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Form 10-Q Voltari Corp For: Jun 30

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August 7, 2015 4:11 PM EDT

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
or 
o
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: 333-186564
 
Voltari Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
90-0933943
(State of incorporation)
 
(I.R.S. Employer
Identification Number)
601 W. 26th Street, Suite 415
New York, NY 10001
(212) 388-5500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 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.    x  Yes    o  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).    x  Yes    o  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
o
Accelerated filer
o
 
 
 
 
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No
As of July 31, 2015, there were 9,068,339 shares of the registrant's common stock, par value of $0.001 per share, outstanding.
 


TABLE OF CONTENTS
 

 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 5.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 5.
Item 6.
 


PART I

Item 1.    Condensed Consolidated Financial Statements.

Voltari Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
 
June 30,
2015
 
December 31,
2014
 
 
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
7,431

 
$
6,448

Accounts receivable, net of allowance for doubtful accounts of $58 and $109 at June 30, 2015 and December 31, 2014 respectively
1,249

 
3,494

Prepaid expenses and other current assets
311

 
1,533

Total current assets
8,991

 
11,475

Property and equipment, net
332

 
667

Other assets
31

 
188

Total assets
$
9,354

 
$
12,330

 
 
 
 
Liabilities, redeemable preferred stock and stockholders’ (deficit) equity
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued expenses
$
1,779

 
$
3,386

Accrued compensation
147

 
721

Other current liabilities
1,567

 
1,451

Total current liabilities
3,493

 
5,558

Other non-current liabilities
28

 
29

Total liabilities
3,521

 
5,587

 
 
 
 
Commitments and contingencies
—

 
—

 
 
 
 
Redeemable preferred stock, $0.001 par value; 1,170,327 and 1,199,643 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively. Redemption value: $41,526 and $39,950 at June 30, 2015 and December 31, 2014, respectively.
38,266

 
36,380

 
 
 
 
Stockholders’ deficit
 
 
 
Common stock, $0.001 par value; 625,000,000 shares authorized; 9,068,339 and 4,763,358 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
9

 
5

Additional paid-in capital
565,320

 
563,643

Accumulated deficit
(597,818
)
 
(593,316
)
Accumulated other comprehensive income
56

 
31

Total stockholders’ deficit
(32,433
)
 
(29,637
)
Total liabilities, redeemable preferred stock and stockholders’ deficit
$
9,354

 
$
12,330

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Voltari Corporation
Condensed Consolidated Statements of Operations
(in thousands, except share data and per share amounts)
(unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015

2014
 
2015
 
2014
Revenue
$
663

 
$
2,641

 
$
2,707

 
$
4,960

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Direct third-party expenses
375

 
1,731

 
1,631


3,336

Network operations, excluding depreciation
118

 
1,332

 
829


2,603

Product development, excluding depreciation
—

 
574

 
206


1,093

Sales and marketing, excluding depreciation
468

 
1,143

 
1,297


2,360

General and administrative, excluding depreciation
1,316

 
1,909

 
2,537


3,492

Depreciation and amortization
78

 
1,101

 
236


2,368

Restructuring
25

 
—

 
530


—

Total operating expenses
2,380

 
7,790

 
7,266

 
15,252

Operating loss
(1,717
)
 
(5,149
)
 
(4,559
)
 
(10,292
)
Total other income, net
115

 
7

 
120

 
7

Loss from continuing operations before income taxes
(1,602
)
 
(5,142
)
 
(4,439
)
 
(10,285
)
Provision for income taxes
—

 
—

 
—


—

Net loss from continuing operations
(1,602
)
 
(5,142
)
 
(4,439
)
 
(10,285
)
Net (loss) income from discontinued operations
(18
)
 
326

 
(63
)
 
424

Net loss
(1,620
)
 
(4,816
)
 
(4,502
)
 
(9,861
)
Accretion of redeemable preferred stock
(176
)
 
(150
)
 
(345
)
 
(293
)
Series J redeemable preferred stock dividends
(1,309
)
 
(1,176
)
 
(2,589
)
 
(2,303
)
Net loss attributable to common stockholders
$
(3,105
)
 
$
(6,142
)
 
$
(7,436
)
 
$
(12,457
)
 
 
 
 
 
 
 
 
Net (loss) income per share attributable to common stockholders - basic and diluted
 
 
 
 
 
 
 
Continuing operations
$
(0.34
)
 
$
(1.39
)
 
$
(1.07
)
 
$
(2.77
)
Discontinued operations
(0.01
)
 
0.07

 
(0.01
)
 
0.09

Total net loss per share attributable to common stockholders
$
(0.35
)
 
$
(1.32
)
 
$
(1.08
)
 
$
(2.68
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic and diluted
8,992,475

 
4,655,593

 
6,900,554

 
4,655,593

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Voltari Corporation
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015

2014
 
 
 
 
 
 
 
 
Net loss
$
(1,620
)
 
$
(4,816
)
 
$
(4,502
)
 
$
(9,861
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
8

 
23

 
25

 
(52
)
Other comprehensive income (loss)
8

 
23

 
25

 
(52
)
Comprehensive loss
$
(1,612
)
 
$
(4,793
)
 
$
(4,477
)
 
$
(9,913
)
The accompanying notes are an integral part of these condensed consolidated financial statements.


4

Voltari Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
(in thousands, except share data)
(unaudited)


 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income
 
 
 
Shares
 
Amount
 
 
 
 
Total
Balance as of December 31, 2014
4,763,358

 
$
5

 
$
563,643

 
$
(593,316
)
 
$
31

 
$
(29,637
)
Net loss
—

 
—

 
—

 
(4,502
)
 
—

 
(4,502
)
Sale of common stock
4,300,000

 
4

 
4,551

 


 


 
4,555

Other comprehensive income
—

 
—

 
—

 
—

 
25

 
25

Redeemable preferred stock dividends
—

 
—

 
(2,589
)
 
—

 
—

 
(2,589
)
Accretion of redeemable preferred stock
—

 
—

 
(345
)
 
—

 
—

 
(345
)
Common stock options and warrants
4,981

 
—

 
22

 
—

 
—

 
22

Stock-based compensation expense
—

 
—

 
38

 
—

 
—

 
38

Balance as of June 30, 2015
9,068,339

 
$
9

 
$
565,320

 
$
(597,818
)
 
$
56

 
$
(32,433
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Voltari Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Six Months Ended
 
June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(4,502
)
 
$
(9,861
)
Loss (income) from discontinued operations
63

 
(424
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
236

 
2,368

Stock-based compensation expense
38

 
201

Other non-cash adjustments
(159
)
 
98

Changes in operating assets and liabilities:
 
 
Accounts receivable
2,283

 
(329
)
Prepaid expenses and other current assets
553

 
(35
)
Other assets
157

 
—

Accounts payable and accrued expenses
(2,166
)
 
(871
)
Net cash used in operating activities - continuing operations
(3,497
)
 
(8,853
)
Net cash (used in) provided by operating activities - discontinued operations
(63
)
 
775

Net cash used in operating activities
(3,560
)
 
(8,078
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
—

 
(4
)
Capitalized software development costs
—

 
(1,681
)
Proceeds from sale of fixed assets
218

 
—

Net cash provided by (used in) investing activities - continuing operations
218

 
(1,685
)
Net cash provided by investing activities - discontinued operations
—

 
200

Net cash provided by (used in) investing activities
218

 
(1,485
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from sale of common stock
5,755

 
—

Rights offering costs
(465
)
 
—

Proceeds from exercise of common stock options and warrants
22

 
—

Redemption of Series J preferred stock
(1,012
)
 
—

Net cash provided by financing activities
4,300

 
—

Effect of exchange rate changes on cash and cash equivalents
25

 
(49
)
Net increase (decrease) in cash and cash equivalents
983

 
(9,612
)
Cash and cash equivalents at beginning of period
6,448

 
24,745

Cash reclassified to assets held for sale at beginning of period
—

 
856

Cash reclassified to assets held for sale at end of period
—

 
(547
)
Cash and cash equivalents at end of period
$
7,431

 
$
15,442

The accompanying notes are an integral part of these condensed consolidated financial statements.

6
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)



1. Business Description and Basis of Presentation

Business Description
Voltari Corporation (“Voltari” or the “Company”) has been engaged in the business of providing mobile advertising solutions to brands, marketers and advertising agencies. In August 2015, we began implementing a transformation plan pursuant to which, among other things, we intend to exit our mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real properties.

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheet as of December 31, 2014 included herein was derived from the audited financial statements as of that date, but does not include all disclosures required by U.S. GAAP.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments which are necessary for a fair statement of the results of the interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the fiscal year ended December 31, 2014 included in our Annual Report on Form 10-K (together with Amendment No. 1 to the 2014 Annual Report on Form 10-K/A, the "10-K"). The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year or for any other period.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates include the allowance for doubtful accounts receivable, valuation of deferred tax assets, valuation of goodwill, long-lived and intangible assets, stock-based compensation, litigation and other loss contingencies. Actual results could differ from those estimates.

Reclassifications
On May 30, 2014, we completed the sale of our U.S. and Canadian messaging business. Further, on September 1, 2014, we completed the sale of our wireless carrier business in the United Kingdom ("UK"). As a result, these businesses are reported as discontinued operations in the condensed consolidated financial statements for the requisite periods presented in this Quarterly Report on Form 10-Q. See Note 3 - Discontinued Operations for further information.

2. Summary of Significant Accounting Policies

Our significant accounting policies are those that we believe are both important to the portrayal of our financial condition and results of operations. Management believes there have been no material changes to the significant accounting policies discussed in Note 2 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Recently Adopted Accounting Pronouncements

In April 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-08, which amends FASB ASC Topic 205, Presentation of Financial Statements and FASB ASC Topic 360, Property, Plant, and Equipment. This standard amends the definition of a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. This guidance became effective on a prospective basis for annual periods beginning on or after December 15, 2014, and interim periods within those years. The Company adopted this standard beginning January 1, 2015. Adoption did not have an impact on our consolidated financial statements.


7
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)


Recently Issued Accounting Pronouncements
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to evaluate for each reporting period whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosure in certain circumstances. The new standard is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company expects to adopt this standard for our annual period ending December 31, 2016 and is currently evaluating the impact of the adoption of the new standard on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The guidance in this ASU supersedes nearly all existing revenue recognition guidance under U.S. GAAP and creates a single, principle-based revenue recognition framework that is codified in a new FASB ASC Topic 606. The core principle of this guidance is for the recognition of revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new revenue standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years. Early adoption is not permitted. The new standard allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the transition method that will be elected and the potential effects of the adoption of the new standard on our consolidated financial statements.


3. Discontinued Operations

In August, 2015 we began implementing a transformation plan pursuant to which, among other things, we intend to exit our mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real properties. Net loss from continuing operations in the condensed consolidated statements of operations includes the results of our mobile marketing and advertising business for the three and six months ended June 30, 2015. See Exhibit 99.1 included in this Quarterly Report on Form 10-Q, "Unaudited Pro Forma Consolidated Financial Information" for pro forma information related to the exit from our mobile marketing and advertising business and our entry into the business of acquiring, financing and leasing commercial real properties.
On May 30, 2014, we completed the sale of our U.S. and Canadian messaging business. On September 1, 2014, we completed the sale of our UK carrier business. The operations related to the U.S. and Canadian messaging business as well as our UK carrier business are reported as discontinued operations in the condensed consolidated financial statements for all periods presented. We discontinued U.S. carrier operations in 2013 and discontinued India, Asia Pacific and European carrier operations in 2012.
Discontinued operations on the condensed consolidated statements of operations for the three months ended June 30, 2015 and 2014 is as follows (in thousands):

8
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)


 
Three Months Ended June 30,
 
2015
 
2014
 
Total
 
U.S. Messaging & Other
 
Canadian Messaging
 
UK Carrier
 
Total
Revenue
$
—

 
$
105

 
$
119

 
$
334

 
$
558

Operating (loss) income
(18
)
 
18

 
(26
)
 
205

 
197

Other income (expense)
—

 
178

 
(49
)
 
—

 
129

Pre-tax (loss) income
(18
)
 
196

 
(75
)
 
205

 
326

Provision for income taxes
—

 
—

 
—

 
—

 
—

Net (loss) income from discontinued operations
$
(18
)
 
$
196

 
$
(75
)
 
$
205

 
$
326


Discontinued operations on the condensed consolidated statements of operations for the six months ended June 30, 2015 and 2014 is as follows (in thousands):

 
Six Months Ended June 30,
 
2015
 
2014
 
Total
 
U.S. Messaging & Other
 
Canadian Messaging
 
UK Carrier
 
Total
Revenue
$
—

 
$
372

 
$
451

 
$
646

 
$
1,469

Operating (loss) income
(63
)
 
228

 
(114
)
 
326

 
440

Other income (expense)
—

 
82

 
(98
)
 
—

 
(16
)
Pre-tax (loss) income
(63
)
 
310

 
(212
)
 
326

 
424

Provision for income taxes
—

 
—

 
—

 
—

 
—

Net (loss) income from discontinued operations
$
(63
)
 
$
310

 
$
(212
)
 
$
326

 
$
424




4. Goodwill and Long-Lived Assets Impairment

Based upon a combination of factors and developments, including continuing operating losses and a sustained decline in our stock price, we had strong indications that our goodwill was likely impaired as of December 2014. In addition, expected changes in use of certain of our capitalized software and other property and equipment required an impairment analysis and resulted in impairment charges which are described in greater detail below.
Long-Lived Assets
As a result of termination of our Seattle datacenter operations in the first quarter of 2015 and planned changes in the use of assets consistent with efforts to reduce operating costs, we determined our property and equipment, including capitalized software, as well as intangible assets, were impaired in the fourth quarter of 2014. Certain capitalized software and other long-lived assets classified as property and equipment, net, are no longer used in our operations and carrying value of those assets exceeds the expected net sales proceeds. We have consequently recognized impairment charges of $3.9 million in the fourth quarter of 2014, including $3.8 million related to capitalized software costs.

Goodwill
As a result of continuing operating losses, a sustained decline in our stock price, a discounted cash flow analysis and market value analysis, we determined there was not sufficient value to support the carrying value of the reporting unit's goodwill. Consequently, we recorded a $2.4 million goodwill impairment charge in the fourth quarter of 2014.


9
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)



5. Restructuring

In the first quarter of 2015, we significantly reduced the size of our engineering department and terminated operations at our Seattle Data Center as part of an effort to reduce our operating expenses, particularly the cost of research and development and advertising delivery. As a result of these restructuring plans, we incurred $0.5 million of restructuring charges during the six months ended June 30, 2015, primarily related to vendor contract termination costs, termination benefits associated with the elimination of redundant functions and positions and rental cost related to closed facilities. Other current liabilities at June 30, 2015 includes $0.1 million related to accrued restructuring costs, primarily vendor contract termination costs.

6. Redeemable Preferred Stock

Upon completion of our rights offering in October 2012, we issued 1,199,643 shares of 13% Redeemable Series J Preferred Stock (the "Series J preferred stock") and, after giving effect to the one-for-ten reverse stock split that took effect in April 2013, warrants to acquire 1,014,982 common shares. Net proceeds from the rights offering of approximately $27.8 million were allocated between Series J preferred stock and common stock warrants based on their estimated relative fair market values at the date of issuance. The portion of the net proceeds from the rights offering attributable to the Series J preferred stock was determined to be approximately $26.4 million. The difference between the carrying value of the Series J preferred stock and its liquidation value is being accreted over an anticipated redemption period of five years using the effective interest method. The shares of Series J preferred stock have limited voting rights and are not convertible into shares of our common stock or any other series or class of our capital stock.

Holders of the Series J preferred stock are entitled to an annual dividend of 13%, which is payable in cash or in-kind at our discretion, on a quarterly basis. To date, we have elected to pay all quarterly dividend payments on our Series J preferred stock, in the cumulative amount of $12.3 million, in-kind rather than in cash. Accordingly, we have increased the carrying value of our Series J preferred stock for the amount of the paid in-kind dividend payments. Dividends on the Series J preferred stock and the accretion increase the amount of net loss that is attributable to common stockholders and are presented as separate amounts on the condensed consolidated statements of operations.

Our Series J preferred stock has a preference upon dissolution, liquidation or winding up of the Company in respect of assets available for distribution to stockholders. The liquidation preference of the Series J preferred stock is initially $25 per share. If the quarterly cash dividends on the Series J preferred stock are not paid, which has been the case to date, the liquidation preference is adjusted and increased quarterly (i) until October 11, 2017, by an amount equal to 3.25% of the liquidation preference per share, as in effect at such time and (ii) thereafter by an amount equal to 3.5% of the liquidation preference per share, as in effect at such time. The quarterly accretion will continue until the shares are redeemed, or until the Company's affairs are liquidated, dissolved or wound-up.

Our Series J preferred stock contains certain redemption features and is classified as mezzanine equity on our condensed consolidated balance sheets at June 30, 2015 and December 31, 2014 since the shares are (i) redeemable at the option of the holder upon the occurrence of certain events and (ii) have conditions for redemption which are not solely within our control. Our Series J preferred stock is redeemable at the option of the holder if the Company undergoes a change in control, which includes a person becoming a beneficial owner of securities representing at least 50% of the voting power of our company, a sale of substantially all of our assets, and certain business combinations and mergers which cause a change in 20% or more of the voting power of our company, and if we experience an ownership change (within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended), which results in a substantial limitation on our ability to use our net operating losses and related tax benefits.

As of June 30, 2015, our Series J preferred stock has an aggregate redemption value of approximately $41.5 million, including paid in-kind dividends of $11.0 million and accrued dividends of $1.3 million which are included within Other current liabilities on our condensed consolidated balance sheet. We recorded accretion associated with our Series J preferred stock of $0.2 million and $0.3 million for the three and six months ended June 30, 2015, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2014, respectively.

In connection with the closing of our rights offering on March 30, 2015 (See Note 7 - Rights Offering), entities affiliated with Mr. Carl C. Icahn, our largest shareholder, became the owner of approximately 52.3% of our common stock, which resulted in a change of control of the Company. This constituted a redemption event pursuant to the terms and conditions of the Series J preferred

10
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)


stock, and as a result each holder of shares of Series J preferred stock had the right to require the Company to redeem all or a portion of such holder’s shares of Series J preferred stock. Entities affiliated with Mr. Carl C. Icahn waived their option to redeem Series J preferred stock in connection with the change in control resulting from the completion of the rights offering that closed on March 30, 2015. On April 13, 2015 we redeemed 29,316 shares of Series J preferred stock for approximately $1.0 million in cash. Following the April 13, 2015 redemption of Series J preferred stock, entities affiliated with Mr. Carl C. Icahn became the owner of approximately 97.9% of our Series J preferred stock.

7. Rights Offering

On February 27, 2015, we commenced a rights offering of up to an aggregate of 4,300,000 shares of our common stock. Under the terms of the rights offering, we distributed to stockholders of record at the close of business on February 13, 2015 transferable subscription rights to purchase 0.9027 shares of common stock for every share of common stock owned on such date.

The rights offering was fully subscribed and closed on March 30, 2015. We received approximately $4.6 million in net proceeds from the rights offering, including approximately 96% from entities affiliated with Mr. Carl C. Icahn. Prepaid expenses and other current assets at December 31, 2014 included costs related to the rights offering of $0.7 million, which have been charged against the proceeds of the offering.

Following the completion of the rights offering on March 30, 2015, entities affiliated with Mr. Carl C. Icahn, the Company’s largest stockholder, became the owner of approximately 52.3% of our common stock. Entities affiliated with Mr. Icahn also own warrants to purchase an additional 9.7% of our common stock, which warrants are currently unexercisable by Mr. Icahn and such affiliated entities.

8. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the period indicated (dollars in thousands):

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net loss attributable to common stockholders
$
(3,105
)
 
$
(6,142
)
 
$
(7,436
)
 
$
(12,457
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding - basic and diluted
8,992,475

 
4,655,593

 
6,900,554

 
4,655,593

 
 
 
 
 
 
 
 
Net loss per share attributable to common stockholders - basic and diluted
$
(0.35
)
 
$
(1.32
)
 
$
(1.08
)
 
$
(2.68
)

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the applicable period. Diluted net loss per share attributable to common stockholders includes the effects of any warrants, options and other potentially dilutive securities outstanding during the period. For the periods presented, there were no potentially dilutive securities outstanding, therefore basic and diluted net loss per share attributable to common stockholders are equal. The following table presents the outstanding antidilutive securities excluded from the calculation of net loss per share attributable to common stockholders:
 
June 30,
 
2015
 
2014
Common stock issuable upon exercise of Warrants
1,014,958

 
1,202,804

Options to purchase common stock
57,811

 
261,194

Restricted stock
73,525

 
42,919

Total securities excluded from net loss per share attributable to common stockholders
1,146,294

 
1,506,917




11
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)


9. Commitments and Contingencies

Legal Proceedings
Putative Securities Class Action. We previously announced that Joe Callan filed a putative securities class action complaint in the U.S. District Court, Western District of Washington at Seattle on behalf of all persons who purchased or otherwise acquired common stock of Motricity between June 18, 2010 and August 9, 2011 or in Motricity’s initial public offering. Motricity, which was our predecessor registrant, is now our wholly-owned subsidiary and has changed its name to Voltari Operating Corp. The defendants in the case were Motricity, certain of our current and former directors and officers, including Ryan K. Wuerch, James R. Smith, Jr., Allyn P. Hebner, James N. Ryan, Jeffrey A. Bowden, Hunter C. Gary, Brett Icahn, Lady Barbara Judge CBE, Suzanne H. King, Brian V. Turner; and the underwriters in Motricity’s initial public offering, including J.P. Morgan Securities, Inc., Goldman, Sachs & Co., Deutsche Bank Securities Inc., RBC Capital Markets Corporation, Robert W. Baird & Co Incorporated, Needham & Company, LLC and Pacific Crest Securities LLC. The complaint alleged violations under Sections 11 and 15 of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by all defendants and under Section 10(b) of the Exchange Act by Motricity and those of our former and current officers who are named as defendants. The complaint sought, inter alia, damages, including interest and plaintiff’s costs and rescission. A second putative securities class action complaint was filed by Mark Couch in October 2011 in the same court, also related to alleged violations under Sections 11 and 15 of the Securities Act, and Sections 10(b) and 20(a) of the Exchange Act. On November 7, 2011, the class actions were consolidated, and lead plaintiffs were appointed pursuant to the Private Securities Litigation Reform Act. On December 16, 2011, plaintiffs filed a consolidated complaint which added a claim under Section 12 of the Securities Act to its allegations of violations of the securities laws and extended the putative class period from August 9, 2011 to November 14, 2011. The plaintiffs filed an amended complaint on May 11, 2012 and a second amended complaint on July 11, 2012. On August 1, 2012, we filed a motion to dismiss the second amended complaint, which was granted on January 17, 2013. A third amended complaint was filed on April 17, 2013. On May 30, 2013, we filed a motion to dismiss the third amended complaint, which was granted by the Court on October 1, 2013. On October 31, 2013, the plaintiffs filed a notice of appeal of the dismissal to the United States Court of Appeals for the Ninth Circuit. On April 25, 2014, the plaintiffs filed their opening appellate brief and on July 24, 2014 we filed our answering brief.
From time to time, we are subject to claims in legal proceedings arising in the normal course of business. We do not believe that we are currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

10. Subsequent Events
On August 6, 2015, we committed to a transformation plan pursuant to which, among other things, we intend to exit the mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real estate properties.

In connection with the implementation of our transformation plan, we could incur total costs ranging from $0.6 million to $1.4 million. Included in this estimate are severance and other workforce reduction costs of approximately $0.3 million and costs associated with our exit from the mobile marketing and advertising business, consisting primarily of lease termination and other costs ranging from approximately $0.3 million to $1.1 million in connection with exiting our office space in New York, Chicago and Los Angeles. All costs of our transformation plan are expected to be incurred during 2015 and include non-cash impairment charges of $0.2 million, relating primarily to our leasehold improvements and furniture and fixtures in our New York office.
On August 7, 2015, we, through our wholly owned subsidiary, Voltari Real Estate Holding LLC, entered into a purchase and sale agreement (the “P&S Agreement”) with 160 Brighton Acquisition, LLC to acquire a real estate parcel in Long Branch, New Jersey. The property is subject to a triple net lease with JPMorgan Chase Bank, N.A. ("Chase"), the original term of which expires in June, 2020 (with two, five-year renewal options), pursuant to which Chase is responsible for the payment of basic rent as well as the payment of real estate taxes, maintenance costs, utilities, tenant's insurance and other property related costs. The purchase price is approximately $3.63 million and average annual rental income for the property over the remaining term of the original lease is expected to be approximately $203,000. The P&S Agreement contains customary representations, warranties and covenants by the parties and the closing of the purchase is subject to customary conditions precedent, including a due diligence period. We can make no assurances that the conditions will be satisfied or that the purchase will be consummated in a timely manner, if at all.

On August 7, 2015, we (as borrower) and Koala Holding LP (as lender), an affiliate of Carl C. Icahn, our controlling stockholder (“Koala”), entered into a revolving note (the “Note”). Pursuant to the Note, Koala made available to us a revolving loan facility of up

12
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)


to $10 million in aggregate principal amount. Borrowings under the Note will bear interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Note also includes a fee of 0.25%, per annum, on undrawn amounts and matures on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, is consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that is earlier than December 31, 2017. Subject to the terms and conditions of the Note, we may repay all or any portion of the amounts outstanding under the Note at any time without premium or penalty, and any amounts so repaid will, until the maturity date, be available for re-borrowing. As collateral for the Note, we have pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC.
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere herein.

Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1A—Risk Factors and Exhibit 99.1, Unaudited Pro Forma Consolidated Financial Information, attached hereto, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 12E of the Securities Exchange Act of 1934, as amended, regarding our plans, objectives, expectations and intentions. Such statements include, without limitation, any statements regarding our transformation plan, our exit from the mobile marketing and advertising business and our entry into the real estate investment business, any statements regarding our ability to generate profits, any statements regarding various estimates we have made in preparing our financial statements, statements that refer to projections of our future operating performance, statements regarding any pro forma financial information we present, the sufficiency of our capital resources to meet our cash needs, the exit from or disposition of certain of our businesses, and the anticipated growth and trends in our businesses. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.

Risks and uncertainties that could adversely affect our business and prospects include without limitation:
•
any financial or other information included herein (including pro forma financial information) based upon or otherwise incorporating judgments or estimates based upon future performance or events;
•
our ability to raise additional capital or generate the cash necessary to continue and expand our operations;
•
our ability to raise additional capital or generate the cash necessary to fund the liquidation preference on, or redeem, our Series J preferred stock if required to do so;
•
our ability to protect and make use of our substantial net operating loss carryforwards;
•
our ability to implement our transformation plan;
•
our ability to compete in the highly competitive real estate investment industry;
•
the impact of government regulation, legal requirements or industry standards relating to commercial real estate;
•
our limited experience acquiring and managing commercial real properties;
•
our ability to close our pending real estate acquisition and execute additional acquisitions;
•
risks generally associated with the commercial real estate investment business;
•
our ability to meet the criteria required to remain listed on NASDAQ;
•
the ongoing benefits and risks related to our relationship with Mr. Carl Icahn, our principal beneficial stockholder and principal lender, through certain of his affiliates; and
•
the impact and costs and expenses of any litigation we may be subject to now or in the future.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-

13

looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, projections and pro forma financial information, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above, as well as the risks and uncertainties discussed in Part II, Item 1A - Risk Factors in this Quarterly Report on Form 10-Q and in Part I, Item 1A - Risk Factors of our Annual Report on Form 10-K, as amended by Form 10-K/A, for the fiscal year ended December 31, 2014. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.

Recent Developments & Transformation Plan
On August 6, 2015, the board of directors (the “Board”) of Voltari Corporation (“we, “us”, “Voltari” or the “Company”) committed the Company to a transformation plan pursuant to which, among other things, the Company intends to exit its mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real estate properties. The Company intends to lease such properties pursuant to so-called “double net” or “triple net” leases. As the Company executes its transformation plan, it intends to significantly reduce its workforce over the next several weeks, which process has begun.

The Board decided to implement the transformation plan following its review of the Company's efforts to realign its strategic path and management's analysis of the Company's mobile marketing and advertising business. As previously disclosed, we have undergone significant changes over the past two years. Prior to July 1, 2013, most of our revenue was derived from providing hosting services to wireless carriers. Starting in 2012, we began our exit from most of our international carrier business and, on June 30, 2013, concluded our U.S. carrier business. On October 31, 2013, we completed the sale of our Gen5 business. On May 30, 2014, we completed the sale of our U.S. and Canadian messaging business. Further, on September 1, 2014, we completed the sale of our wireless carrier business in the UK.

In connection with our efforts to realign our strategic path, we shifted our focus to the mobile marketing and advertising business and continued to reduce our cost structure. We implemented various cost reduction measures, including reductions in our workforce and a restructuring of our facilities and data centers. Further, in January of 2015, we significantly reduced the size of our engineering staff and terminated operations at our Seattle Data Center as part of our ongoing efforts to reduce our operating expenses, particularly the cost of research and development and the delivery of advertising.

