UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K  
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
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: 001-36105
EMPIRE STATE REALTY TRUST, INC.
(Exact name of Registrant as specified in its charter)    
Maryland
 
37-1645259
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

One Grand Central Place, 60 East 42nd Street, New York, New York 10165
(Address of principal executive offices) (Zip Code)
(212) 687-8700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Class A Common Stock, par value $0.01 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   x     No  o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   o     No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer    x
 
Accelerated filer  
Non-accelerated filer      (Do not check if a smaller reporting company)
 
Smaller reporting company  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o  No   x
As of February 23, 2015, there were 108,956,563 shares of the Registrants' Class A Common Stock outstanding and 1,149,463 shares of the Registrants' Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Empire State Realty Trust, Inc.'s Proxy Statement for its 2015 Annual Stockholders' Meeting (which is scheduled to be held on June 17, 2015) to be filed within 120 days after the end of the Registrant's fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.
 



 
EMPIRE STATE REALTY TRUST, INC.
 
 
FORM 10-K
 
 
TABLE OF CONTENTS
 
 
 
PAGE
PART I.
 
1.
Business
4
1A.
Risk Factors
12
1B.
Unresolved Staff Comments
36
2.
Properties
37
3.
Legal Proceedings
44
4.
Mine Safety Disclosures
44
PART II.
 
5.
Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
45
6.
Selected Financial Data
48
7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
51
7A.
Quantitative and Qualitative Disclosure about Market Risk
73
8.
Financial Statements and Supplementary Data
74
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
74
9A.
Controls and Procedures
74
9B.
Other Information
76
PART III
 
10.
Directors, Executive Officers and Corporate Governance
76
11.
Executive Compensation
76
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
76
13.
Certain Relationships and Related Transactions, and Director Independence
76
14.
Principal Accounting Fees and Services
76
PART IV
 
15.
Exhibits, Financial Statements and Schedules
76
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1



DEFINITIONS

•
"annualized rent" represents annualized base rent and current reimbursement for operating expenses and real estate taxes;

•
"formation transactions" mean a series of transactions pursuant to which we acquired, substantially currently with the completion of the Offering on October 7, 2013 through a series of contributions and merger transactions, our portfolio of real estate assets that were held by the existing entities, the ownership interests in the certain management entities of our predecessor and one development parcel;

•
"fully diluted basis" means all outstanding shares of our Class A common stock at such time plus shares of Class A common stock that may be issuable upon the exchange of operating partnership units on a one-for-one basis and shares of Class A common stock issuable upon the conversion of Class B common stock on a one-for-one basis, which is not the same as the meaning of “fully diluted” under generally accepted accounting principles in the United States of America, or "GAAP";

•
"enterprise value" means all outstanding shares of our Class A common stock at such time plus shares of Class A common stock that may be issuable upon the exchange of operating partnership units on a one-for-one basis and shares of Class A common stock issuable upon the conversion of Class B common stock on a one-for-one basis multiplied by the Class A common share price at December 31, 2014, plus private perpetual preferred units plus consolidated debt at December 31, 2014;

•
"Malkin Group” means all of the following, as a group: Anthony E. Malkin, Peter L. Malkin and each of their spouses and lineal descendants (including spouses of such descendants), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin or any permitted successor in such entity for the benefit of any of the foregoing; provided, however that solely with respect to tax protection rights and parties who entered into the contribution agreements with respect to the formation transactions, the Malkin Group shall also include the lineal descendants of Lawrence A. Wien and his spouse (including spouses of such descendants), any estates of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of the foregoing;

•
the "Offering" means the initial public offering of our Class A common stock which was completed on October 7, 2013;

•
"option properties" mean the long-term leasehold and/or sub-leasehold interests in 1400 Broadway and/or 112 West 34th Street (including fee title interest in a small connected structure at 122 West 34th Street) that we previously had a right to acquire and did acquire on July 15, 2014;

•
"our company," "we," "us" and "our" refer to Empire State Realty Trust, Inc., a Maryland real estate investment trust, together with its consolidated subsidiaries, including Empire State Realty OP, L.P., a Delaware limited partnership, which we refer to as "our operating partnership";

•
"our predecessor" means a combination of (i) controlling interests in (a) 16 office and retail properties, (b) one development parcel, and (c) certain management companies, which were owned by certain entities that Anthony E. Malkin and Peter L. Malkin, as sponsors, owned interests in and controlled, which we collectively refer to as the controlled entities, and (ii) non-controlling interests in four office properties (which include two of the 16 properties set forth in (i) above), held through entities which we collectively refer to as the non-controlled entities, and are presented as uncombined entities in our combined financial statements. Specifically, the term “our predecessor” means (i) Malkin Holdings LLC, a New York limited liability company that acted as the supervisor of, and performed various asset management services and routine administration with respect to, certain of the existing entities, which we refer to as “the

2


supervisor;” (ii) the limited liability companies or limited partnerships that previously (a) owned, directly or indirectly and either through a fee interest or a long-term leasehold in the underlying land, and/or (b) operated, directly or indirectly and through a fee interest, an operating lease, an operating sublease or an operating sub-sublease, the 18 office and retail properties (which include non-controlling interests in four office properties for which Malkin Holdings LLC acted as the supervisor but that are not consolidated into our predecessor for accounting purposes) and entitled land that will support the development of an approximately 380,000 rentable square foot office building and garage that we own after the formation transactions, which we refer to as the “existing entities;” (iii) Malkin Properties, L.L.C., a New York limited liability company that served as the manager and leasing agent for certain of the existing entities in Manhattan, which we refer to as “Malkin Properties;” (iv) Malkin Properties of New York, L.L.C., a New York limited liability company that served as the manager and leasing agent for certain of the existing entities in Westchester County, New York, which we refer to as “Malkin Properties NY;” (v) Malkin Properties of Connecticut, Inc., a Connecticut corporation that served as the manager and leasing agent for certain of the existing entities in the State of Connecticut, which we refer to as “Malkin Properties CT;” and (vi) Malkin Construction Corp., a Connecticut corporation that is a general contractor and provided services to certain of the existing entities and third parties (including certain tenants at the properties in our portfolio), which we refer to as “Malkin Construction.” The term “the predecessor’s management companies” refers to the supervisor, Malkin Properties, Malkin Properties NY, Malkin Properties CT and Malkin Construction, collectively;

•
"securityholder" means holders of our Class A common stock and Class B common stock and holders of our operating partnership's Series ES, Series 250, Series 60 and Series PR operating partnership units;

•
"traded OP units" mean our operating partnership's Series ES, Series 250 and Series 60 operating partnership units.
































3


PART I
ITEM 1. BUSINESS

Overview
We are a self-administered and self-managed real estate investment trust, or REIT, that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.
As of December 31, 2014 , our total portfolio, containing 10.0 million rentable square feet of office and retail space, was 88.6% occupied. Including signed leases not yet commenced, our total portfolio was 89.6% leased. As of December 31, 2014 , we owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.3 million rentable square feet of office space, which were approximately 88.2% occupied or 89.4% leased including signed leases not yet commenced. Nine of these properties are located in the midtown Manhattan market and encompass in the aggregate approximately 7.4 million rentable square feet of office space, including the Empire State Building. Our Manhattan office properties also contain an aggregate of 523,463 rentable square feet of premier retail space on their ground floor and/or contiguous levels. Our remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.9 million rentable square feet. The majority of square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation. Additionally, we have entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 380,000 rentable square foot office building and garage, which we refer to herein as Metro Tower. As of December 31, 2014 , our portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 204,175 rentable square feet in the aggregate. As of December 31, 2014 , our standalone retail properties were 100.0% leased in the aggregate.
The Empire State Building offers panoramic views of New York and neighboring states from its world-famous 86th and 102nd floor observatories that draw millions of visitors per year. The number of visitors to the observatories was approximately 4.3 million for the years ended December 31, 2014 and 2013. The 86th floor observatory has a 360-degree outdoor deck as well as indoor viewing galleries to accommodate guests day and night, all year-round. The 102nd floor observatory is entirely indoors and offers a 360-degree view of New York City from 1,250 feet above ground.
We were organized as a Maryland corporation on July 29, 2011. We did not have any assets other than cash and did not have any meaningful operating activity until the consummation of the Offering and the related acquisition of our predecessor and certain non-controlled entities controlled by our predecessor on October 7, 2013 as part of the formation transactions. Our operations commenced upon completion of the Offering and related formation transactions on October 7, 2013. Our operating partnership holds substantially all of our assets and conducts substantially all of our business. As of December 31, 2014, we owned approximately 40.1% of the aggregate operating partnership units in our operating partnership.  Our company, as the sole general partner in our operating partnership, has responsibility and discretion in the management and control in our operating partnership, and the limited partners in our operating partnership, in such capacity, have no authority to transact business for, or participate in the management activities of our operating partnership. We elected to be taxed as a real estate investment trust ("REIT") and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013.
Our Competitive Strengths
We believe that we distinguish ourselves from other owners and operators of office and retail properties as a result of the following competitive strengths:
•
Irreplaceable Portfolio of Office Properties in Midtown Manhattan . Our Manhattan office properties are located in one of the most prized office markets in the world due to a combination of supply constraints, high barriers to entry, near-term and long-term prospects for job creation, vacancy absorption and rental rate growth. Management believes these properties could not be replaced today on a cost-competitive basis, if at all. As of December 31, 2014 , we owned nine Manhattan office properties (including three long-term ground leasehold interests) encompassing approximately 7.4 million rentable square feet of office space, including the Empire State Building, our flagship property. Unlike traditional office buildings, the Empire State Building provides us with a significant source of income from its observatory and broadcasting operations. All of these properties include premier retail space on their ground floor and/or contiguous levels, which comprise 523,463 rentable square feet in the aggregate and some of which have recently undergone significant redevelopments. We believe the high quality of our buildings, services and

