referred to as the World Trade Center.
1.104“WTC Site” shall mean those portions of the World Trade Center which comprise the Designated Coverage Areas.
1.105“WTC Termination Amount” shall have the meaning set forth in Section 11.11.5.
1.106“WTCR” shall have the meaning set forth in Section 7.2.1.
2.1Relationship to TNAS Agreement. This Supplement embodies the entire agreement and understanding between the Port Authority and the Permittee with respect to the World Trade Center and supersedes all prior agreements and understandings between the Parties relating to the Port Authority facilities at the World Trade Center. Notwithstanding anything to the contrary set forth in the TNAS Agreement, the TNAS Agreement shall only apply to the World Trade Center and any portion thereof as and to the extent specifically provided in this Supplement. In furtherance of the foregoing, and for the avoidance of doubt, (i) the TNAS Agreement shall be and hereby is superseded in its entirety solely with respect to the World Trade Center and shall be of no further force and effect with respect thereto except as specifically incorporated herein and (ii) the Permittee shall have no rights or obligations with respect to any portion of the World Trade Center other than those portions of the World Trade Center which comprise the Designated Coverage Areas, and only to the extent set forth herein. The remaining provisions of the TNAS Agreement unrelated to the World Trade Center shall be unaffected by this Supplement, except to the extent expressly provided in Sections 11.1 and 11.10.
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3.1DAS System, Wi-Fi System, Fiber Backbone. The Permittee shall have the right and obligation to design, install, operate, maintain, and market at the WTC Site (i) a custom-designed DAS System for shared use by Carrier Users and (ii) a custom-designed Wi-Fi System, each on the terms and in accordance with the applicable specifications set forth in this Section 3.1 (collectively, the “System Specifications”) and the System Performance Standard, in a manner so as to provide service to the Designated Coverage Areas and otherwise in accordance with the terms of this Supplement. The Permittee shall design the System to be world-class, comprehensive, flexible and scalable and in a manner which will, at a minimum, limit potential service loss, allow for routine maintenance and upgrading to prevailing professional standards, reasonably accommodate future uses and reasonably limit total cost of the System and its operations through the use of prudent design alternatives.
3.1.1 DAS System Specifications. The Permittee shall design the DAS System to address commercially reasonable design needs, standards and requirements of the Port Authority and Carrier Users, provided, however, that at a minimum, the DAS System shall reasonably accommodate the future participation of additional Carrier Users, even if such Carrier Users do not initially participate. The DAS System will be an easy-to-scale, fiber-based, reasonably future-proof system with system-wide availability of [*] or greater for all core components.
3.1.2 Wi-Fi System Specifications. The Permittee shall design the Wi-Fi System to address commercially reasonable design needs, standards and requirements of a state of the art commercial Wi-Fi System intended to service the needs of anticipated current and future general public and private enterprise Wi-Fi Users. The Wi-Fi System will be an easy-to-scale, fiber-based, future-proof system with system-wide availability of [*] or greater for all core components, as further described below. Permittee shall ensure that the Wi-Fi System will at all times meet or exceed industry standards.
3.1.3 Fiber Backbone Specifications. The Permittee shall design the Fiber Backbone to include a minimum of [*] fiber strands to meet the design, spare strands and growth requirements of the System and to permit the provision of the excess capacity and additional services required pursuant to this Supplement.
3.1.4 Excess Capacity.
(a)The Permittee shall design, deploy and install, as part of the System, additional fiber optic capacity as so-called dark fiber strands in an amount equal to one hundred percent (100%) of the minimum design capacity in the distribution routes designated by the Port Authority (the “Port Authority Dark Fiber”). The Port Authority Dark Fiber may be used by the Port Authority, its affiliates, assignees, designees, licensees, lessees and any other Person designated by the Port Authority for any purpose, provided that such utilization does not (i) compromise the functionality of the System or (ii) violate any exclusive rights granted to the Permittee pursuant to this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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(b)The Permittee shall have the non-exclusive right to offer excess or overbuilt fiber capacity other than the Port Authority Dark Fiber on a non-discriminatory basis for use by Carrier Users (or other third parties approved by the Port Authority in writing) within the Designated Coverage Areas, and any amounts received or payable to the Permittee on account of such use shall constitute DAS Gross Revenues. Nothing in this Supplement shall restrict the rights of the Port Authority to offer fiber capacity for use by third parties including, without limitation, the right to offer such capacity in competition with the Permittee, provided that such capacity is not used by any third party for: (i) DAS Service available to the general public within the Designated Coverage Areas or (ii) Wi-Fi Service available to the general public within the public areas of the Transportation Hub, except as provided in Section 4.1.2.
3.2Periodic Meetings. Senior representatives of the Permittee shall meet with the Port Authority on a monthly basis (or more frequently upon the Port Authority’s reasonable request) from and after the Commencement Date until the completion of the Initial System Construction Work and quarterly thereafter (or at such other times as may be specified by the Port Authority) to discuss design, construction, operational and financial performance and any other matters reasonably requested by the Port Authority. At such meetings, the Permittee’s representatives shall discuss, among other things, (i) the impact of any changes in the wireless communications industry, (ii) the financial and operational performance of the System and (iii) any steps the Permittee is taking to assure that all appropriate technological developments are incorporated into the System on an ongoing basis. The Permittee shall prepare minutes following each such meeting, deliver copies of all minutes to the Port Authority and maintain a minute book containing all of the minutes (which minute book shall be available to the Port Authority upon advance notice). Meetings may be conducted either by phone, video-conference or in person at a location in New York City. At the request of the Port Authority, the Permittee shall invite the architect(s) and/or contractor(s) for the Initiation System Construction Work to attend such meetings. In addition, the Permittee shall notify the Port Authority and invite the Port Authority’s attendance at and participation in meetings material to the design and implementation of the System and the development of business terms of Carrier Agreements.
3.3Applicable Provisions of the TNAS Agreement: Port Authority’s Right of Relocation. Section 15 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement), (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement and (iii) the references to “Section 7” as used in Section 15(e) of the Original Agreement shall mean Section 7 of the Original Agreement as incorporated in this Supplement pursuant to Section 7.1.
3.4.1 The Permittee shall, at no cost to the Port Authority, promptly upgrade the DAS System upon the request of any Carrier User in accordance with the applicable Carrier Agreement and
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the Wi-Fi System as emerging technological advances become commercially operable in world-class transportation facilities.
3.4.2 Subject to the Port Authority and Permittee negotiating in good faith the terms and conditions for an upgrade, the Permittee shall upgrade the System upon request by the Port Authority (or the Port Authority on behalf of the net lessee of the Retail Premises) from time to time so that the Port Authority, such retail net lessee and their respective tenants may avail themselves of technological advances in communication services.
3.5Port Authority Expansion Right. At the Port Authority’s request, the Permittee shall provide internal staff resources to the Port Authority at no cost to the Port Authority to evaluate the System or any portion thereof to be extended into select and limited areas of the WTC Site beyond the Designated Coverage Areas. If the addition of such areas will not compromise the applicable System Specifications and System Performance Standard, the Port Authority, at its sole cost and expense, may direct the Permittee to expand the System or such portion thereof. Any benefit derived from said expansion will accrue solely to the Port Authority.
ARTICLE IV
PROVISION OF DAS AND WI-FI SERVICE
4.1Permittee’s Service Obligations. The Permittee shall install, deploy, operate and maintain the System in a manner such that the Wi-Fi Service and DAS Service, respectively, are provided to the Designated Coverage Areas in accordance with the provisions of this Supplement.
4.1.1 DAS Service. Subject to the Port Authority’s rights under Section 7.3, the Permittee shall have the exclusive right to install, operate, maintain and market the DAS System within the Designated Coverage Areas, except that if (i) the Port Authority or the retail net lessee wishes to expand the areas where cellular communications are capable of transmission and reception beyond the Designated Coverage Areas and (ii) the Permittee is unable or unwilling to expand such areas on terms and conditions, including allocation of costs, that are reasonably acceptable to the retail net lessee and the Port Authority, as applicable, then the retail net lessee and/or the Port Authority may expand such areas directly or through a third-party without violating any rights of Permittee, provided such expansion does not impact the operations of the System. The DAS System shall enable each Carrier User to provide current and future DAS Service to its respective DAS Users within the DAS Designated Coverage Areas pursuant to and in accordance with the applicable Carrier Agreement and otherwise in accordance with the standards and requirements set forth in this Section 4.1.1.
(a)DAS System Performance Standard.
(i)Permanent DAS System. Except as otherwise expressly provided in this Section 4.1.1, the Permittee shall, after connection to the DAS System by a Carrier User, operate the DAS System at the WTC Site in accordance with a performance standard (the “Permanent DAS System Performance Standard”) that is the greatest of (i) prevailing commercial
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performance standards for a state of the art DAS System utilized in a world-class mixed use facility (provided that if the Port Authority contends that the DAS System does not comply with such prevailing commercial performance standards and the DAS System would require upgrades or improvements to comply with such standards, the Permittee’s obligation to make such upgrades or improvements to bring the DAS System into compliance shall be subject to the Port Authority and Permittee negotiating in good faith the terms and conditions for any required upgrades or improvements) and (ii) the following detailed standards:
(A)DAS System coverage within [*] or greater of the DAS Designated Coverage Areas shall have signal levels at -65dBm (above grade) or -75dBm (below grade) or better at all times (collectively, the “Signal Level Range”). In the event certain DAS Designated Coverage Areas meet the Signal Level Range less than [*] of the time, on average, as a result of the design of the DAS System or known signal strength limiting site conditions, the Permittee shall identify such areas (the “Under Covered Areas”) and specify the expected user experience for the Under Covered Areas. If the total square footage of the Under Covered Areas is greater than [*] of the DAS Designated Coverage Areas, then the DAS System shall be deemed not to satisfy the foregoing detailed standard unless such degraded service is caused by failures of Carrier User equipment or other causes outside of the control of Permittee.
(B)The DAS System shall be available (a) [*] of the time or greater from 7:00 a.m. to 10:00 p.m. daily (“Peak Times”) and (b) [*] of the time or greater on average during all hours (i.e., Peak Times and Off-Peak Times). If the accumulated DAS System downtime during any Annual Period exceeds (y) [*] for Peak Times or (z) [*] on average during all hours (i.e., Peak Times and Off-Peak Times), Permittee shall be deemed not to satisfy the foregoing detailed standard. For the purposes of this Section 4.1.1(a)(2), availability and downtime determinations shall be calculated based on the amount of devices that are able to access the DAS System at any time and from time to time, in a manner as reasonably determined by the Port Authority. For purposes of illustration only, and without limiting the right of the Port Authority to make reasonable determinations pursuant to the immediately preceding sentence, a sample calculation methodology is set forth on Schedule 2 attached hereto.
(ii)Temporary System. The Permittee shall operate each Temporary System at the WTC Site so that the Temporary System Areas are provided with DAS Service in accordance with the so-called “3G” protocols promulgated by the International Telecommunications Union (the “Temporary System Performance Standard”) from the period commencing upon the connection to such Temporary System by a Carrier User until the permanent DAS System for the applicable area is delivered, commissioned in accordance with applicable QAD requirements and fully operational (as applicable) in accordance with this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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(iii)Carrier Users. Notwithstanding any provisions of this Section 4.1.1(a) to the contrary, if one (1) or more Carrier Users requires a performance standard for the DAS System in its Carrier Agreement that is inconsistent with the performance standard otherwise required herein (such inconsistent standard, the “Carrier User Alternative Performance Requirement”), the Carrier User Alternative Performance Requirement shall constitute the applicable System Performance Standard to the extent of such inconsistency so long as the inconsistent standard is greater than the performance standard otherwise required herein.
(b)The Permittee shall not permit any radio signals received or transmitted to or by any DAS User through the DAS System to be in any electromagnetic radio frequency spectrum other than the portion(s) of the electromagnetic radio frequency spectrum then-permitted for such use by the FCC or any other governmental authority pursuant to applicable law.
(c)In addition to the foregoing, in light of the particular technical requirements associated with elevators, the Permittee and the Port Authority shall work cooperatively to enable DAS Service to be provided to the elevators located within such portions of the WTC Site apart from those noted in the Designated Coverage Areas, as may be designated by the Port Authority from time to time.
(d)The Permittee shall operate the DAS System so as to accommodate all interested Carrier Users on a non-exclusive and non-discriminatory basis up to the design capacity of the DAS System or the Wi-Fi System, as more specifically provided in the applicable Carrier Agreement.
4.1.2 Wi-Fi Service. Subject to the Port Authority’s rights under Section 7.3, the Permittee shall have (a) the right to install, operate, maintain and market the Wi-Fi System within the Designated Coverage Areas and (b) the exclusive right to install, operate, maintain and market the Wi-Fi System and provide Wi-Fi Service within the public areas of the Transportation Hub. For the avoidance of doubt, (i) the utilization of any In-Kind Services by the Port Authority for any purpose expressly permitted in this Supplement or that does not directly compete with the provision of DAS or Wi-Fi will not be deemed a violation of any rights of Permittee, (ii) the Port Authority may provide Wi-Fi services for its internal operations and public stakeholders, including, but not limited to, police, fire, ambulatory and other such emergency service providers, without violating any rights of Permittee and (iii) retail stores, restaurants, commercial office lobbies and attractions (including, without limitation, any observation deck lobbies from time to time located within One World Trade Center) may install and provide their own Wi-Fi services without violating any rights of the Permittee, provided that such tenants utilize a system that will not provide Wi-Fi service outside of such tenant’s demised space or use area except leakage to a de minimus extent. In addition, and notwithstanding anything contained in this Supplement to the contrary, the Port Authority reserves the right to offer or permit its development partners or tenants to offer premium Wi-Fi Service free of charge to the public in common areas of the WTC Site in a manner that maintains the economic benefits to the Permittee of the Wi-Fi provisions of this Supplement. Any such free Wi-Fi Service may be paid for by sponsorships or by the Port Authority (or its development partners or tenants). Without limiting any of the foregoing provisions of this Section 4.1.2, the Port Authority shall use commercially reasonable efforts to ensure that any wireless local area network operated by the Port Authority within the Designated Coverage Areas does not cause Objectionable Interference with the Wi-Fi System.