Beginning in late May 2015, the Board undertook a review of the Company’s prospects, cost-cutting efforts and strategic alternatives. As part of its review, the Board considered alternative businesses the Company could enter into that would preserve the Company’s assets and maximize shareholder value. Based on its assessment of the Company’s prospects and cost structure including, among other factors, the Company’s performance during the three and six month periods ended June 30, 2015, recent forecasts provided by management, input from an independent consultant, and potential strategic alternatives available to the Company, the Board concluded that our cost-cutting efforts have not kept pace with our declining revenue, that our forecasted cash burn and revenue potential are unsatisfactory and that effecting the transformation plan by exiting the mobile marketing and advertising business and entering into the real estate investment business is in the best interests of the Company’s stockholders. The Board believes that, if successfully implemented, the Company can significantly decrease its operating costs and cash burn and, over time, generate profits from the transformation plan.

In addition to our entry into the real estate investment business as described above, the Company intends to explore additional strategic opportunities from time to time, which may include opportunities with respect to its intellectual property, investments in various industries or acquisitions.

Cost Reductions and Material Charges — In connection with the implementation of our transformation plan, we could incur total costs ranging from $0.6 million to $1.4 million. Included in this estimate are severance and other workforce reduction costs of approximately $0.3 million and costs associated with our exit from the mobile marketing and advertising business, consisting primarily of lease termination and other costs ranging from approximately $0.3 million to $1.1 million in connection with exiting our office space in New York, Chicago and Los Angeles.
All costs of our transformation plan are expected to be incurred during 2015 and include non-cash impairment charges of $0.2 million, relating primarily to our leasehold improvements and furniture and fixtures in our New York office.
Real Property Acquisition—As the first step in the execution of our transformation plan, on August 7, 2015, we caused our wholly-owned subsidiary, Voltari Real Estate Holding LLC, formed for this purpose, to enter into a purchase and sale agreement (the “P&S Agreement”) with 160 Brighton Acquisition, LLC to acquire a real estate parcel in Long Branch, New Jersey. The property is subject to a triple net

14

lease with JPMorgan Chase Bank, N.A. ("Chase"), the original term of which expires in June, 2020 (with two, five-year renewal options), pursuant to which Chase is responsible for the payment of basic rent as well as the payment of real estate taxes, maintenance costs, utilities, tenant's insurance and other property related costs. Refer to http://investor.shareholder.com/jpmorganchase/sec.cfm for the financial statements of the tenant. The purchase price is approximately $3.63 million and average annual rental income for the property over the remaining term of the original lease is expected to be approximately $203,000. The P&S Agreement contains customary representations, warranties and covenants by the parties and the closing of the purchase is subject to customary conditions precedent, including a due diligence period. We can make no assurances that the conditions will be satisfied or that the purchase will be consummated in a timely manner, if at all.

Revolving Note—On August 7, 2015, we (as borrower) and Koala Holding LP (as lender), an affiliate of Carl C. Icahn, the Company’s controlling stockholder (“Koala”), entered into a revolving note (the “Note”). The Company sought and received the Note to, in part, allay potential concerns regarding the Company’s ability to invest in and execute its transformation plan while retaining cash levels sufficient to fund its ongoing operations. There are no limitations on the use of proceeds under the Note. The Company currently intends to use this funding to facilitate the acquisition of additional commercial real estate properties as it executes its transformation plan, as well as for operating expenses and working capital purposes.

Our Board formed a special committee of independent directors (the “Special Committee”) to negotiate the structure and terms of the Note. The Special Committee consisted of James L. Nelson and Jay A. Firestone. In connection with its negotiation of the structure and terms of the Note, the Special Committee retained and received advice from its own legal counsel as well as an independent financial advisor. The Special Committee received an opinion from its independent financial advisor that the financial terms of the Note are fair, from a financial point of view, to us. The Special Committee approved the terms and conditions of, and our entry into, the Note.  

Pursuant to the Note, Koala made available to the Company a revolving loan facility of up to $10,000,000 in aggregate principal amount. Borrowings under the Note will bear interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Note also includes a fee of 0.25%, per annum, on undrawn amounts and matures on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the Company (or its successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at the Company’s option, a date selected by the Company that is earlier than December 31, 2017.

If an event of default exists, the Note will bear interest at a default rate equal to the greater of the LIBOR Rate plus 450 basis points, per annum, and 4.75%, per annum. Subject to the terms and conditions of the Note, the Company may repay all or any portion of the amounts outstanding under the Note at any time without premium or penalty, and any amounts so repaid will, until the maturity date, be available for re-borrowing. As collateral for the Note, the Company has pledged and granted to Koala a lien on the Company’s limited liability company interest in Voltari Real Estate Holding LLC.

Incentive Award—On August 6, 2015 and in light of the transformation plan, the compensation committee of the Company’s Board (the “Compensation Committee”) approved a discretionary performance incentive award for Mr. John Breeman, the Company’s Chief Financial Officer and acting principal executive officer.  The incentive award is intended to provide performance-based compensation to Mr. Breeman for his contribution to the achievement of the Company’s objectives, including without limitation, the successful implementation of the Company’s transformation plan.  The Compensation Committee set a target for the award of 60% of Mr. Breeman’s base salary for 2015.  Payment of any incentive award will be discretionary, in cash, and will be tied to the successful implementation of our transformation plan, as determined by the Board.  Payment of any award will be made following the finalization of the Company’s audited financial statements for the fiscal year ended December 31, 2015.

Other Recent Developments
Rights offering—On February 27, 2015, we commenced a rights offering of up to an aggregate of 4,300,000 shares of our common stock. Under the terms of the rights offering, we distributed to stockholders of record at the close of business on February 13, 2015 transferable subscription rights to purchase 0.9027 shares of common stock for every share of common stock owned on the record date. The rights offering included an over-subscription privilege, which permitted each subscriber that exercised its basic subscription right in full the option to purchase additional shares of common stock that remained unsubscribed at the expiration of the offering. If a subscriber exercised its basic subscription right or over-subscription privilege to purchase less than 1,300,000 shares in the rights offering, the subscriber paid a price of $0.97 per whole share. If a subscriber exercised its basic subscription right or over-subscription privilege to purchase 1,300,000 shares or more in the rights offering and owned 33% or more of our issued and outstanding common stock following completion of the rights offering, the subscriber paid a price of $1.36 per whole share.


15

The rights offering was fully subscribed and closed on March 30, 2015. We received approximately $4.6 million in net proceeds from the rights offering and we intend to use these proceeds for general corporate and working capital purposes. Following the completion of the rights offering on March 30, 2015, entities affiliated with Mr. Carl C. Icahn, the Company’s largest stockholder, became the owner of approximately 52.3% of our common stock. Entities affiliated with Mr. Icahn also own warrants to purchase an additional 9.7% of our common stock, which warrants are currently unexercisable by Mr. Icahn and such affiliated entities.

Series J Preferred Stock—The March 30, 2015 acquisition of common stock by entities affiliated with Mr. Carl C. Icahn in the rights offering resulted in a change of control of the Company, which triggered a redemption event pursuant to the terms of the Company's 13% Redeemable Series J Preferred Stock, par value $0.001 per share (the "Series J preferred stock"), and as a result each holder of shares of Series J preferred stock had the right to require the Company to redeem all or a portion of such holder’s shares of Series J preferred stock. Entities affiliated with Mr. Carl C. Icahn waived their option to redeem Series J preferred stock in connection with the change in control resulting from the completion of the rights offering on March 30, 2015. On April 13, 2015 we redeemed 29,316 shares of Series J preferred stock for approximately $1.0 million in cash. Following the April 13, 2015 redemption of Series J preferred stock, entities affiliated with Mr. Carl C. Icahn became the owner of approximately 97.9% of our Series J preferred stock.

Regained Compliance with NASDAQ Continued Listing Requirements—Our common stock is currently listed on the NASDAQ Capital Market. On May 22, 2014, we received a letter from the NASDAQ Stock Market LLC (“NASDAQ”) advising that we did not meet the minimum $2.5 million stockholders’ equity value requirement for continued listing on the NASDAQ Capital Market and we did not satisfy the alternative requirements for continued listing based on market value of listed securities or net income from continuing operations pursuant to applicable NASDAQ Marketplace Rules. The NASDAQ Listing Qualifications Panel granted us an extension of time until May 18, 2015 to regain compliance with the minimum stockholders' equity value requirements. On April 22, 2015 we received written notice from NASDAQ notifying us that we had regained compliance with the applicable NASDAQ Marketplace Rules based on the market value of listed securities greater than $35 million for 10 consecutive trading days.

On March 17, 2015, we received written notice from NASDAQ notifying us that for the preceding 30 consecutive business days, our common stock did not maintain a minimum closing bid price of $1.00 per share, as required by NASDAQ Listing Rule 5550(a)(2). NASDAQ stated in its letter that in accordance with the NASDAQ Listing Rules, we would be provided 180 calendar days, or until September 14, 2015, to regain compliance with the minimum bid price requirement. On April 15, 2015, we received written notice from NASDAQ notifying us that for the preceding 10 consecutive business days the closing bid price of the Company's common stock had been $1.00 per share or greater. Accordingly, NASDAQ determined that the Company had regained compliance with NASDAQ Listing Rule 5550(a)(2).

Having regained compliance with these rules, we are now in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. We cannot assure that we will remain in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market.

Results of Operations
Our continuing operations for the three and six months ended June 30, 2015 consist of our mobile maketing and advertising business which has terminated in August 2015.
On May 30, 2014, we completed the sale of our messaging business in the U.S. and Canada. Further, on September 1, 2014, we completed the sale of our wireless carrier business in the UK. As a result, these businesses are reported as discontinued operations in the condensed consolidated financial statements for the requisite periods presented in this Quarterly Report on Form 10-Q. See discussion of net (loss) income from discontinued operations below and Note 3 - Discontinued Operations to our condensed consolidated financial statements for more information.

Total revenue
 
Three Months Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
 
 
 
 
June 30,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
2015
 
2014
 
$ Change
 
% Change
 
(Dollars in thousands)
Total revenue
$
663

  
$
2,641

  
$
(1,978
)
  
(74.9
)%
 
$
2,707

  
$
4,960

 
$
(2,253
)
  
(45.4
)%

Total revenue for the three and six months ended June 30, 2015 decreased $2.0 million and $2.3 million, respectively, compared to corresponding periods in 2014 primarily due to the effects of competition, sales department staff turnover and curtailed product development in 2015.


16

Operating expenses
 
Three Months Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
 
 
 
 
June 30,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
2015
 
2014
 
$ Change
 
% Change
 
(Dollars in thousands)
Direct third-party expenses
$
375

 
$
1,731

  
$
(1,356
)
 
(78.3
)%
 
$
1,631

 
$
3,336

 
$
(1,705
)
 
(51.1
)%
Network operations*
118

 
1,332

  
(1,214
)
 
(91.1
)
 
829

 
2,603

 
(1,774
)
 
(68.2
)
Product development*
—

 
574

  
(574
)
 
(100.0
)
 
206

 
1,093

 
(887
)
 
(81.2
)
Sales and marketing*
468

 
1,143

  
(675
)
 
(59.1
)
 
1,297

 
2,360

 
(1,063
)
 
(45.0
)
General and administrative*
1,316

 
1,909

  
(593
)
 
(31.1
)
 
2,537

 
3,492

 
(955
)
 
(27.3
)
Depreciation and amortization
78

 
1,101

  
(1,023
)
 
(92.9
)
 
236

 
2,368

 
(2,132
)
 
(90.0
)
Restructuring
25

 
—

  
25

 
—

 
530

 
—

 
530

 
—

Total operating expenses
$
2,380

  
$
7,790

  
$
(5,410
)
 
(69.4
)%
 
$
7,266

  
$
15,252

 
$
(7,986
)
 
(52.4
)%
* excluding depreciation

Direct third-party expenses
In connection with lower revenue for the three and six months ended June 30, 2015 compared to 2014, our costs, in the form of fees paid to publishers for displaying customer advertisements, ad data and serving fees, also decreased.

Network operations, excluding depreciation

We ceased operations in our Seattle datacenter in the first quarter of 2015 as part of an effort to reduce our operating expenses and subsequently increased use of third-party vendors in the placement of mobile advertising. As a result of ceasing datacenter operations in the first quarter of 2015, network operations expense, excluding depreciation for the three months ended June 30, 2015, decreased $1.2 million from the three months ended June 30, 2014. The decrease was primarily due to:
•
$0.8 million reduction in bandwidth and hosting costs;
•
$0.2 million lower personnel related costs; and
•
$0.2 million lower facilities and other costs.
For the six months ended June 30, 2015 network operations expense, excluding depreciation, decreased $1.8 million from the six months ended June 30, 2014 also due primarily to closing the Seattle datacenter in the first quarter of 2015.
The cost of exiting the Seattle datacenter and related vendor contracts is reflected as Restructuring costs.

Product development, excluding depreciation
In the first quarter of 2015, we significantly reduced the size of our engineering department as part of an effort to reduce our operating expenses, particularly the cost of research and development and advertising delivery. We curtailed development related to our Voltari-Connect platform and Emporia product. We incurred no product development costs for the three months ended June 30, 2015, compared to product development costs of $0.6 million for the three months ended June 30, 2014. For the six months ended June 30, 2015, product development costs, excluding depreciation, decreased $0.9 million primarily due to the decreased second quarter 2015 product development costs as well as lower personnel and contractor costs in the first quarter of 2015 as compared to 2014. Costs related to vendor contract early termination and employee termination benefits are reflected in Restructuring costs.
 
Sales and marketing, excluding depreciation
For the three months ended June 30, 2015, sales and marketing expense, excluding depreciation, decreased $0.7 million, compared to the three months ended June 30, 2014. This decrease was primarily due to reduced personnel and related costs as well as $0.1 million lower marketing and advertising costs. For the six months ended June 30, 2015 , sales and marketing expense, excluding depreciation, decreased $1.1 million, compared to the six months ended June 30, 2014. This decrease was primarily due to a reduction in personnel and related costs as well as $0.2 million lower marketing and advertising costs.


17

General and administrative, excluding depreciation
For the three months ended June 30, 2015, general and administrative expense, excluding depreciation, decreased $0.6 million, or 31.1%, compared to the three months ended June 30, 2014. This decrease was primarily due to:
•
$0.3 million decrease in salaries, benefits and contractor costs resulting from reductions in personnel and the use of contractors in 2015;
•
$0.1 million reduction in bad debt expense; and
•
$0.2 million reduction in business taxes, legal and other costs.
For the six months ended June 30, 2015, general and administrative expense, excluding depreciation, decreased $1.0 million compared to the six months ended June 30, 2014. This decrease was primarily due to:
•
$0.6 million decrease in salaries, benefits and contractor costs resulting from reductions in personnel and the use of contractors in 2015;
•
$0.1 million reduction in bad debt expense; and
•
$0.3 million reduction in business taxes, legal and other costs.
Depreciation and amortization
For the three months ended June 30, 2015, depreciation and amortization expense decreased $1.0 million compared to the three months ended June 30, 2014. For the six months ended June 30, 2015, depreciation and amortization expense decreased $2.1 million compared to the six months ended June 30, 2014. The decrease in depreciation and amortization expense for the three and six months ended June 30, 2015 compared to the comparable periods in 2014 is primarily the result of the reduced carrying value of property and equipment, capitalized software and intangible assets following impairment charges recognized in the fourth quarter of 2014, as well as disposition of fixed assets in connection with the termination of our Seattle datacenter operations in the first quarter of 2015. Depreciation and amortization expense for the six months ended June 30, 2015 relates primarily to general office computer equipment, furniture, computer software and leasehold improvements.

Restructuring
As part of an effort to reduce our operating expenses, we significantly reduced the size of our engineering department and terminated operations at our Seattle Data Center in the first quarter of 2015. As a result of this restructuring, we incurred $0.5 million of restructuring charges during the six months ended June 30, 2015, primarily related to vendor contract early termination costs, termination benefits associated with the elimination of redundant functions and positions and rental cost related to closed facilities.
Net (loss) income from discontinued operations
 
Three Months Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
 
 
 
 
June 30,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
2015
 
2014
 
$ Change
 
% Change
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
Net (loss) income from discontinued operations
$
(18
)
 
$
326

 
$
(344
)
  
(105.5
)%
 
$
(63
)
 
$
424

 
$
(487
)
  
(114.9
)%

Net loss from discontinued operations for the three and six months ended June 30, 2015 reflects residual charges related to operations discontinued in 2014 and prior years. Net income from discontinued operations for the three and six months ended June 30, 2014 reflects operating income generated by the UK carrier business, partially offset by operating loss related to the U.S. and Canadian messaging businesses. See Note 3 - Discontinued Operations to our condensed consolidated financial statements for more information.

Results of operations for our mobile marketing and advertising business, which has terminated in August 2015, are included in continuing operations for all periods presented. Direct third-party expenses, network operations, sales and marketing expenses relate to the mobile maketing and advertising business and no expenses related to the commercial rental real estate business were incurred during the six months ended June 30, 2015.

Net loss

18

 
Three Months Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
 
 
 
 
June 30,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
2015
 
2014
 
$ Change
 
% Change
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
Net loss
$
(1,620
)
 
$
(4,816
)
 
$
3,196

  
66.4
%
 
$
(4,502
)
 
$
(9,861
)
 
$
5,359

  
54.3
%
For the six months ended June 30, 2015, net loss was $4.5 million, compared to net loss of $9.9 million for the six months ended June 30, 2014. The $5.4 million improvement in net loss is primarily due to:
•
Lower operating costs of $8.5 million; partially offset by
•
Decreased revenue of $2.3 million;
•
Restructuring costs of $0.5 million;
•
Increased Other Income, consisting of gain from sale of assets; and,
•
Decreased income from discontinued operations of $0.5 million.
For the three months ended June 30, 2015, net loss was $1.6 million, compared to net loss of $4.8 million for the three months ended June 30, 2014. The $3.2 million improvement in net loss is primarily due to:
•
Lower operating costs of $5.4 million; partially offset by
•
Decreased revenue of $2.0 million;
•
Increased Other Income, consisting of gain from sale of assets; and,
•
Decreased income from discontinued operations of $0.3 million.

Liquidity and Capital Resources
General
Our principal needs for liquidity have been to fund operating losses, working capital requirements, capital expenditures, debt service, restructuring expenses, international activity, acquisitions and integration. Our principal source of liquidity as of June 30, 2015 consisted of cash and cash equivalents of approximately $7.4 million.

On August 7, 2015, we (as borrower) and Koala Holding LP (as lender), an affiliate of Carl C. Icahn, our controlling stockholder (“Koala”), entered into a revolving note (the “Note”). Pursuant to the Note, Koala made available to us a revolving loan facility of up to$10 million in aggregate principal amount. Borrowings under the Note will bear interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Note also includes a fee of 0.25%, per annum, on undrawn amounts and matures on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, is consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that is earlier than December 31, 2017. Subject to the terms and conditions of the Note, we may repay all or any portion of the amounts outstanding under the Note at any time without premium or penalty, and any amounts so repaid will, until the maturity date, be available for re-borrowing. As collateral for the Note, we have pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC.
In August, 2015, we began implementing a transformation plan pursuant to which, among other things, we intend to exit our mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real properties. We expect that the acquisition of commercial real properties, the cost of operations and working capital requirements will be our principal need for liquidity in the future. Our cash flows may be affected by many factors including the economic environment, competitive conditions in the commercial real estate industry and the success of our transformation plan. We believe we will have adequate resources to fund our operations, capital expenditures and working capital needs for the next 12 months using borrowing under the Note and our cash and cash equivalents on hand. We currently intend to leverage real properties that we may acquire, but cannot assure that we will be able to do so on commercially reasonable terms, if at all. Our liquidity may be adversely affected if, and to the extent that, our remaining Series J preferred stock becomes redeemable.

Our ability to achieve our business and cash flow plans is based on a number of assumptions which involve significant judgments and estimates of future performance, borrowing capacity and credit and equity finance availability, which cannot at all times be assured. Accordingly, we cannot assure that cash flows from operations and other internal and external sources of liquidity will at all times be sufficient for our cash requirements. If necessary, we may need to consider actions and steps to improve our cash position and mitigate any potential liquidity shortfall, such as modifying our business plan, pursuing additional financing to the extent available,

19

pursuing and evaluating other alternatives and opportunities to obtain additional sources of liquidity and other potential actions to reduce costs. We cannot assure that any of these actions would be successful, sufficient or available on favorable terms. Any inability to generate or obtain sufficient levels of liquidity to meet our cash requirements at the level and times needed could have a material adverse impact on our business and financial position.
  
Our ability to obtain any additional financing depends upon many factors, including our then existing level of indebtedness (if any) and restrictions in any debt facilities we may establish in the future, historical business performance, financial projections, prospects and creditworthiness and external economic conditions and general liquidity in the credit and capital markets. Any financing (or subsequent refinancing) could also be extended only at costs and require us to satisfy restrictive covenants, which could further limit or restrict our business and results of operations, or be dilutive to our stockholders.

Cash Flows
As of June 30, 2015 and December 31, 2014, we had cash and cash equivalents of $7.4 million and $6.4 million, respectively. The increase reflects cash from financing activities of $4.3 million, primarily net proceeds from our rights offering, partially offset by cash used in operating activities of $3.6 million.

Net Cash Used in Operating Activities
For the six months ended June 30, 2015, net cash of $3.6 million was used in operating activities. Operating activities from continuing operations used $3.5 million of cash consisting largely of our net loss of $4.5 million. The change in our operating assets and liabilities was mainly driven by a $2.3 million decrease in accounts receivable, a $0.6 million decrease in prepaid and other current assets, partially offset by a $2.2 million decrease in accounts payable and accrued expenses. The decrease in accounts receivable resulted primarily from the decrease in advertising billings in 2015 as compared to 2014 billings. Prepaid expenses and other current assets at December 31, 2104 included prepaid costs related to our 2015 rights offering, which have been applied against the rights offering proceeds. Accounts payable and accrued expenses declined in 2015, reflecting the decline in our ongoing operating costs.

Net Cash from Investing Activities
For the six months ended June 30, 2015, net cash from investing activities consisted of proceeds from sale of fixed assets which had been used in our Seattle datacenter operations, terminated in the first quarter of 2015.

Net Cash From Financing Activities
Net cash from financing activities for the six months ended June 30, 2015 of $4.3 million consisted primarily of $5.3 million net proceeds from our rights offering which was completed on March 30, 2015, partially offset by the $1.0 million redemption of Series J preferred stock.
The March 30, 2015 acquisition of common stock by entities affiliated with Mr. Carl C. Icahn resulted in a change of control of the Company and as a result each holder of shares of Series J preferred stock had the right to require the Company to redeem all or a portion of such holder’s shares of Series J preferred stock. On April 13, 2015 we redeemed 29,316 shares of Series J preferred stock for $1.0 million in cash. See Note 7 - Rights Offering to our condensed consolidated financial statements for more information.
 
Off-Balance Sheet Arrangements
As of December 31, 2014 and June 30, 2015, we do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions and in certain cases the difference may be material. Our critical accounting policies and estimates include those involved in recognition of revenue, the allowance for doubtful accounts receivable, software development costs, valuation of goodwill, long-lived and intangible assets, provision for income taxes, stock-based compensation and accounting for our redeemable preferred stock.

A detailed discussion of our critical accounting policies and estimates is available in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There have been no material changes with respect to those policies or estimates during the period covered by this Quarterly Report on Form 10-Q.

20


Recent Accounting Pronouncements
See discussion of recent accounting pronouncements in Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

We are not required to provide qualitative and quantitative disclosures about market risk because we are a smaller reporting company.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our Chief Financial Officer, who is currently also our acting principal executive officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Financial Officer has concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



21

PART II
 
Item 1.    Legal Proceedings.

There have been no material changes to the legal proceedings previously disclosed in Part 1, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Item 1A.    Risk Factors.

The following risk factors should be considered carefully in addition to the other information contained in this report and in our other filings with the Securities and Exchange Commission, including the risks and risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2014, as amended by our Annual Report on Form 10-K/A for the year ended December 31, 2014 (collectively, the "Annual Report"). This report contains forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements,” above. Our actual results could differ materially from those contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, those discussed below, as well as those discussed elsewhere in this report and in our Annual Report. Additional risks and uncertainties that management is not aware of or that are currently deemed immaterial may also adversely affect our business operations. If any of the following risks materialize, our business, financial condition and results of operations could be materially adversely affected. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
We are implementing a transformation plan, which may not be successful.
We are implementing a transformation plan pursuant to which, among other things, we intend to exit our mobile marketing and advertising business and enter into the business of acquiring, leasing and financing commercial real properties. In connection with this transformation plan, we have entered into a purchase and sale agreement to acquire our first commercial real property, located in Long Branch, New Jersey. Our ability to generate revenues and become profitable will be dependent in large part on our ability to consummate that acquisition and to acquire, lease and finance additional commercial real properties. There can be no assurance that we will be able to do so or that we will ever achieve profitability. Our failure to successfully execute our transformation plan would adversely affect our financial condition, results of operations and stockholders’ equity. In addition, we could incur costs or become subject to liabilities to a greater degree than anticipated in connection with our exit from the mobile marketing and advertising business and our entry into the business of acquiring, leasing and financing commercial real properties. For example, we may incur unanticipated costs and/or become subject to litigation from customers, vendors or other third parties in connection with our exit from the mobile marketing and advertising business, which could materially adversely affect our financial condition, results of operations and stockholders’ equity.
We have limited operating experience in the commercial real estate business, which makes it difficult to predict the long-term success of our new business model. In addition, because of our new business plan, our historical performance is not a meaningful indicator of future results.
We may fail to complete the acquisition of the Long Branch property on a timely basis or at all.
The completion of our purchase of the Long Branch property is subject to the satisfactory completion of due diligence and other customary closing conditions. We cannot assure you that we will complete the purchase of the Long Branch property in a timely manner, or at all.
If our purchase of the Long Branch property is delayed or not completed, our business, financial condition, results of operations and stockholders equity’ will be adversely affected. In addition, the failure to complete the purchase of the Long Branch property may delay or prevent the completion of our transformation plan.
Even if we do complete the purchase of the Long Branch property, until and unless we acquire additional properties, the rental payments by the lessee of the Long Branch property will represent the sole source of our revenues. The termination of the Long Branch lease or our failure to maintain the lease on favorable terms could have a material adverse effect on our business and financial condition.
We have limited experience acquiring commercial real properties.