4


amenities, their desirable locations and commuter access to mass transportation should allow us to increase rents and occupancy to generate positive cash flow and growth.
•
Expertise in Repositioning and Redeveloping Manhattan Office Properties . We have substantial expertise in redeveloping and repositioning Manhattan office properties, having invested a total of approximately $594.0 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties since we assumed full control of the day-to-day management of these properties beginning with One Grand Central Place in November 2002 through 2006. The $594.0 million includes amounts invested at our recently acquired properties, 1400 Broadway and 112 West 34th Street. We have gained substantial experience in upgrading, redeveloping and modernizing (or are in the process thereof) building lobbies, corridors, bathrooms and elevator cabs and old, antiquated spaces to include new ceilings, lighting, pantries and base building systems (including electric distribution and air conditioning), as well as enhanced tenant amenities. To complete our portfolio-wide redevelopment program as presently defined, we intend to spend an additional $75.0 million to $115.0 million on repositioning activities at our existing Manhattan office properties (excluding tenant improvement costs and leasing commissions), most of which remains at the Empire State Building. We have successfully aggregated and are continuing to aggregate smaller spaces to offer larger blocks of space, including multiple floors, that are attractive to larger, higher credit-quality tenants and to offer new, pre-built suites with improved layouts. As part of this program, we have converted some or all of the second floor office space of certain of our Manhattan office properties to higher rent retail space. We believe that the post-redevelopment high quality of our buildings and the service we provide also attract higher credit-quality tenants at rents above similar vintage buildings, and below new construction, thus defining a new price point and allowing us to grow cash flow. In addition, we believe that, based on the results of our base building energy efficiency retrofit, and energy efficient tenant build-outs, at the Empire State Building, the lessons of which we are applying throughout our portfolio, we derive cost savings through innovative energy efficiency retrofitting and sustainability initiatives, reducing direct and indirect energy costs paid both by tenants and by us throughout our other Manhattan office properties and greater New York metropolitan area office properties, and that this improves our competitive position.
•
Leader in Energy Efficiency Retrofitting . We have pioneered certain practices in energy efficiency, and at the Empire State Building we have partnered with the Clinton Climate Initiative, Johnson Controls Inc., Jones Lang LaSalle and the Rocky Mountain Institute to create and implement a groundbreaking, replicable process for integrating energy efficiency retrofits in the existing built environment. The reduced energy consumption reduces costs for us and our tenants, and we believe creates a competitive advantage for our properties. We believe that higher quality tenants in general place a higher priority on sustainability, controlling costs, and minimizing contributions to greenhouse gases. We believe our expertise in this area gives us the opportunity to attract higher quality tenants at higher rental rates and to reduce our expenses. As a result of our efforts, approximately 51.1% of our portfolio square feet is Energy Star certified, including the Empire State Building. As a result of the energy efficiency retrofits, we estimate that the Empire State Building will save at least 38% of its energy use, resulting in at least $4.4 million of annual energy cost savings. Johnson Controls Inc. has guaranteed minimum energy cost savings of $2.2 million annually, from 2010 through 2025, with respect to certain of the retrofits which Johnson Controls Inc. was project leader. Actual 2013 energy cost savings was $2.8 million. We are implementing cost justified energy efficiency retrofit projects in our Manhattan and greater New York metropolitan area office properties based on our work at the Empire State Building. Finally, we maintain a series of management practices utilizing recycling of tenant and construction waste, recycled content carpets, low off-gassing paints and adhesives, “green” pest control and cleaning solutions, and recycled paper products throughout our office portfolio. We believe that our portfolio’s attractiveness is enhanced by these practices and that this should result in higher rental rates, longer lease terms and higher quality tenants.
•
Attractive Retail Locations in Densely Populated Metropolitan Communities . As of December 31, 2014 , our portfolio also included six standalone retail properties and retail space at the ground floor and/or lower levels of our Manhattan office properties, encompassing 727,638 rentable square feet in the aggregate, which were approximately 93.2% occupied in the aggregate. All of these properties are located in premier retail corridors with convenient access to mass transportation, a diverse tenant base and high pedestrian traffic and/or main destination locations. Our retail portfolio includes 706,482 rentable square feet located in Manhattan and 21,156 rentable square feet located in Westport, Connecticut. Our retail tenants cover a number of industries, including financial services, and include Allen Edmonds; Ann Taylor; AT&T; Bank of America; Bank Santander (Sovereign Bank); Best Buy Mobile; Charles Schwab; Chipotle; Duane Reade (a division of Walgreen Co.); Ethan Allen; FedEx/Kinko’s; Food Emporium; FootLocker; Gamestop; HSBC; JP Morgan Chase; Loews Theatre; Lululemon; Men’s Wearhouse; Nike; Panera Bread; Potbelly Sandwich Works; Sprint; Starbucks; Theory; TJ Maxx; Urban Outfitters; and Walgreens. Our Westport, Connecticut retail properties are located on Main Street, the main pedestrian thoroughfare in Westport, Connecticut, and have the advantage of being adjacent to one of the few available large-scale parking lots in town.

5


•
Experienced and Committed Management Team with Proven Track Record . Our senior management team is highly regarded in the real estate community and has extensive relationships with a broad range of brokers, owners, tenants and lenders. We have developed relationships we believe enable us to both secure high credit-quality tenants on attractive terms, as well as provide us with potential acquisition opportunities. We have substantial in-house expertise and resources in asset and property management, leasing, marketing, acquisitions, construction, development and financing and a platform that is highly scalable. Members of our senior management team have worked in the real estate industry for an average of approximately 31 years. We take an intensive, hands-on approach to the management of our portfolio and quality brand building. As of December 31, 2014 , our named executive officers owned 8.2% of our common stock on a fully diluted basis (including shares of common stock as to which Anthony E. Malkin has the right to vote, but does not have a primary interest), and therefore their interests are aligned with those of our securityholders and they are incentivized to maximize returns to our securityholders.
•
Strong Balance Sheet Well Positioned For Future Growth . As of December 31, 2014 , we had total debt outstanding of approximately $1.6 billion , with a weighted average interest rate of 3.55% and a weighted average maturity of 3.6 years. Additionally, we had approximately $330.0 million of available borrowing capacity under our secured revolving and term credit facility as of December 31, 2014 . Our debt represented 25.4% of enterprise value. Excluding principal amortization, we have approximately $44.1 million of debt maturing in 2015 and no maturities in 2016. In January 2015 we continued to improve our balance sheet by replacing our secured revolving and term credit facility with a new unsecured revolving credit facility, unencumbering assets and extending the weighted average maturity of our debt. Our low level of leverage gives us flexibility to cover our capital program and to take advantage of opportunities to acquire additional properties as and when we see compelling opportunities.
Business and Growth Strategies
Our primary business objectives are to maximize cash flow and total returns to our securityholders and to increase the value of our properties through the pursuit of the following business and growth strategies:
•
Vacating, Redeveloping, and Leasing of Redeveloped Space at Our Manhattan Office Properties . As of December 31, 2014 , our Manhattan office properties (excluding the retail component of these properties) were approximately 87.5% occupied, or 88.5% leased including signed leases not commenced, and had approximately 0.9 million rentable square feet of available space (excluding signed leases not commenced). Our program of redevelopment necessarily includes vacating older less desirable suites; demolishing them for re-leasing as full or multi-floor blocks, or as new pre-built suites; and re-leasing them. We believe our redevelopment and repositioning program for our Manhattan office properties results in our leasing space to better credit tenants and higher rents. Over time, as we have created and redeveloped large blocks of available space, we have leased them to higher quality tenants at higher rents, and intend to continue to execute on this program over the years to come. To date we believe these efforts have accelerated our ability to lease space to new higher credit-quality tenants, many of which have expanded the office space they lease from us over time. We also employ a pre-built suite strategy in selected portions of some of our properties to appeal to many credit-worthy smaller tenants by fitting out some available space with new ceilings, lighting, pantries and base building systems (including electric distribution and air conditioning) for immediate occupancy. These pre-built suites deploy energy efficiency strategies developed in our work at the Empire State Building and are designed with efficient layouts sought by a wide array of users which we believe will require only minor painting and carpeting for future re-leasing thus reducing our future costs. Over time, as we have redeveloped the spaces in our buildings, we believe we will increase our occupancy.
•
Increase Existing Below-Market Rents . The purpose of our redevelopment is to rent to better credit tenants at higher rents. To date, we have capitalized on this opportunity and we believe we can execute on the successful repositioning of our Manhattan office portfolio and improving market fundamentals to increase rents. For example, we expect to benefit from the re-leasing of 11.6% , or approximately 861,874 rentable square feet (including month-to-month leases), of our Manhattan office leases expiring through December 31, 2015, which we generally believe are currently at below market rates. These expiring leases represent a weighted average base rent of $44.50 per square foot based on current measurements. As older leases expire, we expect to continue to upgrade certain space to further increase rents. Our concentration in Manhattan and the greater New York metropolitan area should also enable us to benefit from increased rents associated with current and anticipated near-term improvements in the financial and economic environment in these areas. We also expect to benefit from our price positioning, above comparable vintage properties, and below new construction.
•
Complete the Redevelopment and Repositioning of Our Current Portfolio . We intend to continue to increase occupancy, improve tenant quality and enhance cash flow and value by completing the redevelopment and