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(a)The Wi-Fi System shall permit the Permittee to provide current and future Wi-Fi services to Wi-Fi Users within the Designated Coverage Areas. The Permittee shall cause Wi-Fi Service to be available for an unlimited amount of time to each user free of charge and at standards comparable that provided by other Wi-Fi providers at other world-class facilities within the United States. Permittee shall operate the Wi-Fi System at the WTC Site in accordance with a performance standard (the “Wi-Fi System Performance Standard”) that is the greatest of (i) prevailing commercial performance standards for a state of the art Wi-Fi System utilized in a world-class mixed use facility and (ii) a standard pursuant to which the Wi-Fi System is available [*] of the time or greater, provided that if the accumulated Wi-Fi System downtime during any Annual Period exceeds [*] for the Wi-Fi System, Permittee shall be deemed not to satisfy the foregoing detailed standard set forth in this clause (ii).
(b)The Permittee shall not permit any radio signals received or transmitted to or by any Wi-Fi User through the Wi-Fi System to be in any electromagnetic radio frequency spectrum other than the portion(s) of the electromagnetic radio frequency spectrum then-permitted for such use by the FCC or any other governmental authority pursuant to applicable law.
4.2Resiliency Requirements. Permittee shall provide a minimum [*] resiliency for the System through battery back-up in the Point of Interface room and any certain other rooms outside of the Point of Interface room, including the intermediate distribution frame closets, telecom closets, and equipment closets in which System components are located and, with respect to the DAS System, a location in the Transportation Hub.
4.3Times to Report and Repair. Upon the occurrence of any event that has an adverse effect on the provisions of DAS Service and/or the Wi-Fi Service, the Permittee shall use its best efforts to resolve such adverse effect as soon as practicable. Without limiting the foregoing, Permittee shall additionally comply with the following requirements with respect to any such event:
4.3.1 Within [*] after any System-wide, DAS Service affecting and/or Wi‑Fi Service affecting outage or interruption, the Permittee shall report the proposed solution or resolution regarding such outage or interruption to the Port Authority. The Permittee shall resolve such outage and restore service to pre-outage conditions within [*] after such notification, except that, with respect to any such outage that is the direct result of a failure of Carrier User equipment or infrastructure outside of the control of the Permittee, the Permittee shall be obligated to use best efforts to resolve such outage and restore service to pre-outage conditions as soon as possible following such notification.
4.3.2 Within [*] after any partial DAS Service affecting and/or Wi-Fi Service affecting outage or interruption, Permittee shall report the proposed solution or resolution regarding such outage or interruption to the Port Authority. The Permittee shall resolve such outage and restore service to pre-outage conditions within [*] after such notification, except that, with respect to any such outage that is the direct result of a failure of Carrier User equipment or infrastructure outside of the control of the Permittee, the Permittee shall be obligated to use best efforts to resolve such outage and restore service to pre-outage conditions as soon as possible following such notification.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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4.3.3 Within [*] of any non-service affecting System outage, the Permittee shall report the proposed solution or resolution regarding such outage or interruption to the Port Authority. The Permittee shall use best efforts to resolve such outage as soon as possible in order to minimize risk of a subsequent service-affecting outage. If the condition degrades to a DAS Service affecting and/or Wi-Fi Service outage, the response standards set forth in this Supplement for such outage shall apply and shall be measured from the onset of such service-affecting degradation.
Notwithstanding the foregoing, electrical service outages to the System will not be grounds for waiving the foregoing report and repair requirements.
4.4Remedies for System Failures. The Permittee shall, subject to Section 11.10, cure any and all failures to meet the applicable System Performance Standard (each, a “Performance Standard Violation”) within a fifteen (15) calendar day period after the earlier of written notice thereof shall have been received by the Permittee or such time as the Permittee has become aware of such Performance Standard Violation, which cure period may be extended for an additional thirty (30) calendar day period (or longer, if the circumstances reasonably require, provided that in no event shall any such cure period be extend for longer than a ninety (90) calendar day period in total) if the Permittee commences such cure within the original fifteen (15) calendar day period and continues to diligently pursue completion thereof.
4.4.1 Notwithstanding the foregoing (and regardless of whether the Permittee is pursuing or has effected cure), the Permittee shall pay the following amounts (each, a “Violation Fee”) on account of such Performance Standard Violations to the Port Authority at the time it is next obligated to make a Variable Fee payment pursuant to this Supplement (and the same shall be deemed fees collectible in the same manner and with like remedies as if such Violation Fees were a part of the Variable Fees hereunder):
(a)For the first Performance Standard Violation resulting in any DAS Service affecting and/or Wi-Fi Service affecting outage or interruption lasting more than four (4) hours within any Annual Period, the Violation Fee shall be an amount equal to (a) [*].
(b)For the second and each subsequent Performance Standard Violations resulting in any DAS Service affecting and/or Wi-Fi Service affecting outage or interruption lasting more than four (4) hours within any Annual Period, the Violation Fee shall be an amount equal to (a) [*].
The Parties acknowledge and agree that (i) the Violation Fees described above are a reasonable estimate of and bear a reasonable relationship to the damages that would be suffered and costs incurred by the Port Authority as a result of any such Performance Standard Violations, (ii) the actual damages suffered and costs incurred by the Port Authority as a result of any such Performance Standard Violations would be extremely difficult and impractical to determine and (iii) the applicable Violation Fees shall be and constitute valid liquidated damages on account of such Performance Standard Violations.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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4.4.2 Within forty-eight (48) hours of any Performance Standard Violation, the Permittee will prepare and issue to the Port Authority an analysis and narrative statement that outlines the cause of the Performance Standard Violation, the remedies taken by the Permittee, Carriers Users (with respect to the DAS System) and any other Persons to remedy such outage or interruption and improvements planned or undertaken to avoid future Performance Standard Violations.
4.5Applicable Provisions of the TNAS Agreement: Manner of Operation. Section 35 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement), (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement, (iii) the references to “Covered Facilities” as used in Section 35(iii) of the Original Agreement shall mean the WTC Site, (iv) the references to “Gross Receipts” as used in Section 35(vi) and (vii) of the Original Agreement shall mean Gross Revenues, (iii) the phrase “Paging Carrier User” as used in Section 35(viii) of the Original Agreement shall not be incorporated in this Supplement and (v) Section 35(ix) shall not be incorporated in this Supplement.
4.6Applicable Provisions of the TNAS Agreement: Objectionable Interference. Section 46 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement), (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement, (iii) the phrase “Paging Carrier User” as used in Section 46 shall not be incorporated in this Supplement and (iv) Section 46(e) shall not be incorporated in this Supplement.
4.7On-Site Staff. At the Port Authority’s option, the Permittee shall maintain, at its sole cost, a full time staff on-site to address customer service issues during normal business hours. Such staff will be based in an office to be provided and furnished by the Port Authority at no additional cost to the Permittee.
4.8Applicable Provisions of the TNAS Agreement: Maintenance and Repair. Section 11 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement), (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement, (iii) the reference to “Section 12” as used in Section 11(a) of the Original Agreement shall mean Section 12 of the Original Agreement as incorporated in this Supplement pursuant to Section 14.1.4, (iv) the references to “Section 7” as used in Section 11(b) of the Original Agreement shall mean Section 7 of
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the Original Agreement as incorporated in this Supplement pursuant to Section 7.1 and (v) all the Permittee’s obligations and duties pursuant to Section 11 of the Original Agreement as incorporated in this Supplement pursuant to this Section 4.8 shall be performed by the Permittee so as to ensure that the System is operated and maintained to a first-class standard.
4.9Planned Maintenance. The Permittee shall schedule all planned maintenance within limited maintenance windows during Off-Peak Times, which scheduling shall be subject to the prior written approval of the Port Authority (which approval may not be unreasonably delayed or withheld).
5.1In-Kind Services. Upon the written request by the Port Authority from time to time, the Permittee shall, at no charge, install, operate and maintain for use by the Port Authority the following in-kind services in accordance with the Port Authority’s reasonable specifications (the “In-Kind Services”): (i) up to [*] and (ii) prominent reserved space on the splash page first accessed by end-users accessing the Wi-Fi Service for the World Trade Center and/or Port Authority logo and icon and to allow users to download, without charge, Port Authority or World Trade Center applications or to access other information or products related to the Port Authority or World Trade Center.
6.1Carrier User Access to System. The Permittee may, in the conduct of its operations hereunder, permit the use of portions of the System by Carrier Users pursuant to and in accordance with this Article VI solely to provide current and future DAS Service to such Carrier Users’ respective DAS Users within all of the Designated Coverage Areas (except as otherwise approved in writing in advance by the Port Authority). The Permittee shall offer reasonable, non-exclusive and non-discriminatory terms to any Carrier User holding a valid FCC license to purchase access to the DAS System. All such uses shall be governed by a carrier agreement (“Carrier Agreement”) by and between the Permittee and the applicable Carrier User, which shall be negotiated and executed as provided in this Article VI. The Permittee shall use commercially reasonable efforts to enter into Carrier Agreements with one (1) or more Carrier Users as soon as practicable after the date of this Agreement.
6.2Standard Access Offering. The Permittee shall develop and maintain a standard access offering containing the basic terms pursuant to which the Carrier Users may purchase access to the DAS System (the “Standard Access Offering”), which shall contain, among other things, business terms, monthly fees and capital cost reimbursements to be paid by Carrier Users and certain standard terms required by the Port Authority. The Standard Access Offering and any updates thereto shall be subject to approval of Port Authority, not to be unreasonably withheld.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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6.3Carrier Agreements. Unless otherwise approved in writing by the Port Authority, the Permittee shall commence all new Carrier Agreement negotiations based on the Standard Access Offering. [*] The Permittee shall include the Port Authority in any meetings or other discussions between the Permittee and any Carrier User. If Carrier Agreement terms are discussed extemporaneously at meetings where a representative of the Port Authority is not in attendance, the Permittee will provide the Port Authority with notes of such meeting or discussion that briefly characterize the discussion and any conclusions reached within a reasonable time of such meeting or discussion. The Permittee shall fully disclose to the Port Authority Carrier User requirements and terms of requested technology service and performance, and will promptly forward to the Port Authority any Carrier User requirements or specifications pertaining to the DAS System or space and conditioning requirements for the rooms that house components of the DAS System. The Permittee will use commercially reasonable efforts to obtain Carrier Agreement terms [*]. Carrier Agreements may include [*]. Prior to its execution of a Carrier Agreement, the Permittee shall deliver to the Port Authority an unsigned but final copy of such Carrier Agreement, together with any other information that is reasonably relevant to the Port Authority’s evaluation of such Carrier Agreement (including, without limitation, [*]). The Permittee shall obtain the prior written approval of the Port Authority to such Carrier Agreement, which the Port Authority agrees to review promptly upon request therefor. Upon the Port Authority’s written approval, the Permittee shall be authorized to execute such Carrier Agreement. The Permittee shall furnish the Port Authority with a true copy of each fully-executed Carrier Agreement promptly after the execution thereof. The Port Authority shall provide each Carrier User with a subordination, non-disturbance and attornment agreement in form reasonably acceptable to such Carrier User.
ARTICLE VII
SYSTEM CONSTRUCTION AND ALTERATIONS
7.1Applicable Provisions of the TNAS Agreement: Installation Work. Section 7 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement), (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement and (iii) the last sentence of Section 7(b)(i) of the Original Agreement, the last two sentences of Section 7(b)(ii)(1) of the Original Agreement, the last sentence of Section 7(b)(ii)(2) of the Original Agreement, Section 7(c)(i), Section 7(c)(ii), and Section 7(g)(iii)-(iv) shall not be incorporated in this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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7.2Port Authority Review of Proposed System Work. Pursuant to (i) Section 7(b)(ii) of the Original Agreement (as incorporated in this Supplement pursuant to Section 7.1), with respect to the Initial System Construction Work, and (ii) Section 38 of the Original Agreement (as incorporated in this Supplement pursuant to Section 7.5), with respect to any construction, modifications, alterations, additions or improvements other than the Initial System Construction Work, the Permittee is required to obtain the written approval of the Port Authority prior to commencing any such work. For the avoidance of doubt, the following approval process shall be undertaken with respect to any such approvals required to be obtained from the Port Authority:
7.2.1 The Permittee shall submit a Construction Application to the Port Authority’s World Trade Center Redevelopment department (“WTCR”) for its review and written approval, which approval shall be granted or withheld in the Port Authority’s reasonable discretion. WTCR shall use best efforts to review and respond to the Permittee with respect to any complete Construction Application within five (5) business days. If WTCR does not respond to the Permittee within any such five (5) business day period, then any succeeding Initial Schedule Milestones shall be extended for a period of time equal to the period of time commencing upon the date that is five (5) business days after the submission by the Permittee to WTCR of a complete Construction Application and concluding on the date that WTCR responds to the Permittee with respect to such Construction Application. In no event shall any such failure to respond constitute a default by the Port Authority under this Agreement. In order to facilitate the initial design of the System, the Permittee may submit the required materials for major individual components of the WTC Site for review and approval as such components are ready for consideration. If at any time WTCR is subsumed into another Port Authority department or otherwise ceases to exist, the Port Authority may designate another department to receive, review and approve Construction Applications as set forth herein.