22

Our experience in acquiring, leasing and financing commercial real properties is limited. As a result, we may encounter unforeseen difficulties in our efforts to identify essential assets, assess and underwrite the risk levels associated with such assets, negotiate favorable terms with property owners, negotiate favorable terms with lessees, and comply with applicable laws and regulations.
If we are unable to correctly predict rental rates, cancellation rates, demand, consolidation trends and growth trends, a material adverse impact on our results of operations could result. If we are unable to effectively expand, our growth rate may be adversely impacted.
We intend to pursue acquisitions of additional properties and may be unsuccessful in this pursuit, and any acquisitions that we do consummate may fail to meet our expectations.
We intend to pursue acquisitions of additional properties to grow our business in connection with our transformation plan. Accordingly, from time to time, we may engage in discussions that may result in one or more transactions. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transaction, we may devote a significant amount of management and other resources to such a transaction, which could negatively impact our operations. We may incur significant costs in connection with seeking acquisitions regardless of whether any transaction is completed.
The industry is highly competitive, and we will face competition from many other entities engaged in real estate investment activities, including individuals, corporations, REITs, investment companies, private equity and hedge fund investors, and other investors, some of whom are significantly larger and have greater resources and lower costs of capital. This competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. If we cannot identify and purchase a sufficient quantity of properties at favorable prices or if we are unable to finance acquisition opportunities on commercially favorable terms, our business, financial condition or results of operations could be materially adversely affected.
Investments in, and acquisitions of, properties we might seek to acquire entail risks associated with real estate investments generally, including but not limited to the following risks and as noted elsewhere in this report:
•
we may be unable to acquire a desired property because of competition;
•
even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price;
•
even if we enter into agreements for the acquisition of properties, these agreements are subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction;
•
we may incur significant costs and divert management attention in connection with evaluation and negotiation of potential acquisitions, including ones that we are subsequently unable to complete;
•
we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully lease those properties to meet our expectations;
•
we may be unable to finance the acquisition on favorable terms in the time period we desire, or at all; even if we are able to finance the acquisition, our cash flow may be insufficient to meet our required principal and interest payments;
•
we may spend more than budgeted to make necessary improvements or renovations to acquired properties;
•
we may be unable to quickly and efficiently integrate new acquisitions, particularly the acquisition of portfolios of properties, into our existing operations;
•
market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and
•
we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities.
In the event that we consummate an acquisition in the future, there is no assurance that we would fully realize the potential benefits of such a transaction. Further, acquisitions of properties we might seek to acquire entail risks associated with real estate investments generally, including that the investment's performance will fail to meet expectations.
Our ongoing leadership transition could have a material adverse impact on our business, operating results or financial condition.
On March 26, 2013, Nathan Fong notified us that he would resign from his positions as our Chief Financial Officer and Chief Operating Officer, effective April 12, 2013. On August 14, 2013, John Breeman commenced serving as our Chief Financial Officer. On December 20, 2013, Richard Stalzer resigned as our Chief Executive Officer. Following the receipt of Mr. Stalzer's resignation, Richard Sadowsky, who had, since November 15, 2012 been serving as our Chief Administrative Officer as well as our General Counsel, was appointed as our Acting Chief Executive Officer. In connection with his appointment, Mr. Sadowsky relinquished his titles as our Chief Administrative Officer and General Counsel. On May 11, 2015, Richard Sadowsky resigned from his position as our Acting Chief Executive Officer and from all other positions he held, effective immediately. In addition, effective May 11, 2015, Aaron Epstein was appointed as our President. John Breeman, in addition to his role as our Chief Financial Officer, now serves as our acting

23

principal executive officer and principal financial and accounting officer. Our ongoing leadership transition could have a material adverse impact on our business, operating results or financial condition.
The uncertainty inherent in our ongoing leadership transition can be difficult to manage, may cause concerns from third parties with whom we do business, and may increase the likelihood of turnover of other key officers and employees. In addition, our current management team lacks experience in the commercial real estate business, and we may need to hire personnel with relevant experience to help us execute our transformation plan. We cannot assure that we will be able to do so, and our failure to do so could materially harm our results of operations.
We will be dependent on our tenants to make payments to us under our leases, and an event that materially and adversely affects our tenants’ business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.
Pursuant to our transformation plan, to the extent we generate revenues, we will generate substantially all of our revenues from payments made by our tenants. Additionally, to the extent we are able to enter into triple net leases, we will depend on our tenants to pay all insurance, taxes, utilities, and maintenance and repair expenses related to the applicable property, subject to limited carveouts, and to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with its business. There can be no assurance that our tenants will have sufficient assets, income and access to financing to enable them to satisfy their payment obligations under the applicable leases. The failure of a tenant to satisfy its other obligations under the lease, such as the payment of insurance, taxes and utilities, could materially and adversely affect the condition of our properties. For these reasons, if a tenant were to experience a material and adverse effect on its business, financial position or results of operations, our business, financial position or results of operations could also be materially and adversely affected.
Due to our dependence on rental payments from our tenants as our primary source of revenues, we may be limited in our ability to enforce our rights under, or to terminate, the applicable leases. Failure by a tenant to comply with the terms of a lease could require us to find another lessee for the property. There is no assurance that we would be able to lease a property to another lessee on substantially equivalent or better terms, or at all, successfully reposition the property for other uses or sell the property on terms that are favorable to us.
The historical and pro forma financial information included in this Quarterly Report on Form 10-Q may not be a reliable indicator of future results.
Our historical financial data and our pro forma financial data included in this Quarterly Report on Form 10-Q may not reflect what our business, financial position or results of operations will be in the future. The historical financial statements included in this Quarterly Report on Form 10-Q are not indicative of how we will conduct our business following the consummation of our transformation plan. Significant changes have and will continue to occur in our cost structure, financing and business operations as a result of our transformation plan.
The pro forma financial data included in this Quarterly Report on Form 10-Q includes adjustments based upon SEC Regulation SX and available information to reflect those requirements. However, the assumptions may change or may be incorrect, and actual results may differ, perhaps significantly. Our cost structure may be higher and our future financial costs and performance may be worse than the performance implied by the pro forma financial data presented herein. For additional information about the basis of presentation of our pro forma financial information included in this Quarterly Report on Form 10-Q, see Exhibit 99.1, "Unaudited Pro Forma Consolidated Financial Information."
Our operating results may be affected by economic and regulatory changes that have an adverse impact on the commercial real estate market in general, and we can provide no assurance that we will be profitable or that we will realize growth in the value of our commercial real estate properties.
Our operating results are subject to risks generally incident to the ownership of real estate, including:
•
changes in general economic or local conditions;
•
changes in supply of or demand for competing properties in an area;
•
changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;
•
changes in tax, real estate, environmental and zoning laws; and
•
periods of high interest rates and tight money supply.

24

These and other risks may prevent us from realizing growth or maintaining the value of our real estate properties or from becoming profitable.
Our operations may face adverse effects from tenant bankruptcies or insolvencies.
The bankruptcy or insolvency of any of our tenants may adversely affect the income produced by our properties. If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy, we cannot evict the tenant solely because of such bankruptcy. A court, however, may authorize a tenant to reject or terminate its lease with us. We may also incur additional vacancy and other re-tenanting expense.
Mr. Carl C. Icahn indirectly owns a majority of our common stock and Series J preferred stock, our certificate of incorporation waives the corporate opportunity doctrine as it relates to funds affiliated with him and he may have interests that diverge from those of other stockholders, and one of his affiliates is our principal lender.
Following the completion, and as a result of, the rights offering on March 30, 2015, entities affiliated with Mr. Carl C. Icahn, our largest stockholder, became the beneficial owner, and has voting control over, of approximately 52.3% of our common stock. Entities affiliated with Mr. Icahn also own warrants to purchase an additional 9.7% of our common stock, which warrants are currently unexercisable by Mr. Icahn and such entities. Further, he holds 97.7% of our Series J preferred stock, which has limited voting rights. Mr. Icahn is able to control and exert substantial influence over us, including the election of our directors and controlling most matters requiring board or stockholder approval, including business strategies, mergers, business combinations, acquisitions or dispositions of significant assets, issuances of common stock, incurrence of debt or other financing and the payment of dividends. The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a third party from seeking to acquire a majority of our outstanding common stock, which could adversely affect the market price of our stock. Mr. Carl Icahn owns, controls and has an interest in many companies, some of which may compete directly or indirectly with us. As a result, his interests may not always be consistent with our interests or the interests of our other stockholders.
In our certificate of incorporation, we renounce and provide for a waiver of the corporate opportunity doctrine as it relates to the funds affiliated with Koala Holding LP, an affiliate of Mr. Carl C. Icahn, Technology Crossover Ventures, and any person or entity affiliated with these investors. As a result, Mr. Carl C. Icahn and entities controlled by him will have no fiduciary duty to present corporate opportunities to us. These exempted persons are in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. They may also pursue, for their own accounts, acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are directed by the exempted persons to themselves or their other affiliates instead of to us. As a result, corporate opportunities that may benefit us may not be available to us. To the extent that conflicts of interest may arise between us, Mr. Carl Icahn and his affiliates, those conflicts may be resolved in a manner adverse to us or our other shareholders.
On August 7, 2015, we (as borrower) and Koala Holding LP (as lender), an affiliate of Carl C. Icahn, our controlling stockholder (“Koala”), entered into a revolving note (the “Note”). Pursuant to the Note, Koala made available to us a revolving loan facility of up to $10,000,000 in aggregate principal amount. Borrowings under the Note will bear interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Note also includes a fee of 0.25%, per annum, on undrawn amounts and matures on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, is consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that is earlier than December 31, 2017. Subject to the terms and conditions of the Note, we may repay all or any portion of the amounts outstanding under the Note at any time without premium or penalty, and any amounts so repaid will, until the maturity date, be available for re-borrowing. As collateral for the Note, we have pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC.
We may have future capital needs and may not be able to obtain additional financing on acceptable terms.
We may incur indebtedness in the future to refinance our existing indebtedness or to finance newly acquired properties. Demands on our cash resources from debt service will reduce funds available to us to make capital expenditures and acquisitions or carry out other aspects of our business strategy. Our indebtedness may also limit our ability to adjust rapidly to changing market conditions, make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relatively lower debt levels. Increased future debt service obligations may limit our operational flexibility, including our ability to acquire properties, finance or refinance our properties or sell properties as needed.

25

Moreover, our ability to obtain additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then- prevailing general economic, real estate and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. A prolonged worsening of credit market conditions would have a material adverse effect on our ability to obtain financing on favorable terms, if at all.
We may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under any indebtedness outstanding from time to time. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to enhance our properties or develop new properties, complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to secure funds for future tenant improvements or capital needs, which could adversely impact the returns we generate on our properties.
When tenants do not renew their leases or otherwise vacate their space, in order to attract replacement tenants, we may be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. In addition, we will likely be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops, even if our leases with tenants may require tenants to pay routine property maintenance costs. We may use cash flow from operations, borrowings, property sales or future debt or equity offerings in order to improve or maintain our properties or for any other reason. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, all of which could have a material adverse effect on the value of our investments.
Rising expenses could reduce cash flow and funds available for future acquisitions.
Any properties that we may buy will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds with respect to that property for operating expenses. Any of our properties could be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses. Leases may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net-lease basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs which could adversely affect our cash flows and funds available for future acquisitions.
Costs of complying with governmental laws and regulations, including those relating to environmental matters, may adversely affect our operations and cash position.
All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater and storm water discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated in soils or groundwater. Environmental laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.
Some of these laws and regulations are amended from time to time and may require compliance with new or more stringent standards in the future. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, contamination from others in the soils or groundwater on adjoining properties, or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and that may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines, or damages we must pay could materially adversely affect our results from operations and may reduce the value of an investment in our shares. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims may materially adversely affect our business, assets or results of operations.

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Environmental compliance costs and liabilities associated with real estate properties owned by us may materially and adversely affect us.
Our properties may be subject to known and unknown environmental liabilities under various federal, state and local laws and regulations relating to human health and the environment. Certain of these laws and regulations may impose joint and several liability on certain statutory classes of persons, including owners or operators, and past owners and operators for the costs of investigation or remediation of contaminated properties. These laws and regulations apply to past and present business operations on the properties, and the use, storage, handling and recycling or disposal of hazardous substances or wastes. We may face liability regardless of our knowledge of the contamination, the timing of the contamination, the cause of the contamination or the party responsible for the contamination of the property.
We may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any of our properties on which there is contamination, or from which there has been a release or threatened release of a regulated material as well as other affected properties, regardless of whether we knew of or caused the release.
As the owner or operator of real property, we may also incur liability based on various building conditions. The presence of significant asbestos, mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation to contain or remove the asbestos, mold or other airborne contaminants or increase ventilation and/or expose us to liability from our tenants, employees of our tenants, or others if property damage or personal injury occurs.
In addition to these costs, which could exceed the property’s value, we could be liable for certain other costs, including governmental fines, and injuries to persons, property or natural resources. Further, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs the government incurs in connection with such contamination. Any such costs or liens could have a material adverse effect on our business or financial condition.
Although we intend to require our tenants to undertake to indemnify us for certain environmental liabilities, including environmental liabilities they cause, the amount of such liabilities could exceed the financial ability of the tenant to indemnify us. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease the real estate or to borrow using the real estate as collateral.
We may obtain only limited warranties when we purchase a property and would have only limited recourse if our due diligence did not identify any issues that lower the value of our property, which could adversely affect our financial condition.
The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all our invested capital in the property as well as the loss of rental income from that property.
Our costs associated with complying with the Americans with Disabilities Act may affect our operating results.
Our properties are and will be subject to the Americans with Disabilities Act of 1990 (the “Disabilities Act”). Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. There is no assurance that we will be able to acquire properties or allocate the burden on the seller or other third party, such as a tenant, to ensure compliance with the Disabilities Act. If we cannot, our funds used for Disabilities Act compliance may affect our results from operations. The fluctuation in market conditions makes judging the future performance of these assets difficult. There is a risk that we may not purchase real estate assets at absolute discounted rates and that these assets may continue to decline in value.
Properties that we may own and may acquire face competition that may decrease the amount of rent that we may charge our tenants.
Properties that we may own and may acquire face competition for tenants. The number of competitive properties could have a material effect on our ability to rent space at our properties and the amount of rents charged. We could be adversely affected if additional competitive properties are built in locations competitive with our properties, causing increased competition for customer traffic and

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creditworthy tenants. This could result in decreased cash flow from tenants and may require us to make capital improvements to properties that we would not have otherwise made, thus affecting our income, financial condition and results of operations.
We may be unable to renew leases or re-lease space as leases expire.
If tenants do not renew their leases upon expiration, we may be unable to re-lease the vacated space. Even if the tenants do re-lease the lease or we are able to re-lease to a new tenant, the terms and conditions of the new lease may not be as favorable as the terms and conditions of the expired lease. One or more of our properties may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the cash flow generated from the property which in the case of vacancies, will be reduced.
Changes in building and/or zoning laws may require us to renovate or reconstruct a property in connection with the continued use of the property or the commencement of a new use of the property or prevent us from fully restoring a property in the event of a substantial casualty loss and/or require us to meet additional or more stringent construction requirements.
Due to changes, among other things, in applicable building and zoning laws, ordinances and codes that may affect certain of our properties that have come into effect after the initial construction of the properties, certain properties may not comply fully with current building and/or zoning laws, including electrical, fire, health and safety codes and regulations, use, lot coverage, parking and setback requirements, but may qualify as permitted non-conforming uses. Such changes may require updating various existing physical conditions of buildings in connection with our recapture, renovation, and/or redevelopment of properties. In addition, such changes may limit our or our tenant’s ability to restore the premises of a property to its previous condition in the event of a substantial casualty loss with respect to the property or the ability to refurbish, expand or renovate such property to remain compliant, or increase the cost of construction in order to comply with changes in building or zoning codes and regulations. If we are unable to restore a property to its prior use after a substantial casualty loss or are required to comply with more stringent building or zoning codes and regulations, we may be unable to re-lease the space at a comparable effective rent or sell the property at an acceptable price, which may materially and adversely affect us.
We may be subject to unanticipated liabilities as a result of our real properties.
We may be involved in disputes and other matters with property owners, tenants, their respective employees and agents, and other unrelated parties, such as tort claims related to hazardous conditions, foreclosure actions and access disputes. We cannot assure you that we will not become subject to material litigation or other liabilities. If these liabilities are not adequately covered by insurance, they could have a material adverse impact on our results from operations.
We intend to enter into leases that will generally make our tenants contractually responsible for payment of taxes, maintenance, insurance and other similar expenditures associated with our tenants' use of a property. If our tenants fail to pay these expenses as required, it could result in a material adverse impact on our results of operations.
Under triple net lease arrangements, tenant lease agreements typically make tenants contractually responsible for payment of taxes, maintenance, insurance and other similar expenditures associated with tenants' infrastructure assets. If our tenants fail to pay these expenses as required, it could result in a diminution in the value of the infrastructure asset associated with our real property interest and have a material adverse impact on our results of operations. Further, if a tenant fails to pay real property taxes, any lien resulting from such unpaid taxes would be senior to our real property interest in the applicable site. Failure to pay such real property taxes could result in our real property interest being impaired or extinguished, or we may be forced to incur costs and pay the real property tax liability to avoid impairment of our assets.
We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expenses.
Leases that we enter into are expected to require that the tenant maintain comprehensive insurance and hazard insurance or self-insure its insurance obligations. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, that may be uninsurable or not economically insurable. Insurance coverage may not be sufficient to pay the full current market value or current replacement cost of a loss. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace the property after such property has been damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such property.

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If the Long Branch property or any other property we acquire experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the damaged property as well as the anticipated future cash flows from the property. In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty event may result in loss of revenue for our tenants or us. Any business interruption insurance may not fully compensate them or us for such loss of revenue. If one of our tenants experiences such a loss, it may be unable to satisfy its payment obligations to us under its lease with us.
Our ability to fully control the maintenance of our net-leased properties may be limited.
The tenants or managers of net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance expenditures or other liabilities once the property becomes free of the lease. While we expect our leases will generally provide for recourse against the tenant in these instances, a bankrupt or financially-troubled tenant may be more likely to defer maintenance and it may be more difficult to enforce remedies against such a tenant. In addition, to the extent tenants are unable to conduct their operation of the property on a financially-successful basis, their ability to pay rent may be adversely affected. Although we endeavor to monitor, on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of our properties, such monitoring may not in all circumstances ascertain or forestall deterioration either in the condition of a property or the financial circumstances of a tenant.
Real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when appropriate or on favorable terms.
Investments in real properties are relatively illiquid. We may not be able to quickly alter our portfolio or generate capital by selling properties. The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. If we need or desire to sell a property or properties, we cannot predict whether we will be able to do so at a price or on the terms and conditions acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Further, we may be required to invest monies to correct defects or to make improvements before a property can be sold. We can make no assurance that we will have funds available to correct these defects or to make these improvements. Moreover, in acquiring a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These provisions would restrict our ability to sell a property.
Any material weaknesses in our internal controls over financial reporting or failure to maintain proper and effective internal controls could impair our ability to produce accurate and timely financial statements and investors' views of us could be harmed. The execution of our transformation plan may make it more challenging for us to maintain effective controls.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can manage our business and produce accurate financial statements on a timely basis is a costly and time-consuming effort. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We are required to comply with Section 404(a) of the Sarbanes-Oxley Act of 2002, which requires annual management assessment of the effectiveness of our internal control over financial reporting. Our compliance with Section 404 has required and will continue to require that we incur additional expense and expend management time on compliance-related issues. We expect to reduce staffing in connection with the execution of our transformation plan. As a result, our maintenance of sufficient controls will be dependent on a smaller group of individuals than in the past. If we fail to maintain proper controls, our business could be adversely affected, our ability to predict our cash needs, and the market's confidence in our financial statements could decline, and the market price of our common stock could be adversely affected.

Item 5.    Other Information.

Recent Developments & Transformation Plan
On August 6, 2015, the board of directors (the “Board”) of Voltari Corporation (“we, “us”, “Voltari” or the “Company”) committed the Company to a transformation plan pursuant to which, among other things, the Company intends to exit its mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real estate properties. The Company intends to lease such properties pursuant to so-called “double net” or “triple net” leases. As the Company executes its transformation plan, it intends to significantly reduce its workforce over the next several weeks, which process has begun.

The Board decided to implement the transformation plan following its review of the Company's efforts to realign its strategic path and management's analysis of the Company's mobile marketing and advertising business. As previously disclosed, we have undergone

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significant changes over the past two years. Prior to July 1, 2013, most of our revenue was derived from providing hosting services to wireless carriers. Starting in 2012, we began our exit from most of our international carrier business and, on June 30, 2013, concluded our U.S. carrier business. On October 31, 2013, we completed the sale of our Gen5 business. On May 30, 2014, we completed the sale of our U.S. and Canadian messaging business. Further, on September 1, 2014, we completed the sale of our wireless carrier business in the UK.

In connection with our efforts to realign our strategic path, we shifted our focus to the mobile marketing and advertising business and continued to reduce our cost structure. We implemented various cost reduction measures, including reductions in our workforce and a restructuring of our facilities and data centers. Further, in January of 2015, we significantly reduced the size of our engineering staff and terminated operations at our Seattle Data Center as part of our ongoing efforts to reduce our operating expenses, particularly the cost of research and development and the delivery of advertising.

Beginning in late May 2015, the Board undertook a review of the Company’s prospects, cost-cutting efforts and strategic alternatives. As part of its review, the Board considered alternative businesses the Company could enter into that would preserve the Company’s assets and maximize shareholder value. Based on its assessment of the Company’s prospects and cost structure including, among other factors, the Company’s performance during the three and six month periods ended June 30, 2015, recent forecasts provided by management, input from an independent consultant, and potential strategic alternatives available to the Company, the Board concluded that our cost-cutting efforts have not kept pace with our declining revenue, that our forecasted cash burn and revenue potential are unsatisfactory and that effecting the transformation plan by exiting the mobile marketing and advertising business and entering into the real estate investment business is in the best interests of the Company’s stockholders. The Board believes that, if successfully implemented, the Company can significantly decrease its operating costs and cash burn and, over time, generate profits from the transformation plan.

In addition to our entry into the real estate investment business as described above, the Company intends to explore additional strategic opportunities from time to time, which may include opportunities with respect to its intellectual property, investments in various industries or acquisitions.

Cost Reductions and Material Charges
In connection with the implementation of our transformation plan, we could incur total costs ranging from $0.6 million to $1.4 million. Included in this estimate are severance and other workforce reduction costs of approximately $0.3 million and costs associated with our exit from the mobile marketing and advertising business, consisting primarily of lease termination and other costs ranging from approximately $0.3 million to $1.1 million in connection with exiting our office space in New York, Chicago and Los Angeles.
All costs of our transformation plan are expected to be incurred during 2015 and include non-cash impairment charges of $0.2 million, relating primarily to our leasehold improvements and furniture and fixtures in our New York office.
Real Property Acquisition
As the first step in the execution of our transformation plan, on August 7, 2015, we caused our wholly-owned subsidiary, Voltari Real Estate Holding LLC, formed for this purpose, to enter into a purchase and sale agreement (the “P&S Agreement”) with 160 Brighton Acquisition, LLC to acquire a real estate parcel in Long Branch, New Jersey. The property is subject to a triple net lease with JPMorgan Chase Bank, N.A. ("Chase"), the original term of which expires in June, 2020 (with two, five-year renewal options), pursuant to which Chase is responsible for the payment of basic rent as well as the payment of real estate taxes, maintenance costs, utilities, tenant's insurance and other property related costs. Refer to http://investor.shareholder.com/jpmorganchase/sec.cfm for the financial statements of the tenant. The purchase price is approximately $3.63 million and average annual rental income for the property over the remaining term of the original lease is expected to be approximately $203,000. The P&S Agreement contains customary representations, warranties and covenants by the parties and the closing of the purchase is subject to customary conditions precedent, including a due diligence period. We can make no assurances that the conditions will be satisfied or that the purchase will be consummated in a timely manner, if at all.

Revolving Note
On August 7, 2015, we (as borrower) and Koala Holding LP (as lender), an affiliate of Carl C. Icahn, the Company’s controlling stockholder (“Koala”), entered into a revolving note (the “Note”). The Company sought and received the Note to, in part, allay potential concerns regarding the Company’s ability to invest in and execute its transformation plan while retaining cash levels sufficient to fund its ongoing operations. There are no limitations on the use of proceeds under the Note. The Company currently intends to use this funding to facilitate the acquisition of additional commercial real estate properties as it executes its transformation plan, as well as for operating expenses and working capital purposes.

Our Board formed a special committee of independent directors (the “Special Committee”) to negotiate the structure and terms of the Note. The Special Committee consisted of James L. Nelson and Jay A. Firestone. In connection with its negotiation of the structure and terms of the Note, the Special Committee retained and received advice from its own legal counsel as well as an independent

30

financial advisor. The Special Committee received an opinion from its independent financial advisor that the financial terms of the Note are fair, from a financial point of view, to us. The Special Committee approved the terms and conditions of, and our entry into, the Note.  

Pursuant to the Note, Koala made available to the Company a revolving loan facility of up to $10,000,000 in aggregate principal amount. Borrowings under the Note will bear interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Note also includes a fee of 0.25%, per annum, on undrawn amounts and matures on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the Company (or its successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at the Company’s option, a date selected by the Company that is earlier than December 31, 2017.
 
If an event of default exists, the Note will bear interest at a default rate equal to the greater of the LIBOR Rate plus 450 basis points, per annum, and 4.75%, per annum. Subject to the terms and conditions of the Note, the Company may repay all or any portion of the amounts outstanding under the Note at any time without premium or penalty, and any amounts so repaid will, until the maturity date, be available for re-borrowing. As collateral for the Note, the Company has pledged and granted to Koala a lien on the Company’s limited liability company interest in Voltari Real Estate Holding LLC.

Incentive Award
On August 6, 2015 and in light of the transformation plan, the compensation committee of the Company’s Board (the “Compensation Committee”) approved a discretionary performance incentive award for Mr. John Breeman, the Company’s Chief Financial Officer and acting principal executive officer.  The incentive award is intended to provide performance-based compensation to Mr. Breeman for his contribution to the achievement of the Company’s objectives, including without limitation, the successful implementation of the Company’s transformation plan.  The Compensation Committee set a target for the award of 60% of Mr. Breeman’s base salary for 2015.  Payment of any incentive award will be discretionary, in cash, and will be tied to the successful implementation of our transformation plan, as determined by the Board.  Payment of any award will be made following the finalization of the Company’s audited financial statements for the fiscal year ended December 31, 2015.


Item 6.    Exhibits.

Exhibit Number
 
Exhibit Description
 
 
 
10.1
 
Revolving Note with Koala LP (as lender) dated August 7, 2015
 
 
 
10.2
 
Agreement for Sale and Purchase with 160 Brighton Acquisition LLC dated August 7, 2015
 
 
 
10.3
 
Ground Lease with JPMorgan Chase Bank, N.A., together with Bill of Sale and General Assignment to 160 Brighton Acquisition LLC, dated March 2, 2006
 
 
 
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Certification pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer, Acting Principal Executive Officer and Principal Financial and Accounting Officer.*
 
 
 
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer, Acting Principal Executive Officer and Principal Financial and Accounting Officer.**
 
 
 
99.1
 
Unaudited Pro Forma Consolidated Financial Information
 
 
 
101.INS
 
XBRL Instance Document.*
101.SCH
 
XBRL Taxonomy Extension Schema Document.*
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.*
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.*
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.*


*
 
Filed herewith.
 
 
 
**
 
Furnished herewith.
 
 
 

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SIGNATURES
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.

 
 
 
VOLTARI CORPORATION
 
 
 
 
Date:
August 7, 2015
By:
/s/ John Breeman
 
 
 
John Breeman
 
 
 
Chief Financial Officer (Acting Principal Executive Officer and Principal Financial and Accounting Officer)




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Exhibit 10.1

REVOLVING NOTE
 
New York, New York
US$10,000,00.00
August 7, 2015
 
 
FOR VALUE RECEIVED, Voltari Corporation (together with its successors and assigns, the “Borrower”), HEREBY UNCONDITIONALLY PROMISES TO PAY to, or to the order of, Koala Holding LP (together with its successors and assigns, the “Lender”), on the terms hereinafter set forth, the principal sum of TEN MILLION DOLLARS ($10,000,000.00), or such lesser amount as is outstanding from time to time as set forth on Schedule 1 hereto, together with interest thereon for such periods, on such dates and at such rates as set forth in Section 1 of this Revolving Note (this “Note”).
The Borrower further promises to pay the Undrawn Amount Fee (as defined below in Section 2), and any other amounts owed hereunder as such Undrawn Amount Fee and other amounts shall become due and payable pursuant to the terms hereof.
1.Interest. The principal amount of each borrowing under this Note outstanding from time to time as set forth on Schedule 1 hereto (each, a “Borrowing”) shall bear interest at a rate equal to the greater of (x) the LIBOR Rate (defined below) plus 350 basis points, per annum and (y) 3.75%, per annum, which simple interest shall accrue daily and be computed on the basis of the actual number of days elapsed over a 360-day year. Such interest shall commence to accrue on the date each Borrowing is made and shall be due and paid in arrears on the Maturity Date (as defined below) or such earlier date as principal, interest, the Undrawn Amount Fee and/or other amounts shall become due and payable pursuant to the terms hereof (provided that if any such day is not a Business Day (as hereinafter defined), such payment shall be made on the immediately following Business Day with no additional interest accruing thereon, if so made). To the extent any payment of interest is made prior to 12:00 noon (New York City time) on the date of such payment, no interest shall accrue on such date with respect to such payment. To the extent any payment of interest is made after 12:00 noon (New York City time) on the date of such payment, interest shall accrue and be payable on such date with respect to such payment.
Notwithstanding the foregoing, during any period in which an Event of Default (as defined below in Section 8) exists, the principal amount of each Borrowing outstanding under this Note shall bear interest at a rate equal to the greater of (x) the LIBOR Rate plus 450 basis points, per annum and (y) 4.75%, per annum (such rate, the “Default Rate”), which simple interest shall be computed on the basis of the actual number of days elapsed over a 360-day year. Any amounts payable hereunder that are not paid when due (whether principal, interest, Undrawn Amount Fees or other amounts) shall, to the fullest extent permitted by applicable law, also bear interest at the Default Rate. Anything contained in this Note or any other related document to the contrary notwithstanding, the Lender does not intend to charge, and the Borrower shall not be required to pay, whether under this Note or any other related document, any amount of interest that would be deemed usurious, or is otherwise in excess of the maximum amount permitted under applicable law, and the Lender shall, at the Lender’s discretion, either return any such excess amount or same shall be credited against the principal or other amounts due hereunder.
As used in this Note, the term “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, New York are authorized or required by law to close.
As used in this Note, the term “LIBOR Rate” means, with respect to any Borrowing under this Note, the rate appearing on Bloomberg’s British Banker’s Association rate page (or on any successor or substitute page) at approximately 11:00 a.m., London time, one Business Day prior to the disbursement of funds in respect of such Borrowing, as the rate for U.S. dollar deposits for a period equal to six (6) months. In the event that such rate is not available on such page at such time for any reason, then the “LIBOR Rate” with respect to such Borrowing under this Note shall be determined by reference to any analogous page of another quotation service providing quotations comparable to those currently provided on such page for interest rates applicable to U.S. dollar deposits in the London interbank market, as reasonably determined by the Lender.
2.Undrawn Amount Fee. The Borrower shall pay to the Lender a fee on the Commitment (defined below) (the “Undrawn Amount Fee”) for the period from and including the date hereof to but excluding the Maturity Date equal to 0.25%, per annum, calculated on the average daily amount of the Commitment, which fee shall accrue daily and be computed on the basis of the actual number of days elapsed over a 360-day year and shall be paid in a lump sum on the Maturity Date.
As used in this Note, the term “Commitment” means, as of any date, the Maximum Amount (as defined below in Section 4) less the aggregate principal amount of all Borrowings outstanding hereunder.