6


repositioning of our Manhattan office properties. We intend selectively to continue to allow leases for smaller spaces to expire or relocate smaller tenants in order to aggregate, demolish and re-demise existing office space into larger blocks of vacant space, which we believe will attract higher credit-quality tenants at higher rental rates. We apply rigorous underwriting analysis to determine if aggregation of vacant space for future leasing to larger tenants will improve our cash flows over the long term. In addition, we are a leader in developing economically justified energy efficiency retrofitting and sustainability and have made it a portfolio-wide initiative. We believe this makes our properties desirable to high credit-quality tenants at higher rental rates and longer lease terms.
•
Pursue Attractive Acquisition and Development Opportunities . We will opportunistically pursue attractive opportunities to acquire office and retail properties. For the foreseeable future, we intend to focus our acquisition strategy primarily on Manhattan office properties and, to a lesser extent, office and multi-tenanted retail properties in densely populated communities in the greater New York metropolitan area and other markets we may identify in the future. We believe we can utilize our industry relationships (including well-known real estate owners in Manhattan), brand recognition, and our expertise in redeveloping and repositioning office properties to identify acquisition opportunities where we believe we can increase occupancy and rental rates. We also believe there is significant growth opportunity to acquire and reposition additional stand-alone retail spaces. Our strong balance sheet, access to capital, and ability to offer operating partnership units in tax deferred acquisition transactions should give us significant flexibility in structuring and consummating acquisitions. Further, we have a development site, Metro Tower at the Stamford Transportation Center, which is adjacent to our Metro Center property, which we believe to be one of the premier office buildings in Connecticut. All required zoning approvals have been obtained to allow development of an approximately 380,000 rentable square foot office tower and garage. We intend to develop this site when we deem the appropriate combination of market and other conditions are in place.
•
Proactively Manage Our Portfolio . We believe our proactive, service-intensive approach to asset and property management helps increase occupancy and rental rates. We utilize our comprehensive building management services and our strong commitment to tenant and broker relationships and satisfaction to negotiate attractive leasing deals and to attract high credit-quality tenants. We proactively manage our rent roll and maintain continuous communication with our tenants. We foster strong tenant relationships by being responsive to tenant needs. We do this through the amenities we provide, the quality of our buildings and services, our employee screening and training, energy efficiency initiatives, and preventative maintenance and prompt repairs. Our attention to detail is integral to serving our clients and building our brand. Our properties have received numerous industry awards for their operational efficiency. We believe long-term tenant relationships will improve our operating results over time by reducing leasing, marketing and tenant improvement costs and reducing tenant turnover. We do extensive diligence on our tenants’ (current and prospective) balance sheets, businesses and business models to determine if we will establish long-term relationships in which they will both renew with us and expand over time.
Leasing    
We utilize leasing agents at certain of our properties. We are focused on maintaining a brand that tenants associate with a consistently high level of quality of services, installations, maintenance and amenities with long term financial stability. Through our commitment to brokers, we have developed long-term relationships that focus on negotiating attractive deals with high credit-quality tenants. We proactively manage and cultivate our industry relationships and make the most senior members of our management team available to our constituencies. We believe that our consistent, open dialogue with our tenants and brokers enables us to maximize our redevelopment and repositioning opportunities. Our focus on performance and perspective allows us to concentrate on the ongoing management of our portfolio, while seeking opportunities for growth in the future.
Property Management
We protect our investments by regularly monitoring our properties, performing routine preventive maintenance, and implementing capital improvement programs in connection with property redevelopment and life cycle replacement of equipment and systems. We presently self-manage all of our properties. We proactively manage our properties and rent rolls to (i) aggregate smaller demised spaces to create large blocks of vacant space, to attract high credit-quality tenants at higher rental rates, and (ii) create efficient, modern, pre-built offices that can be rented through several lease cycles and attract better credit-quality tenants. We aggressively manage and control operating expenses at all of our properties. In addition, we have made energy efficiency retrofitting and sustainability a portfolio-wide initiative driven by economic return. We pass on the cost savings achieved by such improvements to our tenants through lower utility costs and reduced operating expense escalations. We believe these initiatives make our properties more desirable to a broader tenant base than the properties of our competitors.
Construction Management

7


Our construction management business is a general contracting and construction management business in the greater New York metropolitan area with in-depth experience in projects of varying type, complexity, budget and schedule.
Business Segments
Our reportable segments consist of a real estate segment and an observatory segment. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets. Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and different marketing strategies. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. We include our construction operation in "Other" and it includes all activities related to providing construction services to tenants and to other entities within and outside our company. See Note 14 to our consolidated financial statements for further information on our reportable segments.
Regulation
General
The properties in our portfolio are subject to various laws, ordinances and regulations, including regulations relating to common areas. We believe each of the existing properties has the necessary permits and approvals to operate its business.
Americans with Disabilities Act
Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

Environmental Matters
Under various federal, state and/or local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation or remediation, natural resource damages, or third party liability for personal injury or property damage. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several. Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial, industrial or other purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. We also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so. The presence of contamination or the failure to remediate contamination on our properties may adversely affect our ability to attract and/or retain tenants, and our ability to develop or sell or borrow against those properties. In addition to potential liability for cleanup costs, private plaintiffs may bring claims for personal injury, property damage or for similar reasons. Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property.

Some of our properties are adjacent to or near other properties used for industrial or commercial purposes or that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. Releases from these properties could impact our properties. In addition, some of our properties have previously been used by former owners or tenants for commercial or industrial activities, e.g. , gas stations and dry cleaners, and a portion of the Metro Tower site is currently used for automobile parking and fueling, that may release petroleum products or other hazardous or toxic substances at such properties or to surrounding properties. While certain properties contain or contained uses that could have or have impacted our properties, we are not aware of any liabilities related to environmental contamination that we believe will have a material adverse effect on our operations.

8


Soil contamination has been identified at 69-97 Main Street in Westport, Connecticut. The affected soils are more than four feet below the ground surface. An Environmental Land Use Restriction has been imposed on this site to ensure the soil is not exposed, excavated or disturbed such that it could create a risk of migration of pollutants or a potential hazard to human health or the environment. While the contamination is currently contained, the potential resale value of this property and the company’s ability to finance or refinance this property in the future may be adversely affected as a result of such contamination. In addition, pursuant to the Environmental Land Use Restriction, plans for the redevelopment of the property would be subject to the review of the Town of Westport, Connecticut among other conditions.
The property situated at 500 Mamaroneck Avenue in Harrison, New York was the subject of a voluntary remedial action work cleanup plan performed by the former owner following its conveyance of title to the present owners under an agreement with the New York State Department of Environmental Conservation, or NYDEC. As a condition to the issuance of a “no further action” letter, NYDEC required that certain restrictive and affirmative covenants be recorded against the subject property. In substantial part, these include prohibition against construction that would disturb the soil cap isolating certain contaminated subsurface soil, limiting the use of such property to commercial uses, implementing engineering controls to assure that improvements be kept in good condition, not using ground water at the site for potable purposes without treatment, implementing safety procedures for workers to follow excavating at the site to protect their health and safety and filing an annual certification that the controls implemented in accordance with the voluntary remedial action work cleanup plan remain in place. Furthermore, a substantial portion of the site that had been substantially unimproved prior to acquisition may not be further developed.
In addition, our properties are subject to various federal, state and local environmental and health and safety laws and regulations. Noncompliance with these environmental and health and safety laws and regulations could subject us or our tenants to liability. These liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with such laws and regulations or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have a material adverse effect on us. We sometimes require our tenants to comply with environmental and health and safety laws and regulations and to indemnify us for any related liabilities in our leases with them. But in the event of the bankruptcy or inability of any of our tenants to satisfy such obligations, we may be required to satisfy such obligations. We are not presently aware of any instances of material non-compliance with environmental or health and safety laws or regulations at our properties, and we believe that we and/or our tenants have all material permits and approvals necessary under current laws and regulations to operate our properties.
As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental and health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, redevelopment or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of releases of ACM into the environment. We are not presently aware of any material liabilities related to building conditions, including any instances of material non-compliance with asbestos requirements or any material liabilities related to asbestos.
In addition, our properties may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or costs for remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others if property damage or personal injury occurs. We are not presently aware of any material adverse indoor air quality issues at our properties.


9


Insurance
We carry comprehensive liability, fire, extended coverage, earthquake, terrorism and rental loss insurance covering all of our Manhattan properties and our greater New York metropolitan area properties under a blanket policy. We carry additional all-risk property and business insurance, which includes terrorism insurance, on the Empire State Building through ESRT Captive Insurance Company L.L.C., or ESRT Captive Insurance, our wholly owned captive insurance company. ESRT Captive Insurance covers terrorism insurance for $700 million in losses in excess of $800 million per occurrence suffered by the Empire State Building, providing us with aggregate terrorism coverage of $1.5 billion at that property. ESRT Captive Insurance fully reinsures the 15% coinsurance under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) and the difference between the TRIPRA captive deductible and policy deductible of $25,000 for non-Nuclear, Biological, Chemical and Radiological exposures. As a result, we remain only liable for the 15% coinsurance under TRIPRA for Nuclear, Biological, Chemical and Radiological (NBCR) exposures, as well as a deductible equal to 20% of the prior year’s premium. As long as we own ESRT Captive Insurance, we are responsible for ESRT Captive Insurance’s liquidity and capital resources, and ESRT Captive Insurance’s accounts are part of our consolidated financial statements. If we experience a loss and our captive insurance company is required to pay under its insurance policy, we would ultimately record the loss to the extent of its required payment. The policies described above cover certified terrorism losses as defined under the Terrorism Risk Insurance Act of 2002 (TRIA) and subsequent extensions. On January 12, 2015, the President of the United States signed into law TRIPRA, which extends TRIA through December 31, 2020. TRIA provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism. As a result, the certified terrorism coverage provided by ESRT Captive Insurance is eligible for 85% coinsurance provided by the United States Treasury in excess of a statutorily calculated deductible. ESRT Captive Insurance reinsures 100% of their 15% coinsurance for non-NBCR exposures. The 15% coinsurance on NBCR exposures is retained by ESRT Captive Insurance.

TRIA was not in effect for the period from January 1, 2015 through January 11, 2015. During this brief period of time, ESRT carried a reduced terrorism insurance limit, which we believed was commercially acceptable under the circumstances.

Reinsurance contracts do not relieve ESRT Captive Insurance from its primary obligations to its policyholders. Additionally, failure of the various reinsurers to honor their obligations could result in significant losses to ESRT Captive Insurance. The reinsurance has been ceded to reinsurers approved by the State of Vermont. ESRT Captive Insurance continually evaluates the reinsurers’ financial condition by considering published financial stability ratings of the reinsurers and other factors. There can be no assurance that reinsurance will continue to be available to ESRT Captive Insurance to the same extent and at the same cost. ESRT Captive Insurance may choose in the future to reevaluate the use of reinsurance to increase or decrease the amounts of risk it cedes.

In addition to insurance held through our captive insurance company described above, we carry terrorism insurance on all of our properties in an amount and with deductibles which we believe are commercially reasonable.

Competition
The leasing of real estate is highly competitive in Manhattan and the greater New York metropolitan market in which we operate. We compete with numerous acquirers, developers, owners and operators of commercial real estate, many of which own or may seek to acquire or develop properties similar to ours in the same markets in which our properties are located. The principal means of competition are rent charged, location, services provided and the nature and condition of the facility to be leased. In addition, we face competition from other real estate companies including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others that may have greater financial resources or access to capital than we do or that are willing to acquire properties in transactions which are more highly leveraged or are less attractive from a financial viewpoint than we are willing to pursue. In addition, competition from observatory and/or broadcasting operations at One World Trade Center and, to a lesser extent, from the existing observatory at Rockefeller Center and the existing broadcasting facility at Four Times Square, could have a negative impact on revenues from our observatory operations and/or broadcasting revenues. Adverse impacts on domestic travel and changes in foreign currency exchange rates may also decrease demand in the future, which could have a material adverse effect on our results of operations, financial condition and ability to make distributions to our securityholders. If our competitors offer space at rental rates below current market rates, below the rental rates we currently charge our tenants, in better locations within our markets or in higher quality facilities, we may lose potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire.
Our Tax Status

10


We elected to be taxed as a REIT and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013. We believe we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended, the ("Code"), and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT. So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our securityholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which we lost our REIT qualification. Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income or property.
Employees
As of December 31, 2014 , we had approximately 862 employees, 133 of whom were managers and professionals. There are currently collective bargaining agreements which cover the workforce that services all of our office properties.
Offices
Our principal executive offices are located at One Grand Central Place, 60 East 42 nd Street, New York, New York 10165. In addition, we have six additional regional leasing and property management offices in Manhattan and the greater New York metropolitan area. Our current facilities are adequate for our present and future operations, although we may add regional offices or relocate our headquarters, depending upon our future operations.
Available Information
Our website address is http://www.empirestaterealtytrust.com. The information found on, or otherwise accessible through, our website is not incorporated information and does not form a part of this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC. We make available, free of charge, on or through the SEC Filings section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We have also posted on our website the Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics, which govern our directors, officers and employees. Within the time period required by the SEC, we will post on our website any amendment to our Code of Business Conduct and Ethics and any waiver applicable to our senior financial officers, and our executive officers or directors. You can also read and copy any materials we file with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549 (1-800-SEC-0330). The SEC maintains an Internet site ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.