7.2.2 If and when the Permittee receives WTCR’s approval of the Construction Application in accordance with Section 7.2.1, WTCR shall directly forward, or request the Permittee to forward, the approved Construction Application to the Port Authority’s Quality Assurance Division (“QAD”) and any other divisions or departments as may be required by the Port Authority for approval. QAD and such other divisions or departments shall review such materials in accordance with their respective standard practices and procedures (including, without limitation, the then-applicable Tenant Construction and Alteration Process Manual), and the Permittee shall pay the Port Authority’s standard fees and charges in connection with such applications and review. Such review shall be in the Port Authority’s capacity as a governmental agency with jurisdiction over the WTC Site, and may be granted or withheld by the Port Authority in the exercise of such capacity.
7.3Initial System Construction Work Schedule. The Permittee shall perform the Initial System Construction Work and any other work as necessary to ensure that (i) the Initial System Construction Work proceeds in accordance with the schedule milestones set forth on Exhibit D attached hereto, (ii) the DAS System (other than the Temporary System with respect to the Other Temporary System Areas) and the Wi-Fi System are delivered, commissioned in accordance with applicable QAD requirements and fully operational (as applicable) on or before the applicable dates indicated on Exhibit D attached hereto (or such later dates as may be agreed in writing by the Port Authority in light of any applicable delays or adjustments to the construction schedule for the World
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Trade Center) (each, an “Initial Schedule Milestone”) and (iii) the Temporary System with respect to the Other Temporary System Areas is delivered, commissioned in accordance with applicable QAD requirements and fully operational (as applicable) as early as practicable. Without limiting the foregoing, the Permittee shall in all events use best efforts to deliver, activate and make available the DAS System (including, without limitation, the Temporary System) and the Wi-Fi System as early as practicable.
With respect to any area of the WTC Site, until such time as the Permittee delivers the System, commissions the System in accordance with applicable QAD requirements and the System is fully operational so that such area is provided with the DAS Service and Wi-Fi Service, as applicable, in accordance with the applicable System Performance Standard, the Port Authority shall have the right (but not the obligation) in its sole discretion, either directly or through one or more third parties, to install, operate and/or otherwise utilize such temporary measures as are reasonably necessary to provide DAS Service and/or Wi-Fi Service within such area. Exercise of the foregoing right shall conclusively be deemed not to violate any rights granted to the Permittee pursuant to this Supplement (including, without limitation, pursuant to Sections 4.1.1 or 4.1.2) and shall be without limitation of any other available remedies.
The Parties shall regularly discuss the status of the Initial System Construction Work and shall provide weekly updates to each other. The Parties acknowledge that after the DAS System and Wi-Fi System are delivered, commissioned in accordance with applicable QAD requirements and operational (and, in the case of the DAS System, in service with a connected Carrier User), the DAS System and Wi-Fi System may be subject to further testing, adjustment and commissioning for a period of time of up to six (6) months after commissioning (the “Testing Period”), provided, however, that during the Testing Period, the provisions of this Supplement (including, without limitation, Article IV) shall not be suspended or reduced and shall remain applicable to the Permittee. The Parties hereby acknowledge that, pursuant to Section 39 of the Original Agreement (as incorporated in this Supplement pursuant to Section 11.10), neither the Port Authority nor the Permittee shall be liable for any failure, delay or interruption in performing its obligations hereunder due to causes or conditions beyond its control. For the avoidance of doubt, the following shall be deemed causes or conditions beyond the Permittee’s control with respect to the Temporary System to the extent such matters cause failure, delay or interruption in performing its obligations hereunder: (i) the inability of Boingo to obtain the necessary Carrier User approvals to permit the operation of the Temporary System after using best efforts to secure such approvals, (ii) the inability of Boingo to obtain the necessary approvals from the Port Authority to locate and install the applicable “donor sites” for the Temporary System at the WTC Site or (iii) if incorporating additional “donor sites” is necessary to provide DAS Service to portions of the Temporary System Areas not sufficiently covered by the initial Temporary System, the failure of the Parties to agree on the addition of additional “donor sites” after exercising reasonable good faith efforts to do so. In addition, the Parties acknowledge that the Permittee intends to commence the Initial System Construction Work on the Temporary System for the Initial Temporary System Areas promptly following the date hereof. If the Port Authority thereafter requires the Permittee to temporarily suspend such work with respect to the Initial Temporary System Areas to accommodate any required Port Authority reviews of the associated Construction Application submissions, any such suspension shall be deemed to be a cause or condition beyond the Permittee’s
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control with respect to such work to the extent such matters cause failure, delay or interruption in performing its obligations hereunder. Notwithstanding the foregoing, the Permittee shall (i) use its best efforts to anticipate, take prudent steps to avoid and mitigate any delays in achieving each Initial Schedule Milestone and (ii) provide the Port Authority with written notice if at any time the Permittee anticipates or has reason to believe that the Permittee may be unable to meet an Initial Schedule Milestone. The Parties shall jointly discuss and, if appropriate, work in good faith to agree upon an equitable adjustment to the Initial Schedule Milestones (including the Grand Opening Milestone, if appropriate) in the event of any applicable delays or adjustments to the Port Authority’s construction schedule for the World Trade Center or the opening of the applicable facilities within the World Trade Center venue.
Without limiting the foregoing provisions of this Section 7.3, the Permittee shall use commercially reasonable efforts to cause the below-grade Designated Coverage Areas of the DAS System to be available (such that cellular communications will be capable of transmission and reception in the applicable areas, whether via the DAS System or temporary measures reasonably approved by the Port Authority and at Permittee’s sole cost) on or prior to August 15, 2014 (or such later date as may be agreed in writing by the Port Authority in light of any applicable delays or adjustments to the construction schedule for the World Trade Center). Additionally, the Permittee shall be obligated to arrange for the Wi-Fi Service to be transmitted to the public portions of the above- and below-grade Designated Coverage Areas of the Wi-Fi System on or prior to the applicable grand opening of the Retail Premises (the “Retail Schedule Milestone”).
7.4Applicable Provisions of the TNAS Agreement: Initial System Capital Cost Reporting. Section 8 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement) and (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement.
7.5Applicable Provisions of the TNAS Agreement: Other Construction. Section 38 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement) and (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement.
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8.1Variable Fees. The Permittee shall pay to the Port Authority the following amounts for each Annual Period during the Term of this Supplement:
8.1.1 A variable fee on account of the DAS System (the “DAS Variable Fee”) for each Annual Period during the Term of this Supplement in an amount equal to the DAS Net Income for such Annual Period multiplied by [*]; and
8.1.2 A variable fee on account of the Wi-Fi System (the “Wi-Fi Variable Fee” and together with the DAS Variable Fee, the “Variable Fees”) for each Annual Period during the Term of this Supplement in an amount equal to the Wi-Fi Net Income for such Annual Period multiplied by [*], provided that the Permittee shall not be required to pay the Wi-Fi Variable Fee until such time as the Permittee has received the Wi-Fi Capital Costs Recovery.
The Variable Fees shall be payable in quarterly installments on the last day of each January, April, July and October occurring during the Term, in each case with respect to the calendar quarter ending on the last day of the immediately preceding calendar month (for example, the Variable Fees shall be payable on July 31 for the calendar quarter April 1 to June 30), based on the reasonably determined projection of the amount to be due for the entire Annual Period prepared by the Permittee and approved in writing by the Port Authority, such approval not to be unreasonably withheld. In the event the actual Variable Fees shall exceed the total of the quarterly installments actually paid by the Permittee with respect to such Annual Period, the Permittee shall pay to the Port Authority the difference between the actual Variable Fees for the preceding Annual Period and the total of the said quarterly installments paid by the Permittee. In the event the total of the said quarterly installments paid by the Permittee to the Port Authority shall exceed the actual Variable Fees for the preceding Annual Period, the Port Authority shall pay the amount of such excess to the Permittee. In either such case, the required payment shall be made not later than ten (10) business days following the date of the written notice from the Permittee to the Port Authority setting forth its computation of the actual Variable Fees for the immediately preceding Annual Period.
8.2Port Authority Base Infrastructure Costs. The Permittee shall pay to the Port Authority (or shall cause the Carrier Users to pay to the Port Authority) the following amounts (collectively, the “Port Authority Base Infrastructure Costs”):
8.2.1 [*] as reimbursement for the Port Authority’s previously expended direct and indirect costs associated with the design and construction of the System and associated infrastructure, including, without limitation, allocated costs with respect to common and shared space, infrastructure and systems (the “Base Infrastructure Costs Reimbursement”). The Base Infrastructure Costs Reimbursement shall be payable in full within ten (10) days after the earlier of [*]
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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8.2.2 [*] as further reimbursement for the Port Authority’s previously expended direct and indirect costs associated with the design and construction of the System and associated infrastructure, including, without limitation, allocated costs with respect to common and shared space, infrastructure and systems (the “First Additional Base Infrastructure Costs Reimbursement”). The First Additional Infrastructure Costs Reimbursement shall be payable in full within ten (10) days after the earlier of [*]
8.2.3 [*] as further reimbursement for the Port Authority’s previously expended direct and indirect costs associated with the design and construction of the System and associated infrastructure, including, without limitation, allocated costs with respect to common and shared space, infrastructure and systems (the “Second Additional Base Infrastructure Costs Reimbursement” and, together with the Base Infrastructure Costs Reimbursement and the First Additional Base Infrastructure Costs Reimbursement, collectively, the “Infrastructure Costs Reimbursement”) The Second Additional Base Infrastructure Costs Reimbursement shall be payable in full within ten (10) days after the earlier of [*]
8.2.4 Any amount agreed upon by the Port Authority and the Permittee on account of any additional Initial System Construction Work the Port Authority agrees in writing to undertake upon request from the Permittee, provided that the Permittee shall in all events pay such amounts in full to the Port Authority as costs are incurred for such additional Initial System Construction Work undertaken by the Port Authority. The Port Authority agrees not to incur costs for such additional Initial System Construction Work undertaken by the Port Authority without the Permittee’s prior approval. The Port Authority will use commercially reasonable efforts to accommodate such requests for additional Initial System Construction Work.
8.3Infrastructure Reimbursement Credit. The Permittee shall be entitled to a credit against the Infrastructure Costs Reimbursement for expenses incurred by Permittee prior to January 1, 2014 in direct support of the DAS System and Wi-Fi System in an amount equal to [*] (the “Infrastructure Reimbursement Credit”). [*] of the Infrastructure Reimbursement Credit shall be credited against the payment of the Base Infrastructure Costs Reimbursement, if any, [*] of the Infrastructure Reimbursement Credit shall be credited against the payment of the First Additional Base Infrastructure Costs Reimbursement, if any, and [*] of the Infrastructure Reimbursement Credit shall be credited against the payment of the Second Additional Base Infrastructure Costs Reimbursement, if any.
8.4Port Authority Operating Costs. The Permittee shall pay to the Port Authority the following amounts as reimbursement for the Port Authority’s direct and indirect costs associated with the provision of electricity, HVAC Service and general maintenance expenses of areas utilized by the Permittee that are reasonably partially or fully attributable to the operation of the System at the WTC Site (collectively, the “Port Authority Operating Costs”):
8.4.1 The costs of the Electricity Consumption and Demand in accordance with the provisions of Section 9.1.
8.4.2 The costs of the HVAC Consumption and Demand in accordance with the provisions of Section 9.2.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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8.4.3 The costs of general maintenance expenses in a fixed amount equal to [*] (which amount shall be increased each year by three percent (3%), compounded annually, with the first such increase to occur one year after the Commencement Date) per square foot of space at the World Trade Center that is occupied or otherwise utilized by the Permittee and/or the System per year pursuant to this Supplement. The Parties acknowledge that, based on the System Plans and Specifications, the amount of space to be initially occupied by the System is anticipated to be approximately [*] square feet as reflected on Exhibit F attached hereto. In the event of an increase or decrease in the amount of space used by the Permittee and/or the System, this Section 8.4.3 and Exhibit F shall be revised accordingly as reasonably determined by the Parties.
8.4.4 Any reasonable and non-discriminatory costs incurred in the use of stakeholder resources at the World Trade Center that are for the sole or material benefit of the Permittee in connection with the System.
The Permittee shall use commercially reasonable efforts to provide for the payment or reimbursement by the Carrier Users of such costs and expenses. The Port Authority shall use good faith efforts to minimize Port Authority Operating Costs and to approve vendors without unreasonable delay.