Exhibit 10.1

The Commitment shall increase and decrease directly in proportion to repayments and reborrowings of Borrowings, respectively, from time to time.
3.Maturity Date. The outstanding principal amount under this Note, together with all then accrued but unpaid interest thereon, any unpaid Undrawn Amount Fees and any other amounts then due and payable hereunder, shall be due and paid by the Borrower on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether for debt or equity, is consummated by the Borrower with net proceeds in an amount equal to or greater than $10,000,000 and (iii) a date selected by the Borrower that is prior to December 31, 2017, provided such date is contained in a written notice delivered to the Lender at least two Business Days prior to such earlier date (the earliest of such dates, the “Maturity Date”). No further Borrowings shall be permitted after the Maturity Date.
4.Requests for Borrowing. From time to time following the date hereof through the Maturity Date, the Borrower may make one or more written requests to borrow from the Lender principal amounts under this Note up to a maximum amount not to exceed, together with the aggregate principal amount then outstanding under this Note, TEN MILLION DOLLARS ($10,000,000.00) in the aggregate (the “Maximum Amount”). Such Borrowings shall be in increments of $1,000,000 each, or whole multiples of $1,000,000 in excess thereof, (or if the then aggregate amount available for borrowing under this Note is less than $1,000,000, such aggregate lesser amount). Within two (2) Business Days following the Lender’s receipt of any such borrowing request, the Lender shall arrange to lend and disburse such monies to the Borrower so long as, and to the extent, the aggregate principal amount of all Borrowings outstanding under this Note, after giving effect to such Borrowing, does not exceed the Maximum Amount.
Simultaneously with the making of any Borrowing or the repayment of any Borrowing (as provided below in Section 5) hereunder, the Lender shall update Schedule 1 hereto accurately to reflect any amounts so borrowed or repaid and the aggregate principal amount of all Borrowings outstanding under this Note after giving effect thereto and, upon approval thereof by the Borrower, the Lender and the Borrower shall each affix the initials of their respective authorized representatives to such updated Schedule 1, which shall thereafter constitute prima facie evidence of the aggregate principal amount of all Borrowings outstanding hereunder.
Disbursement of any monies by the Lender in connection with the making of a Borrowing hereunder shall be made to the Borrower by wire transfer of immediately available funds in accordance with the instructions that the Borrower specifies to the Lender in the applicable written request.
5.Repayments and Reborrowings. The Borrower may repay all or any portion of the amounts outstanding under this Note at any time without premium or penalty; provided that any partial repayment hereunder shall be in increments of $1,000,000 each, or whole multiples of $1,000,000 in excess thereof (or if the then aggregate amount outstanding under this Note is less than $1,000,000, such lesser aggregate amount). All payments made on this Note shall be made to the Lender by wire transfer of immediately available funds in accordance with the instructions that the Lender may specify to the Borrower in writing from time to time. All payments to the Lender received from the Borrower hereunder shall be applied first, to the payment of any Expenses (defined below in Section 11) owed to the Lender that are then due and payable pursuant to the terms of this Note, second, to the payment of any accrued Undrawn Amount Fees that are then due and payable pursuant to the terms of this Note, third, to the payment of accrued interest that is then due and payable pursuant to the terms of this Note, and fourth, to reduce the principal balance of all then-outstanding Borrowings hereunder. Any payments of Expenses, Undrawn Amount Fees, principal or interest shall be made in U.S. dollars and in immediately available funds and without deduction or reduction of any kind (whether for set-off, recoupment or otherwise).
Any repayments of Borrowings under this Note shall increase the Commitment correspondingly, and, until the Maturity Date, be available for reborrowing.
Simultaneously with any repayment and/or reborrowing hereunder, the Lender shall update Schedule 1 hereto accurately to reflect any amounts to be so repaid and/or reborrowed and the aggregate principal amount of Borrowings outstanding under this Note after giving effect thereto and, upon approval thereof by the Borrower, the Lender and the Borrower shall each affix the initials of their respective authorized representatives to such updated Schedule 1, which shall thereafter constitute prima facie evidence of the aggregate principal amount of all Borrowings outstanding hereunder.
6.Security Interest. As collateral security for the payment and performance in full of any and all amounts owing from time to time by the Borrower to the Lender under or in connection with this Note (the “Secured Obligations”), the Borrower hereby pledges, assigns and grants to the Lender, a Lien on and security interest in and to all of the right, title and interest of the Borrower in, to and under the following property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the “Pledged Collateral”): (a) the Borrower’s limited liability company interest (the “Interest”) in Voltari Real Estate Holding LLC (the “LLC”); and (b) all proceeds and products of the foregoing, all books and records at any time evidencing or relating to the foregoing, all supporting obligations related thereto, and all accessions to, substitutions and replacements for, and profits and products of, the foregoing, and any and all proceeds of


Exhibit 10.1

any insurance, indemnity, warranty or guaranty payable to the Borrower from time to time with respect to any of the foregoing. The Borrower hereby irrevocably authorizes the Lender at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code (“UCC”) of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral without the signature of the Borrower where permitted by law. The Borrower agrees to provide all necessary information related to such filings to the Lender promptly upon request by the Lender. The Borrower shall take such further actions, and execute and/or deliver to the Lender such additional financing statements, amendments, assignments, agreements, supplements, powers and instruments, as the Lender may in its judgment deem necessary or appropriate in order to perfect, preserve and protect the security interest in the Pledged Collateral as provided herein and the rights and interests granted to the Lender hereunder, and enable the Lender to exercise and enforce its rights, powers and remedies hereunder with respect to any Pledged Collateral, including the filing of any financing statements, continuation statements and other documents under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby, all in form satisfactory to the Lender and in such offices wherever required by law to perfect, continue and maintain a valid, enforceable, first priority security interest in the Pledged Collateral as provided herein and to preserve the other rights and interests granted to the Lender hereunder, as against third parties, with respect to the Pledged Collateral. Without limiting the generality of the foregoing, but subject to applicable law, the Borrower shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Lender from time to time upon request by the Lender such lists, schedules, descriptions and designations of the Pledged Collateral, statements, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments as the Lender shall reasonably request. If an Event of Default has occurred and is continuing, the Lender may institute and maintain, in its own name or in the name of the Borrower, such suits and proceedings as the Lender may deem necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at the sole cost and expense of the Borrower.
7.Representations, Warranties and Covenants. The Borrower hereby represents, warrants and covenants to the Lender that: (a) this Note when executed and delivered by the Borrower shall constitute a valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject only to laws of general application relating to bankruptcy, insolvency and the relief of debtors; (b) the Borrower is not in violation or default of any mortgage, indenture, agreement, instrument or contract to which it is a party or by which it is bound, except where such violation or default would not reasonably be expected to have a material adverse effect on (x) the ability of the Borrower to perform its obligations hereunder or (y) the validity or enforceability of this Note; (c) the execution, delivery and performance by the Borrower of this Note and the consummation of the transactions contemplated hereby, will not result in any such violation or default or an event that results in the creation of any Lien upon any assets of the Borrower (other than the Liens in favor of the Lender created under this Note); (d) there are no issued or outstanding equity interests of the LLC other than the Interest and the Borrower shall not cause or permit the LLC to issue or sell any equity interests other than the Interest; and (e) the Interest is free of all Liens (other than the Liens in favor of the Lender created under this Note) and the Borrower shall not cause or permit the incurrence of any Liens on or with respect to the Interest (other than the Liens in favor the Lender created under this Note). The term “Lien”, as used in this Note, means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
8.Events of Default. This Note shall become immediately due and payable and the Commitment shall terminate immediately upon the occurrence of any Event of Default, whereupon the unpaid principal of all Borrowings under this Note and all accrued and unpaid interest, accrued Undrawn Amount Fees, Expenses and any other amounts owed hereunder shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. For purposes of this Note, the occurrence of any of the following shall constitute an “Event of Default” under this Note:
(a)any failure by the Borrower to pay to the Lender on the Maturity Date an amount equal to the then outstanding aggregate principal amount of this Note together with all accrued but unpaid interest thereon (and any other amounts owed hereunder);
(b)any failure by the Borrower to pay to the Lender on or before the applicable due date thereof (as provided by this Note), any interest payment, Undrawn Amount Fees, Expenses, or any other payment as and when due hereunder, which failure remains uncured for a period of ten (10) Business Days following the applicable due date thereof; or any material breach by the Borrower of any other terms or provisions of this Note, which breach remains uncured for a period of ten (10) Business Days following (x) the date on which the Lender apprises the Borrower in writing of the existence of such breach or (y) the date on which the Borrower otherwise becomes aware of the existence of such breach.
9.Assignment; Transfers; Successors. This Note may not be transferred, assigned, pledged or encumbered, in whole or in part, by the Borrower and the Borrower may not assign any rights or delegate any of its obligations under this Note, in each case without the prior written consent of the Lender. This Note, together with all Borrowings, and any


Exhibit 10.1

other amounts in respect of interest Undrawn Amount Fees, and Expenses may, with reasonable prior written notice to the Borrower, be transferred, assigned, pledged or encumbered, in whole or in part, by the Lender without the prior written consent of the Borrower. Subject to the foregoing, this Note shall inure to the benefit of and be binding upon the successors and permitted assigns of the Borrower and the Lender. There are no third party beneficiaries of this Note.
10.Amendment; Waiver. Any amendment hereto or waiver of any provision hereof may be made only with the written consent of each of the Borrower and the Lender. No failure or delay by the Lender to insist upon the strict performance of any term or condition of this Note, or to exercise any right or remedy consequent upon a breach thereof, shall constitute, or be deemed to constitute, a waiver of any such term or condition or of any such breach, or preclude the Lender from exercising any such right or remedy at any later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to have waived the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to modify, waive or release any provision of this Note.
11.Costs and Expenses; Indemnity. The Borrower hereby agrees to pay all of the Lender’s costs of collection or attempting to collect the same and any other enforcement of this Note, including without limitation, reasonable attorneys’ fees and disbursements and court costs (including those incurred in connection with any appeal) (the foregoing costs and expenses being referred to herein as “Expenses”). The Borrower shall protect, defend, indemnify and save harmless the Lender and any of its affiliates and their respective officers, directors, members, partners, stockholders, controlling persons and employees (each an “Indemnitee”), from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including without limitation reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against any Indemnitee by reason of or in connection with the extension of credit by the Lender pursuant to this Note or any of the terms thereof. The obligations and liabilities of the Borrower under the foregoing sentence shall survive any termination, satisfaction, or assignment of this Note or the indebtedness covered hereunder.
12.Certain Waivers. The Borrower hereby waives presentment, demand, protest, notice of acceptance, notice of dishonor, notice of protest and all other notices of any kind should any indebtedness represented by this Note be collected at law or in equity or in the case of the Lender bankruptcy or other proceedings after demand therefore has been made, or should this Note be placed in the hands of attorneys for collection after default.
13.WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE OF THIS NOTE, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE OR ANY CLAIM RELATING THERETO.
14.Notices. All notices hereunder shall be given in writing and shall be deemed delivered when received by the party to whom such notice is addressed at the address set forth below such party’s signature or at such other address as may be specified by such party from time to time.Governing Law; Jurisdiction. This Note and the legality, validity and performance of the terms hereof is made in accordance with and shall be construed under the laws of the State of New York, without regard to the conflicts of law principles thereof that would result in the application of any law other than the law of the State of New York. Each of the Lender and the Borrower hereby (a) submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in any action or proceeding arising out of or relating to this Note, (b) irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding, and (c) agrees that venue therein is proper and convenient.


Exhibit 10.1

15.
 
BORROWER:
 
 
 
 
 
Voltari Corporation
 
 
/s/ John Breeman
 
 
Name:
John Breeman
 
 
Title:
Chief Financial Officer
 

 
Address:
 
 
 
 
Voltari Corporation
 
 
 
601 W. 26th St. #415
 
 
 
New York, NY 10001
 
ACCEPTED AND AGREED
AS OF THE DATE FIRST
WRITTEN ABOVE:
LENDER:
Koala Holding LP
By: Koala Holding GP Corp., its general partner
 
By: /s/ Keith Cozza
 
 
Name:
Keith Cozza
 
 
Title:
Secretary; Treasurer
 
 

Address:
 
 
 
 
767 Fifth Avenue, Suite 4700
 
 
 
New York, New York 10153
 
 
 
 
 
 


Exhibit 10.1

[REVOLVING NOTE, DATED AUGUST 7, 2015, EVIDENCING A REVOLVING LOAN FACILITY OF $10,000,000.00 FROM KOALA HOLDING LP TO VOLTARI CORPORATION DUE DECEMBER 31, 2017]
Schedule 1

Date of Borrowing/
Repayment
Amount of Borrowing/ Repayment
Aggregate Amount of Borrowings Outstanding after Borrowing/ Repayment
Current Commitment Available
Lender’s Initials
Borrower’s Initials
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Exhibit 10.2




AGREEMENT FOR SALE AND PURCHASE


THIS AGREEMENT, made as of the Effective Date (as hereinafter defined), by and between 160 BRIGHTON ACQUISITION, LLC, a Delaware limited liability company (“Seller”), and VOLTARI REAL ESTATE HOLDING LLC, a Delaware limited liability company (“Buyer”),

W I T N E S S E T H:

WHEREAS, Seller is the owner of all those certain tracts or parcels described in Exhibit A attached hereto (the “Land”), together with a retail bank branch building situated thereon and commonly known as 160 Brighton Avenue, Block 119, Lots 1.01 and 2, City of Long Branch, Monmouth County, New Jersey (together with the Land, the “Project”); and

WHEREAS, Seller desires to sell and Buyer desires to buy, inter alia, the Project at the price and on the other terms and conditions hereinafter set forth; and

NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants herein contained, and intending to be legally bound hereby, the parties covenant and agree as follows:

1.    Agreement to Sell and Purchase

Seller shall sell and convey, and Buyer shall purchase, the Project; together with the easements, rights, privileges and appurtenances belonging thereto, and any abutting strips or gores; together with Seller’s right, title and interest, if any, in and to any land lying in the bed of any street, road or avenue, open or proposed, in front of or adjoining the Land to the center line thereof; together with all appurtenant easements for ingress and egress and utilities; all water and mineral rights owned by Seller respecting the Land; and together with all Seller’s interest in and to the fixtures now located in, upon, attached or appurtenant to the Project, personal property and supplies owned by Seller and used at the Project (the “Personalty”); and together with Seller’s interest as landlord under the Ground Lease, dated May 23, 2005, originally between Dwek Branches, LLC, as Landlord, and JP Morgan Chase Bank, N.A. (“Chase”), as Tenant (the “Lease”) (all of the foregoing property, real, personal and mixed, being collectively called the “Property”).

2.    Purchase Price
                                    
Buyer shall pay Seller for the Property the sum of THREE MILLION SIX HUNDRED TWENTY-NINE THOUSAND SIXTY-TWO AND 50/100 DOLLARS ($3,629,062.50) (the “Purchase Price”), subject to prorations and adjustments as hereinafter set forth, payable as follows:

(a)    THREE HUNDRED SIXTY-TWO THOUSAND NINE HUNDRED AND 00/100 DOLLARS ($362,900.00) by wire transfer of immediately available Federal funds not later than three (3) days following the date the later of Seller or Buyer executes this Agreement, as indicated on the signature page hereof (the “Effective Date”) (such monies, together with any interest which shall accrue thereon, being collectively called the “Deposit”), all to be held in escrow by a reputable national title insurance company licensed in New Jersey selected by Buyer (“Title Company”), as escrow agent, and disbursed in accordance herewith. Buyer designates Commonwealth Land Title Insurance Company, att: Liane Carpenter, 685 Third Avenue, 20th Floor, New York, NY 10017 (212) 973-4802 to be the Title Company.


Exhibit 10.2


(b)    The balance of the Purchase Price at closing by wire transfer of immediately available Federal funds, to Seller’s order, subject to the prorations set forth herein.

3.    Representations, Warranties and Covenants. In order to induce Buyer to enter into this Agreement, and in addition to any other representations, warranties or covenants contained herein, Seller makes the following representations, warranties and covenants, each of which is effective as of the date of this Agreement and, unless Seller notifies Buyer to the contrary as contemplated in Paragraph 3(h) below, will be effective as of the date of closing. Whenever in this Paragraph 3 the phrase “to Seller’s actual knowledge” or words of similar import appear, it shall be deemed to mean the actual knowledge of Isaac D. Massry. Seller represents that Isaac D. Massry is the most knowledgeable principal of Seller with respect to the Property.

(a)    Litigation. There are no pending or, to Seller’s actual knowledge, threatened matters of litigation, administrative action or examination, claim or demand whatsoever relating to the Property (other than any personal injury claims which are covered by Seller’s insurance) nor are there any such matters which would otherwise affect Seller’s ability to comply with the terms and provisions of this Agreement. To Seller’s actual knowledge, and except as disclosed in Seller’s most recent environmental reports, which are included in the Due Diligence Documents (as hereinafter defined), there are no violations of any governmental requirements (including environmental laws) on the Property which have not been remedied.

(b)    Condemnation. Seller has not received any written notice, and has no actual knowledge, of any pending or contemplated eminent domain, condemnation or other governmental taking of the Property or any part thereof.

(c)    Information Delivered. To Seller’s actual knowledge, all Due Diligence Documents (as hereinafter defined) being delivered or made available to Buyer by Seller pursuant to this Agreement are true and accurate in all material respects.

(d)    Authority of Signatories; No Breach of Other Agreements. The execution, delivery of and performance by Seller of this Agreement is pursuant to sufficient authority validly and duly conferred upon Seller and the signatories of Seller hereto. Execution and delivery of this Agreement and the consummation by Seller of the transactions herein contemplated and the compliance by Seller with the terms of this Agreement do not conflict with or result in breach of any of the terms or provisions of, or constitute default under, the constituent documents of Seller or any indenture, note, mortgage, agreement, arrangement, understanding, accord, document or instrument by which Seller or the Property is bound, and will not and do not constitute a violation of any applicable law, rule, regulation, judgment, order or decree of any governmental instrumentality or court, domestic or foreign, to which Seller or the Property is subject.

(e)    Section 1445(a) Non‑foreign Person. Seller is not a foreign person for purposes of, and is not subject to withholding under, Internal Revenue Code Section 1445(a).

(f)     Tenant Leases. Attached hereto as Exhibit B is a true, correct and complete copy of the Lease which Lease is the only lease related to the Property. Seller has received no written notice of any default, failure or breach by Seller under the Lease, which remains uncured, and to Seller’s actual knowledge, no such default, failure or breach now exists.

(g)    Neither Seller, nor any member or principal of any member of Seller, is related to Solomon Dwek by blood, marriage or by business relationship, which representation will survive the closing.



Exhibit 10.2

(h)    Breach of Representation or Warranty. If Seller becomes aware that any of the foregoing representations and warranties become untrue or inaccurate as a result of a change in any material respect on or before the Closing Date, Seller shall promptly notify Buyer. If so notified by Seller, or if Buyer otherwise becomes aware that any of the foregoing representations and warranties has become untrue or inaccurate as a result of a change in any material respect on or before the Closing Date, Buyer shall thereupon have the right and option, as Buyer’s sole remedy, at any time within five (5) days after receipt of Seller’s notice, or otherwise becoming so aware, as the case may be, to cancel and terminate this Agreement, whereupon the Deposit shall immediately be paid to Buyer. If Buyer does not so elect to terminate this Agreement, Seller’s representations and warranties herein shall be deemed revised to include such change. Notwithstanding the foregoing, if Buyer so terminates this Agreement as in this Paragraph 3(h) provided because any such representation or warranty became untrue as a result of Seller's default hereunder, Seller shall reimburse Buyer for Buyer's reasonable, documented, out-of-pocket costs incurred in seeking to acquire the Property, up to an aggregate amount of $10,000.00.

(i)    Buyer acknowledges and agrees that Seller is selling the Property in its “AS IS” CONDITION WITH ALL FAULTS, WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, except as herein expressly provided. Pursuant to this Agreement, Buyer will be given a reasonable opportunity to inspect and investigate the Property, either independently or through agents of Buyer’s choosing. Except for the representations, covenants and warranties of Seller contained herein, Buyer shall not be entitled to, and should not, rely on Seller or its affiliates or its agents as to (A) the quality, nature, adequacy and physical condition of the Property, including, but not limited to, the structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities and the electrical, HVAC, plumbing, sewage, and utility systems, facilities and appliances, (B) the quality, nature, adequacy, and physical condition of soils, ground water, and geology, (C) the existence, quality, nature, adequacy and physical condition of utilities serving the Property, (D) the development potential of the Property, its habitability, merchantability, or fitness, suitability, or adequacy of the Property for any particular purpose, (E) the zoning or the legal status of the Property, (F) the Property’s or its operation’s compliance with applicable codes, laws, regulations, statutes, ordinances, covenants, conditions, and restrictions of any governmental, quasi-governmental entity or any other person or entity, (G) the quality of any labor and materials furnished at or to the Property, (H) the compliance of the Property with any environmental protection, pollution, or land use laws, rules, regulations orders or requirements including, but not limited to, those pertaining to the handling, generating, storing, or disposing of any hazardous and/or regulated materials, or the Americans with Disabilities Act, (I) the condition of title and the nature, status and extent of any right-of-way, lease, right of retention, possession, lien, encumbrance, license, reservation, covenant, condition, restriction, and any other matter affecting the title, (J) any item of income or expense which may be generated by the Property and the operation thereof or (K) the accuracy or completeness of the Due Diligence Documents or any information contained in the Due Diligence Documents. Although Seller and Seller’s predecessors may have performed work, or contracted for work performed by third parties in connection with the Property, Seller and its agents shall not be responsible to Buyer or any successor on account of any errors or omissions or construction defects of such predecessors and/or third parties. Without limiting the foregoing provisions, and except as relates to fraud, willful misconduct or breaches or defaults of any of the representations, covenants and warranties of Seller contained herein, Buyer, for itself and any successors and assigns of Buyer, waives its right to recover from, and forever releases and discharges, and covenants not to sue, Seller and its principals, agents, representatives and affiliates and their respective heirs, successors, personal representatives and assigns with respect to any and all claims and causes of action, whether direct or indirect, known or unknown, foreseen or unforeseen, in contract, tort, or under statute, that may arise on account of or in any way be connected with the Property including, without limitation, the physical, environmental and structural condition of the Property or any law or regulation applicable thereto, including, without limitation, any claim or cause of action relating to the use, presence, discharge or release of hazardous or regulated materials on, under, in,


Exhibit 10.2

above or about the Property (including, without limitation, any and all claims under the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, or any other federal, state or local statute or regulation, or any federal or state common law, whether now existing or applicable or hereafter enacted or applicable, providing for or permitting any right of recovery for any environmental matter or condition). Notwithstanding the foregoing, Buyer does not waive its rights, if any, to recover from, and does not release or discharge or covenant not to sue Seller for any breach of Seller’s obligations, representations, covenants and warranties set forth in this Agreement.

Buyer represents to Seller that the execution, delivery and performance by Buyer of this Agreement is pursuant to authority validly and duly conferred upon Buyer and the signatories of Buyer hereto, and there is no claim, action, suit or proceeding pending or, to the knowledge of Buyer, threatened against, by or otherwise affecting Buyer, which could materially impact on Buyer’s ability to perform its obligations under this Agreement.

(j)    Seller recognizes that Voltari Corporation, which is Buyer’s parent company (“Parent”), is a public company with shares of common stock registered under U.S. securities laws. Accordingly, Seller acknowledges and agrees that Parent may publicly disclose in filings with governmental authorities and/or financial statements such information regarding the transaction contemplated hereby as it may deem necessary or advisable under securities laws, rules or regulations, or accounting rules.

(k)     There are no attachments, executions or assignments for the benefit of creditors or voluntary proceedings in bankruptcy or under any other debtor relief laws contemplated by or pending or threatened by or against Seller or otherwise affecting the Property.

(l)     There is no Personalty to be delivered to Buyer in conjunction with this transaction.

(m)     There are no operating, management, service or similar type agreements or contracts to which Seller is a party affecting the Property which will survive beyond the Closing Date and any existing operating, management, service or similar type agreements or contracts to which Seller is a party affecting the Property will be paid off in full on or prior to the Closing Date.

(n)     There is no contract, option, right of first refusal, lease or other agreement or instrument of any kind which grants to any person or legal entity other than Buyer the present or future right to purchase, occupy, lease or otherwise acquire any interest in, or any right to occupy or use, the Property or any part thereof, other than the Lease.

(o)     As of the date hereof, Seller or Tenant maintains property insurance for the Property equal to 100% of the replacement value of the Property and Seller has not received any written notice of cancellation under any such insurance policy.

(p)     To Seller’s actual knowledge, nothing catastrophic has occurred at the Property since the Property was acquired by Seller. Catistrophic shall mean any condition that would prevent the entire Property from being used for its current use.

(q)     To Seller’s actual knowledge, and except as disclosed in Seller’s most recent environmental reports, which are included in the Due Diligence Documents (as hereinafter defined), there are no environmental issues or hazardous materials at the Property.    

(r)    All of the representations of Seller contained in this Agreement (except the representation contained in Paragraph 3(g) above, which shall survive closing without limitation) shall survive closing for a period of one (1) year.


Exhibit 10.2


4.    Conditions Precedent to Closing

(a)    Buyer’s obligation to close hereunder shall be expressly conditioned upon the occurrence or fulfillment of each of the following conditions on or prior to the Closing Date or such earlier date as may be provided in this Paragraph 4(a):

(i)    All of the representations and warranties by Seller set forth in this Agreement shall be true and correct at and as of the Closing Date in all material respects, subject to Paragraph 3(h).

(ii)    Seller shall have performed, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed by Seller prior to the Closing Date. For the purpose of this paragraph, Seller’s material performance shall be defined as a) delivery or execution of all documents reasonably necessary or contemplated by this Agreement to effectuate the Closing; b) delivery to the Title Company of all documents reasonably requested in order to issue the Title Policy required under this Agreement; and c) delivery of the balance of the purchase price, including adjustments, as required under this Agreement.

(iii)    Seller shall obtain, as a condition of closing, an executed estoppel letter (the “Estoppel Certificate”) from Chase, in the form specified in the Lease.

If any of the conditions set forth above in this Paragraph 4(a) is not satisfied by the applicable date set forth herein, Buyer shall notify Seller within five (5) business days after such date, and if such non-satisfaction continues for five (5) business days after such notice from Buyer thereof, this Agreement may, at Buyer’s option, be terminated upon notice to Seller within three (3) business days after the end of such 5-day period, whereupon Buyer shall be entitled to receive back the Deposit, and if the failure of such condition is not the result of Buyer's default hereunder, Seller shall reimburse Buyer for Buyer's reasonable, documented, out-of-pocket costs incurred in seeking to acquire the Property, up to an aggregate amount of $10,000.00.

(b)    Seller’s obligation to close hereunder shall be expressly conditioned upon the occurrence or fulfillment of each of the following conditions on or prior to the Closing Date:

(i)    All of the representations by Buyer set forth in this Agreement shall be true at and as of the Closing Date in all material respects.

(ii)    Buyer shall have performed, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed by Buyer prior to the Closing Date, including delivery of the balance of the Purchase Price due at closing.

If any of the conditions set forth above in this Paragraph 4(b) is not satisfied by the applicable date set forth herein and such non-satisfaction continues for fifteen (15) days after written notice from Seller thereof, this Agreement may, at Seller’s option, be terminated by notice to Buyer, given within three (3) days after the end of such 5-day period, whereupon Seller shall be entitled to receive the Deposit from Title Company, as liquidated damages and not as a penalty, and such receipt shall be Seller’s sole remedy.

5.    Inspection; Seller’s Operations Prior to Closing

(a)    From and after the date hereof, Seller shall provide Buyer and Buyer’s agents and representatives with access to the Project for the purpose of inspecting the physical condition and operation thereof. In addition, if not previously delivered, not later than three (3) days after the Effective Date, Seller shall make various documents respecting the Property available to Buyer for Buyer’s review, including


Exhibit 10.2

(without limitation) copies of all Leases, service contracts (“Service Contracts”), environmental reports, including any Phase 1 and Phase 2 reports, assessments and inspections (Environmental Reports) and various other financial and other documents in Seller’s possession regarding the operation of the Property (the “Due Diligence Documents”). Buyer shall proceed diligently and in good faith in inspecting the Property and reviewing the Due Diligence Documents and shall indemnify, defend and hold Seller harmless from and against any and all loss, cost, claims, liability or expense arising from Buyer’s exercise of its rights pursuant to this Paragraph 5(a), except for any such loss, cost, claim, liability or expense caused by or arising from the gross negligence, fraud or willful misconduct of Seller, which obligation of Buyer shall survive closing or the termination of this Agreement prior to closing. Prior to entering upon the Project for any reason, Buyer shall provide Seller with reasonable prior notice and a description of Buyer’s intended activities and also shall provide to Seller reasonable evidence that Buyer maintains general liability insurance coverage, including Buyer’s contractual liability, covering its obligations to Seller pursuant to this Paragraph 5(a), in an amount not less than $2,000,000.00 combined single limit. Such insurance policies shall name Seller as an additional insured. If Buyer (in Buyer’s sole discretion) chooses not to proceed with the acquisition of the Property for any reason or no reason, Buyer shall, by notice to Seller on or prior to September 4, 2015 (the “Inspection Termination Date”), terminate this Agreement, whereupon Buyer shall be entitled to receive back the Deposit, and this Agreement shall terminate. All reports and tests in connection with Buyer’s inspections shall be prepared and conducted at Buyer’s sole cost and expense.