11


ITEM 1A. RISK FACTORS

RISK FACTORS
You should carefully consider these risk factors, together with all of the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes thereto, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, prospects, financial condition, cash flows, liquidity, funds from operations, results of operations, share price, ability to service our indebtedness, and/or ability to make cash distributions to our securityholders (including those necessary to maintain our REIT qualification) and unitholders. In such case, the value of our common stock and the trading price of our securities could decline, and you may lose all or a significant part of your investment. Some statements in the following risk factors constitute forward looking statements. See the section entitled “Forward-Looking Statements.”
Risks Related to Our Properties and Our Business
All of our properties are located in Manhattan and the greater New York metropolitan area, in particular midtown Manhattan, and adverse economic or regulatory developments in this area could materially and adversely affect us.
All of our properties are located in Manhattan and the greater New York metropolitan area, in particular midtown Manhattan, as well as nearby markets in Fairfield County, Connecticut and Westchester County, New York. Nine of our 14 office properties are located in midtown Manhattan. As a result, our business is dependent on the condition of the New York City economy in general and the market for office space in midtown Manhattan in particular, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. We are susceptible to adverse developments in the New York City economic and regulatory environment (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation). Such adverse developments could materially reduce the value of our real estate portfolio and our rental revenues, and thus materially and adversely affect our ability to service current debt and to pay distributions to securityholders. We could also be impacted by adverse developments in the Fairfield County, Connecticut and Westchester County, New York markets. We cannot assure you that these markets will grow or that underlying real estate fundamentals will be favorable to owners and operators of office or retail properties. Our operations may also be affected if competing properties are built in either of these markets.
Adverse economic and geopolitical conditions in general and in Manhattan and the greater New York metropolitan area commercial office and retail markets in particular, could have a material adverse effect on our results of operations, financial condition, ability to service debt and our ability to make distributions to our securityholders .
Our business may be affected by the volatility and illiquidity in the financial and credit markets, a general global economic recession and other market or economic challenges experienced by the real estate industry or the U.S. economy as a whole. Our business may also be materially and adversely affected by local economic conditions, as substantially all of our revenues are derived from our properties located in Manhattan and the greater New York metropolitan area, particularly in Manhattan, Fairfield County and Westchester County. Because our portfolio consists primarily of commercial office and retail buildings (as compared to a more diversified real estate portfolio) located principally in Manhattan, if economic conditions persist or deteriorate, then our results of operations, financial condition, ability to service current debt and to make distributions to our securityholders may be materially and adversely affected by the following, among other potential conditions:
•
the financial condition of our tenants, many of which are consumer goods, financial, legal and other professional firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or other reasons;
•
significant job losses in the financial and professional services industries have occurred and may continue to occur, which may decrease demand for our office space, causing market rental rates and property values to be impacted negatively;
•
our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities, engage in our redevelopment and repositioning activities and refinance existing debt, reduce our returns from both our existing operations and our acquisition and development activities and increase our future interest expense;
•
reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;
•
reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital or make such access more expensive; and
•
the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have

12


made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors.
These conditions may continue or worsen in the future, which could materially and adversely affect our results of operations, financial condition and ability to make distributions to our securityholders.
There can be no assurance that our redevelopment and repositioning program will be completed in its entirety in accordance with the anticipated timing or at the anticipated cost, or that we will achieve the results we expect from our redevelopment and repositioning program, which could materially and adversely affect our financial condition and results of operations .
We have been undertaking a comprehensive redevelopment and repositioning program of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties. We currently estimate that between $75.0 million and $115.0 million of capital is needed beyond 2014 to complete substantially the redevelopment and repositioning program of our Manhattan office properties, which we expect to occur by the end of 2016. These estimates are based on our current budgets (which do not include tenant improvements and leasing commissions) and may be less than our actual costs. We may experience conditions which delay or preclude program completion. In addition, we may not be able to lease available space on favorable terms or at all. Further, our redevelopment and repositioning program may lead to temporary increased vacancy rates at the properties undergoing redevelopment. There can be no assurance that our redevelopment and repositioning program will be completed in its entirety in accordance with the anticipated timing or at the anticipated cost, or that we will achieve the results we expect from our redevelopment and repositioning program or that we will be able to achieve anticipated results which could materially and adversely affect our financial condition and results of operations.
We rely on three properties for a significant portion of our rental revenue .
For the year ended December 31, 2014 , three of our properties, the Empire State Building, One Grand Central Place and First Stamford Place, together accounted for approximately 54% of our portfolio’s annual rent, and no other property accounted for more than approximately 5.5% of our portfolio’s annual rent (which excludes revenues from our broadcasting licenses and related leased space). For the year ended December 31, 2014 , the Empire State Building individually accounted for approximately 33.7% of our portfolio’s annual rent. Our revenue and cash available for distribution to our securityholders would be materially and adversely affected if the Empire State Building, One Grand Central Place or First Stamford Place were materially damaged or destroyed. Additionally, our revenue and cash available for distribution to our securityholders would be materially adversely affected if a significant number of our tenants at these properties experienced a downturn in their business which may weaken their financial condition and result in their failure to make timely rental payments, defaulting under their leases or filing for bankruptcy.
The observatory operations at the Empire State Building are not traditional real estate operations, and competition and changes in tourist trends may subject us to additional risks, which could materially and adversely affect us.
During the year ended December 31, 2014 , we derived approximately $111.5 million of revenue from the Empire State Building’s observatory operations, representing approximately 39.4% of the Empire State Building’s total revenue for this period. Demand for our observatory is highly dependent on domestic and overseas tourists. In addition, competition from observatory operations at One World Trade Center and, to a lesser extent, from the existing observatory at Rockefeller Center, could have a negative impact on revenues from our observatory operations which could have a material adverse effect on our results of operations, financial condition and ability to make distributions to our securityholders. Adverse impacts on domestic travel and changes in foreign currency exchange rates may also decrease demand in the future, which could have a material adverse effect on our results of operations, financial condition and ability to make distributions to our securityholders.
We may be unable to renew leases, lease vacant space or re-lease space on favorable terms or at all as leases expire, which could materially and adversely affect our financial condition, results of operations and cash flow.
As of December 31, 2014 , we had approximately 1.0 million rentable square feet of vacant space (excluding leases signed but not yet commenced). In addition, leases representing 10.0% and 7.2% of the square footage of the properties in our portfolio will expire in 2015 and 2016, respectively (including month to month leases). We cannot assure you that expiring leases will be renewed or that our properties will be re-leased at net effective rental rates equal to or above the current average net effective rental rates. Above-market rental rates at some of the properties in our portfolio may force us to renew some expiring leases or re-lease properties at lower rates. If the rental rates of our properties decrease, our existing tenants do not renew their leases or we do not re-lease a significant portion of our available space and space for which leases will expire, our financial condition, results of operations, cash flow, per share/unit trading price of our Class A common stock and our traded OP units and our ability to satisfy our principal and interest obligations and to make distributions to our securityholders would be materially and adversely affected.

13


The actual rents we receive for the properties in our portfolio may be less than our asking rents, and we may experience a decline in realized rental rates from time to time, which could materially and adversely affect our financial condition, results of operations and cash flow.
As a result of various factors, including competitive pricing pressure in our markets, a general economic downturn and the desirability of our properties compared to other properties in our markets, we may be unable to realize our asking rents across the properties in our portfolio. In addition, the degree of discrepancy between our asking rents and the actual rents we are able to obtain may vary both from property to property and among different leased spaces within a single property. If we are unable to obtain sufficient rental rates across our portfolio, then our ability to generate cash flow growth will be negatively impacted. In addition, depending on market rental rates at any given time as compared to expiring leases in our portfolio, from time to time rental rates for expiring leases may be higher than starting rental rates for new leases.
We are exposed to risks associated with property redevelopment and development that could materially and adversely affect our financial condition and results of operations.
We have engaged, and continue to engage, in development and redevelopment activities with respect to our Manhattan office properties. In addition, we own entitled land at the Stamford Transportation Center in Stamford, Connecticut that can support the development of an approximately 380,000 rentable square foot office building and garage. To the extent that we continue to engage in development and redevelopment activities, we will be subject to certain risks, including, without limitation:
•
the availability and pricing of financing on favorable terms or at all;
•
the availability and timely receipt of zoning and other regulatory approvals;
•
the potential for the fluctuation of occupancy rates and rents at properties due to a number of factors, including market and economic conditions, which may result in our investment not being profitable;
•
start up, repositioning and redevelopment costs may be higher than anticipated;
•
the cost and timely completion of construction (including risks beyond our control, such as weather or labor conditions, or material shortages);
•
the potential that we may fail to recover expenses already incurred if we abandon development or redevelopment opportunities after we begin to explore them;
•
the potential that we may expend funds on and devote management time to projects which we do not complete;
•
the inability to complete construction and leasing of a property on schedule, resulting in increased debt service expense and construction or redevelopment costs; and
•
the possibility that properties will be leased at below expected rental rates.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the initiation of development and redevelopment activities or the completion of development and redevelopment activities once undertaken, any of which could have an adverse effect on our financial condition, results of operations, cash flow, per share/unit trading price of our Class A common stock and our traded OP units and ability to satisfy our principal and interest obligations and to make distributions to our securityholders.
We may be required to make rent or other concessions and/or significant capital expenditures to improve our properties in order to retain and attract tenants, which could materially and adversely affect us, including our financial condition, results of operations and cash flow .
To the extent there are adverse economic conditions in the real estate market and demand for office space decreases, upon expiration of leases at our properties and with respect to our current vacant space, we will be required to increase rent or other concessions to tenants, accommodate increased requests for renovations, build-to-suit remodeling and other improvements or provide additional services to our tenants. In addition, eight of our existing properties are pre-war office properties, which may require more frequent and costly maintenance to retain existing tenants or attract new tenants than newer properties. As a result, we would have to make significant capital or other expenditures in order to retain tenants whose leases expire and to attract new tenants in sufficient numbers. Additionally, we may need to raise capital to make such expenditures. If we are unable to do so or capital is otherwise unavailable, we may be unable to make the required expenditures. This could result in non-renewals by tenants upon expiration of their leases and our vacant space remaining untenanted, which could materially and adversely affect our financial condition, results of operations, cash flow and per share/unit trading price of our Class A common stock and our traded OP units. As of December 31, 2014 , we had approximately 1.0 million rentable square feet of vacant space (excluding leases signed but not yet commenced), and leases representing 10.0% and 7.2% of the square footage of the properties in our portfolio will expire in the in 2015 and 2016, respectively (including month to month leases).
We depend on significant tenants in our office portfolio, including Global Brands Group, Coty, Inc., PVH Corp., Thomson Reuters and LinkedIn, which together represented approximately 15.9% of our total portfolio’s annualized rent as of December 31, 2014 .