8.5System Capital Costs. The Permittee shall be responsible for all capital costs, expenses, fees and other costs associated with the design, construction, initial deployment and future upgrades of the System (but excluding any Port Authority-directed work pursuant to Sections 3.4.2 or 3.5) (collectively, the “Capital Costs”), and shall pay such amounts as and when due. Without limiting the foregoing, Permittee shall be responsible for (i) collecting outside contributions for System construction and upgrades and (ii) subcontracting, managing, and paying all third parties for labor and materials associated with work and materials (other than any Port Authority-directed work pursuant to Sections 3.4.2 or 3.5). Additionally, the Permittee shall fund the actual costs of any base-build changes requested by the Permittee and approved by the Port Authority as costs are incurred for such base build changes. The Port Authority shall have the right to review all proposed Capital Costs expenditures in advance, and the Permittee shall not make any Capital Costs expenditures unless the Port Authority has granted its prior written approval to such expenditure (which approval shall not be unreasonably delayed or withheld). Subject to Permittee’s payment in full of the Port Authority Base Infrastructure Costs, the Permittee shall be entitled to receive any reimbursements provided by the Carrier Users of Capital Costs relating to the initial deployment of the DAS System until the Permittee has been reimbursed in full for such Capital Costs plus a [*] accrued preferred annual return on such Capital Costs to the extent expended by the Permittee (collectively, the “DAS Capital Costs Recovery”). The Port Authority shall have the right to review reimbursements for Capital Costs relating to the initial deployment of the DAS System that are applied toward the DAS Capital Costs Recovery. Additionally, the Permittee shall be entitled to receive Wi-Fi Gross Income to recoup Capital Costs relating to the initial deployment of the Wi-Fi System until such time as such Capital Costs have been recovered in full (the “Wi-Fi Capital Costs Recovery”) without interest, carry or other form of financial expense, provided that the Permittee shall not be entitled to receive the Wi-Fi Capital Costs Recovery until such time as the Permittee has demonstrated to the Port Authority’s reasonable satisfaction that the underlying Capital Costs are reasonable and have actually been expended in the manner contemplated by this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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8.6Late Charges. If the Permittee should fail to pay any amount required under this Supplement when due to the Port Authority, including, without limitation, any payment of any Variable Fees or any payment of utility or other charges or if any such amount is found to be due as the result of an audit, then, in such event, the Port Authority may impose (by statement, bill or otherwise) a late charge with respect to each such unpaid amount for each late charge period (described below) during the entirety of which such amount remains unpaid, each such late charge not to exceed an amount equal to eight-tenths of one percent of such unpaid amount for each late charge period. There shall be twenty-four late charge periods on a calendar year basis; each late charge period shall be for a period of at least fifteen (15) calendar days except one late charge period each calendar year may be for a period of less than fifteen (but not less than thirteen) calendar days. Without limiting the generality of the foregoing, late charge periods in the case of amounts found to have been owing to the Port Authority as the result of Port Authority audit findings shall consist of each late charge period following the date any unpaid amount should have been paid under this Supplement. Each late charge shall be payable immediately upon demand made at any time therefor by the Port Authority. No acceptance by the Port Authority of payment of any unpaid amount or of any unpaid late charge amount shall be deemed a waiver of the right of the Port Authority to payment of any late charge or late charges payable under the provisions of this Section 8.6 with respect to such unpaid amount. Each late charge shall be recoverable by the Port Authority in the same manner and with like remedies as if it were a part of the Variable Fees hereunder. Nothing in this Section 8.6 is intended to, or shall be deem to, affect, alter, modify or diminish in any way (i) any rights of the Port Authority under this Supplement or (ii) any obligations of the Permittee under this Supplement. In the event that any late charge imposed pursuant to this Section 8.6 shall exceed a legal maximum applicable to such late charge, then, in such event, each such late charge payable under this Supplement shall be payable instead at such legal maximum.
8.7Additional Revenue Opportunities.
8.7.1 If either the Permittee or the Port Authority becomes aware of additional services or revenue opportunities realized by a system of similar design or with the individual or collective components of the System, the Permittee shall use commercially reasonable efforts to implement such services at the WTC Site within six (6) to twelve (12) months of such services becoming available in the market, subject to agreement of the Parties regarding the terms and conditions of such additional services and otherwise in compliance with the applicable provisions of this Supplement. Notwithstanding the foregoing, nothing contained in this Section 8.7.1 shall limit or otherwise affect the Permittee’s obligations pursuant to Section 3.4.
8.7.2 In the event cellular data offloading to the Wi-Fi System becomes practicable and economic, the Permittee shall be obligated to utilize the then-current Wi-Fi System to provide for data offloading or upgrade the Wi-Fi System to provide additional bandwidth that may be required by data offloading without compromising the then-current functionality of the balance of the Wi-Fi System, all at no cost to the Port Authority and in compliance with the applicable provisions of this Supplement.
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9.1Electricity. Subject to all terms and conditions of this Supplement, the Port Authority shall ensure that such electricity as is reasonably necessary for initial System Operations (as described in the System Plans and Specifications) is made available for use by the Permittee. Any additional capacity outside of the System Plans and Specifications shall be paid for by the Permittee as provided in this Section 9.1.
9.1.1 The Port Authority shall periodically throughout the Term, at such times as the Port Authority may elect, arrange for a survey of the Permittee's equipment by the Port Authority or its designee or by an independent utility consultant to be selected by the Port Authority for the purpose of establishing the Permittee's annual consumption of and demand for electricity (such consumption of and demand for electricity being hereinafter referred to as “Electricity Consumption and Demand”). Such Electricity Consumption and Demand shall be based on the Permittee's electrical equipment and the frequency and duration of the use thereof. The Permittee's annual Electricity Consumption and Demand shall be divided by the number of "Billing Periods" per Annual Period established by the public utility company supplying electricity in the vicinity of the World Trade Center so as to determine the Electricity Consumption and Demand per Billing Period. The Port Authority shall compute the cost of such Electricity Consumption and Demand as determined by the survey based on the greater of (1) the rates (including the fuel or other adjustment factor if any) which the Permittee at the time of such purchase and under the service classification then applicable to it would have to pay for the same quantity of electricity to be used for the same purposes under the same conditions if it received the electricity directly from the public utility supplying the same to commercial buildings in the vicinity and (2) the Port Authority's cost of obtaining and supplying the same quantity of electricity, provided, however, that in no event shall the Port Authority charge the Permittee for any Electricity Consumption and Demand in excess of amounts the Port Authority is legally or contractually permitted to charge for such Electricity Consumption and Demand. The Permittee shall pay the cost of such Electricity Consumption and Demand for each such Billing Period to the Port Authority at the time the next Variable Fee payment following the close of such Billing Period is due and the same shall be deemed fees collectible in the same manner and with like remedies as if it were a part of the Variable Fees hereunder. The determination of Electricity Consumption and Demand by survey shall be effective until the next succeeding survey and shall be binding and conclusive on both the Permittee and the Port Authority as to all matters, including but not limited to the frequency and duration of use of the Permittee's electrical equipment at the World Trade Center by the Permittee. The cost of each such survey shall be borne by the Port Authority, provided that if the Permittee makes any alterations or improvements at the WTC Site in accordance with the provisions of this Supplement or otherwise which may result in greater Consumption or Demand, the Port Authority may direct a new survey to establish the Electricity Consumption and Demand for electricity at the World Trade Center and the cost thereof shall be borne by the Permittee. Any method of measurement used herein shall not preclude the Port Authority from reverting to the use of any prior method. In lieu of a determination of Electricity Consumption and Demand by survey, the same may be measured by meter which the Port Authority may install at its option, exercised at any time during the Term, and if for any reason any meter fails to
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record the consumption of electricity, the consumption of electricity during any such period that the meter is out of service will be considered to be the same as the consumption for a like period either immediately before or immediately after the interruption as selected by the Port Authority. If the Port Authority elects to install any such meter or meters, then (i) the Permittee shall pay to the Port Authority the full cost of the installation and operation of any such meter(s) that is installed in connection with the Initial System Construction Work and (ii) the Permittee shall use commercially reasonable efforts to provide for the full payment or reimbursement by the Carrier Users of the cost of the installation and operation of any such meter(s) that is installed at any time after the Initial System Construction Work and, if the Permittee is not able to obtain such full payment or reimbursement from the Carrier Users, then the Permittee shall pay to the Port Authority one-half the amount of such costs, in each case such amounts to be paid at the time the next Variable Fee payment following the close of the applicable Billing Period is due and the same shall be deemed fees collectible in the same manner and with like remedies as if such amounts were a part of the Variable Fees hereunder.
9.1.2 Notwithstanding that the Port Authority has agreed to supply electricity to the Permittee, the Port Authority shall be under no obligation to provide or continue such service if the Port Authority is prevented by law, agreement or otherwise from metering or measuring electrical consumption as set forth in Section 9.1.1 or elects not to so meter or measure consumption of the same, and in any such event, the Permittee shall make all arrangements and conversions necessary to obtain electricity directly from the applicable public utility. Also in such event, the Permittee shall perform the construction necessary for conversion and if any lines or equipment of the Port Authority are with the consent of the Port Authority used therefor, the Permittee shall pay to the Port Authority its pro rata share of the reasonable costs and expenses for said lines and equipment.
9.1.3 The supply of electricity shall be made by the Port Authority at such points as are designated in the applicable approved Construction Application for connection of the electrical distribution systems to be installed by the Permittee with the Port Authority's lines and conduits, and the Port Authority shall have no responsibility for the distribution of electrical current beyond the points of connection to the System.
9.1.4 The Port Authority shall have the right to discontinue temporarily the supply of any of the above services when necessary or desirable in the reasonable opinion of the Port Authority in order to make any repairs, alterations, changes or improvements in the premises or elsewhere at the World Trade Center, including but not limited to all systems for the supply of services. Except in cases of emergency, the Port Authority shall give the Permittee reasonable prior notice before discontinuing the supply of services pursuant to the provisions of this Section 9.1.4. The Port Authority may not claim a Performance Standard Violation to the extent caused solely by any such temporary discontinuation.
9.1.5 No failure, delay, interruption or reduction in any service or services shall be or shall be construed to be an eviction of the Permittee, shall be grounds for any diminution or abatement of the fees or other amounts payable hereunder or shall constitute grounds for any claim by the Permittee for damages, consequential or otherwise, unless due to the gross negligence or willful misconduct of the Port Authority, its employees or agents.
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9.1.6 The Port Authority shall be under no obligation to supply any service or services if and to the extent and during any period that the supplying of any such service or services or the use of any component necessary therefor shall be prohibited or rationed by any federal, state or municipal law, rule, regulation, requirement, order or direction and if the Port Authority deems it in the public interest to comply therewith, even though such law, rule, regulation, requirement, order or direction may not be mandatory on the Port Authority as a public agency.
9.2Heating, Ventilation and Air Conditioning. Subject to all terms and conditions of this Supplement, the Port Authority shall ensure that such heating, ventilation and air conditioning service (“HVAC Service”) as is reasonably necessary for System Operations is provided to the Point of Interface room and any other areas outside of such Point of Interface room that are reasonably necessary for System Operations, the quantity of such HVAC Service supplied to the Permittee to be in accordance with the design criteria and capacity of the System and to be paid for by the Permittee as provided in this Section 9.2.
9.2.1 The Port Authority shall periodically throughout the Term, at such times as the Port Authority may elect, arrange for a survey of the Permittee's equipment by the Port Authority or its designee or by an independent utility consultant to be selected by the Port Authority for the purpose of establishing the Permittee's annual consumption of and demand for HVAC Service (such consumption of and demand for HVAC Service being hereinafter referred to as “HVAC Consumption and Demand”). Such HVAC Consumption and Demand shall be based on the Permittee's HVAC equipment and the frequency and duration of the use thereof. The Permittee's annual HVAC Consumption and Demand shall be divided by the number of Billing Periods per Annual Period so as to determine the HVAC Consumption and Demand per Billing Period. The Port Authority shall compute the cost of such HVAC Consumption and Demand based on the greater of (i) the Port Authority's cost of obtaining and supplying the HVAC Service and (ii) an amount equal to the cost of the Electricity Consumption and Demand determined in accordance with Section 9.1 on account of the Port Authority’s provision of HVAC Service to the Permittee for such Billing Period (which amount shall be in addition to, not replacement of, the payment due on account of such Electricity Consumption and Demand pursuant to Section 9.1). The Permittee shall pay the cost of such HVAC Consumption and Demand for each such Billing Period to the Port Authority at the time the next Variable Fee payment following the close of such Billing Period is due and the same shall be deemed fees collectible in the same manner and with like remedies as if it were a part of the Variable Fees hereunder. Any method of measurement used herein shall not preclude the Port Authority from reverting to the use of any prior method. In lieu of a determination of HVAC Consumption and Demand as described above, the same may be measured by meter which the Port Authority may install at its option, exercised at any time during the Term, and if for any reason any meter fails to record the consumption of HVAC Service, the consumption of HVAC Service during any such period that the meter is out of service will be considered to be the same as the consumption for a like period either immediately before or immediately after the interruption as selected by the Port Authority. If the Port Authority elects to install any such meter or meters, then (i) the Permittee shall pay to the Port Authority the full cost of the installation and operation of any such meter(s) that is installed in connection with the Initial System Construction Work and (ii) the Permittee shall use commercially reasonable efforts to provide for the full payment or reimbursement by the Carrier Users of the cost of the installation and operation of any such meter(s)
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that is installed at any time after the Initial System Construction Work and, if the Permittee is not able to obtain such full payment or reimbursement from the Carrier Users, then the Permittee shall pay to the Port Authority one-half the amount of such costs, in each case such amounts to be paid at the time the next Variable Fee payment following the close of the applicable Billing Period is due and the same shall be deemed fees collectible in the same manner and with like remedies as if such amounts were a part of the Variable Fees hereunder.
9.2.2 The supply of HVAC Service shall be made by the Port Authority at such points as are designated in the applicable approved Construction Application for connection of the electrical distribution systems to be installed by the Permittee with the Port Authority's lines and conduits, and the Port Authority shall have no responsibility for the distribution of HVAC Service beyond the points of connection to the System.
9.2.3 The Port Authority shall have the right to discontinue temporarily the supply of any of the above services when necessary or desirable in the reasonable opinion of the Port Authority in order to make any repairs, alterations, changes or improvements in the premises or elsewhere at the World Trade Center, including but not limited to all systems for the supply of services. Except in cases of emergency, the Port Authority shall give the Permittee reasonable prior notice before discontinuing the supply of services pursuant to the provisions of this Section 9.2.3. The Port Authority may not claim a Performance Standard Violation to the extent caused solely by any such temporary discontinuation.
9.2.4 No failure, delay, interruption or reduction in any service or services shall be or shall be construed to be an eviction of the Permittee, shall be grounds for any diminution or abatement of the fees or other amounts payable hereunder, or shall constitute grounds for any claim by the Permittee for damages, consequential or otherwise, unless due to the gross negligence or willful misconduct of the Port Authority, its employees or agents.
9.2.5 The Port Authority shall be under no obligation to supply any service or services if and to the extent and during any period that the supplying of any such service or services or the use of any component necessary therefor shall be prohibited or rationed by any federal, state or municipal law, rule, regulation, requirement, order or direction and if the Port Authority deems it in the public interest to comply therewith, even though such law, rule, regulation, requirement, order or direction may not be mandatory on the Port Authority as a public agency.