(b)     During the term of this Agreement, Seller shall operate the Property in the normal course of business consistent with Buyer’s prior operations, and Seller shall not modify, amend or seek or grant any waiver under the Lease without Buyer’s prior consent.

6.    Closing; Time.

(a)    Closing shall take place by way of an escrow closing at the offices of the Title Company on a date (the “Closing Date”) occurring not later than September 17, 2015.

(b)    All times specified in this Agreement are of the essence of this Agreement.

7.    Evidence and Condition of Title

(a)    At closing, title to the Property (other than the Personalty) shall be fee simple and shall be: (i) good and marketable; (ii) insurable as such, at regular rates, by Title Company, and (iii) subject to only the Lease, the lien of any real estate taxes or assessments which are not yet due and payable, and those matters approved by Buyer in the manner set forth below in this Paragraph 7 (collectively, the “Permitted Exceptions”). Title to the Personalty shall be free and clear of all liens, security interests and other encumbrances.
    
(b)    Promptly after the execution of this Agreement, Buyer shall apply for a commitment for title insurance from Title Company (the “Title Commitment”). Seller agrees, at no cost to Seller, to cooperate with Buyer and Title Company in connection therewith. Prior to September 4, 2015, Buyer shall deliver a copy of the Title Commitment to Seller, together with a notice to Seller identifying the existence of any exceptions in the Title Commitment, other than the Permitted Exceptions, which are unsatisfactory to Buyer (such exceptions so identified by Buyer being called “Title Defects”). All other matters affecting title to the Property shall be deemed approved by Buyer.

(c)    (i)    If Buyer notifies Seller of the existence of any Title Defects, Seller shall have ten (10) days within which to notify Buyer whether Seller intends to cure such Title Defects, and the failure


Exhibit 10.2

to notify Buyer within such 10-day period shall be conclusively deemed to be Seller’s notice to Buyer of Seller’s decision not to cure the Title Defects.

(ii)    If Seller notifies, or is deemed to have notified, Buyer of its intention not to cure any Title Defects, Buyer shall have five (5) business days thereafter to notify Seller of its decision whether to take such title as Seller may give, without abatement of the Purchase Price, or of terminating this Agreement, and in the latter event, the Deposit shall be returned to Buyer and this Agreement shall terminate.

(d)    If Seller agrees to cure any Title Defects and such Title Defects remain uncured at closing, or if additional Title Defects created after the issuance of the Title Commitment exist at the time of closing, then Buyer shall either (i) take such title as Seller may give, with a credit against the Purchase Price in an amount necessary to cure or correct any Title Defects which constitute monetary liens in an ascertainable amount (as reasonably determined by Title Company), or (ii) be entitled to a return of the Deposit, whereupon this Agreement shall terminate.

(e)    Seller shall not voluntarily transfer or encumber the Property or any part thereof during the term of this Agreement.

(f)    Notwithstanding the foregoing, Seller agrees to cure any monetary lien or encumbrance in an ascertainable amount affecting the Property that can be cured by the payment of money.

8.    Delivery of Documents

At closing, Seller shall deliver to Buyer:

(a)    A bargain and sale deed with covenant against grantor’s acts (the “Deed”), conveying fee simple title to the Property to Buyer in accordance with the requirements of subparagraph 7(a) above.

(b)    A Bill of Sale to the Personalty duly executed by Seller.

(c)    A valid assignment of the Lease, containing an assumption by Buyer, assigning to Buyer all of Seller’s right, title and interest in and to the Lease.

(d)    A valid assignment of Seller’s interest under any service contracts respecting the operation and maintenance of the Property, to the extent assignable, containing an assumption by Buyer, assigning to Buyer all of Seller’s interest under such contracts.

(e)    Such affidavits, state and local tax forms and other documentation as is customary in New Jersey or as the Title Company shall reasonably require, to be signed by Buyer also, as appropriate.         
                                    
(f)    An original letter in the form of Exhibit C, executed by Seller, advising Chase of the sale of the Property and directing that rents and other payments thereafter be sent to Buyer or as Buyer may direct.

(g)     A certificate in the form of Exhibit D, executed and acknowledged by Seller, in accordance with Section 1445 of the Internal Revenue Code, as amended.

(h)    An original of the Lease to the extent in Seller’s possession.

(i)    An original Estoppel Certificate..


Exhibit 10.2


(j)    An assignment of Seller’s rights and interest in and to the names, signs and logotypes under which the Property have been managed, operated and advertised.

(k)    Possession of the Property subject only to the Lease.

(l)    An original or certified copy of the Assignment of the Lease from Seller’s predecessor to Seller.

9.    Apportionments and Adjustments

The following items are to be computed and apportioned between Buyer and Seller as of the Closing Date on a per diem and on a 365 day year basis:

(a)    Any water and sewer rents not paid directly by Chase.

(b)    Any real estate taxes not paid directly by Chase.

(c)    Any amounts payable under assignable service contracts.

(d)    The rents and charges due under the Lease (“Rents”).

(e)    Any Rents which are due and payable under the Lease on or prior to the Closing Date, but which have not been collected by Seller, shall promptly be remitted to Seller by Buyer in accordance with this subparagraph 10(e), if collected by Buyer. The first of any of Rents received by Buyer from Chase subsequent to the Closing Date shall be retained by Buyer on account of Rents then currently due and payable, and any excess Rents received by Buyer shall be promptly remitted to Seller on account of any delinquencies existing for periods prior to closing. Buyer assumes no obligation to collect delinquent Rents on behalf of Seller, other than to use commercially reasonable collection efforts, which efforts shall not require Buyer to commence litigation, evict Chase or terminate the Lease.

(f)    If Chase or any subtenant is obligated to pay expense reimbursements, escalation rent, percentage rent or any other item set forth in subparagraph 10(d), and if the total amount received by Seller or by Buyer on account thereof exceeds the portion of such rent or other items (when ascertained) allocable to the portion of the billing period falling during the receiving party’s period of ownership, the receiving party shall promptly pay the excess to the other. Each of Seller and Buyer shall provide the other with copies of all reports relating to the aforementioned which Seller or Buyer has received from or sent to Chase and/or subtenants, from time-to-time, so that Seller and Buyer may have the full billing period information necessary to ascertain and confirm that amount to which each party is entitled.

(g)    Any utility company charges, up to and including the Closing Date (including electricity, water and sewer) accrued and payable by Seller (other than those payable directly by Chase to the utility suppliers) based upon the last bill therefor. If any such bill has not been received by the Closing Date, then such adjustment shall be based upon the next such bill received and such adjustment shall occur after the Closing Date. Seller shall retain the right to the refund of all utility deposits. With respect to any utility adjustment, Seller shall endeavor to obtain meter (or other measuring device) readings of the utility consumption as of the Closing Date and, wherever possible, Seller shall pay directly to the utility company the amount determined to be due as of the Closing Date.

This Paragraph 9 shall survive closing.



Exhibit 10.2

10.    Transfer Taxes; Other Expenses.

Any and all state and local transfer taxes and documentary stamp charges arising from the sale of the Property and the recordation of the Deed to the extent imposed by applicable law shall be paid by Seller at closing, except that Buyer and Seller shall each pay 50% of the applicable New Jersey Mansion Tax. Buyer also shall pay the cost of recording the Deed and all title insurance premiums and charges and any survey costs, and each party shall pay the fees and expenses of its respective legal and other advisors. Each party shall pay one‑half (1/2) of the reasonable and customary escrow or closing fees charged by the Title Company, but not more than $250.00 per party.

11.    Defaults and Remedies; Title Company as Holder of Deposit

(a)    Default by Seller. In the event that any of Seller’s representations or warranties contained herein are untrue (either when made or at closing), but subject to Paragraph 3(g), or if Seller shall have failed to have timely performed any of its obligations, covenants and/or agreements contained herein in all material respects which are to be performed by Seller and Seller shall not have cured said default within ten (10) days after written notice thereof, then Buyer, at its option may (i) elect to close the purchase of the Property pursuant to the provisions hereof and such closing shall be deemed a waiver of any claims against Seller for damages as a result of Seller’s default, (ii) Buyer may specifically enforce the provisions of this Agreement, or (iii) Buyer may cancel and terminate this Agreement and in such event the Deposit shall immediately be paid to Buyer; provided, that in no event may Buyer proceed against Seller for damages arising out of Seller’s default.

(b)    Default by Buyer. If, following the Inspection Termination Date, Buyer shall fail to close the purchase of the Property as contemplated hereby due to the default of Buyer hereunder, and Buyer shall not have cured said default within ten (10) days after written notice thereof, the Deposit shall be paid to Seller as liquidated damages as Seller’s sole and exclusive remedy for such default, Seller hereby specifically waiving any and all rights which it may have to any additional damages or specific performance as a result of Buyer’s default under this Agreement.

(c)    Title Company, in its sole discretion, may at any time deposit the Deposit with a court of competent jurisdiction selected by it and, in such event, Title Company shall be fully released and discharged from all obligations as escrow holder hereunder.

(d)    The duties of Title Company hereunder are only as herein specifically provided and are purely ministerial in nature. Title Company shall incur no liability whatever as escrow holder, as long as Title Company acts in good faith.

12.    Insurance

Seller shall maintain in effect until the Closing Date its existing property insurance policies with respect to the Property. In the event of damage to the Property by fire or any other casualty, Seller shall promptly notify Buyer and this Agreement shall not be affected thereby, provided the cost of repairing such damage shall not exceed the sum of $500,000.00, and provided all such costs are covered by such policies, or Seller agrees to pay Buyer the cost of any uncovered damage. If, however, damage caused by fire or other casualty insured under such policies shall exceed $500,000.00, or if the damage is not fully covered by such policies and Seller does not agree to pay Buyer at closing the cost of repairing the uncovered damage, Buyer shall have the right and option to terminate this Agreement by giving notice to Seller within ten (10) days after Seller’s notifying Buyer of such damage, whereupon Buyer shall be entitled to receive back the Deposit. If, in the event of a casualty, this Agreement shall not be terminated as in this Paragraph 12 provided, Seller


Exhibit 10.2

shall pay or assign to Buyer at closing all monies received or receivable from the insurance companies which wrote such policies and all claims against such insurance companies as a result of the losses covered by such policies, less costs previously expended by Seller on account of the damage.

13.    Condemnation

In the event that all or part of the Property is taken by condemnation or eminent domain proceeding between the date of this Agreement and the Closing Date, Buyer may (a) cancel this Agree-ment, if the part of the Property so taken is material to the current use of the Property, or (b) take title subject to such condemnation or taking and receive the proceeds thereof, Seller assigning all its rights to unpaid proceeds to Buyer at closing. Buyer shall notify Seller of its election not more than ten (10) days after notice from Seller of the occurrence of the condemnation or taking. If Buyer shall elect to cancel this Agreement, then Buyer shall be entitled to receive back the Deposit.

14.    Brokers

Seller and Buyer each represents and warrants to the other that it has engaged no broker or finder in connection with the Property, other than Stan Johnson Company (“Broker”). Seller shall pay Broker a commission if and when required by a separate agreement. Seller and Buyer each agrees to indemnify, save harmless and defend the other from and against all claims, losses, liabili-ties and expenses, including reasonable attorneys’ fees, through any and all appeals, arising out of any claim made by any other broker, finder or other intermediary who claims to have been engaged by such party in connection with the transactions contem-plated by this Agreement. The provisions of this Paragraph 14 shall survive closing.

15.    Notices    

All notices and other communications hereunder to be effective shall be in writing and be sent by overnight delivery with an overnight courier such as Federal Express, Airborne, United Postal Service or other nationally-recognized overnight courier service:
                        
IF TO SELLER:        160 Brighton Acquisition, LLC
8 Industrial Way East
Second Floor
Eatontown, NJ 07724                                                    Attn: Isaac D. Massry

WITH A COPY TO:        Alan N. Escott, Esquire
McCausland, Keen & Buckman
Radnor Court, Suite 160
259 N. Radnor-Chester Road
Radnor, PA 19087-5240
        
IF TO BUYER:        Voltari Real Estate Holding LLC
Att: Chief Principal Officer
601 West 26th Street, Suite 415
New York, NY 10001
                
WITH A COPY TO:        Marshall Schiff, Esquire
Marshall S. Schiff, P.C.
One North Broadway, Suite 701
White Plains, New York 10601


Exhibit 10.2

                        
Notices shall be deemed given one (1) delivery date after the date when duly deposited with the courier as provided above. Notices may be given by a party’s attorney on such party’s behalf.

16.    Assignment
        
Buyer may not assign its rights under this Agreement without Seller’s prior consent, other than to a newly formed or existing entity related to or affiliated with Voltari Real Estate Holding LLC or its principals. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties and their respective legal representatives, successors and assignees.
    
17.    Binding Effect; Amendments

This Agreement contains the final and entire agreement between the parties with respect to the subject matter hereof. The parties shall not be bound by any terms, conditions, statements, warranties or representations, oral or written, not herein contained. This Agreement may not be changed orally but only by an instrument in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. Neither this Agreement nor any assignment hereof shall be filed of record or in any office or place of public record.

18.    Counterparts

This Agreement may be executed in one or more counter-parts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Electronically transmitted copies of this Agreement and/or signature pages hereof shall have the same force and effect as originals.

.    
19.    Governing Law

This Agreement shall be construed and interpreted in accordance with the laws of the State of New Jersey.

20.    Captions

The captions in this Agreement are inserted for convenience of reference only and in no way define, describe or limit the scope or intent of this Agreement or any of the provisions hereof, and shall not constitute a part of this Agreement.

21.    Agreement Separable

If any provision hereof is for any reason unenforceable or inapplicable, the other provisions hereof will remain in full force and effect in the same manner as if such unenforceable or inapplicable provision had never been contained herein.


Exhibit 10.2

22.    Tax-Deferred Exchange

Buyer or Seller may desire to exchange, for other property of like kind and qualifying use within the meaning of Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder, fee title in the Project. Each of Buyer and Seller expressly reserves the right to assign its rights, but not its obligations, hereunder to a Qualified Intermediary as provided in Treasury Reg. §1.1031(k)-1(g)(4) on or before closing and each party hereby agrees to fully cooperate with the other party, at no cost to such party, in the furtherance of any such like-kind exchange pursuant to Code §1031 contemplated by either party hereto.

23.    Time Periods

If any date, time period or deadline hereunder falls on a weekend or a holiday generally observed in the State of New Jersey, then such date shall be extended to the next occurring business day.

(Remainder of page intentionally left blank)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.
                        
SELLER:

160 BRIGHTON ACQUISITION, LLC

By:
Linden Exchange Group, LLC, a Delaware limited liability company and its Sole
Member

By:    Linden Plaza Management, Inc., a
Delaware corporation and its Managing Member


By:/s/Isaac Massry                    
Isaac Massry, Vice President
                    
Date of Execution: August 7, 2015



BUYER:

VOLTARI REAL ESTATE HOLDING LLC


By:_/s/ John Breeman____________
Title: Chief Financial Officer
    
Date of Execution: August 7, 2015


Exhibit 10.2


LIST OF EXHIBITS


ITEM            PARAGRAPH No.            DOCUMENT DESCRIPTION

A             Recitals                 Legal Description

B             1                    Lease

C             8(f)                Tenant Notice

D             8(g)                FIRPTA Certificate



Exhibit 10.2

EXHIBIT B

Chase Lease

(see attached)




Exhibit 10.2

EXHIBIT C

160 Brighton Acquisition, LLC
8 Industrial Way East
Second Floor
Eatontown, NJ 07724


To:
JP Morgan Chase Bank, N.A.                JP Morgan Chase Legal Department
575 Washington Boulevard - 4th Floor            270 Park Avenue - 39th Floor
Jersey City, New Jersey 07310-1680            New York, New York 10017
Attn: Retail Real Estate - Northeast Region        Attn: Retail Real Estate Counsel

Re:    160 Brighton Avenue, Long Branch, New Jersey (the “Premises”)

_____________, 2015

Dear Ladies and Gentlemen:

In that the Premises today have been sold to Voltari Real Estate Holding LLC, please be advised that all future payments of rent and other charges in connection with your respective leases at the Premises should be paid to the new owner at the following address:

Voltari Real Estate Holding LLC
601 West 26th Street, Suite 415
New York, New York 10001

Furthermore, any security deposits made by you and held by us as of today’s date have been transferred to Voltari Real Estate Holding LLC, to whom you should look for the return of such deposits upon your fulfillment of all your respective obligations under your leases.

Very truly yours,

160 BRIGHTON ACQUISITION, LLC

By:
Linden Exchange Group, LLC, a Delaware limited liability company and its Sole
Member

By:    Linden Plaza Management, Inc., a
Delaware corporation and its Managing Member


By:___________________________    
                                    Isaac Massry, Vice President


Exhibit 10.2

EXHIBIT D
FIRPTA CERTIFICATE FOR ENTITIES

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee that withholding of tax is not required upon the transfer of a U.S. real property interest by 160 Brighton Acquisition, LLC to the transferee, the undersigned hereby certifies the following:

1)     160 Brighton Acquisition, LLC is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2)     160 Brighton Acquisition, LLC is not a disregarded entity as defined in Reg. §1.1445-2(b)(2)(iii);

3)     The U.S. employer identification number of 160 Brighton Acquisition, LLC is _______________; and

4)     The office address of 160 Brighton Acquisition, LLC is 8 Industrial Way East, Second Floor, Eatontown, NJ 07724.

The undersigned understands that this certification may be disclosed to the Internal Revenue Service by the transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief, it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of 160 Brighton Acquisition, LLC.

160 BRIGHTON ACQUISITION, LLC

By:
Linden Exchange Group, LLC, a Delaware limited liability company and its Sole
Member

By:    Linden Plaza Management, Inc., a
Delaware corporation and its Managing Member

By: /s/     Isaac Massry            
Isaac Massry, Vice President




Exhibit 10.3

GROUND LEASE
THIS GROUND LEASE (“Lease”) is entered into by and between DWEK BRANCHES, LLC, a New Jersey limited liability company (“Landlord”), and JPMORGAN CHASE BANK, N.A., a national banking association (“Tenant”).
R E C I T A L S
A.Landlord is the owner of those certain tracts of land located in the City of Long Branch, County of Monmouth, State of New Jersey and more fully described in Exhibit A attached hereto and also known as Lot 1.01, Block 119 (formerly Lots 1.01 and 2, Block 119) on the Official Tax Map of the City of Long Branch (the “Property”).
B.Landlord desires to lease to Tenant the Property, consisting of approximately 1.3 acres of land, together with all buildings, driveways, parking areas, sidewalks. landscaping and other structures and improvements now or hereinafter located on the Property including, without limitation the Building (as hereinafter defined) and more fully described in Exhibit B attached hereto (collectively, the “Premises”), and Tenant desires to lease the Premises from Landlord.
NOW, THEREFORE, Landlord and Tenant hereby agree as follows:
ARTICLE 1

Grant and term
1.1    Property Leased.
(a)    Landlord, in consideration of the rents, covenants, agreements and conditions herein set forth, hereby demises and leases to Tenant, and Tenant hereby leases from Landlord, the Premises together with all of Landlord’s rights, interests, estates and appurtenances thereto, all improvements thereon, including, without limitation, the Building, and all other rights, titles, interests and estates, if any, of the Landlord in adjacent streets and roads. The “Building” shall mean the building located on the Premises on the date of execution of this Lease, containing approximately five thousand two hundred forty (5,240) square feet (which includes 2,620 square feet on the ground floor and 2,620 square feet in the basement) as well as all drive-up teller lanes, associated sidewalks, signage and related facilities as well as utility connections and landscaping, all as is shown on Exhibit B attached hereto. Landlord hereby certifies to Tenant that the Premises is a separately subdivided tax lot and that no other lands or property are included within such tax lot.
1.2    Term.
(a)    The term of this Lease (as extended pursuant to Section 1.3, if applicable, the “Term”) shall commence on the date (the “Commencement Date”) that Landlord delivers to Tenant vacant, broom-clean and Environmentally Clean possession of the Premises and shall expire at midnight on the date which is the last day of the month in which the fifteenth (15th) anniversary of the Rent Commencement Date (defined below) shall occur (such period, the “Original Term”), unless the Term shall be extended in accordance with Section 1.3 below, in which case the expiration shall be as provided in Section 1.3. “Environmentally Clean” means that each of the Landlord’s representations and warranties contained in Section 5.1(b) through 5.1(k) hereof are true and correct (without regard to any knowledge qualifiers contained therein).

1

Exhibit 10.3

(b)    Landlord shall use its best efforts to cause the Commencement Date to occur as soon as is reasonably possible after the date hereof.
(c)    Notwithstanding anything to the contrary contained herein, in the event that the Commencement Date has not occurred on or before the date which is six (6) months from the date of this Lease, then Tenant shall have the right, in its sole discretion, to terminate this Lease by providing fifteen (15) days’ written notice to Landlord; provided, however, that if the Delivery Date shall occur on or before the date which is fifteen (15) days after the date of Tenant’s notice, Tenant’s termination shall be deemed null and void and this Lease shall continue in full force and effect. Such termination shall be effective on the date stated in such notice.
1.3    Renewal Terms. Provided that this Lease be in effect and that no Event of Default shall have occurred and be continuing beyond any applicable cure period at the time of the exercise of the option hereinafter granted, Tenant shall have the right to renew this Lease for two (2) additional consecutive periods of five (5) years each (each of which is referred to herein as a “Renewal Term”), upon the same terms and conditions as the Original Term except that the number of renewal options shall be reduced by the renewal option then being exercised and any renewal options previously exercised and the Base Rent shall be payable at the rate set forth in Section 2.2(e) below during each such Renewal Term. Tenant shall deliver written notice to Landlord of Tenant’s intent to exercise any such renewal option on or before the date that is twelve (12) months prior to the end of the Original Term or the applicable Renewal Term. In the event Tenant does not notify Landlord of its intention to renew within the time specified, Landlord shall notify Tenant of such failure, and Tenant shall have an additional fifteen (15) calendar days from receipt of such notice to exercise its right to renew. If Tenant fails to timely deliver written notice of its intent to renew this Lease after receipt of Landlord’s notice, Tenant’s right to renew shall terminate, and this Lease shall expire as of the end of the Original Term or the applicable Renewal Term, as the case may be.
ARTICLE 2    

Rent
2.1    Rent Commencement Date and Lease Year Defined. “Rent Commencement Date” shall mean the thirtieth (30th) day following the Commencement Date. “Lease Year” shall mean each consecutive period of twelve (12) full calendar months, following the Rent Commencement Date. If the Rent Commencement Date is a date other than the first day of a calendar month, the first Lease Year shall include that fractional portion of the calendar month in which the Rent Commencement Date occurs and the first full twelve (12) months thereafter, and the last Lease Year shall end on the expiration or earlier termination of this Lease. At the request of either party hereto, Landlord and Tenant agree to execute, within fifteen (15) days following receipt of a written request from the other party, the Rent Commencement Date Letter attached hereto as Exhibit C acknowledging the actual Rent Commencement Date.
2.2    Base Rent. Tenant shall pay rent (“Base Rent”) to Landlord in the amounts set forth below for the periods set forth below:
(a)    Commencing on the Rent Commencement Date and continuing through the last day of the fifth (5th) Lease Year, Base Rent shall be payable in equal monthly installments of FOURTEEN THOUSAND AND NO/100 DOLLARS ($14,000.00). [ONE HUNDRED SIXTY EIGHT THOUSAND AND NO/100 DOLLARS ($168,000.00) per annum].

2

Exhibit 10.3

(b)    Commencing on the first day of the sixth (6th) Lease Year and continuing through the last day of the tenth (10th) Lease Year, Base Rent shall be payable in equal monthly installments of FIFTEEN THOUSAND FOUR HUNDRED AND NO/100 DOLLARS ($15,400.00). [ONE HUNDRED EIGHTY FOUR THOUSAND EIGHT HUNDRED AND NO/100 DOLLARS ($184,800.00) per annum].
(c)    Commencing on the first day of the eleventh (11th) Lease Year and continuing through the last day of the fifteenth (15th) Lease Year, Base Rent shall be payable in equal monthly installments of SIXTEEN THOUSAND NINE HUNDRED FORTY AND NO/100 DOLLARS ($16,940.00). [TWO HUNDRED THREE THOUSAND TWO HUNDRED EIGHTY AND NO/100 DOLLARS ($203,280.00) per annum].
(d)    If Tenant exercises its right to renew the Lease as set forth in Section 1.3, Base Rent for the applicable Renewal Term commencing on the first day of the sixteenth (16th) Lease Year and continuing through the last day of the twentieth (20th) Lease Year shall be payable in equal monthly installments of EIGHTEEN THOUSAND SIX HUNDRED THIRTY FOUR AND NO/100 DOLLARS ($18,634.00). [TWO HUNDRED TWENTY-THREE THOUSAND SIX HUNDRED EIGHT AND NO/100 DOLLARS ($223,608.00) per annum].
(e)    If Tenant exercises its right to renew the Lease as set forth in Section 1.3. Base Rent for tire applicable Renewal Term commencing on the first day of the twenty-first (21st) Lease Year and continuing through the last day of the twenty-fifth (25th) Lease Year shall be payable in equal monthly installments of TWENTY THOUSAND FOUR HUNDRED NINETY SEVEN AND 42/100 DOLLARS ($20,497.42). [TWO HUNDRED FORTY-FIVE THOUSAND NINE HUNDRED SIXTY-NINE AND NO/100 DOLLARS ($245,969.00) per annum].
2.3    Additional Rent and Rent Defined. The term “Additional Rent” shall mean all amounts required to be paid by Tenant under the terms of this Lease other than Base Rent. The term “Rent” shall mean collectively Base Rent and Additional Rent.
2.4    Payment of Rent. Base Rent shall be paid to Landlord by Tenant in equal monthly installments in advance on the first day of each calendar month in lawful money of the United States of America without demand, notice, setoff, counterclaim or abatement, except as otherwise set forth herein, at the address of Landlord as set forth in Section 16.1 or to such other persons or at such other addresses as Landlord may designate from time to time in writing to Tenant. If the Rent Commencement Date or termination or expiration date of this Lease is other than the first day of a month, Tenant shall be required to pay a pro rata portion of the monthly installment of Base Rent for any partial month. Additional Rent shall be paid as herein set forth.
Except for those costs to be specifically borne by Landlord as set forth in this Lease, the Base Rent shall be considered a “net” rent and Landlord shall receive same free from any costs, charges or liabilities relating to the operation, upkeep, maintenance, repair or replacement of the Premises or any portion thereof.
2.5    Late Payments. In the event any installment of Rent is not paid within thirty (30) days after the same becomes due, a late charge of five (5%) percent of the late installment will be immediately due and payable to Landlord as liquidated damages for Tenant’s failure to make prompt payment. Landlord further reserves the right to require Tenant to pay as an additional charge hereunder interest at the rate of one and one-half (1-1/2%) percent per month (based upon the rate of eighteen (18%) percent per annum) on all payments of Rent which are made more than five (5) days

3

Exhibit 10.3

after the due date hereof. In the event Tenant fails or refuses to pay Rent, or any additional charge hereunder and Landlord institutes suit for the collection of same, Tenant agrees to reimburse Landlord for all reasonable expenses incurred by Landlord in connection therewith, including, but not limited to attorneys’ fees and disbursements.
ARTICLE 3    

Taxes and Utilities
3.1    Taxes.
3.1.2    Tenant shall pay during the Term beginning on the Rent Commencement Date, as Additional Rent, all Real Estate Taxes (as hereafter defined). “Real Estate Taxes” shall mean all taxes, assessments and charges levied upon or with respect to the Premises or any improvements thereon. Real Estate Taxes shall include, without limitation, all general real property taxes and assessments, including, without limitation, general and special assessments, all assessments for schools, public improvements, and benefits, charges, fees or assessments for all governmental services or purported benefits to the Premises, service payments in lieu of taxes, all business privilege taxes, and any tax, fee or excise on the act of entering into this Lease and other governmental impositions and charges of every kind and nature whatsoever, whether general or special, that are now or hereafter levied or assessed against Landlord by the United States of America, the State of New Jersey, or any political subdivision, public entity, and shall also include any other tax, fee or other excise, however described, that may be levied or assessed as a substitute for, in whole or in part, any other Real Estate Taxes and any license fees, tax measured or imposed upon leasing the Premises, or tax measured by or based in whole or in part upon the economic value of the Premises, or any portion thereof, whether or not now customary or in the contemplation of the parties on the date of this Lease. Real Estate Taxes shall not include assessments, adjustments or any other charges or penalties related to ownership of the Property or the Premises prior to the Rent Commencement Date, and shall further not include any transfer, inheritance or capital stock taxes or income taxes measured by the net income of Landlord from all sources, unless, due to a change in the method of taxation, any such tax is levied against Landlord as a substitute for, in whole or in part, any other tax that would otherwise constitute a Real Estate Tax.
Notwithstanding anything to the contrary contained herein, Tenant shall have the right to seek a reduction in the valuation of the Building or the Premises for tax purposes and to contest in good faith by appropriate proceedings, at Tenant’s expense, the amount of validity in whole or in part of any imposition, tax or assessment affecting the Premises. Tenant shall further have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of Tenant, or Landlord (if legally required), without cost or expense to Landlord, the validity or application of any law, ordinance, rule, regulation or requirement relating in whole or in part to any imposition, tax or assessment affecting the Premises. If by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith may legally be delayed pending the prosecution of any such proceeding. Tenant may delay such compliance therewith until the final determination of such proceeding. Landlord shall not be required to join in any proceedings referred to herein unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord or any owner of the Premises, in which event Landlord shall, at no cost or expense to Landlord, join in such proceedings or permit the same to be brought in its name. Landlord shall not ultimately be subjected to any liability for the payment of any costs or expenses in connection with any such proceedings, and Tenant shall indemnify and save harmless Landlord from any such costs and expenses, including reasonable, out-of-pocket attorneys’ fees. Tenant shall be entitled to any refund of any imposition and penalties or interest thereon received by Landlord which have been paid by Tenant or which have been paid by Landlord but previously reimbursed in full by Tenant. Landlord, in the event Tenant has not filed an appeal, reserves unto itself the right to appeal and seek a reduction in the valuation of the Premises for real estate tax purposes.