14


As of December 31, 2014 , our five largest tenants together represented 15.9% of our total portfolio’s annualized rent. Our largest tenant is Global Brands Group. As of December 31, 2014 , Global Brands Group leased an aggregate of 0.7 million rentable square feet of office space at three of our office properties, representing approximately 7.0% of the total rentable square feet and approximately 6.8% of the annualized rent in our portfolio. Our rental revenue depends on entering into leases with and collecting rents from tenants. General and regional economic conditions, such as the current challenging economic climate described above, may adversely affect our major tenants and potential tenants in our markets. Our major tenants may experience a material business downturn, weakening their financial condition and potentially resulting in their failure to make timely rental payments and/or a default under their leases. In many cases, we have made substantial up front investments in the applicable leases, through tenant improvement allowances and other concessions, as well as typical transaction costs (including professional fees and commissions) that we may not be able to recover. In the event of any tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
The bankruptcy or insolvency of a major tenant also may adversely affect the income produced by our properties. If any tenant becomes a debtor in a case under the United States Bankruptcy Code of 1978, as amended, we cannot evict the tenant solely because of the bankruptcy. In addition, the bankruptcy court might authorize the tenant to reject and terminate their lease with us. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected.
Our revenue and cash flow could be materially adversely affected if any of our significant tenants were to become bankrupt or insolvent, or suffer a downturn in their business, default under their leases or fail to renew their leases at all or renew on terms less favorable to us than their current terms.
Competition may impede our ability to attract or retain tenants or re-let space, which could materially and adversely affect our results of operations and cash flow.
The leasing of real estate in the greater New York metropolitan area is highly competitive. The principal means of competition are rent charged, location, services provided and the nature and condition of the premises to be leased. We directly compete with all lessors and developers of similar space in the areas in which our properties are located as well as properties in other submarkets. Demand for retail space may be impacted by the recent bankruptcy of a number of retail companies and a general trend toward consolidation in the retail industry, which could adversely affect the ability of our company to attract and retain tenants. In addition, retailers at our properties face increasing competition from outlet malls, discount shopping clubs, electronic commerce, direct mail and telemarketing, which could (i) reduce rents payable to us, (ii) reduce our ability to attract and retain tenants at our properties and (iii) lead to increased vacancy rates at our properties, any of which could materially and adversely affect us.
Our office properties are concentrated in highly developed areas of midtown Manhattan and densely populated metropolitan communities in Fairfield County and Westchester County. Manhattan is the largest office market in the United States. The number of competitive office properties in the markets in which our properties are located (which may be newer or better located than our properties) could have a material adverse effect on our ability to lease office space at our properties, and on the effective rents we are able to charge.
If our tenants are unable to secure financing necessary to continue to operate their businesses and pay us rent, we could be materially and adversely affected.
Many of our tenants rely on external sources of financing to operate their businesses. If our tenants are unable to secure financing necessary to continue to operate their businesses, they may be unable to meet their rent obligations or be forced to declare bankruptcy and reject their leases, which could materially and adversely affect us.
Our dependence on smaller businesses to rent our office space could materially and adversely affect our cash flow and results of operations.
The majority of the tenants in our properties (measured by number of tenants as opposed to aggregate square footage) are smaller businesses that generally do not have the financial strength of larger corporate tenants. Smaller companies generally experience a higher rate of failure than large businesses. There is a current risk with these companies of a higher rate of tenant defaults, turnover and bankruptcies, which could materially and adversely affect our distributable cash flow and results of operations.
Our dependence on rental income may materially and adversely affect our cash flow and results of operations.
A substantial portion of our income is derived from rental income from real property. As a result, our performance depends on our ability to collect rent from tenants. Our income and funds for distribution would be negatively affected if a significant number of our tenants, or any of our major tenants (as discussed in more detail below):

15


•
delay lease commencements;
•
decline to extend or renew leases upon expiration;
•
fail to make rental payments when due; or
•
declare bankruptcy.
Any of these actions could result in the termination of the tenants’ leases and the loss of rental income attributable to the terminated leases. In these events, we cannot be sure that any tenant whose lease expires will renew that lease or that we will be able to re-lease space on economically advantageous terms or at all. The loss of rental revenues from a number of our tenants and our inability to replace such tenants may adversely affect our profitability, our ability to meet debt and other financial obligations and our ability to make distributions to our securityholders.
We may not be able to control our operating costs, or our expenses may remain constant or increase, even if income from our properties decreases, causing our results of operations to be adversely affected.
Our financial results depend substantially on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease or other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays and may incur substantial legal costs. The terms of our leases may also limit our ability to charge our tenants for all or a portion of these expenses. Additionally, new properties that we may acquire or redevelop may not produce significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and principal and interest on debt associated with such properties until they are fully leased.
Our breach of or the expiration of our ground leases could materially and adversely affect our results of operations.
Our interest in three of our commercial office properties, 1350 Broadway, 112 West 34th Street and 1400 Broadway are long-term leaseholds of the land and the improvements, rather than a fee interest in the land and the improvements. If we are found to be in breach of these ground leases, we could lose the right to use the properties. In addition, unless we purchase the underlying fee interest in these properties or extend the terms of our leases for these properties before expiration on terms significantly comparable to our current leases, we will lose our right to operate these properties and our leasehold interests in these properties upon expiration of the leases or we will continue to operate them at much lower profitability, which would significantly adversely affect our results of operations. In addition, if we are perceived to have breached the terms of these leases, the fee owner may initiate proceedings to terminate the leases. The long-term leases, including unilateral extension rights available to us expire on July 31, 2050 for 1350 Broadway, June 10, 2077 for 112 West 34th Street, and December 31, 2063 for 1400 Broadway.
Pursuant to the ground leases, we, as tenant under the ground leases, perform the functions traditionally performed by owners, as landlords, with respect to our subtenants. In addition to collecting rent from our subtenants, we also maintain the properties and pay expenses relating to the properties. We do not have a right, pursuant to the terms of our leases or otherwise, to acquire the fee interests in these properties.
We will not recognize any increase in the value of the land or improvements subject to our ground leases, and we may only receive a portion of compensation paid in any eminent domain proceeding with respect to these properties, which could materially and adversely affect us.
We have no economic interest in the land or improvements at the expiration of our ground leases at 1350 Broadway, 112 West 34th Street and 1400 Broadway, and therefore we will not share in any increase in value of the land or improvements beyond the term of our ground leases, notwithstanding our capital outlay to purchase our interest in the properties. Furthermore, if the state or federal government seizes the properties subject to the ground leases under its eminent domain power, we may only be entitled to a portion of any compensation awarded for the seizure. In addition, if the value of the properties has increased, it may be more expensive for us to renew our ground leases.
The broadcasting operations at the Empire State Building are not traditional real estate operations, and competition and changes in the broadcasting of signals over air may subject us to additional risks, which could materially and adversely affect us.
The Empire State Building and its broadcasting mast provides radio and data communications services and supports delivery of broadcasting signals to cable and satellite systems and television and radio receivers. We license the use of the broadcasting mast to third party television and radio broadcasters. During the year ended December 31, 2014, we derived approximately $20.6 million, of revenue from the Empire State Building’s broadcasting licenses and related leased space, representing approximately 7.3% of the Empire State Building’s total revenue for this period. Competition from broadcasting operations at One World Trade Center and, to a lesser extent, from the existing broadcasting operations at Four Times Square, could have a negative impact on revenues from our broadcasting operations. Our broadcast television and radio licensees also

16


face a range of competition from advances in technologies and alternative methods of content delivery in their respective industries, as well as from changes in consumer behavior driven by new technologies and methods of content delivery, which may reduce the demand for over-the-air broadcast licenses in the future. New government regulations affecting broadcasters, including the implementation of the Federal Communications Commission's (the "FCC") National Broadband Plan, (the "FCC Plan"), also might materially and adversely affect our results of operations by reducing the demand for broadcast licenses. Among other things, the FCC Plan urges Congress to make more spectrum available for wireless broadband service providers by encouraging over-the-air broadcast licensees to relinquish spectrum through a voluntary auction process, which raises many issues that could impact the broadcast industry. At this time we cannot predict whether Congress or the FCC will adopt or implement any of the FCC Plan’s recommendations or the rule changes as proposed, or how any such actions might affect our broadcasting operations. Any of these risks might materially and adversely affect us.
We may be unable to identify and successfully complete acquisitions and even if acquisitions are identified and completed, we may fail to operate successfully acquired properties, which could materially and adversely affect us and impede our growth.
Our current portfolio of consists entirely of properties that we acquired (or received the right to acquire) in connection with the formation transactions. Our ability to identify and acquire additional properties on favorable terms and successfully operate or redevelop them may be exposed to the following significant risks:
•
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 and other conditions that are not within our control, which may not be satisfied, and we may be unable to complete an acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs;
•
we may be unable to finance the acquisition on favorable terms in the time period we desire, or at all;
•
we may spend more than budgeted to make necessary improvements or redevelopments to acquired properties;
•
we may not be able to obtain adequate insurance coverage for new properties;
•
acquired properties may be located in new markets where we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures;
•
we may be unable to integrate quickly and efficiently new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and as a result our results of operations and financial condition could be adversely affected;
•
market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and
•
we may incur significant costs and divert management attention in connection with evaluating and negotiating potential acquisitions, including ones that we are subsequently unable to complete.