9.3Government Charges. If any federal, state, municipal or other governmental body, authority or agency or any public utility assesses, levies, imposes, make or increases any charge, fee or rent on the Port Authority for any service, system or utility now or in the future supplied to the Permittee or to any of its Carrier Users, then, at the option of the Port Authority exercised at any time and from time to time by notice to the Permittee, the Permittee shall pay, in accordance with said notice, such charge, fee or rent or increase thereof (or the portion thereof equitably allocated by the Port Authority to the Permittee's operations hereunder) either directly to the governmental body, authority or agency or to the public utility or directly to the Port Authority.
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10.1Prohibition on Transfers. During the Term, the Permittee covenants and agrees that it will not sell, assign, transfer, mortgage, pledge, hypothecate, encumber, or in any way convey or dispose of the System or this Supplement, or any part thereof, any rights created thereby or any license or other interest of the Permittee therein without the prior written consent of the Port Authority, except that the Permittee, if an entity, shall be permitted without the prior written consent of the Port Authority, to become a possessor or merged entity in a merger, a constituent entity in a consolidation, or an entity in dissolution so long as (i) the entity resulting from the merger or dissolution has a financial standing as of the date of the merger or consolidation at least as good as that of the Permittee, by which is meant that its ratio of current assets to current liabilities, its ratio of fixed assets to fixed liabilities and its tangible net worth shall each be at least as favorable as that of the Permittee and (ii) such resulting entity at all times is able to make the representation and warranties and satisfy the covenants set forth in Section 14.2.
10.2Carrier Users. The Permittee may, in the course of its business and the conduct of its operations hereunder, permit the use of portions of the System by Carrier Users, pursuant to and in accordance with Article VI. All Carrier Users shall use the System for the purpose set forth in this Supplement and its Carrier Agreement, and whether or not expressly set forth in its Carrier Agreement, all Carrier Agreements shall in all respects be subject to the terms and conditions of this Supplement.
ARTICLE XI
TERM, DEFAULT AND TERMINATION
11.1Term. The “Term of this Supplement” shall commence on the Commencement Date and shall end on the earlier of (a) the scheduled expiration date of the initial term of the first Carrier Agreement but in no event after the date that is twenty (20) years after the Commencement Date and (b) the date upon which this Supplement is earlier terminated pursuant to the terms hereof. For the avoidance of doubt, except with respect to a termination on account of a Schedule Milestone Default pursuant to Section 11.3 or unless otherwise agreed by the Parties in writing: (i) in the event of any termination of the TNAS Agreement for cause (including, without limitation, pursuant to Section 20 of the TNAS Agreement), this Supplement shall immediately be terminated effective as of the date of such termination for cause of the TNAS Agreement and (ii) in the event of any expiration or termination for cause of this Supplement, the TNAS Agreement shall immediately be terminated effective as of the date of such expiration or termination for cause of this Supplement, in each case without any action by or notice to or from either Party but subject to the applicable provisions of the TNAS Agreement, with respect to the Port Authority Facilities other than the World Trade Center, and this Supplement, with respect to the World Trade Center.
11.2Non-Curable Terminating Events. In addition to any other rights of termination specifically granted in this Supplement, the Port Authority may terminate this Supplement on not less than twenty (20) calendar days written Notice to the Permittee upon the occurrence of any of the following events (each, a “Non-Curable Default”):
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11.2.1 The Permittee shall (i) become insolvent, (ii) take the benefit of any present or future insolvency statute, (iii) make a general assignment for the benefit of creditors, (iv) file a voluntary petition in bankruptcy or a petition or answer seeking an arrangement or its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United States or of any state thereof or (iv) consent to the appointment of a receiver, trustee, or liquidator of all or substantially all its property;
11.2.2 By order or decree of a court the Permittee shall be adjudged bankrupt or an order shall be made approving a petition filed by any of the creditors or, if the Permittee is an entity, by any of the stockholders, members, partners, beneficiaries or any other Person holding a beneficial interest in the Permittee, seeking its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws or under any law or statute of the United States or of any state thereof;
11.2.3 A petition under any part of the Federal bankruptcy laws or an action under any present or future insolvency law or statute shall be filed against the Permittee and shall not be dismissed or vacated within sixty (60) calendar days after the filing thereof;
11.2.4 Except to the extent permitted under Article X of this Supplement, the interest of the Permittee under this Supplement and/or the System, or any portion thereof shall be transferred to, pass to or devolve upon, by operation of law or otherwise, any other Person;
11.2.5 The Permittee, if an entity, shall, without the prior written consent of the Port Authority, become a possessor or merged entity in a merger, a constituent entity in a consolidation, or an entity in dissolution unless (i) the entity resulting from a merger or dissolution has a financial standing as of the date of the merger or consolidation at least as good as that of the Permittee, by which is meant that its ratio of current assets to current liabilities, its ratio of fixed assets to fixed liabilities and its tangible net worth shall each be at least as favorable as that of the Permittee and (ii) such resulting entity at all times is able to make the representation and warranties and satisfy the covenants set forth in Section 14.2;
11.2.6 By or pursuant to, or under authority of any legislative act, resolution or rule, or any order or decree of any court or government board, agency or officer, a receiver, trustee, or liquidator shall take possession or control of all or substantially all the property of the Permittee, or any execution or attachment shall be issued against the Permittee or any of its property, whereupon possession of any part of the System shall be taken by someone other than the Permittee, and any such possession or control shall continue in effect for a period of at least thirty (30) calendar days;
11.2.7 Any lien is filed against the System or any part thereof because of any act or omission of the Permittee and is not bonded or discharged within sixty (60) calendar days;
11.2.8 The Permittee shall (i) conduct any other form of business activity other than System Operations (except that the Permittee shall be permitted to conduct the business activities permitted under the TNAS Agreement and this Supplement without violating the foregoing) or (ii) control any other Person or own any equity interest in any other Person; or
11.2.9 The Permittee or any of its affiliates, subsidiaries, directors, officers, members or employees commits fraud, embezzlement or theft against the Port Authority or its affiliates.
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11.3Schedule Milestone Defaults. The Permittee shall be in default of this Supplement if it fails to meet any Initial Schedule Milestone or the Retail Schedule Milestone (any such default, a “Schedule Milestone Default”).
11.3.1 Regardless of the Port Authority’s knowledge of such Schedule Milestone Default, and in addition to the remedies set forth this Section 11.3 and Section 11.8, upon the occurrence of any Schedule Milestone Default, the Permittee at no cost to the Port Authority, shall (i) use best efforts to complete the Initial System Construction Work and any other work that was required to be completed by the applicable Initial Schedule Milestone or the Retail Schedule Milestone at the earliest possible time following such milestone and (ii) prepare and issue to the Port Authority within one (1) business day after the applicable Initial Schedule Milestone or the Retail Schedule Milestone an analysis and narrative statement that outlines the cause of the Schedule Milestone Default and the steps taken and to be taken by the Permittee to complete the Initial System Construction Work and any other work that was required to be completed by such Initial Schedule Milestone or the Retail Schedule Milestone.
11.3.2Upon the occurrence of any Schedule Milestone Default (subject to extension of the applicable Initial Schedule Milestones pursuant to Section 7.2.1, 7.3 or Section 11.10, if applicable) other than a Grand Opening Milestone Default, the Permittee shall incur liquidated damages in the amount of [*] for each day that such Schedule Milestone Default has not been cured from and after the twentieth (20th) day following the applicable Initial Schedule Milestone.
11.3.3 Upon the occurrence of a Grand Opening Milestone Default (subject to extension pursuant to Section 7.2.1, 7.3 or Section 11.10, if applicable), the Permittee shall incur liquidated damages in the following amounts: (i) [*] for each day that such Grand Opening Milestone Default has not been cured from the eleventh (11th) day following the Grand Opening Milestone until and through the fortieth (40th) day following such Grand Opening Milestone, (ii) [*] for each day that such Grand Opening Milestone Default has not been cured from the forty-first (41st) day following the Grand Opening Milestone until and through the seventieth (70th) day following such Grand Opening Milestone, and (iii) [*] for each day that such Grand Opening Milestone Default has not been cured from and after the seventieth (70th) day following such Grand Opening Milestone, provided, however, that if the Permittee does not cure such Grand Opening Milestone Default within eighty-five (85) days after the Grand Opening Milestone or otherwise comply with the provisions of this Section 11.3, the Port Authority may terminate this Supplement on account of such Grand Opening Milestone Default upon not less than two (2) calendar days written Notice to the Permittee. Notwithstanding anything to the contrary contained in this Supplement (including, without limitation, Section 11.1), termination of this Supplement pursuant to this Section 11.3 shall not result in the automatic termination of the TNAS Agreement solely on account of such Grand Opening Milestone Default (although nothing in this sentence shall restrict or otherwise limit any otherwise applicable or available termination rights with respect to the TNAS Agreement, whether under this Supplement, under the TNAS Agreement or otherwise).
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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11.3.4 The Parties acknowledge and agree that (i) the liquidated damages described in Sections 11.3.2 and 11.3.3 are a reasonable estimate of and bear a reasonable relationship to the damages that would be suffered and costs incurred by the Port Authority as a result of the applicable Schedule Milestone Defaults, (ii) the actual damages suffered and costs incurred by the Port Authority as a result of any such Schedule Milestone Defaults would be extremely difficult and impractical to determine and (iii) the applicable amounts shall be and constitute valid liquidated damages on account of such Schedule Milestone Defaults.
11.4Major Defaults. The Port Authority may terminate this Supplement on not less than twenty (20) calendar days written Notice to the Permittee if the Permittee shall default in the performance or observance of any other material term, condition or covenant contained in this Supplement not falling under Section 11.2 or Section 11.3 (any such default, a “Major Default”) and such Major Default shall continue for a period of thirty (30) calendar days after the earlier of written notice thereof (a “Major Default Notice”) shall have been received by the Permittee or such time as the Permittee has become aware of such Major Default, provided that a ten (10) calendar day period shall apply with respect to any failure to make a monetary payment hereunder. Notwithstanding the foregoing, if such a Major Default (other than a monetary default) is such that it is reasonably susceptible to cure but cannot reasonably be remedied within thirty (30) calendar days and the Permittee has, in good faith, commenced cure of such Major Default within ten (10) calendar days after being notified or becoming aware of any such Major Default, then the Port Authority shall not be entitled to terminate this Supplement pursuant to this Section 11.4 for a sixty (60) calendar day period following such Major Default Notice or the date upon which the Permittee became aware of such Major Default so long as the Permittee is diligently prosecuting the cure to its completion. By way of example only, and without limitation, the Parties acknowledge and agree that the occurrence any of the following events shall be deemed to be a Major Default: (a) the Permittee’s failure to make payments as and when due under this Supplement, (b) repeated System Performance Violations that together evidence a pattern and practice which is materially inconsistent with the standard of service required by the System Performance Standard or (c) repeated defaults by the Permittee in the performance or observance of any term, condition or covenant contained in this Supplement that together evidence a pattern and practice inconsistent with the Permittee’s obligations under this Supplement.
11.5Other Defaults. The Permittee shall be in default of this Supplement if it defaults in the performance or observance of any term, condition or covenant contained in this Supplement not falling under Section 11.2, Section 11.3 or Section 11.4 (an “Other Default”) and such default shall continue for a period of thirty (30) calendar days after written notice thereof (an “Other Default Notice”) shall have been received by the non-defaulting party specifying such default and requesting that the same be remedied in such thirty (30) calendar day period, provided that a ten (10) calendar day period shall apply with respect to any failure to make a monetary payment hereunder; and provided further that if such Other Default (other than a monetary default) is such that it is reasonably susceptible to cure but cannot reasonably be remedied within thirty (30) calendar days and the Permittee has, in good faith, commenced cure of such Other Default within ten (10) calendar days after being notified of any such Other Default, then the Port Authority shall not be entitled to terminate
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this Supplement pursuant to this Section 11.4 so long as the Permittee is diligently prosecuting the cure to its completion.
11.6Default Notices. The Port Authority shall notify the Permittee in writing of any default condition it observes, provided that the Port Authority’s failure to provide any such notification shall in no event have any effect on any other provision of the other provisions of this Article XI.
11.7Self-Help. If at any time (i) the Permittee shall fail to pay or perform any of its obligations in accordance with the terms and provisions of this Supplement, (ii) such failure is not of the type described in Section 39 of the Original Agreement (as incorporated in this Supplement pursuant to Section 11.10) and (iii) such failure shall continue for a period of five (5) calendar days after receipt of written notice thereof to the Permittee (except in the event of an emergency in which case written notice shall be furnished as soon as reasonably possible), then the Port Authority may, without limitation of any other available remedies, perform the same or arrange for alternative performance of the same until such time as the Permittee cures its failure to perform. The Port Authority shall be entitled to payment from the Permittee for all costs and expenses (including reasonable attorneys’ fees) paid or incurred by the Port Authority in performing such work.
11.8Remedies; No Waiver. Upon the occurrence of and during the continuation of any default described in Sections 11.2, 11.3 or 11.4 or otherwise, all or any one or more of the rights, powers, privileges and other remedies available to the Port Authority against the Permittee under this Supplement or at law or in equity may be exercised by the Port Authority at any time and from time to time. Any such actions taken by the Port Authority shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as the Port Authority may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of the Port Authority permitted by law, equity or contract or as set forth herein. No acceptance by the Port Authority of fees or other payments in whole or in part for any period or periods after a default in any of the terms, covenants and conditions to be performed, kept or observed by the Permittee shall be deemed a waiver of any right on the part of the Port Authority to terminate this Supplement. No waiver by the Port Authority of any default on the part of the Permittee in performance of any of the terms, covenants or conditions hereof to be performed, kept or observed by the Permittee shall be or be construed to be a waiver by the Port Authority of any other or subsequent default in performance of any of the said terms, covenants and conditions.
11.9Imputation of Actions of Carrier Users. Without in any way affecting the obligations of the Permittee under this Supplement, all acts and omissions of the Carrier Users shall be deemed acts and omissions of the Permittee hereunder, provided, however, that the Permittee shall not be or be deemed to be in default to the extent that any of the foregoing shall constitute a breach hereof if the causes thereof are beyond the control of the Permittee or if the Permittee shall have commenced to remedy said default within twenty (20) calendar days after receipt of notice thereof from the Port Authority and continues diligently to pursue such remedy without interruption.