4

Exhibit 10.3

3.1.2    Landlord shall promptly provide copies of the bills for the Real Estate Taxes assessed against the Premises to Tenant and, from and after the Rent Commencement Date, Tenant shall pay any such Real Estate Taxes directly to the taxing authority prior to the time the same shall become delinquent or payable with penalty. Promptly upon the Rent Commencement Date, Landlord shall arrange for copies of the bills to be sent to Tenant directly from the applicable taxing authorities.
3.2    Utilities. From and after the Commencement Date, Tenant shall arrange for and pay for its own utilities servicing the Premises, including, but not limited to water, electricity, natural gas, telephone, cabling and trash removal. Tenant shall be solely responsible for and pay when due directly to the applicable utility companies for heat, light, water, sewer, gas, telephone, electricity or any other utility services used or consumed in the Building and Premises. If any of such charges are billed to Landlord, Tenant shall pay same to Landlord within twenty (20) days after presentation by Landlord of a bill therefor. Tenant shall be responsible for making all arrangements with utility companies for its utility requirements and all necessary connections and installations (including without limitation responsibility for connection and tap fees and for installation of necessary meters), and Landlord’s sole responsibility following the Commencement Date shall be to cap the utility lines at their current location. Landlord represents and warrants that all utilities, including, without limitation, electricity, telephone, a water main and sanitary and storm sewers, are located immediately adjacent to the Property and the Building, within a public right-of-way and are dedicated to public use and of sufficient size to service Tenant’s proposed use in the Premises. Landlord shall not be responsible for any interruption, failure or suspension of utility systems or services not caused by Landlord or its employees, contractors, agents or affiliates but Landlord shall exercise reasonable diligence to eliminate the cause of interruption and to effect restoration of service to the extent within Landlord’s ability and control. Tenant shall not be entitled to any diminution or abatement of rent or other compensation or damages, nor shall this Lease or any of the obligations of the Tenant be affected or reduced, by reason of the interruption, stoppage or suspension of any of the utility systems or services, except to the extent caused by Landlord or its employees, contractors, agents or affiliates.
3.3    Permitted Contests. Tenant, at Tenant’s sole cost and expense, may contest by appropriate proceedings, the amount, validity or application of any Real Estate Taxes or any legal requirement or any lien arising therefrom provided that all of the following conditions shall apply: (a) in the case of contesting any imposition of Real Estate Taxes, such proceedings shall suspend collection thereof (or in the event such collections are not suspended. Tenant shall pay its portion of the applicable Real Estate Taxes prior commencing such contest), (b) no part of the Premises would be subject to loss, sale or forfeiture before determination of any contest, (c) neither Landlord nor Tenant would be subject to any criminal liability for failure to comply and (d) such proceeding shall be conducted in good faith and with due diligence and promptly after the determination of such contest, the party obligated to comply with any such legal requirement determined to be valid shall comply therewith.
ARTICLE 4    

Tenant’s Review Period
4.1    Tenant’s Approvals. Tenant’s performance under this Lease is subject to (a) Tenant receiving approval of its upper management; (b) Tenant receiving authorization from the Office of the Comptroller of the Currency to open a branch on the location of the Property; (c) Tenant’s approval of the configuration of the floor plan and the size of the Premises; (d) Tenant’s determination that the zoning of the Property, the Building, and the Premises permits Tenant to use the Premises for the purposes and uses contemplated in this Lease; (e) Tenant’s determination that the environmental condition of the Property, the Building and the Premises is satisfactory to Tenant in its sole discretion; and (f) Tenant’s determination that it will be able to procure all applicable building department permits to allow Tenant

5

Exhibit 10.3

to complete its initial tenant improvements. In the event that Tenant fails to receive any approval or authorization set forth in clauses (a) or (b) of the previous sentence, does not approve the floor plan as described in clause (c) of the previous sentence or does not make the determinations set forth in clauses (d), (e) or (0 of the previous sentence, then Tenant shall have the unilateral right to terminate this Lease by delivery of written notice to Landlord; provided that if Tenant has not notified Landlord within ninety (90) days after the Commencement Date that Tenant has elected to cancel this Lease because Tenant has failed to receive the approval set forth in clause (a), has not approved the floor plan as described in clause (c) or has not made the determinations set forth in clause (d), then Tenant shall be deemed to waive any right to cancel or terminate this Lease on account of such clause (a), (c) or (d).
4.2    Documents to be Supplied by Landlord. Within ten (10) days following the date of full execution of this Lease, Landlord shall deliver to Tenant any environmental reports, studies or other reports relating to the Property and the Premises in the possession of Landlord or its property manager or their agents (collectively, “Landlord’s Reports”).
4.3    Title Information. Within ten (10) days following the date of full execution of this Lease, Tenant shall order a commitment for title insurance (“Commitment”) covering Tenant’s leasehold estate in the amount of the value of the Property and the cost of the improvements to be constructed on the Property, together with copies of all liens, encumbrances and other matters affecting Landlord’s title to the Property (“Title Documents”).
4.4    Survey. Within ten (10) days following the date of full execution of this Lease. Tenant shall order a current on-the-ground survey (“Survey”) of the Property prepared by a registered public surveyor satisfactory to Tenant and the Title Company. Upon approval of the Survey by Tenant and Title Company, this Lease shall be amended and the metes and bounds description of the Property prepared pursuant to such Survey shall be added to this Lease as a part of Exhibit A and such Survey shall be added to this Lease as a new Exhibit B.
4.5    Title Review Period. Within twenty (20) days (“Title Review Period”) after receipt of the last of the Landlord’s Reports, Commitment. Title Documents and Survey. Tenant shall deliver to Landlord written notice of any objection which Tenant may have with respect to the Commitment, Survey and/or Title Documents. If Tenant fails to object in writing to any items reflected in such documents within the Title Review Period, then all such items shall be deemed to be Permitted Encumbrances (as hereinafter defined). If Tenant objects in writing to any of the items reflected in the Commitment, Survey or Title Documents, Landlord shall have fifteen (15) days (“Title Cure Period”) following Landlord’s receipt of Tenant’s written objections in which to remove or cure, to Tenant’s reasonable satisfaction, any matters to which Tenant has objected. If Landlord has commenced to cure, and thereafter is diligently pursuing the cure of, such item(s) but such item(s) cannot be cured within the Title Cure Period, Tenant shall, without waiving any of its other rights under this Section, have the unilateral right to extend the Title Cure Period by written notice to Landlord until such time as the cure of such items has been completed or until Tenant, in its sole discretion, determines that the item(s) cannot be cured within a period compatible with Tenant’s intended use of the Property. If Landlord fails to cure such items during the Title Cure Period or Tenant has extended the Title Cure Period and thereafter determines that the item(s) cannot be cured within the extended Title Cure Period. Tenant shall have the right (i) to terminate this Lease by written notice to Landlord within ten (10) days after the expiration of the Title Cure Period (as it may have been extended) or (ii) waive the objection to such matters and proceed with this Lease. Tenant shall have the right to object to any exceptions other than the Permitted Encumbrances (as hereinafter defined) shown on any updated Commitment, Title Document, Landlord’s Report or Survey. If Landlord fails to cure such items. Tenant shall again have the right to terminate this Lease, notwithstanding that the Approval Period (as defined herein) may have expired, or waive the objection. Upon such termination. Landlord shall reimburse Tenant for all of Tenant’s actual title, survey and inspection costs incurred under this Article 4 within thirty (30) days after receipt of an invoice therefor. The time periods for objecting to and curing the additional exceptions and for terminating the Lease shall be the same as

6

Exhibit 10.3

those set forth above, commencing with the date Tenant receives the updated Commitment, Title Document, Landlord’s Report or Survey, as applicable. “Permitted Encumbrances” shall mean any encumbrances reflected in the Commitment and Title Documents or on the Survey to which Tenant does not object within the Title Review Period or to which any objection has been waived by Tenant.
4.6    Inspections and Approvals. During the first ninety (90) days following the date of full execution of this Lease (the “Inspection Period”), Tenant shall have the right (i) to conduct soil, engineering, environmental and other tests with regard to the Property; investigate the availability of utilities, the applicable governmental requirements relating to signage and construction of improvements on the Property; investigate the availability of necessary permits and licenses relating to signage and construction of any improvements; and determine generally the desirability and utility of the Property for Tenant’s purposes; and (ii) to obtain all governmental approvals required by all regulatory agencies having jurisdiction over Tenant to authorize Tenant to operate a financial institution on the Premises, as set forth in Section 4.7 below. Tenant shall have the right, at any time prior to the expiration of the Inspection Period, to terminate this Lease by delivery of written notice to Landlord, in which event Tenant’s deposit shall be returned to Tenant, and, except as set forth in the following sentence, the parties shall have no further rights or obligations to the other hereunder. Tenant promptly shall repair and restore all damage to the Property and indemnify and hold Landlord harmless from and against all losses, claims, costs, damages and liabilities arising out of or in connection with any entry upon the Property by Tenant and its agents, servants, employees and contractors, unless such losses, claims, costs, damages and liabilities were caused by Landlord or its agents, servants, employees or contractors.
4.7    Regulatory Approval.
4.7.1    Upon execution of this Lease, Tenant will apply for, and will thereafter use commercially reasonable and diligent, efforts to obtain, all necessary, final, unappealable approvals and consents for the operation of a branch banking facility upon terms and conditions customary for Tenant’s operation of a branch banking facility, with an exterior ATM in the State of New Jersey (all such approvals collectively, the “Regulatory Approvals”). Tenant agrees, upon written request, to provide Landlord with the status of such applications. Provided Tenant has either waived (or is satisfied with) the inspections permitted by Section 4.6 (i) above, in the event that all of the Regulatory Approvals for the conduct of such business by Tenant are not obtained within ninety (90) days from the date of full execution of this Lease, Tenant shall have the option, without any liability hereunder, to cancel this Lease by written notice to Landlord within an additional ten (10) business days following the end of such ninety (90)-day period. If Tenant elects to cancel this Lease in the manner herein provided, then Tenant shall quit and surrender to Landlord the possession of the Premises within thirty (30) days after the date such notice is given, and this Lease shall thereupon cease and be of no further force and effect.
4.7.2    In the event that any of the said governmental departments shall, prior to the end of the ninety (90)-day period aforesaid (as such period may be extended by Tenant as provided above), deny the application for the conduct of banking operations as aforesaid and all appeals from such denial are exhausted by Tenant, then Tenant shall have the option to cancel this Lease effective immediately upon the date such denial shall be received upon written notice to Landlord and shall surrender possession in the manner set forth in this Lease. 
ARTICLE 5    

Landlord’s Warranties and Covenants

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Exhibit 10.3

5.1    Representations, Warranties and Covenants. Landlord represents, warrants and, as applicable, covenants to Tenant as follows:
(a)    There are no management, employment, service or other agreements with respect to or affecting the Premises which will burden Tenant.
(b)    The Premises comply with all applicable environmental laws, including without limitation, any present or future federal, state or local law or regulation relating to the handling, use, control, management, treatment, storage, disposal, Release (as defined below) or threat of Release of any Hazardous Materials (as defined below), including without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§9601 et seq.. the federal Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §§ 6901 et seq., the federal Water Pollution Control Act (“CWA”), 33 U.S.C. §§1251 et seq.. the federal Clean Air Act (“CAA”), 42 U.S.C- §§ 7401 et seq., the Toxic Substances Control Act (‘“TSCA”). 7 U.S.C. §§ 136 et seq.. the Safe Drinking Water Act (“SDWA”), 42 U.S.C. §§ 300f et seq.. the Occupational Safety and Health Act of 1970 (the “OSH Act”)- 29 U.S.C. §§ 651 et seq.. the New Jersey Industrial Site Recovery Act (“ISRA”). N.J.S.A. 13;1K. and any similar state or local laws, rules or regulations, (collectively, “Environmental Laws”). As used herein, “Release”‘ shall mean any spilling, leaking, seeping, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, placement, movement through soil or groundwater, burying or disposing into or upon or under any land or water or air, or otherwise into the indoor or outdoor Environment, including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks, and other receptacles containing or previously containing any Hazardous Materials. The term “Release” shall also mean any “threat” of Release, as defined pursuant to CERCLA. For purposes of this Lease, “Hazardous Materials” shall include but not be limited to any substances, materials or wastes that are regulated by any local governmental authority, the state in which the Premises are located, or the United States of America, because of toxic, flammable, explosive, corrosive, reactive, radioactive or other properties that may be hazardous to human health or the environment, as well as any hazardous or toxic substances, materials, wastes, pollutants and the like which are listed in the United States Department of Transportation Hazardous Materials Table (49 CFR 172.101). as amended from time to time, or defined as such in, and/or regulated by (or become defined in and/or regulated by), any applicable local, state or federal law including, without limitation, CERCLA. RCRA, CWA, CAA, TCSA, the Hazardous Materials Transportation Act (49 U.S.C, § 1801), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.). the OSH Act, ISRA (and its predecessor statutes), the Spill Compensation and Control Act (N.J.S.A. 58:10-23.11, et seq.). the Air Pollution Control Act (N.J.S.A. 26:2C-2, et seq.). the New Jersey Water Pollution Control Act (N.J.S.A. 58:10A-1, et seq.), the Underground Storage Tank Act (N.J.S.A. 58:10A-21, et seq.) and the Solid Waste Management Act (N.J.S.A. 13:1E-1, et seq.), any other federal, state, local or foreign law or ordinance which is presently in effect or hereafter enacted relating to environmental matters, any rules and regulations promulgated under any of the foregoing, and any and all amendments to the foregoing.
(c)    Landlord has obtained all permits, registrations, licenses, approvals and authorizations (collectively, “Permits”) required for the Premises by any applicable Environmental Law, is in compliance with all of the terms, conditions and requirements of such Permits, has provided copies of all such permits to Tenant, and has taken all reasonable steps necessary to transfer any such Permits to Tenant that are required to be transferred.
(d)    None of Landlord or any affiliate thereof or, to Landlord’s knowledge (actual or constructive), any other person has caused, and the Premises are not adversely affected by, any Release, threatened Release, or disposal of any Hazardous Material at the Premises or originating or emanating from any other property.

8

Exhibit 10.3

(e)    There are no Hazardous Materials on. in or under the Premises, whether contained in barrels, tanks, equipment (moveable or fixed) or other containers, deposited or located in land, waters. sumps or in any other part of the site, incorporated into any structure on the site, or otherwise existing thereon.
(f)    The Premises do not contain and have not contained any: (a) asbestos-containing building material, (b) landfills or dumps, (c) solid waste management units, or (d) areas designated for any removal or cleanup activity pursuant to any Environmental Law. The Premises do not contain any underground storage tank.
(g)    None of Landlord or any affiliate thereof or, to Landlord’s knowledge (actual or constructive), any other person has used any Hazardous Materials, nor conducted any activities involving the use, handling, treatment, storage, transportation or disposal of any Hazardous Material at the Premises.
(h)    Landlord has no pending or contingent liability, and has received no notice relating to any claim, order or proceeding pursuant to any Environmental Law (“Environmental Claim”) concerning the Premises, and there are no conditions or occurrences at the Premises which could form the basis for an Environmental Claim against Landlord and/or the Premises.
(i)    Landlord has not submitted to any governmental agency or other person any notice, and is not required to give any such notice, regarding any Release on. under, or from the Premises.
(j)    The Premises are not subject to, and Landlord has no knowledge of, any restriction on the ownership, occupancy, use, or transferability of the Premises in connection with any (a) Environmental Law or (b) Release, threatened Release, or disposal of a Hazardous Material.
(k)    Landlord has provided or otherwise made available to Tenant all environmental audits, reports and assessments concerning Landlord or the Premises which Landlord possesses or which Landlord is aware of and has access to.
(l)    Landlord hereby represents that the Permitted Use (as defined herein) shall not result in the violation of any applicable law, site plan approval, zoning or subdivision regulation applicable to the Premises.
(m)    Landlord represents and warrants that (i) each person executing this Lease on behalf of Landlord is duly authorized to execute and deliver this Lease on behalf of Landlord in accordance with the articles of organization or by-laws of Landlord and pursuant to a duly enacted resolution of Landlord; (ii) this Lease is valid and binding upon Landlord and enforceable against Landlord in accordance with its terms; (iii) the execution and delivery of this Lease will not. with or without the passage of time, violate any other agreement, lease or mortgage by which Landlord is bound or by which Landlord’s property is encumbered; and (iv) Landlord is not a subsidiary or affiliate of any other corporation, or, if it is a subsidiary or affiliate, Landlord’s parent, or its affiliates, have executed and delivered to Tenant simultaneously herewith an absolute guaranty of Landlord’s obligations hereunder.
(n)    The Premises shall be delivered to Tenant free of all tenancies, licenses and other rights of occupancy on the Commencement Date.
(o)    Landlord hereby represents that the Building complies with all laws, ordinances, resolutions, regulations and orders of all governmental entitles having jurisdiction over the Building (collectively, “Applicable Laws”), and Landlord has not received notice of any alleged violation thereof.

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Exhibit 10.3

5.2    Dedications and Easements. In order to plat the Property or develop the Property with the improvements (as defined herein), it may be necessary or desirable that street, water, sewer, drainage, gas, power lines, set back lines and other easements, dedications and similar rights be granted or dedicated over or within portions of the Property by plat, replat, grant, deed or other appropriate instrument. Landlord shall, without cost to Landlord, on written request of Tenant, timely join with Tenant in executing and delivering such documents, in recordable form, from time to time throughout the Term, as may be reasonably appropriate, necessary or required by any governmental authority, public utility or company for the purpose of granting such easements and dedications.
ARTICLE 6    

Signs, ATM Alterations/ Leasehold Improvements; Window Film
6.1    Signs. Tenant shall have the right to place its signs (which may be illuminated), canopies and awnings on the front and side of the Building and the Premises, and to place freestanding signs on the Property, to the full extent allowed by any and all governmental laws, ordinances and regulations including, without limitation, the right to place signs on the doors and windows, and banners on the exterior of the Premises and elsewhere on the interior of the Premises. Additionally. Tenant shall be provided space on any available common sign pylons at no additional charge. During the first twelve (12) months of the Term, Tenant may display promotional banners and awnings advertising its opening in and around the Premises and the Building. In addition, Tenant shall have the right to display promotional banners at other times during the Term, in accordance with any regional or national marketing or advertising program of Tenant. Tenant shall also have the right, without Landlord’s consent, to erect and maintain its logo and sign advertising Tenant’s business on the interior of the Premises. Tenant shall be responsible for the maintenance and repair, at Tenant’s sole cost and expense, of any signs erected by Tenant hereunder. Notwithstanding anything to the contrary contained in this Lease, Tenant shall have a period of one hundred twenty (120) days from the Commencement Date to apply for its signage approvals and permits based on Tenant’s signage plans, specifications, and drawings as Tenant shall determine in its sole discretion. If Tenant shall be unable to procure signage permits and approvals, despite using reasonable diligence, within said one hundred twenty (120)-day period, then Tenant shall have the right to terminate this Lease by providing written notice thereof to Landlord within such one hundred twenty (120)-day period. The termination shall be effective on the date of Landlord’s receipt of the notice.
6.2    Tenant’s Automated Teller Machines.
6.2.1    Tenant participates in. or will participate in. various automated teller machine (“ATM”) networks, in which customers of Tenant and other depository financial institutions participating in such ATM networks (“Network Participants”) may perform transactions that are permitted by Tenant from time to time. Improvements to the Premises may include a remote walk-up and/or drive-up ATM, which Tenant may install.
6.2.2    Tenant may install as many ATMs as it deems reasonably necessary and also install all telephone lines and other utility connections necessary for communications and continued operation of each ATM.
6.2.3    Tenant may make such additions to. modifications to. or replacements of any element of the ATM as it may, from time to time, in its discretion deem desirable to provide continued, expanded, restricted or otherwise altered service to the public.
6.2.4    Tenant may, at its expense, identify its services on the Premises. Such identification may include one (1) or more of the following: logos of Tenant and the “Cirrus’“, “MAC”, ‘“Magic Line”, “MasterCard”,

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Exhibit 10.3

“Money Station”, “Plus”, and “Visa” networks, and any other network in which Tenant allows cardholder access. Notwithstanding anything to the contrary herein. Landlord acknowledges that all logos, service marks and other identifying signs installed at the ATM Site by Tenant are and shall remain the exclusive property of Tenant.
6.2.5    Tenant may share use of its ATMs with any Network Participant or other financial institution(s) and shall have sole discretion as to which institutions, if any, it shall so share with, and shall be free to increase or decrease the number of such sharing institutions, if any.
6.2.6    Notwithstanding anything to the contrary herein. Landlord acknowledges that each ATM furnished by Tenant is and shall remain the exclusive personal property of Tenant, and shall not be considered a fixture nor otherwise permanently attached or affixed to the Premises. Landlord shall not permit any lien or other encumbrance of any kind to attach to any ATM on behalf of any creditor or lienholder of Landlord.
6.3    Tenant’s Window Film.
6.3.1    Installation. At any time during the Term. Tenant shall have the right to install blast-resistant, anti-fragmenting window film (“Window Film”) on the interior surfaces of the windows on the Premises or any portions thereof, subject to the following conditions:
(a)    Tenant will provide Landlord with ten (10) days’ prior notice of such proposed installation, which shall include the product specifications of the Window Film;
(b)    The installation, maintenance and removal of the Window Film shall be at Tenant’s sole cost and expense;
(c)    Notwithstanding anything to the contrary herein. Tenant shall remove the Window Film at the expiration of the Term and repair any damage caused by such removal; and
(d)    The installation of the Window Film shall be performed in compliance with all Applicable Laws, codes and regulations.
6.4    Alterations.
6.4.1    Permitted Alterations. Tenant shall have the right at any time, at its own cost, to make such repairs, decorations, alterations, changes, substitutions, replacements, additions and/or improvements in, on and to the Premises, which Tenant may deem necessary or desirable (collectively, the “Improvements’“). Landlord’s approval shall not be required for any Improvements to the interior of the Building. Subject to Section 6.1 hereof. Landlord’s approval shall be required for any Improvements affecting the exterior of the Building, provided that, such approval shall not be unreasonably withheld, delayed or conditioned. Tenant shall be permitted to construct additions to the Building with the Landlord’s consent, which consent shall not be unreasonably withheld, delayed or conditioned. Tenant shall be permitted to demolish the Building and construct a new building (which shall be deemed to be the Building for all purposes hereunder) only with Landlord’s prior written consent, which consent may be withheld in Landlord’s sole and absolute discretion. In the event Landlord does not approve of Tenant’s plans and specifications for any Improvement under this Section 6.4.1, it shall provide detailed written reasons for such disapproval, and Tenant shall resubmit the plans and specifications to Landlord, and the process shall be repeated until the plans and specifications

11

Exhibit 10.3

have been approved, or deemed approved, by Landlord; provided, however Landlord shall be precluded from making additional comments to the plans and specifications after its initial review and comment.
Notwithstanding anything to the contrary in the foregoing, in the event that Landlord fails to approve Tenant’s plans for Tenant’s initial improvements to be completed prior to Tenant’s commencing business, Landlord and Tenant shall attempt to resolve any dispute or disagreement relating thereto in good faith. In the event that Landlord and Tenant are unable to resolve such dispute to the satisfaction of Tenant, Tenant shall have the option to terminate this Lease upon prior written notice to Landlord. Landlord hereby consents to Tenant’s construction of the initial Improvements as further described on Exhibit E hereto and incorporated herein.
6.4.2    Construction Standards. Tenant agrees that any work performed by it pursuant to this Lease shall be performed in a good and workmanlike manner and in accordance with all governmental laws, rules, regulations and code requirements applicable thereto. Landlord shall cooperate with Tenant in obtaining all permits, licenses, and approvals for such work and will join Tenant in the execution of any application for any such permit, license or approval (at no cost to Landlord, except Landlord shall bear any costs of its own professionals should Landlord elect to engage professional advice in connection with the foregoing). At all times during the course of any Improvements, in addition to the insurance requirements of Article 8 hereof Tenant shall procure and maintain or cause to be provided or maintained, at its sole cost and expense: (i) Worker’s Compensation and Disability Benefits Insurance covering all individuals and entities employed in connection with any Improvement at the Premises, with maximum statutory benefits permitted in the state in which the Property is located, (ii) Owner’s Protective Insurance written under a commercial general liability policy or policies form (separate from any contractor’s comprehensive general liability policy) naming Tenant as named insured in an amount not less than the amount provided in Article 8 hereof and with the Landlord named as an additional insured on the policy; and (iii) Builder’s Risk Insurance (fire, extended coverage, vandalism, malicious mischief, burglary and theft) written on a non-reporting basis of at least Two Million and No/100 ($2.000.000.00) Dollars; naming Tenant as named insured and such insurance (y) shall contain an endorsement stating that “permission is granted to complete and occupy” and (z) if any off-site storage location is used, shall cover, for full insurable value, all materials and equipment on or about any such off-site storage location intended for use with respect to the Premises. Not later than five (5) days prior to the commencement of any Improvement. Tenant shall deliver, or cause to be delivered, to Landlord a certificate or certificates of insurance evidencing the aforesaid coverages which certificate or certificates shall provide that each of such insurance coverages is cancelable only upon fifteen (15) days’ prior written notice to Landlord. Promptly upon completion of any Improvement. Tenant shall furnish Landlord with (i) an affidavit, in form reasonably satisfactory to Landlord’s counsel, from Tenant’s general contractor stating that ail subcontractors, laborers and material suppliers who have supplied labor and/or materials in connection with such Improvement have been paid in full and that the general contractor releases any and all liens with respect to labor and materials supplied to the Premises for such Improvement, (ii) “as-built” plans for such Improvement, certified to Landlord by Tenant’s architect, and (iii) a certificate of occupancy or other approval issued by the applicable governmental authority.
6.4.3    Mechanic’s and Materialmen’s Liens. The Premises shall not be subject to liens for improvements made or ordered by Tenant, without the approval of Landlord, whether or not such work is permitted by this Lease, and Tenant shall notify the contractor or other party making any such improvements of this exclusion. Tenant shall discharge or bond over any lien filed against the Premises or any other property owned by Landlord or any part thereof for work done or materials furnished with respect to the Premises within thirty (30) days after such lien is filed unless Tenant shall contest the validity of such liens by appropriate proceedings, no part of the Premises would be subject to loss, sale or forfeiture before determination of any such proceedings and such proceedings are conducted in good faith and with due diligence. If Tenant fails to keep this covenant, in addition to any other remedies available to Landlord under this Lease or otherwise, Landlord may at its option discharge such lien, in which event

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Exhibit 10.3

Tenant agrees to pay Landlord a sum equal to the amount of the lien thus discharged plus Landlord’s internal administrative costs, reasonable out-of-pocket attorneys’ fees, expenses, and damages thereby caused Landlord.
6.5    Tenant’s Equipment Defined. The term “Tenant’s Equipment” means all trade fixtures and personal property, including, without limitation, furnishings, furniture, equipment, sign faces. ATMs, computers, computer related equipment on property, liebert units, cabling, tubing, pneumatic tubing, safes, halon systems, security systems, communications equipment and other equipment or property useful to Tenant in its operations, and, in certain circumstances, vaults (other than the vault located on the Premises prior to the Commencement Date), for use in connection with the conduct of Tenant’s business regardless of the manner in which they are installed.
6.6    Ownership and Removal of Tenant’s Equipment. Tenant’s Equipment shall be solely the property of Tenant. Within thirty (30) business days following the expiration or earlier termination of the Term for any reason. Tenant shall have the right, but not the obligation, to remove all Tenant’s Equipment from the Premises; provided, however, that Tenant shall repair any damage caused by such removal. If Tenant fails to remove all Tenant’s Equipment within such thirty (30)-day period, all of Tenant’s Equipment remaining on the Premises shall become the property of Landlord without any credit or compensation to Tenant.
6.7    Ownership of Improvements. During the Term all Improvements shall be solely the property of Tenant. Upon expiration or earlier termination of the Term, the Improvements, excluding Tenant’s Equipment, shall be the property of Landlord.
ARTICLE 7    

Use, Maintenance and Repairs
7.1    Use.
(a)    Tenant shall be entitled to use and occupy the Premises for the purposes of operating a branch bank and providing banking, insurance, trust, guaranty, safe deposit, electronic banking and automatic teller machine banking, investment or securities business services, or any combination of the foregoing, or any similar or allied business, and/or for general office purposes, and for any other use permitted by law (the “Permitted Use”), including installation of all curbing, sidewalks, parking, lighting and landscaping as well as any masonry trash enclosures, compactor areas and concrete pads for service areas. Tenant shall be entitled to use the Premises for no other purpose other than the Permitted Use without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.
(b)    For the avoidance of doubt. Tenant shall not be required to occupy the Premises at any time during the Term.
7.2    Maintenance and Repairs. Subject to Tenant’s rights under Article 6. from and after the Commencement Date, Tenant shall take good care of the Premises, make all repairs thereto, interior and exterior, structural and nonstructural, and shall maintain and keep the Premises and the sidewalks, curbs and landscaping around the Premises in good order, repair and condition at all times. Tenant will not do, knowingly permit or suffer any waste, damages, disfigurement or injury to or upon the Premises or any part thereof, but this Section shall not be construed as limiting Tenant’s rights under Article 6. Landlord shall have no obligation to maintain or repair the Premises.