Any delay or failure on our part to identify, negotiate, finance and consummate such acquisitions in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, could impede our growth and adversely affect our financial condition, results of operations, cash flow and per share/unit trading price of our Class A common stock and traded OP units.
Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions, which may impede our growth.
We plan to acquire properties as we are presented with attractive opportunities. We may face significant competition for acquisition opportunities in the greater New York metropolitan area with other investors, particularly private investors who can incur more leverage, and this competition may adversely affect us by subjecting us to the following risks:
•
an inability to acquire a desired property because of competition from other well-capitalized real estate investors, including publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign wealth funds, pension trusts, commercial developers, partnerships and individual investors; and
•
an increase in the purchase price for such acquisition property, in the event we are able to acquire such desired property.

The significant competition for acquisitions of commercial office and retail properties in the greater New York metropolitan area may impede our growth.
Acquired properties may expose us to unknown liability, which could adversely affect our results of operations, cash flow and the market value of our securities.

17


We may acquire properties subject to liabilities and without any recourse, or with only limited recourse, against the prior owners or other third parties with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations, cash flow and the market value of our securities. Unknown liabilities with respect to acquired properties might include:
•
liabilities for clean-up of undisclosed environmental contamination;
•
claims by tenants, vendors or other persons against the former owners of the properties;
•
liabilities incurred in the ordinary course of business; and
•
claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in securityholder dilution and limit our ability to sell such assets.
In the future we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our operating partnership, which may result in stockholder/unitholder dilution. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions.
Should we decide at some point in the future to expand into new markets, we may not be successful, which could adversely affect our financial condition, result of operations, cash flow and trading price of our Class A common stock and traded OP units.
If opportunities arise, we may explore acquisitions of properties in new markets. Each of the risks applicable to our ability to acquire and integrate successfully and operate properties in our current markets is also applicable to our ability to acquire and integrate successfully and operate properties in new markets. In addition to these risks, we will not possess the same level of familiarity with the dynamics and market conditions of any new markets that we may enter, which could adversely affect the results of our expansion into those markets, and we may be unable to build a significant market share or achieve a desired return on our investments in new markets. If we are unsuccessful in expanding into new markets, it could adversely affect our financial condition, results of operations, cash flow, trading price of our Class A common stock and traded OP units and ability to satisfy our principal and interest obligations and to make distributions to our securityholders.
Our growth depends on external sources of capital that are outside of our control, which may affect our ability to seize strategic opportunities, satisfy debt obligations and make distributions to our securityholders.
In order to qualify as a REIT, we must distribute to our securityholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for distributions paid and excluding net capital gains. In addition, we will be subject to U.S. federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we may need to rely on third-party sources to fund our capital needs. We may not be able to obtain financing on favorable terms, in the time period we desire, or at all. Any additional debt we incur will increase our leverage. Our access to third-party sources of capital depends, in part, on:
•
general market conditions;
•
the market’s perception of our growth potential;
•
our current debt levels;
•
our current and expected future earnings;
•
our cash flow and cash distributions; and
•
the market price per share/unit of our Class A common stock and traded OP units.
If we cannot obtain capital from third-party sources, we may not be able to acquire or redevelop properties when strategic opportunities exist, satisfy our principal and interest obligations or make the cash distributions to our securityholders necessary to maintain our qualification as a REIT.

18


If we are unable to sell, dispose of or refinance one or more properties in the future, we may be unable to realize our investment objectives, and our business may be adversely affected.
The real estate investments made, and to be made, by us are relatively difficult to sell quickly. Return of capital and realization of gains from an investment generally will occur upon disposition or refinancing of the underlying property. In addition, the Internal Revenue Code of 1986, as amended (the "Code"), imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies. We may be unable to realize our investment objectives by sale, other disposition or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions and changes in laws, regulations or fiscal policies of jurisdictions in which our properties are located.
Our outstanding indebtedness reduces cash available for distribution and may expose us to the risk of default under our debt obligations and may include covenants that restrict our financial and operational flexibility and our ability to make distributions.
As of December 31, 2014 , our total consolidated indebtedness was approximately $1.6 billion . We may incur significant additional debt to finance future acquisition and redevelopment activities. Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT. Our level of debt and the limitations imposed on us by our loan documents could have significant adverse consequences, including the following:
•
our cash flow may be insufficient to meet our required principal and interest payments;
•
we may be unable to borrow additional funds as needed or on favorable terms;
•
we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;
•
to the extent we borrow debt that bears interest at variable rates, increases in interest rates could materially increase our interest expense;
•
we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms;
•
we may default on our obligations or violate restrictive covenants, in which case the lenders or mortgagees may accelerate our debt obligations, foreclose on the properties that secure their loans and/or take control of our properties that secure their loans and collect rents and other property income;
•
we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations or reduce our ability to make, or prohibit us from making, distributions; and
•
our default under any one of our mortgage loans with cross default provisions could result in a default on other indebtedness.
In addition, the terms of our secured revolving and term credit facility, our unsecured revolving credit facility (which we entered into on January 23, 2015 to replace our secured revolving and term credit facility) and other debt instruments that we may enter into in the future are subject to customary financial and operational covenants. For example, our secured revolving and term credit facility requires us to maintain designated ratios, including but not limited to, total debt-to-assets, secured debt-to-assets, adjusted EBITDA to consolidated fixed charges, variable rate debt-to-assets and secured recourse debt-to-assets, and contains a minimum tangible net worth requirement. In addition, subject to certain exceptions, our secured revolving and term credit facility restricts us from paying dividends or other distributions in excess of the greater of (x) 95% of funds from operations (as defined therein) and (y) the amount of dividends and other distributions we are required to pay in order to maintain our qualification as a REIT and (other than during an event of default) to avoid the payment of federal or state income or excise tax; provided, that if certain events of default exist, we may be precluded from paying any dividends or other distributions. Our secured revolving and term credit facility was terminated on January 23, 2015. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Secured Revolving and Term Credit Facility."
Our unsecured revolving credit facility requires us to maintain designated ratios, including but not limited to, total debt-to-assets, secured debt-to-assets, adjusted EBITDA to consolidated fixed charges, net operating income from unencumbered properties to interest expense on unsecured debt, unsecured debt to unencumbered assets and secured recourse debt-to-assets, and contains a minimum tangible net worth requirement. Our unsecured revolving credit facility does not generally contain restrictions on the payment of dividends or other distributions. In addition, subject to certain exceptions, our secured revolving and term credit facility restricts us from paying dividends or other distributions in excess of the greater of (x) 95% of funds from operations (as defined therein) and (y) the amount of dividends and other distributions we are required to pay in order to maintain our qualification as a REIT and (other than during an event of default) to avoid the payment of federal

19


or state income or excise tax ; provided, that if certain events of default exist, we may be precluded from paying any dividends or other distributions. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Unsecured Revolving Credit Facility." The indenture governing our outstanding senior unsecured notes does not contain financial or operational covenants or restrictions on the payments of dividends; however, upon the occurrence of fundamental changes described in the indenture, holders of our outstanding senior unsecured notes may require our operating partnership to repurchase for cash all or part of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, subject to certain conditions. Further, upon the occurrence of any make-whole fundamental change described in the indenture, the exchange rate for holders who exchange their notes in connection with any such make-whole fundamental change may be increased. See "[Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Senior Unsecured Notes]."

The provisions in the partnership agreement of our operating partnership that govern the preferred units may restrict our ability to pay dividends if we fail to pay the cumulative preferential cash distributions thereon. See "[Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Private Perpetual Preferred Units].”
If any one of these events were to occur, our financial condition, results of operations, cash flow, per share/unit trading price of our Class A common stock and traded OP units and our ability to satisfy our principal, interest and preferred unit distribution obligations and to make distributions to our securityholders could be adversely affected. In addition, in connection with our debt agreements we may enter into lockbox and cash management agreements pursuant to which substantially all of the income generated by our properties will be deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders and from which cash will be distributed to us only after funding of improvement, leasing and maintenance reserves and the payment of principal and interest on our debt, insurance, taxes, operating expenses and extraordinary capital expenditures and leasing expenses. As a result, we may be forced to borrow additional funds in order to make distributions to our securityholders (including, potentially, to make distributions necessary to allow us to qualify as a REIT). See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.
Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default. Any foreclosure on a mortgaged property or group of properties could adversely affect the overall value of our portfolio of properties. For tax purposes, a foreclosure of any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the distribution requirements applicable to REITs under the Code. Foreclosures could also trigger our tax indemnification obligations under the terms of our agreements with certain continuing investors with respect to sales of certain properties, and obligate us to make certain levels of indebtedness available for them to guarantee which.
High mortgage rates and/or unavailability of mortgage debt may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income and the amount of cash distributions we can make.
If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we may be unable to refinance the properties when the loans become due, or to refinance on favorable terms. If interest rates are higher when we refinance our properties, our income could be reduced. If any of these events occur, our cash flow could be reduced. This, in turn, could reduce cash available for distribution to our securityholders and may hinder our ability to raise more capital by issuing more stock or by borrowing more money. In addition, to the extent we are unable to refinance the properties when the loans become due, we will have fewer debt guarantee opportunities available to offer under our tax protection agreement. If we are unable to offer certain guarantee opportunities to the protected parties under the tax protection agreement, or otherwise are unable to allocate sufficient liabilities of our operating partnership to those parties, it could trigger an indemnification obligation of our company under the tax protection agreement.
Some of our financing arrangements involve balloon payment obligations, which may adversely affect our ability to make distributions.