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11.10Applicable Provisions of the TNAS Agreement: Force Majeure. Section 39 of the Original Agreement shall be and hereby is incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that, for purposes of this Supplement, (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement) and (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement.
11.11Termination Without Cause. Without limiting any other rights of the Port Authority under this Supplement (including, without limitation, the rights set forth in this Article XI), the Port Authority shall have the right to terminate this Supplement without cause effective on the date of the expiration of the Term of the TNAS Agreement upon not less than ninety (90) days’ prior written notice to the Permittee. The Port Authority shall not have the right to terminate this Supplement under this Section 11.11 if the Port Authority intends to work with, or is working with or contemplates working with, a third party (including, without limitation, any investors, Carrier Users or any affiliate of any of them) to have such third party provide or finance (in whole or in part) the termination fee payable under this Section 11.11). If the Port Authority so elects to terminate this Supplement, then this Supplement shall be terminated on the date of the expiration of the Term of the TNAS Agreement and, notwithstanding anything to the contrary contained in the TNAS Agreement, the Port Authority shall, within ten (10) days after the effective date of such termination, pay to the Permittee an amount determined as follows:
[*]
11.12Right of Use Upon Termination.
11.12.1 In the event the Port Authority terminates this Supplement pursuant to this Article XI or otherwise in accordance with this Supplement during the Term (other than pursuant to Section 11.11, for which the provisions of Section 11.11 shall govern), the Port Authority shall, at no cost or expense to the Port Authority, either (1) direct the Permittee to remove the System or the portions thereof designated by the Port Authority, or (2) operate the System or any portion or portions thereof as are not so removed free and clear of any claim of ownership by the Permittee, including all the Permittee's rights to all Carrier Agreements, System software licenses, equipment warranties and service contracts. Such foregoing rights of the Port Authority to use the System shall not in any manner affect, alter or diminish any of the obligations of the Permittee under this Supplement, and shall in no event constitute an acceptance of surrender of this Supplement.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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11.12.2 The rights of the Port Authority under Section 11.12.1 to use the System shall include the right of the Port Authority to use and/or operate the System or any portion thereof and the right to continue in effect the terms and provisions of the Carrier Agreements or to enter into a new agreement with any Person to use and/or operate the System or any portion thereof for a period of time the same as or different from the balance of the Term remaining under this Supplement, and on terms and conditions the same as or different from those set forth in this Supplement. The Port Authority shall also, upon a termination as described in Section 11.1, or otherwise upon the exercise of its rights pursuant to this Section 11.11, have the right to repair or to make physical or other changes in the System, including changes which alter its wireless telecommunications and other electronic characteristics, without affecting, altering or diminishing the obligations of the Permittee under this Supplement.
11.12.3 The Port Authority will honor Carrier Agreements in the event of the expiration or termination of this Supplement in accordance with the terms thereof.
ARTICLE XII
SECURITY FOR PERFORMANCE OF PERMITTEE’S OBLIGATIONS
12.1Initial Construction and Reimbursement Obligations. In connection with this Supplement, Boingo Wireless, Inc. (“Boingo”), the parent of the Permittee, shall execute a completion and payment guaranty pursuant to which Boingo guarantees (i) the lien-free payment and performance of the Initial System Construction Work in accordance with all provisions of this Supplement and (ii) the payment of the Port Authority Base Infrastructure Costs in accordance with all provisions of this Supplement.
13.1Periodic Reports During Initial Construction. Prior to the completion of the Initial System Construction Work, the Permittee shall maintain and deliver to the Port Authority a report in form reasonably acceptable to the Port Authority containing the following information with respect to the System and its obligations under this Supplement within thirty (30) calendar days after the end of each calendar month (or within thirty (30) calendar days after the end of such other period as may be agreed between the Parties) (each such month or other period being referred to in this Section 13.1 as a “Period”):
13.1.1 A statement of Wi-Fi Gross Revenues and DAS Gross Revenues for the Period and cumulatively for the Annual Period to date and the amount of all payments made to the Port Authority for the Period and cumulatively for the Annual Period to date pursuant to this Agreement;
13.1.2 A statement of capital receipts (on an invoice basis) for the Period and cumulatively for the Annual Period to date;
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13.1.3 A statement showing the Wi-Fi Allowable Deductions, DAS Allowable Deductions and other expenditures made by the Permittee for the Period and the cumulative Wi-Fi Allowable Deductions, DAS Allowable Deductions and other expenditures made by the Permittee for the Annual Period to date;
13.1.4 A statement showing the capital expenditures and significant maintenance items of a capital nature for the Period and cumulatively for the Annual Period to date;
13.1.5 A statement of Capital Costs expended during the Period, cumulatively for the Annual Period to date and cumulatively for Initial System Construction Work;
13.1.6 A management report summarizing significant events or activities affecting the System, the Permittee’s obligations under this Supplement or Carrier Agreements which occurred during the Period or which are likely to occur in subsequent months, including, without limitation, detailed information regarding the System’s performance with respect to the System Performance Standards;
13.1.7 Updated information and projections regarding the status of the Initial System Construction Work and targeted completion and commissioning dates for the various phases and elements of such work (including as related to the Initial Schedule Milestones and the Retail Schedule Milestone);
13.1.8 A management report regarding operational and maintenance issues, including in-process, completed and anticipated operating and capital activities and expenses; and
13.1.9 Any other information or statements reasonably requested by the Port Authority from time to time.
13.2Periodic Reports Following Initial Construction. From and after the completion of the Initial System Construction Work, the Permittee shall maintain and deliver to the Port Authority a report in form reasonably acceptable to the Port Authority containing the following information with respect to the System and its obligations under this Supplement within thirty (30) calendar days after the end of each calendar quarter (or within thirty (30) calendar days after the end of such other period as may be agreed between the Parties) (each such quarter or other period being referred to in this Section 13.2 as a “Period”):
13.2.1 A statement of Wi-Fi Gross Revenues and DAS Gross Revenues for the Period and cumulatively for the Annual Period to date and the amount of all payments made to the Port Authority for the Period and cumulatively for the Annual Period to date pursuant to this Agreement;
13.2.2 A statement of capital receipts (on an invoice basis) for the Period and cumulatively for the Annual Period to date;
13.2.3 A statement showing the Wi-Fi Allowable Deductions, DAS Allowable Deductions and other expenditures made by the Permittee for the Period and the cumulative Wi-Fi
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Allowable Deductions, DAS Allowable Deductions and other expenditures made by the Permittee for the Annual Period to date;
13.2.4 A statement showing the capital expenditures and significant maintenance items of a capital nature for the Period and cumulatively for the Annual Period to date;
13.2.5 A management report summarizing significant events or activities affecting the System, the Permittee’s obligations under this Supplement or Carrier Agreements which occurred during the Period or which are likely to occur in subsequent months, including, without limitation, detailed information regarding the System’s performance with respect to the System Performance Standards;
13.2.6 An estimate of any operating expenses and other items required to be paid by the Permittee hereunder becoming due during the ensuing month and the dates on which such amounts will become due;
13.2.7 A management report regarding operational and maintenance issues, including in-process, completed and anticipated operating and capital activities and expenses; and
13.2.8 Any other information or statements reasonably requested by the Port Authority from time to time.
13.3Inventory and Depreciation. In addition to the reports required pursuant to Section 13.1 and Section 13.2, as applicable, the Permittee shall deliver to the Port Authority, from time to time upon request of the Port Authority, a report in form reasonably acceptable to the Port Authority setting forth an inventory of all equipment, machinery and other property in connection with the System showing their current depreciated values, each as of the date(s) specified by the Port Authority in such request.
14.1Additional Applicable Provisions of the TNAS Agreement. The following provisions of the TNAS Agreement shall be and hereby are incorporated in this Supplement and made applicable to the WTC Site as if fully set forth herein, except that (i) the capitalized terms used within such provisions shall have the applicable meanings given to such terms in Article I of this Supplement if so defined therein (otherwise, such capitalized terms shall have the applicable meanings given to such terms in the Original Agreement) and (ii) the phrase “this Agreement” or “hereunder” as used in any such provision shall be construed to refer to this Supplement:
14.1.1 Leases of Facilities. Section 6(c), except that, for purposes of this Supplement, (i) the term “Summary Basis of Design” as used in Section 6(c)(ii) of the Original Agreement shall mean the Summary Basis of Design attached hereto as Exhibit C and (ii) no equitable adjustment of
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the Variable Fees or any other amounts owing or due pursuant to this Supplement shall be available or effected pursuant to such Section 6(c) as incorporated in this Supplement.
14.1.2 Governmental Requirements. Section 9, except that, for purposes of this Supplement, (i) the text after the phrase “fulfilling such obligation” in the second sentence of Section 9(a) thereof shall not be part of this Supplement, (ii) the reference to “Section 12” as used in Section 9(c) thereof shall mean Section 12 of the Original Agreement as incorporated in this Supplement pursuant to Section 14.1.4 and (iii) the following text shall be added to the last sentence of Section 9(b) thereof:
except that the Permittee shall pay the Port Authority’s standard fees and charges in connection with the Port Authority’s review of the System in its capacity as governmental agency with jurisdiction over the WTC Site, as more specifically provided in Section 7.2.2 of this Supplement.
14.1.3 Prohibited Acts. Section 10 of the Original Agreement.
14.1.4 Casualty. Section 12 of the Original Agreement, except that, for purposes of this Supplement, (i) Section 12(d) of the Original Agreement shall not be incorporated in this Supplement and (ii) the following text shall be inserted after the phrase “telecommunications network access system” in the third sentence of Section 12(c): “or such other Wi-Fi System and/or DAS System”.
14.1.5 Indemnity. Section 13 of the Original Agreement, except that, for purposes of this Supplement, the phrase “Paging Carrier User” as used in Section 13(a) shall not be incorporated in this Supplement.
14.1.6 Consequential Damages. Section 14 of the Original Agreement.
14.1.7 Condemnation. Section 18 of the Original Agreement, except that, for purposes of this Supplement, the references to “Section 38” as used in Section 18(b) of the Original Agreement shall mean Section 38 of the Original Agreement as incorporated in this Supplement pursuant to Section 7.5.
14.1.8 Waiver of Redemption. Sections 22 and 23 of the Original Agreement.
14.1.9 Surrender. Section 24 of the Original Agreement, except that, for purposes of this Supplement, the text “except as may otherwise be provided in Section 6(b)” in the second sentence of Section 24(b) of the Original Agreement shall not be incorporated in this Supplement.
14.1.10 Disputes. Section 26 of the Original Agreement.
14.1.11 Payments. Section 28 of the Original Agreement.
14.1.12 Recording. Section 29 of the Original Agreement.
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14.1.13 Quiet Enjoyment. Section 30 of the Original Agreement, except that, for purposes of this Supplement, the references to “Section 20” as used in Section 30 of the Original Agreement shall mean Article XI of this Supplement.
14.1.14 Headings. Section 31 of the Original Agreement.
14.1.15 Performance of Permittee’s Obligations. Section 32 of the Original Agreement.
14.1.16 Publicity and Advertising. Section 33 of the Original Agreement.
14.1.17 Liability Insurance. Section 40 of the Original Agreement.
14.1.18 Non-Discrimination. Section 41 of the Original Agreement, except that, for purposes of this Supplement, the reference to “Section 20” as used in Section 41(c) of the Original Agreement shall mean Article XI of this Supplement.
14.1.19 Affirmative Action. Section 42 of the Original Agreement, except that, for purposes of this Supplement, the reference to “Section 20” as used in Section 41(c) of the Original Agreement shall mean Article XI of this Supplement.
14.1.20 Permittee’s Additional Ongoing Affirmative Action – Equal Opportunity Commitment. Section 43 of the Original Agreement, except that, for purposes of this Supplement, the reference to “Sections 41 and 42” as used in Section 43(b) of the Original Agreement shall mean Section 41 and Section 42 of the Original Agreement as incorporated in this Supplement pursuant to Section 14.1.18 and Section 14.1.19, respectively.
14.1.21 Suitability of Port Authority Facilities. Section 45 of the Original Agreement, except that, for purposes of this Supplement, the reference to “Section 44” as used in Section 45 of the Original Agreement shall mean Article IX of this Supplement.
14.1.22 Non-Liability of Individuals. Section 47 of the Original Agreement.
14.1.23 Non-Disturbance. Section 49 of the Original Agreement.
14.1.24 Labor Harmony Obligation. Section 50 of the Original Agreement.
14.1.25 Severability. Section 53 of the Original Agreement.
14.1.26 Counterparts. Section 54 of the Original Agreement.
14.1.27 Rules of Interpretation. Section 55 of the Original Agreement.
14.1.28 Third Party Beneficiaries. Section 56 of the Original Agreement.
14.1.29 Governing Law. Section 57 of the Original Agreement.
14.2Permittee’s OFAC Representations, Warranties and Covenants.
14.2.1 The Permittee hereby represents and warrants to the Port Authority that Permittee, including each of its affiliates and subsidiaries and each of its employees, is not a person or entity with whom U.S. persons or entities (including the Port Authority) are restricted from doing business under the regulations of the Office of Foreign Asset Control (“OFAC”) of the United States Department of the Treasury (including, but not limited to, those named on OFAC’s Specially
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Designated Nationals and Blocked Persons list) or under any statute, executive order (including, but not limited to, the September 24, 2001 Executive Order on Terrorist Financing, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit or Support Terrorism), or other governmental action and is not engaging, and shall not engage, in any dealings or transactions or be otherwise associated with such persons or entities. The Permittee acknowledges that the Port Authority is entering into this Supplement in reliance on the foregoing representations and warranties and that such representations and warranties are a material element of the consideration inducing the Port Authority to enter into and execute this Supplement. In the event of any breach of the foregoing representations and warranties by the Permittee, the Port Authority shall have the right, in addition to any and all other remedies provided under this Supplement, or at law or in equity, to immediately terminate this Supplement upon written notice to the Permittee. In the event of any such termination by the Port Authority, the Permittee, immediately upon receipt of said termination notice, shall have no further right to access the World Trade Center, the WTC Site or any portion thereof and shall surrender the System and all books and records in the Permittee’s possession or control with respect to the System and its services under this Supplement to the Port Authority pursuant to Section 24 of the Original Agreement (as incorporated in this Supplement pursuant to Section 14.1.9). Termination on the aforesaid basis shall be a termination for cause.