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Exhibit 10.3

ARTICLE 8    

Insurance and Indemnity
8.1    Landlord’s Insurance. Landlord shall maintain during this Lease, commercial general liability insurance, with limits of not less than $2,000,000 per occurrence for bodily injury, personal injury and property damage. Landlord shall also obtain and keep in force all- risk property insurance covering loss or damage to all real and personal property except for that property which Tenant is obligated to insure under Section 8.2. Tenant shall be named as an additional insured on all such policies of insurance, and prior to the commencement of the Term and within fifteen (15) days prior to the expiration of each such policy, Landlord shall furnish Tenant with copies of certificates of insurance evidencing that such insurance is in full force and effect.
8.2    Tenant’s Insurance. Commencing on the Commencement Date and continuing thereafter throughout the Term, Tenant shall keep in full force and effect: (a) property insurance against loss or damage by fire and other risks from time to time included under special form (formerly called all risk) policies, in the amount of the full insurable replacement cost of the Building, without regard to depreciation, and other improvements and installations on the Premises; (b) commercial general liability insurance (including broad form contractual liability) against claims for bodily injury, personal injury, death or property damage occurring on, in or about the Premises, such insurance to afford protection of not less than $2,000,000 combined single limit per occurrence: (c) workers’ compensation insurance in amounts required by applicable law and employers liability coverage in an amount not less than $500,000 each accident for bodily injury. $500,000 policy limit for bodily injury by disease, and $500,000 each employee for bodily injury by disease; and (d) umbrella/excess liability insurance in the amount of $5,000,000, in form at least as broad as the required basic commercial general liability policy.
8.3    Policy Requirements. Tenant’s policies of insurance shall (a) be issued by insurance companies rated A-/VIII or better by the then current edition of Best’s Insurance Guide (or equivalent rating guide if Best’s is no longer the industry standard); (b) the commercial general liability policy shall be written as a primary policy which does not contribute to and is not in excess of coverage which the Landlord may carry for losses for which the Tenant indemnifies the Landlord; and (c) be endorsed to state the insurer’s agreement that the policy will not be canceled or amended without thirty (30) days’ prior written notice to all parties insured thereunder (with the phrases “endeavor to” and “failure to mail such notice shall impose no obligation or liability of any kind upon the Company” or similar language deleted from the certificate).
8.3.3    Landlord shall be named in Tenant’s insurance policies as an additional insured. However, Landlord agrees that any casualty insurance proceeds shall be released to Tenant for repair and reconstruction in accordance with the provisions of this Lease.
8.3.4    On or prior to the date Tenant shall first make any entry onto the Premises for the performance of its work. Tenant shall deliver to Landlord original certificates of insurance evidencing compliance with the insurance requirements of this Lease. At least twenty (20) days before the expiration of any such insurance policy. Tenant shall deliver to Landlord certificates evidencing the renewal or replacement of such policy. Should Tenant fail to maintain or renew any insurance required under this Article, or to deliver any of such certificates, and such failure shall continue after five (5) days’ notice. Landlord may (but shall not be obligated to) procure such insurance and any sums so expended shall be paid by Tenant to Landlord on demand.

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Exhibit 10.3

8.4    Self-Insurance. Tenant’s obligations under this Article may be satisfied by means of self-insurance. In the event Tenant elects to self-insure, Tenant shall immediately notify Landlord of such election.
8.5    Waiver of Claims. Notwithstanding anything in this Lease to the contrary, neither Landlord nor Tenant shall be liable to the other for any damage to the property of the other party occurring on the Premises, whether or not caused by the negligence or other fault of Landlord or Tenant or of their respective agents, employees, subtenants, licensees, or assignees; provided, however, that this release shall apply only to the extent that such injury or damage is covered by valid and collectible insurance policies (or would have been so covered if the provisions of this Article were fulfilled, or if Tenant self-insures, if same would have been covered by the insurance otherwise required by this Article), regardless of whether such insurance is payable to or protects Landlord or Tenant or both, and only to the extent of any recovery actually collected under such insurance policies.
8.6    Waiver of Subrogation. Landlord and Tenant agree that all policies of insurance to be kept and maintained in force by the respective parties hereto, shall, unless prohibited by law or other regulation having the effect of law, contain provisions in which the rights of subrogation against the Landlord and Tenant are waived by the insurance company or carriers insuring the Premises, or other property in question. Landlord expressly waives any right of recovery against Tenant for damage to or loss of the Premises, or the improvements thereon, including, without limitation, the Building, which loss or damage may arise by fire or any other peril covered by any policy of insurance maintained or required to be maintained pursuant to this Lease, and Landlord shall make no claim for recovery against Tenant therefor. Tenant expressly waives any right of recovery against Landlord for damage to or loss of its fixtures, improvements, or other property located in the Premises, which damage or loss may arise by fire or any other peril covered by any policy of insurance maintained or required to be maintained pursuant to this Lease which contains or is required to contain a waiver of subrogation right against Landlord as set forth in this Section, and Tenant shall make no claim for recovery against Landlord therefor.
8.7    Indemnifications.
8.7.1    Tenant’s Indemnity.
(a)    Tenant agrees to indemnify, defend, and hold Landlord harmless from and against any and all direct claims as the result of or arising out of: (i) the breach by Tenant or any of its agents, contractors, employees or licensees of any covenant or agreement of this Lease on the part of Tenant to be performed or observed, excluding monetary defaults; (ii) Tenant’s use, non-use, management, control, maintenance or occupancy of the Premises or any part thereof; (iii) the negligence or willful misconduct of Tenant or any of its agents, contractors, employees or licensees; or (iv) any work done on the Premises by or at the direction of Tenant.
(b)    Tenant further agrees to indemnify, defend and hold Landlord harmless from and against all direct and actual costs, damages, expenses, losses, fines, liabilities and reasonable counsel fees paid, suffered or incurred as a result of any of the above described claims or any actions or proceedings brought thereon; and in case any action or proceeding is brought against Landlord by reason of any such claim, upon notice from Landlord, Tenant agrees to resist or defend at Tenant’s expense such action or proceeding by counsel reasonably satisfactory to Landlord.

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Exhibit 10.3

8.7.2    Landlord’s Indemnity.
(a)    Landlord agrees to indemnify, defend, and hold Tenant harmless from and against any and all claims as the result of or arising out of: (i) the breach by Landlord or any of its agents, contractors, employees or licensees of any covenant or agreement of this Lease on the part of Landlord to be performed or observed; or (ii) the negligence or willful misconduct of Landlord or any of its agents, contractors, employees or licensees.
(b)    Landlord further agrees to indemnify, defend and hold Tenant harmless from and against all direct and actual costs, damages, expenses, losses, fines, liabilities and reasonable counsel fees paid, suffered or incurred as a result of any of the above described claims or any actions or proceedings brought thereon: and in case any action or proceeding is brought against Tenant by reason of any such claim, upon notice from Tenant. Landlord agrees to resist or defend at Landlord’s expense such action or proceeding by counsel reasonably satisfactory to Tenant.
ARTICLE 9    

Damage or Destruction
9.1    Destruction of Premises. In the event of the partial or complete destruction or damage to the Building or other improvements on the Premises, by fire or other casualty of any nature whatsoever. Tenant shall, to the extent insurance proceeds are made available to Tenant (or would have been made available in the event Tenant elects to self-insure), promptly rebuild or repair or replace the Building and improvements so as to restore same to as good a condition, and to the same general appearance as existed prior to the damage or destruction, but with such changes therein as may be made at Tenant’s election in conformity with this Lease. Tenant agrees that any rebuilding or repair required by this Section shall be completed at Tenant’s sole cost, to the extent of insurance proceeds made available to Tenant (or if Tenant elects to self-insure, to the extent that insurance proceeds would have been made available to Tenant), and with due diligence in accordance with good construction practices. All casualty insurance proceeds or damages recovered on account of any damage or casualty shall be made available to Tenant for the payment of the cost of such repairs. Notwithstanding the foregoing, if the Building shall be destroyed by reason of fire or other casualty to the extent of fifty percent (50%) or more of its leasable area during the last five (5) years of the Term or any exercised renewal term, then Tenant shall have the option to terminate this Lease by giving Landlord notice thereof within two hundred sixty (260) days after the occurrence of the destruction. Such termination shall be without further liability of the parties except for such liabilities theretofore accrued. In the event of such termination, all insurance proceeds applicable to the casualty shall belong to and shall be assigned to Landlord, other than proceeds specifically attributable to Tenant’s Equipment, Tenant’s business interruption and the unamortized value of Tenant’s interest in the Building and other Improvements, and Tenant’s moving expenses (or if Tenant elects to self-insure, Tenant shall pay to Landlord the amount of insurance proceeds which would have otherwise been available to Tenant, failing which Tenant shall have no right to terminate this Lease).
9.2    Rent. Tenant shall not be entitled to any abatement or reduction in Rent payable under this Lease in the event of damage by fire or other casualty. Tenant may insure its interests and risks for untenantability by business interruption insurance (it being agreed and understood that any proceeds received from a business interruption policy shall be the property of, and shall be retained by, the Tenant). Notwithstanding the foregoing, in the event such fire or other casualty and damage shall be the result of the carelessness, negligence or improper conduct of the Landlord or the Landlord’s agents, employees, guests, licensees, invitees, subtenants, assignees or successors. Rent shall be abated

16

Exhibit 10.3

until the Premises are completely restored, and the Landlord shall be liable for the damage and loss suffered by the Tenant.
9.3    Notice of Damage. Tenant shall notify Landlord as soon as practicable of any destruction or damage to the Premises.
ARTICLE 10    

Condemnation
10.1    Taking of Premises. If the whole of the Premises or the Building is taken (which term, as used in this Article, shall include any conveyance in avoidance or settlement of eminent domain, condemnation or other similar proceedings) by any governmental authority, corporation or other entity under the right of eminent domain, condemnation or similar right, or if there shall occur any partial taking of the Premises or the Building such that Tenant cannot continue to conduct its business in a manner which Tenant deems desirable, then this Lease shall, at Tenant’s sole option, terminate as of the date of the taking of possession by the condemning authorities. Upon such termination, the net proceeds of any award received by reason of such taking shall, notwithstanding anything to the contrary in Section 10.2. be released first, to Tenant in an amount equal to the unamortized cost of the Improvements (assuming that the Improvements are amortized over the Term of the Lease). Except as otherwise provided herein, in the event of a taking, and whether or not this Lease is terminated, Tenant shall have no claim with respect to the award or payment for the value of the unexpired Term. Tenant may interpose and prosecute in any proceeding with respect to the taking (which, if permitted in the jurisdiction, shall be independent of any claim of Landlord) claims for the value of Tenant’s trade fixtures, damages for interruption or dislocation of business in the Premises and loss of goodwill, and moving and remodeling expenses.
If such conditions to termination are not met, then this Lease shall continue in full force and effect, and in such event, the net proceeds of any award received by reason of such condemnation shall, notwithstanding any provision to the contrary in Section 10.2, be released first to Tenant to pay for the costs of repairing and reconstructing the Building and the Premises, including all other Improvements, alterations, fixtures and personal property of Tenant, with any balance of such award not needed by Tenant to repair and reconstruct released to Landlord. Following such a taking, the Base Rent shall be proportionally reduced to reflect the amount of the Premises so taken.
10.2    Ownership of Award. Landlord agrees that Tenant shall have the right to participate in any proceedings with respect to any taking of the Premises and Landlord and Tenant shall each be entitled to prove their respective claims based upon their respective interests in the Premises, or such portion thereof as may have been taken, provided that the amount of the award allocable to Tenant shall in no event exceed the unamortized value of Tenant’s costs in constructing any new Building (if any) and other improvements and fixtures on the Premises, the value of Tenant’s unexpired leasehold interest in the Property and Tenant’s moving expenses and relocation costs (including any cost or loss to which Tenant might be put in removing Tenant’s merchandise, furniture, fixtures and all other Tenant’s Equipment).
10.3    Temporary Taking. If the whole or any portion of the Premises is taken for temporary use or occupancy, the Term shall not be reduced or affected, and following such a taking, the Base Rent shall be proportionally reduced to reflect the amount of the Premises so taken. Except to the extent Tenant is prevented from so doing pursuant to the terms of the order of the condemning authority, Tenant shall continue to perform and observe all of the other covenants, agreements, terms and provisions of this Lease. In the event of any temporary taking, Tenant shall be entitled to receive the entire amount of any award therefor unless the period of temporary use or occupancy shall extend beyond

17

Exhibit 10.3

the expiration of the Term, in which case such award, after payment to Landlord therefrom for the estimated cost of restoration of the Premises to the extent that any such award is intended to compensate for damage to the Premises, shall be apportioned between Landlord and Tenant as of the day of expiration of the Term in the same ratio that the part of the entire period for such compensation is made falling before the day of expiration and that part falling after, bear to such entire period.
10.4    Notice of Taking, Cooperation. Landlord and Tenant shall immediately notify the other of the commencement of any eminent domain, condemnation or other similar proceedings with regard to the Premises. Landlord and Tenant covenant and agree to fully cooperate in any condemnation, eminent domain, or similar proceeding in order to maximize the total award receivable in respect thereof. Any termination of this Lease pursuant to this Article 10 shall not affect the rights of Landlord and Tenant to any such award.
ARTICLE 11    

Assignment and Subletting
11.1    Tenant’s Right to Assign.
11.1.1    Notwithstanding anything to the contrary provided herein, Tenant shall have the right, without Landlord’s consent but upon notice to Landlord accompanied by a copy of the relevant documents of assignment or sublease, to assign this Lease or any interest herein or sublet the Premises or any portion thereof (i) to a corporate affiliate, parent or subsidiary of Tenant, (ii) to a successor in interest to Tenant by (x) merger, consolidation or acquisition, or (y) purchase of substantially all of the assets of Tenant, or (iii) to any affiliate, parent or subsidiary of a successor in interest to Tenant; provided that, in each case, JPMorgan Chase Bank, N.A. (or its successor) remains obligated under the terms of this Lease or guaranties the obligations of the Tenant hereunder.
11.1.2    Provided that no Tenant Default remains uncured, Tenant may assign its rights hereunder to any other party with Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed in any case. Landlord’s right to approve any assignee of Tenant’s rights under this Lease shall be limited to approval of (i) the reputation and financial strength of the proposed assignee and (ii) compliance of the proposed use with any deed restrictions and other Applicable Laws and regulations affecting the Premises. No other factors shall be considered. No such assignment shall relieve Tenant of any liability hereunder. Landlord shall indicate its written approval or disapproval of any proposed assignee within thirty (30) days after Tenant gives to Landlord notice of the proposed assignment, including the identity of the proposed assignee and reasonably sufficient information as to the proposed assignee and proposed use to enable Landlord to evaluate such assignee’s reputation and financial strength and to determine compliance of the intended use. If Landlord fails to indicate its approval or disapproval within such thirty (30)-day period, Landlord shall be deemed to have approved the requested assignment. Any assignment of Tenant’s rights under this Lease that is not in accordance with this Section shall be void. Tenant shall provide Landlord with a copy of the fully executed assignment within thirty (30) days of the full execution thereof. Said assignment must provide, without exception, that the assignee agrees to and shall assume all of the obligations on the part of Tenant to be kept, observed and performed pursuant to this Lease.
11.2    Tenant’s Right to Sublease.
11.2.1    Provided that no Tenant Default remains uncured, Tenant may freely execute subleases with regard to the Building and the Improvements, provided only that (i) the lease term of each such sublease (including all

18

Exhibit 10.3

renewal and extension rights of any kind or type) shall not extend past the stated expiration date of the Term, unless Landlord consents in writing thereto, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) the intended use by the sublessee does not violate any deed restrictions and other Applicable Laws and regulations affecting the Property of which Tenant has received written notice from Landlord.
11.2.2    Each sublease for space in the Building or the Improvements shall specifically provide that the sublessee’s rights thereunder are subject to Landlord’s rights under this Lease and shall provide that upon a termination of this Lease or of Tenant’s right to possession of the Premises such sublease shall terminate, unless Landlord elects to allow said sublease to continue in effect as a lease directly between Landlord and the sublessee thereunder, and further provided that (i) the sublessee attorns to Landlord, (ii) Landlord shall not be responsible for the return or repayment of any security or other deposits made by such sublessee with Tenant unless Tenant has turned the same over to Landlord, and (iii) Landlord shall not be liable or responsible for the cure or remedy of any breach, violation or default on the part of Tenant under subleases occurring prior to termination of this Lease or of Tenant’s right to possession of the Premises. Tenant shall give a copy of each sublease to Landlord within thirty (30) days of the execution of such a sublease.
11.2.3    As used in this Lease the term “sublease” shall include any leases, licenses, occupancy agreements, franchise or other similar rights, agreements or arrangements of whatever nature relating to the use or occupancy of any part of the Premises.
ARTICLE 12    

Warranty of Peaceful Possession
12.1    Peaceful Possession. Landlord covenants that Tenant, on paying the Rent and performing and observing the covenants and agreements herein contained and provided to be performed by Tenant, shall and may peaceably and quietly have, hold, occupy, use and enjoy the Premises during the Term and may exercise all of its rights hereunder, subject only to the provisions of this Lease and applicable governmental laws, rules and regulations. Landlord agrees to warrant and forever defend Tenant’s right to such occupancy, use and enjoyment and the title to the Premises against the claims of any and all persons whomsoever lawfully claiming the same, or any part thereof, by, through or under Landlord, but not otherwise, subject only to provisions of this Lease and all applicable governmental laws, rules and regulations.
ARTICLE 13    

Default and Remedies
13.1    Tenant’s Default. Each of the following shall be deemed a “Tenant’s Default” by Tenant hereunder and a material breach of this Lease:
(a)    If Tenant fails to make any payment of Base Rent for a period of ten (10) days after delivery by Landlord of written notice to Tenant that any such payment is past due, or fails to make any payment of Additional Rent required to be paid by Tenant for a period of thirty (30) days after delivery by Landlord of written notice to Tenant that any such payment is past due.

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Exhibit 10.3

(b)    If Tenant fails to keep, perform or observe any of the covenants, agreements, terms or provisions contained in this Lease that are to be kept or performed by Tenant other than with respect to payment of Rent or other liquidated sums of money and Tenant fails to commence and take such steps as are necessary to remedy the same within thirty (30) days after Tenant is given written notice specifying the same, provided, however, that if such remedy cannot be completed in thirty (30) days, such period shall be extended as long as Tenant proceeds diligently and with continuity to remedy the same, or for such lesser time if such failure constitutes an emergency or apparent emergency.
(c)    If an involuntary petition is filed against Tenant under any bankruptcy or insolvency law or under the reorganization provisions of any law of like import or if a receiver of Tenant, or of all or substantially all of the property of Tenant is appointed without acquiescence, and such petition or appointment is not discharged or stayed within sixty (60) days after the happening of such event.
(d)    If Tenant makes an assignment of its property for the benefit of creditors or files a voluntary petition under any bankruptcy or insolvency law. or seeks relief under any other law for the benefit of debtors.
13.2    Landlord’s Remedies. If a Tenant Default occurs. Landlord may. at any time thereafter prior to the curing thereof and without waiving any other rights hereunder or available to Landlord at law or in equity (Landlord’s rights being cumulative), do any one or all of the following:
(b)    Right of Termination. Upon the occurrence of a Tenant Default, Landlord shall have the right to terminate this Lease on not less than ten (10) additional days’ notice to Tenant and thereupon may recover possession of the Premises in the manner prescribed by law. In case of such early termination by Landlord, Tenant agrees to pay to Landlord as damages (a) Landlord’s actual, reasonable costs incurred in terminating this Lease and recovering possession of the Premises including, without limitation, reasonable out-of-pocket attorneys’ fees and disbursements, plus (b) the actual, reasonable costs of reletting the Premises, but not including the costs of alterations or improvements to the Premises, plus (c) a monthly amount for the duration of the Term (but not any unexercised renewal term) equal to the amount, if any. of (i) the Base Rent and Additional Rent payable by Tenant in excess of (ii) the amount of rent and additional rent received by Landlord through reletting the Premises. Landlord agrees to use its commercially reasonable efforts in reletting the Premises and mitigating its damages.
(c)    Re-entry. In any case in which this Lease shall have been terminated. Landlord may, without further notice, enter upon and repossess the Premises, by summary proceedings, ejectment or as otherwise permitted by law, and may dispossess Tenant and remove Tenant and all other persons and property from the Premises and may have, hold and enjoy the Premises and the rents and profits therefrom. Landlord may relet the Premises or any part thereof for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions and provisions (which may include concessions or free rent) as Landlord in its sole discretion may determine. Landlord may, in connection with any such reletting, cause the Premises to be redecorated, altered, divided, consolidated with other space or otherwise changed or prepared for reletting.
13.3    Landlord’s Default. Each of the following shall be deemed a “Landlord’s Default” by Landlord hereunder and a material breach of this Lease:
(d)    If Landlord fails to keep, perform or observe any of the covenants, agreements, terms or provisions contained in this Lease that are to be kept or performed by Landlord and Landlord fails to commence and take such steps as are necessary to remedy the same within thirty (30) days after Landlord is given written notice specifying the same, provided, however, that if such remedy cannot be completed in thirty (30) days, such period shall be extended

20

Exhibit 10.3

as long as Landlord proceeds diligently and with continuity to remedy the same, or for such lesser time for Landlord’s Default, if such failure: (a) constitutes an emergency or apparent emergency; (b) will or does directly and materially impede Tenant’s or its invitees’ use of, or access to, the Premises.
(e)    If an involuntary petition is filed against Landlord under any bankruptcy or insolvency law or under the reorganization provisions of any law of like import or if a receiver of Landlord, or of all or substantially all of the property of Landlord, is appointed without acquiescence, and such petition or appointment is not discharged or stayed within sixty (60) days after the happening of such event.
(f)    If Landlord makes an assignment of its property for the benefit of creditors or files a voluntary petition under any bankruptcy or insolvency law, or seeks relief under any other law for the benefit of debtors.
(g)    If any representation or warranty made by Landlord hereunder shall have been false or misleading in any material respect as of the date hereof.
13.4    Tenant’s Remedies. If a Landlord’s Default occurs. Tenant may. at any time thereafter prior to the curing thereof and without waiving any other rights hereunder or available to Tenant at law or in equity (Tenant’s rights being cumulative), do any one or all of the following:
(a)    Tenant may perform Landlord’s obligations hereunder and offset the reasonable costs and expenses incurred by Tenant in doing so against Base Rent and Additional Rent thereafter coming due hereunder.
(b)    If Landlord’s Default renders all or any portion of the Premises untenantable for those uses incidental to or customarily associated with the operation of a national bank for more than thirty (30) days, Tenant may terminate this Lease, in which event Tenant shall have no further rights, duties or obligations hereunder.
13.5    Non-Waiver. No waiver by either party of any breach by the other party or any of the other party’s obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by either party to seek a remedy for any breach by the other party be a waiver by either party of any rights and remedies with respect to such or any subsequent breach. No right or remedy herein conferred upon or reserved to either party is intended to be exclusive of any other right or remedy provided herein or by law but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity or by statute.
ARTICLE 14    

Subordination
14.1    Landlord represents that there are no mortgages encumbering the Premises except for that certain mortgage (the “Existing Mortgage”) by Amboy National Bank (the “Existing Mortgagee”) dated November 22, 2004 in the principal amount of $1,012,500. Landlord covenants and agrees that within forty-five (45) days of the date of this Lease, Landlord shall obtain from the Existing Mortgagee and deliver to Tenant a subordination and non-disturbance agreement on Landlord’s standard form (an “SNDA”). In the event that Landlord fails to deliver to Tenant an SNDA within such forty-five (45)-day period. Tenant shall have the right to terminate this Lease on not less than fifteen (15) days’ written notice to Landlord: provided, however, that if the SNDA is delivered within said fifteen (15) day period. Tenant’s termination shall be deemed null and void and this Lease shall continue in full force and effect. If Landlord

21

Exhibit 10.3

has delivered the SNDA, but Tenant desires to negotiate the terms thereof, Tenant shall not be entitled to terminate this Lease for a failure of Landlord to deliver the SNDA. Except with respect to the Existing Mortgage, this Lease shall be superior to, and shall not be subordinate to, any ground leases, operating leases, superior leases, and grants of term of the Premises, including, without limitation, the Building or any portion thereof, or any other mortgages, building loan agreements, deeds of trust or leasehold mortgages, which may now or hereafter affect all or any portion of the Premises unless Tenant shall elect, in Tenant’s sole discretion, to execute an SNDA subordinating such ground lease, superior lease, mortgage, loan agreement, deed of trust or leasehold mortgage, as the case may be.
ARTICLE 15    

Surrender and Holdover
15.1    Surrender. Upon the expiration of the Term or earlier termination of this Lease, Tenant shall peaceably leave and surrender the Premises to Landlord broom-clean and otherwise in the condition in which the Premises are required to be maintained by this Lease, normal wear and tear, damage by casualty or eminent domain, and all alterations, additions and improvements excepted. Notwithstanding anything to the contrary in the foregoing sentence, Landlord’s and Tenant’s rights and obligations related to Tenant’s Equipment shall be as provided in Article 6 above. Landlord hereby acknowledges that Tenant is, by law (12 USCS 1831 r-1), required to give its customers a minimum of ninety (90) days’ notice before closing its business operation. Therefore, notwithstanding anything contained herein to the contrary. Landlord agrees that any termination before the end of the Lease Term or any extension thereof, shall provide that Tenant shall have possession of the Premises to operate its business for one hundred twenty (120) days from the date of such termination at the then current monthly rental rate (and Tenant shall not be deemed to be holding over for purposes of Section 15.2 hereof).
15.2    Holdover. Should Tenant or any party claiming under Tenant hold over in possession at the expiration of the Term of this Lease, such holding over shall not be deemed to extend the Term or renew this Lease. Without limiting any rights or remedies of Landlord on account of such holdover, during the holdover period Tenant shall pay upon demand to Landlord, as liquidated damages, a sum equal to 125% of the monthly rate of Base Rent in effect for the last month of the term of this Lease plus all other Additional Rent.
ARTICLE 16    

General Provisions
16.1    Notices. Any notice provided for or permitted to be given hereunder must be in writing and may be given by (i) depositing same in the United States Mail, postage prepaid, registered or certified, with return receipt requested, addressed as set forth in this Section, (ii) nationally overnight courier service, or (iii) delivering the same in-person to the party to be notified. Notice given in accordance herewith shall be effective upon receipt at the address of the addressee, as evidenced by the executed postal receipt or other receipt for delivery. For purposes of notice the addresses of the parties hereto shall, until changed, be as follows:

22

Exhibit 10.3

Landlord:
Dwek Branches, LLC
Solomon Dwek
P.O. Box 98
200 Wall Street
West Long Branch, NJ 07764
With a simultaneous copy to:
Michael V. Benedetto, Esq.
Ansell Zaro Grimm & Aaron, P.C.
1500 Lawrence Avenue
Ocean Township, NJ 07712
Tenant:
JPMorgan Chase Bank, N.A.
575 Washington Boulevard – 4th Floor
Jersey City, NJ 07310-1680
Attention: Retail Real Estate-
Northeast Region
With a simultaneous copy to:
JPMorgan Chase Legal Department
270 Park Avenue – 39th Floor
New York, NY 10017
Attention: Retail Real Estate Counsel
The parties hereto shall have the right from time to time to change their respective addresses for purposes of notice hereunder to any other location within the United States by giving a notice to such effect in accordance with the provisions of this Section.
16.2    Arbitration. This Section shall only apply where express provision is made in this Lease for settlement of a dispute or determination of a matter by arbitration.
(a)    In the event that a dispute arises between Landlord and Tenant with respect to the valuation and/or distribution of any condemnation award related to the Premises, and if, after a good faith attempt by the parties to resolve such dispute through discussion and negotiation, such dispute shall remain unresolved, either party may, upon the delivery of a notice of dispute (a “Notice of Dispute”) to the other party, elect to have the dispute resolved by arbitration in accordance with the provisions of this Section. The arbitration proceedings shall be held in Monmouth County, New Jersey in accordance with the Arbitration Rules for the Real Estate Industry of the American Arbitration Association (utilizing Expedited Arbitration procedures) as modified by this Section. In the event of a conflict between such rules and the provisions of this Section, the provisions of this Section shall govern. The dispute shall be resolved by one (1) Arbitrator. The decision of the Arbitrator shall be conclusive and binding on all parties.
(b)    Unless Landlord and Tenant shall have selected an Arbitrator at the time of the Notice of Dispute, the Arbitrator shall be appointed in accordance with the provisions of Section 15 of the Arbitration Rules for the Real Estate Industry of the American Arbitration Association, as modified by the terms of this Section. The Arbitrator shall be an appraiser who is a member of the American Arbitration Association National Panel of Real Estate Industry Arbitrators or the American Arbitration Association National Panel of Commercial Arbitrators and must possess at least ten (10) years of experience in the appraisal of real estate within New Jersey.
(c)    Each party shall submit to the other party its written final position as to the resolution of the valuation and/or distribution of any condemnation award related to the Premises (its “Final Position”) within ten (10) days after notice of appointment of the Arbitrator from the American Arbitration Association. If any party fails to submit its Final Position within the required ten (10) day period, then such party shall not be permitted to participate further in the arbitration process contemplated by this Section. If only one party so submits its Final Position, then such Final Position