20


As of December 31, 2014 , we had total debt outstanding of approximately $1.6 billion . As of December 31, 2014, we had approximately $44.1 million of debt maturing in 2015 and no maturities in 2016. As of December 31, 2014, we had 15 mortgage loans outstanding secured by 13 of our properties. As of December 31, 2014, these loans had an aggregate estimated principal balance at maturity of approximately $882.1 million with maturity dates ranging from 2015 through April 2024. See Note 6 to our consolidated financial statements for required payments of our indebtedness. Our financing arrangements require us to make a lump-sum or "balloon" payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to securityholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to make distributions necessary to meet the distribution requirements applicable to REITs under the Code.
Our degree of leverage and the lack of a limitation on the amount of indebtedness we may incur could materially and adversely affect us.
Our organizational documents do not contain any limitation on the amount of indebtedness we may incur. We consider factors other than debt-to-EBITDA in making decisions regarding the incurrence of indebtedness, such as the purchase price of properties to be acquired with debt financing, the estimated market value of our properties upon refinancing and the ability of particular properties and our business as a whole to generate cash flow to cover expected debt service.
Our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes. Our degree of leverage could also make us more vulnerable to a downturn in business or the economy generally. If we become more leveraged in the future, the resulting increase in debt service requirements could cause us to default on our obligations, which could materially and adversely affect us.
Our tax protection agreement could limit our ability either to sell certain properties or to engage in a strategic transaction, or to reduce our level of indebtedness, which could materially and adversely affect us.
In connection with the formation transactions, we entered into a tax protection agreement with Anthony E. Malkin and Peter L. Malkin pursuant to which we have agreed to indemnify the Malkin Group and one additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property) against certain tax liabilities if those tax liabilities result from (i) the operating partnership’s sale, transfer, conveyance, or other taxable disposition of four specified properties (First Stamford Place, Metro Center, 10 Bank Street and 1542 Third Avenue acquired by the operating partnership in the consolidation for a period of 12 years from the consolidation in 2013 with respect to First Stamford Place and for the later of (x) eight years from the consolidation in 2013 or (y) the death of both Peter L. Malkin and Isabel W. Malkin who are 81 and 78 years old, respectively, for the three other properties, (ii) the operating partnership failing to maintain until maturity the indebtedness secured by those properties or failing to use commercially reasonable efforts to refinance such indebtedness upon maturity in an amount equal to the principal balance of such indebtedness, or, if the operating partnership is unable to refinance such indebtedness at its current principal amount, at the highest principal amount possible, or (iii) the operating partnership failing to make available to any of these continuing investors the opportunity to guarantee, or otherwise bear the risk of loss, for U.S. federal income tax purposes, of their allocable share of $160 million of aggregate indebtedness meeting certain requirements, until such continuing investor owns less than the aggregate number of operating partnership units and shares of common stock equal to 50% of the aggregate number of such units and shares such continuing investor received in the formation transactions. If we were to trigger our tax indemnification obligations under these agreements, we would be required to pay damages for the resulting tax consequences to the Malkin Group, and we have acknowledged that a calculation of damages will not be based on the time value of money or the time remaining within the restricted period. Moreover, these obligations may restrict our ability to engage in a strategic transaction. In addition, these obligations may require us to maintain more or different indebtedness than we would otherwise require for our business.
The continuing threat of a terrorist event may materially and adversely affect our properties, their value and our ability to generate cash flow.
There may be a decrease in demand for space in Manhattan and the greater New York metropolitan area because it is considered at risk for a future terrorist event, and this decrease may reduce our revenues from property rentals. In the aftermath of a terrorist event, tenants in Manhattan and the greater New York metropolitan area may choose to relocate their businesses to less populated, lower-profile areas of the United States that are not as likely to be targets of future terrorist activity. This in turn could trigger a decrease in the demand for space in Manhattan and the greater New York metropolitan area, which could

21


increase vacancies in our properties and force us to lease our properties on less favorable terms. Further, certain of our properties, including the Empire State Building, may be considered to be susceptible to increased risks of a future terrorist event due to the high-profile nature of the property. In addition, a terrorist event could cause insurance premiums at certain of our properties to increase significantly. As a result, the value of our properties and the level of our revenues could materially decline.
Potential losses, such as those from adverse weather conditions, natural disasters, terrorist events and title claims, may not be fully covered by our insurance policies, and such losses could materially and adversely affect us.
Our business operations are susceptible to, and could be significantly affected by, adverse weather conditions, terrorist events and natural disasters that could cause significant damage to the properties in our portfolio. Our insurance may not be adequate to cover business interruption or losses resulting from such events. In addition, our insurance policies include substantial self-insurance portions and significant deductibles and co-payments for such events, and recent hurricanes in the United States have affected the availability and price of such insurance. As a result, we may incur significant costs in the event of adverse weather conditions, terrorist events and natural disasters. We may discontinue certain insurance coverage on some or all of our properties in the future if the cost of premiums for any of these policies in our judgment exceeds the value of the coverage discounted for the risk of loss.
We carry comprehensive liability, fire, extended coverage, earthquake, terrorism and rental loss insurance covering all
of our Manhattan properties and our greater New York metropolitan area properties under a blanket policy. We carry additional
all-risk property and business insurance, which includes terrorism insurance, on the Empire State Building through ESRT
Captive Insurance Company L.L.C., or ESRT Captive Insurance, our wholly owned captive insurance company. ESRT Captive
Insurance covers terrorism insurance for $700 million in losses in excess of $800 million per occurrence suffered by the Empire
State Building, providing us with aggregate terrorism coverage of $1.5 billion at that property. ESRT Captive Insurance fully
reinsures the 15% coinsurance under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) and the
difference between the TRIPRA captive deductible and policy deductible of $25,000 for non-Nuclear, Biological, Chemical and
Radiological exposures. As a result, we remain only liable for the 15% coinsurance under TRIPRA for Nuclear, Biological,
Chemical and Radiological (NBCR) exposures, as well as a deductible equal to 20% of the prior year’s premium. As long as we own ESRT Captive Insurance, we are responsible for ESRT Captive Insurance’s liquidity and capital resources, and ESRT Captive Insurance’s accounts are part of our consolidated financial statements. If we experience a loss and our captive insurance company is required to pay under its insurance policy, we would ultimately record the loss to the extent of its required payment.The policies described above cover certified terrorism losses as defined under the Terrorism Risk Insurance Act of 2002 (TRIA) and subsequent extensions. On January 12, 2015, the President of the United States signed into law TRIPRA, which extends TRIA through December 31, 2020. TRIA provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism. As a result, the certified terrorism coverage provided by ESRT Captive Insurance is eligible for 85% coinsurance provided by the United States Treasury in excess of a statutorily calculated
deductible. ESRT Captive Insurance reinsures 100% of their 15% coinsurance for non-NBCR exposures. The 15% coinsurance on NBCR exposures is retained by ESRT Captive Insurance.

TRIA was not in effect for the period from January 1, 2015 through January 11, 2015. During this brief period of time, ESRT carried a reduced terrorism insurance limit, which we believed was commercially acceptable under the circumstances.

Reinsurance contracts do not relieve ESRT Captive Insurance from its primary obligations to its policyholders.
Additionally, failure of the various reinsurers to honor their obligations could result in significant losses to ESRT Captive
Insurance. The reinsurance has been ceded to reinsurers approved by the State of Vermont. ESRT Captive Insurance
continually evaluates the reinsurers’ financial condition by considering published financial stability ratings of the reinsurers and
other factors. There can be no assurance that reinsurance will continue to be available to ESRT Captive Insurance to the same
extent and at the same cost. ESRT Captive Insurance may choose in the future to reevaluate the use of reinsurance to increase
or decrease the amounts of risk it cedes.

In addition to insurance held through our captive insurance company described above, we carry terrorism insurance on all of our properties in an amount and with deductibles which we believe are commercially reasonable.
Furthermore, we do not carry insurance for certain losses, including, but not limited to, losses caused by war. In addition, while our title insurance policies insure for the current aggregate market value of our portfolio, we do not intend to increase our title insurance policies as the market value of our portfolio increases. As a result, we may not have sufficient coverage against all losses that we may experience, including from adverse title claims.

22


If we experience a loss that is uninsured or which exceeds our policy limits, we could incur significant costs and lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
In addition, certain of our properties could not be rebuilt to their existing height or size at their existing location under current land-use laws and policies. In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications and otherwise may have to upgrade such property to meet current code requirements.
Our debt instruments, consisting of mortgage loans secured by our properties (which are generally non-recourse to us), ground leases, our secured term loan and our unsecured revolving credit facility, contain customary covenants requiring us to maintain insurance, including terrorism insurance. While we do not believe it will be likely, there can be no assurance that the lenders or ground lessors under these instruments will not take the position that a total or partial exclusion from “all-risk” insurance coverage for losses due to terrorist acts is a breach of these debt and ground lease instruments that allows the lenders or ground lessors to declare an event of default and accelerate repayment of debt or recapture of ground lease positions for those properties in our portfolio which are not insured against terrorist events. In addition, if lenders insist on full coverage for these risks and prevail in asserting that we are required to maintain such coverage, it could result in substantially higher insurance premiums.
Certain mortgages on our properties contain requirements concerning the financial ratings of the insurers who provide policies covering the property. We provide the lenders on a regular basis with the identity of the insurance companies in our insurance programs. While the ratings of our insurers currently satisfy the rating requirements in some of our loan agreements, in the future, we may be unable to obtain insurance with insurers which satisfy the rating requirements which could give rise to an event of default under such loan agreements. Additionally, in the future our ability to obtain debt financing secured by individual properties, or the terms of such financing, may be adversely affected if lenders generally insist on ratings for insurers which are difficult to obtain or which result in a commercially unreasonable premium.
We may become subject to liability relating to environmental and health and safety matters, which could have a material and adverse effect on us.
Under various federal, state and/or local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation or remediation, natural resource damages, or third party liability for personal injury or property damage. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several. Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial, industrial or other purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. We also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so. The presence of contamination or the failure to remediate contamination on our properties may adversely affect our ability to attract and/or retain tenants and our ability to develop or sell or borrow against those properties. In addition to potential liability for cleanup costs, private plaintiffs may bring claims for personal injury, property damage or for similar reasons. Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property. For example, our property at 69-97 Main Street is subject to an Environmental Land Use Restriction that imposes certain restrictions on the use, occupancy and activities of the affected land beneath the property. This restriction may prevent us from conducting certain redevelopment activities at the property, which may adversely affect its resale value and may adversely affect our ability to finance or refinance this property. See “Item 1. Business - Environmental Matters.”
Some of our properties are adjacent to or near other properties used for industrial or commercial purposes or that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. Releases from these properties could impact our properties. In addition, some of our properties have previously been used by former owners or tenants for commercial or industrial activities, e.g., gas stations and dry cleaners, and a portion of the Metro Tower site is currently used for automobile parking and fueling, that may release petroleum products or other hazardous or toxic substances at such properties or to surrounding properties.