14.2.2 The Permittee hereby agrees, on behalf of itself and its employees, subsidiaries and affiliates to be used by it in performing the duties under this Supplement directly or indirectly (each, a “Representative”), that Permittee shall require that each potential Representative, service provider, contractor, subcontractor and any other Party engaged by the any Representative with respect to or in connection with this Supplement represent and warrant to the Port Authority and provide the Port Authority with documentation indicating that such Persons do not constitute (i) a government, individual or entity that is subject to U.S. Economic Sanctions, (ii) a Person that resides or has a place of business in a country or territory subject to U.S. Economic Sanctions or (iii) the agent of any of the foregoing Persons, and are not identified on the List of Specially Designated Nationals and Blocked Persons maintained by OFAC, available on the Internet at http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf.
14.3Audit Rights. The Port Authority may from time to time carry out an independent audit or inspection of the Permittee’s books, accounts, records or any other information related to the WTC Site and/or its obligations or performance under this Supplement, including, without limitation, with respect to the capital costs of the DAS and Wi-Fi systems (and management of the construction account, including Carrier User payments), maintenance and refurbishment expenses, ongoing operations costs, revenues, cash flows, fee calculations and any systems or metrics that are used in computing revenues, expenses, costs or fees. The Port Authority may engage such third parties as it deems necessary or desirable in connection with any such audit, provided that in no event shall the Port Authority engage an auditor on a contingency or percentage fee basis. Each audit shall be at the Port Authority’s expense, provided, however, that if any such audit discloses a variance of [*] or more in any amount (on an aggregate basis), Permittee shall promptly pay to the Port Authority the cost of such audit.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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14.4No Broker. The Permittee hereby represents and warrants that it has not had any contacts, dealings, acts or conversations with any broker in connection with the negotiation of this Supplement or in connection with the rights and permissions granted to the Permittee hereunder. The Permittee shall indemnify and save harmless the Port Authority from any and all claims for brokerage or commission made by any Person for services in connection with the negotiation and execution of this Supplement or in connection with the rights and permissions granted to the Permittee hereunder arising out of the contacts, dealings, acts or conversations of the Permittee, except for claims arising solely out of any contacts, dealings, acts or conversations of the Port Authority.
14.5Notices. All notices, demands, consents, reports and other communications provided for in this Supplement (each a “Notice”) shall be in writing, shall be given by a method prescribed in this Section 14.5 and shall be given to the Party to whom it is addressed at the address set forth below or at such other address(es) as such party hereto may hereafter specify by at least fifteen (15) calendar days’ prior written notice.
To the Port Authority:
The Port Authority of New York and New Jersey
115 Broadway, 19th floor
New York, New York 10006
Attn: Director, World Trade Center Redevelopment
Telephone: (212) 435-6426
Facsimile: (212) 435-6535
With a copy to:
The Port Authority of New York and New Jersey
225 Park Avenue South
New York, New York 10003
Attn: General Counsel
Telephone: (212) 435-3515
Facsimile: (212) 435-6610
With a copy to:
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, New York 10020-1104
Attn: Jeffrey R. Keitelman, Esq.
Telephone: (212) 335-4660
Facsimile: (301) 717-1122
To the Permittee:
New York Telecom Partners, LLC
2150 S. Central Expressway
Attn: Mark Deshaies
McKinney, Texas 75070
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Telephone: (972) 542-3555 ext. 8933
Facsimile: (310) 586-4060
With a copy to:
Boingo Wireless, Inc.
10960 Wilshire Blvd. Suite 800
Los Angeles, California 90024
Attn: Legal Department
Telephone: (310) 586-4064
Facsimile: (310) 586-4060
A Notice may be mailed by United States certified mail, return receipt requested, postage prepaid, deposited in a United States post office or a depository for the receipt of mail regularly maintained by the post office. A Notice may also be delivered (i) by hand or nationally recognized overnight courier which maintains evidence of receipt or (ii) by facsimile with a confirmation copy delivered by overnight courier which maintains evidence of receipt. A Notice shall be deemed given when received at the address for which such party has given notice in accordance with the provisions hereof. A Notice shall be effective only upon receipt or refusal of receipt after delivery in accordance with the methods hereinabove set forth in this Section 14.5.
14.6Port Authority Additional Provisions. The additional provisions set forth in this Section 14.6 shall apply to the Permittee’s obligations under this Supplement. In the event of any inconsistency between the provisions of this Section 14.6 and any other provision of this Supplement, the provisions of this Section 14.6 shall be deemed to control:
14.6.1 Definitions. For the purposes of this Section 14.6, the following terms shall have the following meanings:
(a)“Agency” or “Governmental Agency” means any federal, state, city or other local agency, including departments, offices, public authorities and corporations, boards of education and higher education, public development corporations, local development corporations and others.
(b)“Director” means the then‑incumbent Executive Director of the Port Authority.
(c)“Investigation” means any inquiries made by any federal, state or local criminal prosecuting agency and any inquiries concerning civil anti‑trust investigations made by any Governmental Agency. Except for inquiries concerning civil anti‑trust investigations, the term does not include inquiries made by any civil government agency concerning compliance with any regulation, the nature of which does not carry criminal penalties, nor does it include any background investigations for employment, or Federal, state, and local inquiries into tax returns.
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(d)“Officer” means any individual who serves as chief executive officer, chief financial officer, or chief operating officer of the Permittee, by whatever titles known.
(e)“Parent” means an individual, partnership, joint venture or corporation that owns more than 50% of the voting stock of the Permittee.
14.6.2 Notification of Security Requirements. The Port Authority has the right to impose multiple layers of reasonably required security requirements on the Permittee and its employees on-site at the World Trade Center, depending upon the level of security required, as determined by the Port Authority. These security requirements may include, but are not limited to, the following:
(a)Identity checks and background screening of the Permittee and its on-site employees, including but not limited to inspection of not less than two (2) forms of valid/current government issued identification (at least one having an official photograph) to verify each employee’s name and residence; screening federal (including terrorist identification files), state, and/or local criminal justice agency information databases and files; multi‑year check of personal, employment and/or credit history; access identification to include some form of biometric security methodology such as fingerprint, facial or iris scanning, or the like;
(b)Issuance of photo identification cards; and
(c)Access control, inspection, and monitoring by security guards.
The Permittee may be required to have its staff authorize the Port Authority or its designee to perform background checks on its on-site employees. Such authorization shall be in a form reasonably acceptable to the Port Authority. The Port Authority may impose, increase, and/or upgrade security requirements for the Permittee and its employees during the term of this Supplement to address changing security conditions and/or new governmental regulations.
14.6.3 Insurance. In connection with any work performed by or on behalf of the Permittee, the Permittee shall take out, maintain, and pay the premiums on Commercial General Liability Insurance, including but not limited to premises-operations, products-completed operations, and independent contractors coverage, with contractual liability language covering the obligations assumed by the Permittee under this Supplement and, if vehicles are to be used to carry out the performance of this Supplement, then the Permittee shall also take out, maintain, and pay the premiums on Automobile Liability Insurance covering owned, non-owned, and hired autos in the following minimum limits:
1.Commercial General Liability Insurance: $5 million combined single limit per occurrence for bodily injury and property damage liability; and
2.Automobile Liability Insurance: $5 million combined single limit per accident for bodily injury and property damage liability.
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3.Workers’ Compensation Insurance: In accordance with the requirements of law in the state(s) where work will take place.
4.Employer’s Liability Insurance: Not less than $1 million each accident.
The Port Authority may, at any time during the term of this Supplement upon not less than thirty (30) calendar days’ prior written notice, change or modify the limits and coverages of insurance required hereunder. Such insurance policies shall name the Persons listed on Schedule 1 attached hereto as additional insureds, including but not limited to premise-operations and products-completed operations on the Commercial General Liability Policy. Moreover, the Commercial General Liability Policy shall not contain any provisions for exclusions from liability other than provisions for exclusion from liability forming part of the most up to date ISO form or its equivalent unendorsed Commercial General Liability Policy. The liability policies and certificate of insurance shall contain cross-liability language providing severability of interests so that coverage will respond as if separate policies were in force for each insured. The certificates of insurance and liability policies must contain the following endorsement for the above liability coverages: “The insurer(s) shall not, without obtaining the express advance written permission from the General Counsel of the Port Authority, raise any defense involving in any way the jurisdiction of the Tribunal over the person of the Port Authority, the immunity of the Port Authority, its Commissioners, officers, agents or employees, the governmental nature of the Port Authority, or the provisions of any statues respecting suits against the Port Authority.”
Each such insurance policy shall additionally be specifically endorsed to contain a provision that the policy may not be canceled, terminated, or modified without thirty (30) calendar days’ prior written notice to the Port Authority and to the Port Authority’s General Manager, Risk Management. The Permittee shall submit original certificate(s) of insurance to the Port Authority on the Commencement Date, which certificate(s) must be approved by the General Manager, Risk Management of the Port Authority prior to the commencement of any work under this Agreement by the Permittee. Upon request by the Port Authority, the Permittee shall furnish to the Port Authority’s General Manager, Risk Management, a certified copy of each policy, including the premiums.
(a)If at any time the insurance required pursuant to this Section 14.6.3 or otherwise pursuant to this Supplement should be canceled, terminated, or modified so that the insurance is not in effect as above required, then, if the Port Authority shall so direct, the Permittee shall suspend performance of any affected work at the World Trade Center. If the work is so suspended, no extension of time shall be due on account thereof. If the work is not suspended (whether or not because of omission of the Port Authority to order suspension), then the Port Authority may, at its option, obtain insurance affording coverage equal to the above required, the cost of such insurance to be immediately payable, without demand, by the Permittee to the Port Authority.
(b)Renewal certificates of insurance or policies shall be delivered to the Port Authority at least fifteen (15) calendar days prior to the expiration date of each expiring policy. The General Manager, Risk Management must approve the renewal certificate(s) of insurance before
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work can resume on the facility. If at any time any of the certificates or policies shall become unsatisfactory to the Port Authority, the Permittee shall promptly obtain a new and satisfactory certificate and policy.
(c)The requirements for insurance procured by the Permittee shall not in any way be construed as a limitation on the nature or extent of the contractual obligations assumed by the Permittee under this contract. The insurance requirements are not a representation by the Port Authority as to the adequacy of the insurance to protect the Permittee against the obligations imposed on them by law or by this Supplement or any other contract.
14.6.4 Certification Of No Investigation (Criminal Or Civil Anti‑Trust), Indictment, Conviction, Debarment, Suspension, Disqualification And Disclosure Of Other Information. By signing this Supplement, the Permittee certifies that the Permittee and Parent, except as previously disclosed to the Port Authority, have not:
(a)been indicted or convicted of a felony in any jurisdiction;
(b)been suspended, debarred, found not responsible or otherwise disqualified from entering into any agreement with any Governmental Agency or been denied a government agreement for failure to meet standards related to the integrity of the Permittee;
(c)had an agreement terminated by any Governmental Agency for breach of agreement or for any cause, in each case based in whole or in part on an indictment or conviction of a felony;
(d)Have not ever used a name, trade name or abbreviated name other than the name Project Mammoth, Inc.;
(e)had any business or professional license suspended or revoked or had any sanction imposed as a result of any judicial or administrative proceeding with respect to any violation of a federal, state or local environmental law, rule or regulation;
(f)had any sanction by a governmental authority imposed as a result of a judicial or administrative proceeding related to fraud, extortion, bribery, proposal rigging, embezzlement, misrepresentation or anti‑trust regardless of the dollar amount of the sanctions or the date of their imposition; or
(g)been, and is not currently, the subject of a criminal investigation by any federal, state or local prosecuting or investigative agency.
14.6.5 Non‑Collusive Proposing And Code Of Ethics Certification, Certification Of No Solicitation Based On Commission, Percentage, Brokerage, Contingent Or Other Fees. Except as previously disclosed to the Port Authority, the Permittee certifies, to the extent applicable, that:
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(a)The Permittee has not, to the best of its knowledge, made any offers or agreements or taken any other action with respect to any Port Authority employee or former employee or immediate family member of either which would constitute a breach of ethical standards under the Code of Ethics and Financial Disclosure dated April 11, 1996 (a copy of which has been delivered to the Permittee), nor does the Permittee have any knowledge of any act on the part of a Port Authority employee or former Port Authority employee relating either directly or indirectly to this organization which constitutes a breach of the ethical standards set forth in said Code; and
(b)The Permittee has not offered, promised or given, demanded or accepted, any undue advantage, directly or indirectly, to or from a public official or employee, political candidate, party or party official, or any private sector employee (including a person who directs or works for a private sector enterprise in any capacity), in order to obtain, retain, or direct business or to secure any other improper advantage in connection with this Supplement. The foregoing certifications shall be deemed to be made by the Permittee as follows:
(A)If the Permittee is a corporation or limited liability company, such certification shall be deemed to have been made not only with respect to the Permittee itself, but also with respect to its Parent; or
(B)if the Permittee is a partnership, such certification shall be deemed to have been made not only with respect to the Permittee itself, but also with respect to each partner.