23

Exhibit 10.3

shall be binding upon all of the parties. Each Final Position shall include a written statement by the party supporting its position with respect to the dispute in question.
(d)    The Arbitrator shall determine the resolution of the subject dispute by no later than twenty (20) days after the receipt of the parties Final Positions. The resolution of the subject of the dispute as determined by the Arbitrator shall be binding upon the parties. The determination of the Arbitrator shall be in writing and counterpart copies thereof shall be promptly delivered to each of the parties.
(e)    Prior to proceeding to resolve the dispute, the Arbitrator shall subscribe and swear to an oath to fairly and impartially resolve such dispute in accordance with the provisions of this Section.
(f)    If the Arbitrator shall die, be disqualified or incapacitated or shall fail or refuse to act before the rendering of a final determination by the Arbitrator, the dispute shall be resubmitted promptly to arbitration under this Section.
(g)    The expenses of arbitration shall be borne equally by Landlord and Tenant except that each party shall pay and separately be responsible for its own counsel and witness fees. The parties agree to sign all documents and to do all other things necessary to submit any such matter to arbitration and further agree to, and hereby do, waive any and all rights they or any of them may at any time have to revoke their agreement hereunder to submit to arbitration and to abide by the decision rendered thereunder.
(h)    The Arbitrator shall have the right to retain and consult experts and competent authorities skilled in the matters under arbitration, but any such consultation shall be made in the presence of representatives of the parties, with full right on their part to cross-examine such experts and authorities.
(i)    At any time during the pendency of the arbitration proceedings, the parties may agree in writing as to the resolution of the dispute, in which event such arbitration proceedings shall thereupon terminate.
Time shall be of the essence with respect to any period of time specified in this Section.
16.3    Modification and Non-Waiver. No variations, modifications or changes herein or hereof shall be binding upon any party hereto unless set forth in writing executed by both parties hereto. No waiver by either party of any breach or default of any term, condition or provision hereof, including without limitation the acceptance by Landlord of any Rent at any time or in any manner other than as herein provided, shall be deemed a waiver of any other or subsequent breaches or defaults of any kind, character or description under any circumstance. No waiver of any breach or default of any term, condition or provision hereof shall be implied from any action of any party, and any such waiver, to be effective, shall be set out in a written instrument signed by the waiving party.
16.4    Governing Law. This Lease shall be construed and enforced in accordance with the laws of the State of New Jersey.
16.5    Number and Gender; Caption; References. Pronouns, wherever used herein, and of whatever gender, shall include natural persons and corporations and associations of every kind and character, and the singular shall include the plural wherever and as often as may be appropriate. Article and section headings in this Lease are for convenience of reference and shall not affect the construction or interpretation of this Lease. Whenever the terms “hereof,”

24

Exhibit 10.3


“hereby,” “herein” or words of similar import are used in this Lease they shall be construed as referring to this Lease in its entirety rather than to a particular section or provision, unless the context specifically indicates to the contrary. Whenever the terms “including,” or “includes,” or words of similar import are used in this Lease they shall be deemed to be followed by the words “without limitation”, regardless of whether the words “without limitation” are actually used. Any reference to a particular “Article” or “Section” shall be construed as referring to the indicated article or section of this Lease.
16.6    Estoppel Certificate. Landlord and Tenant shall execute and deliver to each other, within ten (10) Business Days following written request therefor by the other party, a certificate in the form mutually acceptable to Landlord and Tenant addressed as indicated by the requesting party and stating:
(a)    whether or not this Lease is in full force and effect;
(b)    whether or not this Lease has been modified or amended in any respect, and submitting copies of such modifications or amendment;
(c)    whether or not there are any existing defaults hereunder known to the party executing the certificate, and specifying the nature thereof; and
(d)    certifying as to the date through which Rent and other charges have been paid.
16.7    Exhibits. All exhibits and addenda attached hereto are incorporated herein for all purposes.
16.8    Severability. If any provision of this Lease or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, and the basis of the bargain between the parties hereto is not destroyed or rendered ineffective thereby, the remainder of this Lease, or the application of such provisions to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby.
16.9    Relation of Parties. It is the intention of Landlord and Tenant to hereby create the relationship of landlord and tenant, and no other relationship whatsoever is hereby created. Nothing in this Lease shall be construed to make Landlord and Tenant partners or joint venturers or to render either party hereto liable for any obligation of the other.
16.10    Force Majeure. As used herein “Force Majeure” shall mean the occurrence of any event (specifically excluded are delays resulting from a party’s inability to obtain financing or a party’s lack of capital) which prevents or delays the performance by Landlord or Tenant of any obligation imposed upon it hereunder (other than payment of Base Rent) and the prevention or cessation of which event is beyond the reasonable control of the obligor. If Landlord or Tenant shall be delayed, hindered or prevented from performance of any of its obligations (other than to pay Base Rent) by reason of Force Majeure (and such party shall not otherwise be in default hereunder) the time for performance of such obligation shall be extended for the period of such delay, provided that the following requirements are complied with by such party: (i) such party shall give prompt written notice of such occurrence to the other party and (ii) such party shall diligently attempt to remove, resolve or otherwise eliminate such event, keep the other party advised with respect thereto, and commence performance of its obligations hereunder immediately upon such removal, resolution or elimination. Anything contained in or inferable from this Lease to the contrary notwithstanding, Tenant shall not be

25

Exhibit 10.3

relieved by any event of Force Majeure from Tenant’s obligations to pay Base Rent hereunder, nor shall the Term be extended thereby.
16.11    Environmental Covenants.
(a)    Tenant agrees that it will not use, handle, generate, treat, store or dispose of, or permit the use, handling, generation, treatment, storage or disposal of any Hazardous Materials (other than those types and quantities contained in normal office products and environments) in, on, under, around or above the Premises now or at any future time (except in quantities permitted by Applicable Laws) and will indemnify and save Landlord harmless from any and all actions, proceedings, claims and losses of any kind, including, but not limited to, those arising from injury to any person, including death, damage to or loss of use or value of real or personal property, and costs of investigation and cleanup or other environmental remedial work, which may arise in connection with Hazardous Materials introduced to the Premises solely by Tenant or any of its agents, contractors or employees.
(b)    If at any time during the term of this Lease it is determined that there are any Hazardous Materials located in, on, under, around, or above the Premises which were introduced to the Premises solely by Tenant and which are subject to any Environmental Law, including Environmental Laws requiring special handling of Hazardous Materials in their use, handling, collection, storage, treatment or disposal. Tenant shall at its own expense promptly commence with diligence within thirty (30) days after receipt of notice of the presence of the Hazardous Materials and shall continue to diligently take all actions necessary to comply with Environmental Law regarding the same.
(c)    Landlord shall be solely responsible for and shall comply with all legal requirements with respect to Hazardous Materials on the Premises existing as of the Commencement Date. If, in the exercise of Tenant’s reasonable business judgment, it is necessary for it to close its business until the Hazardous Materials are removed and the Premises restored. Base Rent and all Additional Rent shall abate during the period of removal and restoration. If at any time during the Term of this Lease Landlord becomes aware of any soil or groundwater contamination on the Premises, Landlord shall immediately give notice of such contamination to Tenant.
(d)    Landlord agrees to indemnify and defend Tenant, its agents, employees, contractors, partners, investors, and affiliates against, and to hold them harmless from and against, any and all claims, demands, losses, liabilities, damages, injuries, costs and expenses (including, but not limited to, reasonable fees and disbursements of attorneys, experts and consultants) paid or incurred by. or asserted against, the Tenant for the presence on or under, or the Release into, onto or from the Premises of any Hazardous Materials prior to or after the Commencement Date, other than any such presence or Release of Hazardous Materials introduced to the Premises by Tenant or any of its employees, invitees, agents or contractors.
(e)    Tenant shall, at Tenant’s own expense, comply with ISRA and shall make all submissions to, provide all information to, and comply with all requirements of the. Bureau of Industrial Site Evaluation (the “Bureau”) of the New Jersey Department of Environmental Protection (“NJDEP’’) pursuant to ISRA, but only to the extent that any such compliance obligations directly relate to and arise from Tenant’s particular use of the Premises.
(f)    Notwithstanding anything in this Lease to the contrary. Tenant shall not be responsible for any requirements of Environmental Law, nor for any losses and/or liability of any kind, that apply to or arise from: (i) structures used to contain Hazardous Materials, including without limitation any underground or above-ground storage tanks, sumps, pits or vaults, that were in existence at the Premises as of, or removed prior to, the Commencement Date of this Lease, except to the extent that Tenant has caused any Release from any such structure of Hazardous Materials

26

Exhibit 10.3

that were introduced to the Premises by Tenant or its employees, invitees, agents or contractors; or (ii) any environmental conditions caused by any third party other than Tenant’s invitees, agents or contractors at any time prior to or after the commencement of this Lease.
16.12    Entire Agreement. This Lease constitutes the entire agreement of the parties hereto with respect to its subject matter, and all prior agreements with respect thereto are merged herein. Any agreements entered into between Landlord and Tenant of even date herewith are not, however, merged herein.
16.13    Recordation. This Lease shall not be recorded, except that Landlord will, at the request of the Tenant, promptly execute a Memorandum of Lease substantially in the form of Exhibit D attached hereto, which shall be filed for record in the Office of the County Clerk of Monmouth County. New Jersey.
16.14    Successors and Assigns. This Lease shall constitute a real right and covenant running with the Premises, and, subject to the provisions hereof pertaining to Tenant’s rights to assign, sublet or encumber, this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Whenever a reference is made herein to either party, such reference shall include the party’s successors and assigns.
16.15    Landlord’s Joinder. Landlord agrees to join with Tenant in the execution of such applications for permits and licenses from any governmental authority as may be reasonably necessary or appropriate to effectuate the intents and purposes of this Lease, provided that no such application shall constitute an encumbrance of or with respect to the Premises, and Landlord shall not incur or become liable for any obligation as a result thereof.
16.16    No Third Parties Benefitted. The terms and provisions of this Lease are for the sole benefit of Landlord and Tenant, and no third party is intended to benefit herefrom.
16.17    Survival. Any provision of this Lease which obligates Landlord or Tenant to pay an amount or perform an obligation before the commencement of the Term or after the expiration or earlier termination of the Term shall be binding and enforceable notwithstanding that payment or performance is not within the Term, and the same shall survive.
16.18    Landlord’s Lien. Landlord hereby waives and releases any statutory or contractual landlord’s lien with respect to the property of Tenant now or hereafter located in the Premises, including but not limited to Tenant’s Equipment and other personal property.
16.19    Landlord and Tenant Defined. The word “Landlord”, as used in this Lease, shall include the original Landlord named in this Lease and all persons, natural or artificial, who at any time or from time to time during the Term of this Lease succeed to the estate of Landlord in the Property and the interest of Landlord under this Lease. The word “Tenant”, as used in this Lease, shall include the original Tenant named in this Lease and all persons, natural or artificial, who at any time or from time to time during the Term of this Lease succeed to the estate of Tenant in the Premises and the interest of Tenant under this Lease.
16.20    Commissions. Each party hereby warrants and represents to the other party that it has not dealt with any broker or finder in the negotiation of this Lease other than Sonya Grill (“Broker”). Landlord shall pay Broker a commission pursuant to a separate agreement. Each party agrees to indemnify and hold the other harmless from any charge, liability or expense (including attorneys’ fees) the other may suffer, sustain or incur with respect to any claim for a commission, fee or other compensation by a broker or finder claiming by, through or under the indemnifying party.

27

Exhibit 10.3

16.21    Authority. Landlord and Tenant hereby represent to the other that: (i) Landlord is a duly authorized and existing limited liability company and Tenant is a duly authorized and existing nationally chartered banking association, and each is qualified to do business in the State of New Jersey, (ii) each has full right and authority to enter into this Lease, (iii) each person signing on behalf of the Landlord and Tenant are authorized to do so, and (iv) the execution and delivery of this Lease by Landlord and Tenant will not result in any breach of, or constitute a default under any mortgage, deed of trust, lease, loan, credit agreement partnership agreement or other contract or instrument to which either Landlord or Tenant is a party or by which either such party may be bound.
16.22    Time of the Essence. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor.
16.23    Counterparts. This Lease may be signed in several counterparts, each of which shall be deemed an original and all such counterparts together shall constitute one and the same instrument.
16.24    Mitigation. If there is a Default by one party, except as otherwise specifically staled herein to the contrary, the other party shall use its best efforts to mitigate its damages.
16.25    Exculpation. Notwithstanding anything to the contrary set forth in this Lease, it is specifically understood and agreed by Tenant that there shall be absolutely no personal liability on the part of Landlord or its constituent members including but not limited to officers, directors and shareholders, and their respective successors, assigns or mortgagees in possession with respect to any of the terms, covenants and conditions of this Lease, and Tenant shall look solely to the equity, if any, of Landlord in the Property for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord or any other liability which Landlord may have to Tenant. Tenant shall have no rights, lien, levy, execution or other enforcement proceedings against any other property or asset of Landlord. This exculpation of personal liability to be absolute and without any exception whatsoever.
16.26    WAIVER OF JURY TRIAL. LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE. The waiver of trial by jury in the immediately preceding sentence is voluntarily and intentionally made by Landlord and Tenant.

[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]



28

Exhibit 10.3

EXECUTED as of the dates set forth below.
 
LANDLORD:
Dated:   May 23,    2005
DWEK BRANCHES, LLC,
a New Jersey limited liability company
By:   //s//Solomon Dwek          
Name: Solomon Dwek
Title: Sole Member
 
TENANT:
Dated:   May 21,    2005
JPMORGAN CHASE BANK, N.A.,
a national banking association
By:   //s//Francis J. Hall          
Name: Francis J. Hall
Title: Executive Vice President


29

Exhibit 10.3

BILL OF SALE AND GENERAL ASSIGNMENT
THIS ASSIGNMENT, dated as of March 2nd, 2006, by DWEK INCOME, LLC, a New Jersey limited liability company ("Assignor"), to 160 BRIGHTON ACQUISITION, LLC, a Delaware limited liability company ("Assignee"):
WITNESSETH:
WHEREAS, Assignor has today conveyed to Assignee title to the premises commonly known as 160 Brighton Avenue, Long Branch, New Jersey (the "Premises"); and
WHEREAS, Dwek Branches, LLC, predecessor in title to Assignor, entered into a Lease, dated May 23, 2005, with JPMorgan Chase Bank, N.A. (the "Lease");
NOW, THEREFORE, for valuable consideration and intending to be legally bound, Assignor hereby sells, assigns, transfers, conveys, grants, bargains, sets over, releases, delivers and confirms unto Assignee all of Assignor's right, title and interest, if any, in and to (i) any and all warranties and guaranties with respect to the Premises, including the building fixtures and equipment located therein, (ii) all permits, plans, zoning approvals, utility agreements and utility deposits held by, or in favor or for the account of, Assignor with respect to the Premises, and (iii) the Lease.
Assignee hereby accepts the assignment by Assignor hereunder and agrees: (i) to assume all of the obligations and liabilities of Assignor arising under or in connection with the Lease on and after the date of this Assignment; and (ii) to indemnify Assignor against, and to defend Assignor and hold it harmless from, any and all liabilities, losses, damages, claims, costs and expenses, including (without limitation) reasonable attorneys’ fees and disbursements, incurred or arising on and after the date of this Assignment in connection with any breach of the foregoing covenants by Assignee.
Assignor hereby agrees to indemnify Assignee against, and to defend Assignee and hold it harmless from, any and all liabilities, losses, damages, claims, costs and expenses, including (without limitation) reasonable attorneys’ fees and disbursements, in connection with the obligations of the lessor under the Lease arising prior to the date hereof.
This Assignment shall inure to the benefit of, and bind, as the case may be, the parties hereto and their respective legal representatives, successors and assigns.
This Assignment may be executed in counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. Electronically transmitted copies of executed signature pages of this Assignment shall have the same force and effect as the originals.


30

Exhibit 10.3

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as the date first above written.
DWEK INCOME, LLC
By: //s// Solomon Dwek
Solomon Dwek, its Sole Member
160 BRIGHTON ACQUISITION, LLC
By: Linden Exchange Group, LLC,
its sole member
By: Linden Plaza Management, Inc.,
its manager
By://s// Isaac Massry
Isaac Massry, Vice President


31



EXHIBIT 31
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Breeman, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Voltari Corporation;
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(s) 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; and
5.
The registrant's other certifying officer(s) 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.

Date: August 7, 2015
 
/s/    John Breeman
John Breeman
Chief Financial Officer (Acting Principal Executive Officer and Principal Financial and Accounting Officer)





EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John Breeman, Chief Financial Officer, Acting Principal Executive Officer and Principal Financial Officer of Voltari Corporation (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1.
The Registrant’s quarterly report on Form 10-Q for the period ended June 30, 2015 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
 
Date: August 7, 2015
 
/s/    John Breeman
John Breeman
Chief Financial Officer (Acting Principal Executive Officer and Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to Voltari Corporation and will be retained by Voltari Corporation and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 99.1

Voltari Corporation
Unaudited Pro Forma Consolidated Financial Information

In August 2015, Voltari Corporation (“Voltari” or the “Company”) began implementing a transformation plan pursuant to which, among other things, we intend to exit our mobile marketing and advertising business and enter into the business of acquiring, financing and leasing commercial real properties.

The following unaudited pro forma consolidated statements of operations of the Company for the six months ended June 30, 2015 and years ended December 31, 2014 and 2013 is presented as if our exit from our mobile marketing and advertising business and pending acquisition of commercial real property in Long Branch, NJ had been consummated at the beginning of each interim period and fiscal year presented, respectively. The following unaudited pro forma consolidated balance sheet as of December 31, 2014 assumes that our exit from our mobile marketing and advertising business and pending acquisition of commercial real property in Long Branch, NJ had been consummated on December 31, 2014.

The pro forma information has been presented in accordance with Article 11 of Regulation S-X, as such the statements are presented based on information currently available, are intended for informational purposes only, and do not purport to represent what Voltari's financial position and results of operations actually would have been had the exit from our mobile marketing and advertising business and the pending acquisition of commercial real property in Long Branch, NJ been consummated on the dates indicated, or to project financial performance for any future period.

The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Voltari Corporation Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 2014.

The Historical column in the Unaudited Pro Forma Consolidated Statements of Operations and in the Unaudited Pro Forma Consolidated Balance Sheet reflect historical financial statements of Voltari Corporation for the periods presented and does not reflect any adjustments related to our exit from our mobile marketing and advertising business and pending acquisition of commercial real property in Long Branch, NJ and related events.

1
Exhibit 99.1

Voltari Corporation
Unaudited Pro Forma Consolidated Statements of Operations
(in thousands, except share data and per share amounts)
Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
Pro forma adjustments
 
 
 
 
Historical
 
Mobile Marketing and Advertising
 
Commercial real estate
Notes
Pro forma results
 
 
 
 
 
 
 
 
 
 
Revenue
$
2,707

 
$
(2,707
)
 
$
102

1
$
102

 
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
Direct third-party expenses
1,631

 
(1,631
)
 
 
 
—

 
Datacenter and network operations
829

 
(829
)
 
 
 
—

 
Product development
206

 
(206
)
 
 
 
—

 
Sales and marketing
1,297

 
(1,297
)
 
 
 
—

 
General and administrative
2,537

 
(61
)
 
 
2
2,476

 
Depreciation and amortization
236

 
(150
)
 
27

3
113

 
Restructuring
530

 
(530
)
 
 
 
—

 
 
Total operating expenses
7,266

 
(4,704
)
 
27

 
2,589

Operating loss (income)
(4,559
)
 
1,997

 
75

 
(2,487
)
 
Other income (expense), net
120

 
(120
)
 
(77
)
4
(77
)
Net (loss) income from continuing operations
$
(4,439
)
 
$
1,877

 
$
(2
)
 
$
(2,564
)
Accretion of redeemable preferred stock
(345
)
 
 
 
 
 
(345
)
Series J redeemable preferred stock dividends
(2,589
)
 
 
 
 
 
(2,589
)
Net (loss) income from continuing operations attributable to common stockholders
$
(7,373
)
 
$
1,877

 
$
(2
)
 
$
(5,498
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations per share - basic and diluted
(1.07
)
 
 
 
 
 
(0.80
)
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic and diluted
6,900,554

 
 
 
 
 
6,900,554

See Notes to Unaudited Pro Forma Consolidated Statements of Operations.


2
Exhibit 99.1

Voltari Corporation
Unaudited Pro Forma Consolidated Statements of Operations
(in thousands, except share data and per share amounts)
Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
Pro forma adjustments
 
 
 
 
Historical
 
Mobile Marketing and Advertising
 
Commercial real estate
Notes
Pro forma results
 
 
 
 
 
 
 
 
 
 
Revenue
$
12,240

 
$
(12,240
)
 
$
203

1
$
203

 
 
 
 
 
 
 
 
 

Operating expenses
 
 
 
 
 
 

 
Direct third-party expenses
7,942

 
(7,942
)
 
 
 
—

 
Datacenter and network operations
5,162

 
(5,162
)
 
 
 
—

 
Product development
3,375

 
(3,375
)
 
 
 
—

 
Sales and marketing
5,210

 
(5,210
)
 
 
 
—

 
General and administrative
6,083

 
(644
)
 
 
2
5,439

 
Depreciation and amortization
4,165

 
(3,965
)
 
53

3
253

 
Impairment charges
8,406

 
(8,406
)
 
 
 
—

 
 
Total operating expenses
40,343

 
(34,704
)
 
53

 
5,692

Operating loss (income)
(28,103
)
 
22,464

 
150

 
(5,489
)
 
Other income (expense), net
17

 
—

 
(154
)
4
(137
)
Net (loss) income from continuing operations
$
(28,086
)
 
$
22,464

 
$
(4
)
 
$
(5,626
)
Accretion of redeemable preferred stock
(611
)
 
 
 
 
 
(611
)
Series J redeemable preferred stock dividends
(4,798
)
 
 
 
 
 
(4,798
)
Net (loss) income from continuing operations attributable to common stockholders
$
(33,495
)
 
$
22,464

 
$
(4
)
 
$
(11,035
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations per share - basic and diluted
(7.17
)
 
 
 
 
 
(2.36
)
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic and diluted
4,668,844

 
 
 
 
 
4,668,844

See Notes to Unaudited Pro Forma Consolidated Statements of Operations.

3
Exhibit 99.1

Voltari Corporation
Unaudited Pro Forma Consolidated Statements of Operations
(in thousands, except share data and per share amounts)
Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
Pro forma adjustments
 
 
 
 
Historical
 
Mobile Marketing and Advertising
 
Commercial real estate
Notes
Pro forma results
 
 
 
 
 
 
 
 
 
 
Revenue
$
8,791

 
$
(8,791
)
 
$
203

1
$
203

 
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
Direct third-party expenses
6,699

 
(6,699
)
 
 
 
—

 
Datacenter and network operations
2,416

 
(2,416
)
 
 
 
—

 
Product development
1,557

 
(1,557
)
 
 
 
—

 
Sales and marketing
6,089

 
(6,089
)
 
 
 
—

 
General and administrative
12,088

 
(1,082
)
 
 
2
11,006

 
Depreciation and amortization
3,785

 
(3,572
)
 
53

3
266

 
 
Total operating expenses
32,634

 
(21,415
)
 
53

 
11,272

Operating loss (income)
(23,843
)
 
12,624

 
150

 
(11,069
)
 
Other income (expense), net
(1,419
)
 
—

 
(154
)
4
(1,573
)
Net (loss) income from continuing operations
$
(25,262
)
 
$
12,624

 
$
(4
)
 
$
(12,642
)
Accretion of redeemable preferred stock
(525
)
 
 
 
 
 
(525
)
Series J redeemable preferred stock dividends
(4,221
)
 
 
 
 
 
(4,221
)
Net (loss) income from continuing operations attributable to common stockholders
$
(30,008
)
 
$
12,624

 
$
(4
)
 
$
(17,388
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations per share - basic and diluted
(6.45
)
 
 
 
 
 
(3.74
)
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic and diluted
4,650,920

 
 
 
 
 
4,650,920

See Notes to Unaudited Pro Forma Consolidated Statements of Operations.


4
Exhibit 99.1

Notes to Unaudited Pro Forma Consolidated Statements of Operations

Pro forma adjustments pertain only to events that are directly attributable to exiting the mobile marketing and advertising business and entering the business of acquiring, financing and leasing real properties and are not purported to forecast or reflect estimated future results of operations. No allocation of personnel or facilities costs related to executive management, finance and accounting, human resources or other general corporate staff have been made to pro forma adjustments and no pro forma adjustments have been made related to legal and other professional fees, insurance or any other cost not directly attributable to the mobile marketing and advertising or commercial real estate business. Consequently, the pro forma adjustments do not accurately reflect General and Administrative costs of the ongoing business.

Mobile Marketing and Advertising
Pro forma adjustments reflect revenues and expenses that are not expected to continue following the exit from our mobile marketing and advertising business. General and Administrative pro forma adjustments relate to certain incentive compensation, travel and entertainment, bad debt expense and taxes not expected to continue.

General and Administrative pro forma adjustments include rent expense related to sales and product development offices located in Los Angeles, CA, Chicago, IL and Mesa, AZ. General and Administrative pro forma adjustments do not include lease termination costs, which are presently not estimable, or rent expense related to New York, NY corporate headquarters.

Depreciation and amortization pro forma adjustments relate to assets used in the mobile marketing and advertising business.

Commercial real estate
(1) Reflects rental revenues related to the pending acquisition of commercial real property in Long Branch, NJ. There can be no assurance that we will be able to consummate this pending acquisition.
(2) Pro forma adjustments do not include any incremental General and Administrative costs related to the commercial real estate business. General and Administrative costs after pro forma adjustments reflects the historical personnel and facilities costs related to executive management, finance and accounting, human resources or other general corporate staff as well as legal and other professional fees, insurance and any other cost not directly attributable to the mobile marketing and advertising or commercial real estate business.
(3) Pro forma adjustments reflect depreciation expense related to the pending property to be acquired, pending final allocation of purchase price.
(4) Reflects interest expense and unused balance fees related to the Revolving Note with Koala Holding LP, bearing interest at 3.75% per annum and due December 31, 2017.



5
Exhibit 99.1


Voltari Corporation
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2014
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Pro forma adjustments
 
 
 
 
Historical
 
Mobile Marketing and Advertising
Notes
Commercial real estate
Notes
Pro forma results
Assets
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
6,448

 
 
 
 
 
$
6,448

 
Accounts receivable
3,494

 
 
 
 
 
3,494

 
Prepaid expenses and other current assets
1,533

 
$
(408
)
1
 
 
1,125

 
 
Total current assets
11,475

 
(408
)
 


 
11,067

Property and equipment, net
667

 
(259
)
1
$
3,675

4
4,083

Other assets
188

 
(7
)
2
 
 
181

Total assets
$
12,330

 
$
(674
)
 
$
3,675

 
$
15,331

 
 
 
 
 
 
 
 
 
 
Liabilities, redeemable preferred stock and stockholders’ deficit
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
3,386

 
$
126

2
 
 
$
3,512

 
Accrued compensation
721

 
250

3
 
 
971

 
Other current liabilities
1,451

 
 
 
 
 
1,451

 
 
Total current liabilities
5,558

 
376

 


 
5,934

Long terrm debt
 
 
 
 
$
3,675

4
$
3,675

Other non-current liabilities
29

 
 
 
 
 
29

 
 
Total liabilities
5,587

 
376

 
3,675

 
9,638

 
 
 
 
 
 
 
 
 
 
Redeemable preferred stock
36,380

 
 
 
 
 
36,380

 
 
 
 
 
 
 
 
 
 
Stockholders’ deficit
(29,637
)
 
(1,050
)
 
—

 
(30,687
)
Total liabilities, redeemable preferred stock and stockholders’ deficit
$
12,330

 
$
(674
)
 
$
3,675

 
$
15,331

See Notes to Unaudited Pro Forma Consolidated Balance Sheet.


6
Exhibit 99.1

Notes to Unaudited Pro Forma Consolidated Balance Sheet

Mobile Marketing and Advertising
(1) Reflects unamortized prepaid expenses and Property and equipment, net that are not expected to continue following our exit from the mobile marketing and advertising business.
(2) Reflects effects of lease termination settlement agreement.
(3) Reflects employee termination costs.

Commercial real estate
(4) Pro forma adjustments reflects the pending acquisition of commercial real property in Long Branch, NJ with proceeds from the Revolving Note with Koala Holding LP, bearing interest at 3.75% per annum and due December 31, 2017. There can be no assurance that we will be able to consummate this pending acquisition.

7

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