Moreover, the foregoing certifications, if made by an entity, shall be deemed to have been authorized by the Board of Directors of the Permittee, and such authorization shall be deemed to include the signing and submission of the proposal and the inclusion therein of such certification as the act and deed of the corporation. In any case where the Permittee cannot make the foregoing certifications, the Permittee shall so state and shall furnish to the Port Authority a signed statement setting forth in detail the reasons therefor. The foregoing certifications or signed statement shall be deemed to have been made by the Permittee with full knowledge that they would become a part of the records of the Port Authority and that the Port Authority will rely on their truth and accuracy in executing this Supplement. In the event that the Port Authority should determine at any time prior or subsequent to the execution of this Supplement that the Permittee has falsely certified as to any material item in the foregoing certifications or has willfully or fraudulently furnished a signed statement which is false in any material respect, or has not fully and accurately represented, in all material respects, any circumstance with respect to any item in the foregoing certifications required to be disclosed, the Port Authority may exercise such remedies as are provided to it by this Supplement with respect to these matters. In addition, the Permittee and Parent are advised that knowingly providing a false certification or statement pursuant hereto may be the basis for prosecution for offering a false instrument for filing (see, e.g., New York Penal Law, Section 175.30, et seq.). The Permittee and Parent are also advised that the inability to make such certification will not in and of itself disqualify a consultant, and that in each instance the Port Authority will evaluate the reasons therefor provided by such Person.
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14.6.6 No Gifts, Gratuities, Offers Of Employment, Etc. During the term of this Supplement, the Permittee shall not knowingly offer, give or agree to give anything of value to an employee, officer or director of the Port Authority, or knowingly to a member of the immediate family (i.e., a spouse, child, parent, brother or sister) of any of the foregoing, in connection with the performance by such employee, officer or director of the Port Authority of duties involving transactions with the Permittee on behalf of the Port Authority, whether or not such duties are related to this Supplement or any other Port Authority agreement or matter. As used herein “anything of value” shall include, but not be limited to, but only to the extent any such thing has more than a de minimis value, any (a) favors, such as meals, entertainment and transportation (other than that contemplated by this Supplement or any other Port Authority agreement), and (b) gratuity, money, goods, equipment, services, lodging, discounts not available to the general public, offers or promises of employment, loans or the cancellation thereof, preferential treatment or business opportunity. Such term shall not include compensation contemplated by this Supplement or any other Port Authority agreement. The Permittee shall instruct all employees that no gratuities of any kind or nature whatsoever shall be solicited or accepted by it and by its personnel for any reason whatsoever from the tenants, customers or other persons utilizing the building for commercial purposes (i.e. repairmen, contractors, deliverymen). In addition, during the term of this Supplement, the Permittee shall not make an offer of employment or use confidential information in a manner proscribed by the Code of Ethics and Financial Disclosure dated April 11, 1996 (a copy of which has been delivered to the Permittee). The Permittee shall include the provisions of this clause in each subagreement entered into under this Supplement.
14.7Entire Agreement. This Supplement constitutes the entire agreement between the Port Authority and the Permittee regarding the World Trade Center (as more specifically set forth in Section 14.1) and may not be changed, modified, discharged or extended except by instrument in writing duly executed on behalf of both the Port Authority and the Permittee. The Permittee agrees that no representations or warranties shall be binding upon the Port Authority unless expressed in writing in this Supplement. The submission of any unexecuted copy of this Supplement shall not constitute an offer to be legally bound by the provisions of the document submitted.
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IN WITNESS WHEREOF, the Parties have executed this Supplement as of the day and year first above written.
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THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY |
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[Signature Page to Supplemental Agreement No. 4]
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Schedule 1
List of Additional Insureds
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Schedule 2
Sample DAS System Availability and Downtown Calculation Methodology
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Exhibit A
Master Plan
[See attached]
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Exhibit B-1
DAS Designated Coverage Areas
[See attached]
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Exhibit B-2
Temporary System Areas
[See attached]
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Exhibit B-3
Wi-Fi Designated Coverage Areas
[See attached]
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Exhibit C
Summary Basis of Design
1.0Introduction
1.1Purpose
This exhibit provides a general overview of the wireless communications system(s) known as the multi-wireless service, neutral-host Distributed Antenna System (the “DAS System”) and Wireless Local Area Network (the “Wi-Fi System”) respectively. Collectively known as the Telecommunications Network Access System (TNAS). The Systems are designed specifically for the areas of the World Trade Center complex as shown in EXHIBIT B-1, EXHIBIT B-2 and EXHIBIT B-3 to extend wireless services to the patrons, tenants, and visitors of those facilities.
1.2General Description
1.2.1DAS System
The DAS is designed to provide a single, comprehensive, wireless voice and data access system for the Port Authority (PA) and the wireless service providers to better serve tenants, patrons, commuters, and visitors as they inhabit, roam, or are transported through the PA facilities. The DAS is a multi-service system capable of supporting the services and technologies of today and those of the foreseeable future.
The DAS provides a broadband, technology-neutral, RF distribution backbone that allows for neutral equal access of all service providers wishing to join the system. The system offers seamless hand-off of service between the PA facilities and the existing cellular networks. The flexible system architecture allows for future expansion and upgrade as new services or technologies become commercially available.
The DAS extends radio frequency signals throughout the required coverage areas within the PA facilities in a substantially uniform manner. The facilities contain a variety of architectural features. To design the system in the most cost effective way, the DAS architecture incorporates a variety of engineering techniques and state-of the-art products; including multi-band Omni-directional an directional antennas, radiating coaxial cable, non-radiating coaxial cable, single mode fiber optic cable, fiber optic receivers, transmitters and combiners, RF amplifiers, and a variety of passive and active RF combiners.
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A simplified diagram representative of the DAS architecture is provided in FIGURE 1.
FIGURE 1: DAS ARCHITECTURE *
The Base Transceiver Station (BTS) interface equipment combines and processes the Wireless Service Providers’ (WSP) signals and distributes them directly to the Point of Interface (POI) of the DAS. The POI combines multiple RF signals and converts those signals to analog light that is fed into a single mode fiber optic backbone network. The base stations and POI units, and RF to light converters are installed in the POI room. The analog light is then converted back to RF in the IDF closets by the remote amplifier units. The remote amplifier units provide a zero sum gain to the RF signals. The RF is then “distributed” to one or more antennas via coaxial cable in a Single Input Single Output (SISO) configuration. For the Multi Input Multi Output (MIMO) case, there are two separate coaxial distribution plants that provide independent signals for greater data speed and quality.
* TEMPORARY SYSTEM – In place of the POI / BTS room in Figure 1 above, “Broadband” antennas, known as donor sites, will be installed above grade on masts at the WTC site to communicate with the wireless (WSP) Macro sites in the surrounding neighborhood. The above grade donor site antennas will be cabled in conduit to the appropriately located DAS repeater room(s). The repeaters are the amplifier electronics that will connect to the DAS antennas below grade.
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1.2.2Wi-Fi System
The Wi-Fi system is proposed to support high-density coverage throughout the venue as described in Exhibit B-3 and is proposed to support all cellular and Wi-Fi users, tenants, applications, and systems. All of the necessary materials and labor to provide a fully functional, enterprise level network that includes backbone, access routers, core switches, edge switches, endpoints, enclosures, access points, and all associated raceways, back-boxes, and enclosures is proposed to be provided.
The system is proposed to utilize 801.11 N AP’s, Routers, and Switches throughout the public and private coverage areas as defined in Exhibit B-3 including all licensure for software, and operating system. Frequencies and channel assignments is proposed to be coordinated with other networks as necessary and ensure the network is proposed to support all Wi-Fi applications and users. Internet circuit bandwidth is proposed to be based on the highest capacity and use.
The Wi-Fi system is proposed to synergize the available deployed DAS infrastructure to the fullest extent. Implementation of devices is proposed to require installation of Category 6 cabling. Access point required performance data in accordance with the 802.11 standard is proposed to be used for predictive modeling in order to create this design. The following criteria is proposed to be used to estimate necessary equipment performance requirements to best predict Access Point placement, type, quantity and specifications. This requirement criterion is proposed to be used throughout the predictive modeling process.
Requirement Criteria for High Speed, High Usage
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Primary and Secondary Routers
The primary/secondary routers is proposed to be configured in an active-active mode. They is proposed to be managed via an out-of-band router on a management DSL line separate from the primary guest WAN circuit. If the primary WAN circuit goes down, via the OOB DSL line, we is proposed to be able to manage the primary/secondary router to edit the default route to the secondary guest WAN circuit maintaining connectivity for all guests.
* CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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Primary and Secondary Gateways
The primary/secondary gateway is proposed to be linked via two separate gigabit Ethernet connections to each core distribution switch. If the primary WAN circuit goes down, the default route on each gateway can be changed to the secondary WAN circuit by access through the OOB router via a management DSL line.
Primary and Secondary Core Distribution Switches
The primary/secondary core switches are in an active-active configuration meaning, if one of the switches goes offline or is unavailable, traffic is proposed to be automatically re-routed, (using spanning-tree) to the other active switch without any interruption to traffic.
Primary and Secondary Wireless LAN Controllers
The primary/secondary wireless LAN controllers are in an active-standby configuration. If the primary one fails, the standby (Cisco WLC-HA) is proposed to be where all of the APs home to. Once the primary comes back online or is replaced, all APs is proposed to be pushed back to the primary controller.
Primary and Secondary Access Layer Switches
Primary/Secondary access layer switches are in an active-active configuration. All APs being serviced by that IDF closet are equally distributed on both switches to provide wireless coverage redundancy in the case of an AP or access switch failure. Each access switch has two homeruns; one to each core switch providing network redundancy.
Platforms
The system is proposed to be enabled to use a variety of available media, advertising, way finding, and data collection platforms.
2.0Venue Description
2.1Transportation Hub/Retail
The transportation hub is projected to be the third largest transportation hub in New York City. The hub DAS coverage is proposed to be approximately 1.1 MM square feet. The hub also contains multiple levels of retail space. The hub provides pedestrian access to the WTC complex, the World Financial Center, PATH, and the NYC Subway system. The average daily patronage of the transportation hub is projected to 500K + each day.
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2.2Vehicle Security Center (VSC)
The VSC is proposed to provide secure parking facilities for all towers within the WTC Complex. The center is proposed to cover approximately 530K square feet. In addition to vehicle screening facilities, the center is proposed to also provide parking for certain office tenants, tour buses, and VIP and government agency parking.
3.0Coverage Zones and Capacity
The DAS system provides zoned coverage based on user capacity. The zoning plan allows for future expansion of capacity as required. The initial zone plan contains Thirteen (13) zones. The system is designed is designed to be flexible for each WSP zoning requirements and the final zone plan for each WSP may vary from the initial plan.
3.1Transportation Hub Zones
The Transportation Hub is proposed to consist of a Ten (10) Zone DAS Design as follows:
–East West Connector & Path Hall, Zone’s 1 & 2
–Chiller Plant, South Mezzanine, Zone 3
–Oculus, Zone’s 4 & 5
–South Concourse, Zone’s 6 & 7
–Platform Level, Zone 8
–Above Grade Retail, Zone’s 9 & 10
3.2Vehicle Security Center Zones
The Vehicle Security Center is proposed to consist of a Three (3) Zone DAS Design as follows:
–South Basements are in zone 11
–East Side Bus Parking is in zone 12
–GSA Commercial, T3 & T4 Loading Docks are in zone 13
4.0POI and IDF Locations
The POI room is located in the Transportation Hub RM UT-004 and consists of approximately 1500 square feet of conditioned space. The POI room is proposed to serves DAS systems in
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the Transportation Hub and the Vehicle Security Center. IDF locations is proposed to be provided for each node by the Port Authority as required. Current IDF Locations identified are the following:
Transportation Hub, MIMO
Dedicated Cell Closets
Platform Level – PL-114
Mezzanine Level – MZ-227, MZ181, MZ-004
Transit Hall Level – TH-074, TH-069, TH-060
Co-lo PA IDFs (MUST BE APPROVED)
Platform Level – PL-006, PL-047
Mezzanine Level – MZ-184
Transit Hall Level – TH-028, TH-065, TH-083
Retail Closets (MUST BE COORDINATED & APPROVED)
9X Retail Storage, Above Grade Tower 4, Above Grade Tower 3
Vehicle Security Center, SISO
Dedicated Cell Closets
East Basement - RM 110, RM 126, RM 130
South Basement - RM 123, RM 204C, RM M204, RM M231C
VSC3/North – Closets TBD
Total Existing Nodes Closets – 24, final Node counts may vary and require additional closets.
Each Cell closet averages 80 square feet. Some Node Closets are proposed to house a pair of nodes.
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Exhibit D
Initial Schedule Milestones
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Exhibit E
System Plans and Specifications
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Exhibit F
System Site Plan
[See attached]
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EXHIBIT F
SUPPLEMENTAL AGREEMENT NO. 4
TO
TELECOMMUNICATIONS NETWORK ACCESS AGREEMENT
SYSTEM SITE PLAN
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CERTIFICATIONS
I, David Hagan, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Boingo Wireless, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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/s/ David Hagan |
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David Hagan |
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Chief Executive Officer |
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(Principal Executive Officer) |
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November 10, 2014 |
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CERTIFICATIONS
I, Peter Hovenier, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Boingo Wireless, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: |
/s/ Peter Hovenier |
|
|
Peter Hovenier |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
|
|
|
|
Date: |
November 10, 2014 |
|
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014 of Boingo Wireless, Inc., (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Hagan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ David Hagan |
|
David Hagan |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
|
Date: November 10, 2014 |
A signed original of this written statement required by Section 906 has been provided to Boingo Wireless, Inc. and will be retained by Boingo Wireless, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014 of Boingo Wireless, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter Hovenier, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ Peter Hovenier |
|
Peter Hovenier |
|
Chief Financial Officer |
|
(Principal Accounting Officer) |
|
Date: November 10, 2014 |
A signed original of this written statement required by Section 906 has been provided to Boingo Wireless, Inc. and will be retained by Boingo Wireless, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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