23


In addition, our properties are subject to various federal, state and local environmental and health and safety laws and regulations. Noncompliance with these environmental and health and safety laws and regulations could subject us or our tenants to liability. These liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with such laws and regulations or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have a material adverse effect on us.
As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental and health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, redevelopment or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of releases of ACM into the environment.
In addition, our properties may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or costs for remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others if property damage or personal injury occurs.
We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our securityholders or that such costs, liabilities, or other remedial measures will not have a material adverse effect on our financial condition and results of operations.
Potential environmental liabilities may exceed our environmental insurance coverage limits, which could have a material and adverse effect on us.
We carry environmental insurance to cover certain potential environmental liabilities associated with pollution conditions at certain of our properties. We cannot assure you, however, that our insurance coverage will be sufficient or that our liability will not have a material adverse effect on our financial condition, results of operations, cash flow, per share trading price of our Class A common stock and our ability to satisfy our principal and interest obligations and to make distributions to our securityholders.
We may experience a decline in the fair value of our assets, which may have a material impact on our financial condition, liquidity and results of operations and adversely impact our stock price.
A decline in the fair market value of our assets may require us to recognize an other-than-temporary impairment against such assets under Generally Accepted Accounting Principles ("GAAP") if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be other-than-temporarily impaired. Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
Failure to hedge interest rates effectively could have a material and adverse effect on us.

24


We may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements that involve risk, such as the risk that counterparties may fail to honor their obligations under these arrangements, and that these arrangements may not be effective in reducing our exposure to interest rate changes. Moreover, there can be no assurance that our hedging arrangements will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations. Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our initial obligation under the hedging agreement. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
When a hedging agreement is required under the terms of a mortgage loan it is often a condition that the hedge counterparty maintains a specified credit rating. With the current volatility in the financial markets, there is an increased risk that hedge counterparties could have their credit rating downgraded to a level that would not be acceptable under the loan provisions. If we were unable to renegotiate the credit rating condition with the lender or find an alternative counterparty with acceptable credit rating, we could be in default under the loan and the lender could seize that property through foreclosure.
As a general contractor, ESRT Construction LLC and ESRT Construction TRS, LLC, our wholly-owned subsidiaries, are subject to the various risks associated with construction that could have a material adverse effect on our business and results of operations.
As a general contractor, ESRT Construction LLC and ESRT Construction TRS, LLC, our wholly-owned subsidiaries, are subject to the various risks associated with construction (including, without limitation, shortages of labor and materials, work stoppages, labor disputes and weather interference) that could cause construction delays. We are subject to the risk that we will be unable to complete construction at budgeted costs or be unable to fund any excess construction costs, which could have a material adverse effect on our business and results of operations.
We may incur significant costs complying with the ADA and similar laws, which could adversely affect our financial condition, results of operations, cash flow and per share/unit trading price of our Class A common stock and traded OP units.
Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. We have not conducted a recent audit or investigation of all of our properties to determine our compliance with the ADA. If one or more of the properties in our portfolio is not in compliance with the ADA, we would be required to incur additional costs to bring the property into compliance. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. We cannot predict the ultimate cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA and any other legislation, our financial condition, results of operations, cash flow, per share/unit trading price of our Class A common stock and traded OP units and our ability to satisfy our principal and interest obligations and to make distributions to our securityholders could be adversely affected.
Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flows.
Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past. If the property taxes we pay increase, our financial condition, results of operations, cash flows, per share trading price of our Class A common stock and our ability to satisfy our principal and interest obligations and to make distributions to our securityholders could be adversely affected.
We may become subject to litigation, which could have a material and adverse effect on our financial condition, results of operations, cash flow and per share/unit trading price of our Class A common stock and our traded OP units.
In the future we may become subject to litigation, including claims relating to our operations, offerings, and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to defend ourselves vigorously; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and settlements exceed insured levels, could adversely impact our earnings and cash flows, thereby having an adverse effect on our financial condition, results of operations, cash flow and per share/unit trading

25


price of our Class A common stock and our traded OP units. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors. There is currently litigation pending, and the potential for additional litigation, associated with the consolidation. We may incur costs from these litigations. Please see Footnote 10 “Commitments and Contingencies” to the financial statements on page F-32 of this Annual Report in Form 10-K for a description of such legal proceedings.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers.
We may co-invest in the future with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity. In such event, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives, and they may have competing interests in our markets that could create conflict of interest issues. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. In addition, prior consent of our joint venture partners may be required for a sale or transfer to a third party of our interests in the joint venture, which would restrict our ability to dispose of our interest in the joint venture. If we become a limited partner or non-managing member in any partnership or limited liability company and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity including at an unfavorable price. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers. Our joint ventures may be subject to debt and, in any weakened credit market, the refinancing of such debt may require equity capital calls.
We may incur significant costs complying with various regulatory requirements, which could materially and adversely affect us.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we might incur governmental fines or private damage awards. In addition, existing requirements could change and future requirements might require us to make significant unanticipated expenditures, which materially and adversely affect us.
We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.
We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password protection, frequent password change events, firewall detection systems, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cybersecurity attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and affect the business operations.
Risks Related to Our Organization and Structure
Holders of our Class B common stock have a significant vote in matters submitted to a vote of our securityholders.
As part of our formation, original investors were offered the opportunity to contribute their interests to us in exchange for Class A common stock, operating partnership units, a combination of one share of Class B common stock for each 50

26


operating partnership units to which an investor was entitled, resulting in one share of Class B common stock and 49 operating partnership units, or a combination of any of the above. Each outstanding share of Class B common stock entitles the holder thereof to 50 votes on all matters on which Class A common securityholders are entitled to vote, including the election of directors. Holders of our Class B common stock are entitled to share equally, on a per share basis, in all distributions payable with respect to shares of our Class A common stock. Holders of our Class B common stock may have interests that differ from those holders of our Class A common stock, including by reason of their interest in our operating partnership, and may accordingly vote as a stockholder in ways that may not be consistent with the interests of holders of our Class A common stock. This significant voting influence over certain matters may have the effect of delaying, preventing or deterring a change of control of our company, or could deprive holders of our Class A common stock of an opportunity to receive a premium for their Class A common stock as part of a sale of our company. Class B common stock has been issued only in connection with the formation transactions as described above, and any such share is automatically converted to a share of Class A common stock (having a single vote) upon its holder conveying the related 49 operating partnership units to any person other than a family member, affiliate or controlled entity of such person.
We assumed unknown liabilities in connection with the formation transactions, which, if significant, could materially and adversely affect our business.
As part of the formation transactions, we (through our operating partnership) acquired the properties and assets of our predecessor and certain other assets, subject to existing liabilities including unknown liabilities. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other persons dealing with such entities prior to the Offering (that had not been asserted or threatened prior to the Offering), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business. In addition, we have agreed to indemnify our senior management team and certain members, managers, shareholders, directors, limited partners, general partners, officers or controlling persons of our predecessor in their capacities as such for certain claims. Any unknown or unquantifiable liabilities that we assumed in connection with the formation transactions for which we have no or limited recourse could materially and adversely affect us. See “-We may become subject to liability relating to environmental and health and safety matters, which could have a material and adverse effect on us” as to the possibility of undisclosed environmental conditions potentially affecting the value of the properties in our portfolio.
The departure of any of our key personnel could materially and adversely affect us.
Our success depends on the efforts of key personnel, particularly Anthony E. Malkin, our Chairman and Chief Executive Officer. Among the reasons Anthony E. Malkin is important to our success is that he has a national industry reputation that benefits us in many ways. He has led the acquisition, operating and repositioning of our assets for the last two decades. If we lost his services, our external relationships and internal leadership resources would be materially diminished.
Other members of our senior management team also have strong industry reputations and experience, which aid us in attracting, identifying and exploiting opportunities. The loss of the services of one or more members of our senior management team, particularly Anthony E. Malkin, could have a material and adverse impact on us.
Tax consequences to holders of operating partnership units upon a sale or refinancing of our properties may cause the interests of certain members of our senior management team to differ from your own.
As a result of the unrealized built-in gain attributable to a property at the time of contribution, some holders of operating partnership units, including Anthony E. Malkin and Peter L. Malkin, may suffer different and more adverse tax consequences than holders of our Class A common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all. As a result, the effect of certain transactions on Anthony E. Malkin and Peter L. Malkin may influence their decisions affecting these properties and may cause such members of our senior management team to attempt to delay, defer or prevent a transaction that might otherwise be in the best interests of our other securityholders. In connection with the formation transactions, we entered into a tax protection agreement with Anthony E. Malkin and Peter L. Malkin pursuant to which we have agreed to indemnify the Malkin Group and one additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property) against certain tax liabilities if those tax liabilities result from (i) the operating partnership’s sale, transfer, conveyance, or other taxable disposition of four specified properties (First Stamford Place, Metro Center, 10 Bank Street and 1542 Third Avenue) acquired by the operating partnership in the consolidation for a period of 12 years from the consolidation in 2013 with respect to First Stamford

27


Place and for the later of (x) eight years from the consolidation in 2013 or (y) the death of both Peter L. Malkin and Isabel W. Malkin who are 81 and 78 years old, respectively, for the three other properties, (ii) the operating partnership failing to maintain until maturity the indebtedness secured by those properties or failing to use commercially reasonable efforts to refinance such indebtedness upon maturity in an amount equal to the principal balance of such indebtedness, or, if the operating partnership is unable to refinance such indebtedness at its current principal amount, at the highest principal amount possible, or (iii) the operating partnership failing to make available to any of these continuing investors the opportunity to guarantee, or otherwise bear the risk of loss, for U.S. federal income tax purposes, of their allocable share of $160 million of aggregate indebtedness meeting certain requirements, until such continuing investor owns less than the aggregate number of operating partnership units and shares of common stock equal to 50% of the aggregate number of such units and shares such continuing investor received in the formation transactions. As a result of entering into the tax protection agreement, Anthony E. Malkin and Peter L. Malkin may have an incentive to cause us to enter into transactions from which they may personally benefit.
Our Chairman and Chief Executive Officer has outside business interests that take his time and attention away from us, which could materially and adversely affect us.
Anthony E. Malkin, our Chairman and Chief Executive Officer, has agreed to devote a majority of his business time and attention to our business and, under his employment agreement, he may also devote time to the excluded properties, the excluded businesses and certain family investments to the extent that such activities do not materially interfere with the performance of his duties to us. He owns interests in the excluded properties and excluded businesses that were not contributed to us in the formation transactions, some of which are managed by our company and certain non-real estate family investments. In some cases, Anthony E. Malkin or his affiliates have certain management and fiduciary obligations that may conflict with such person’s responsibilities as an officer or director of our company and may adversely affect our operations. In addition, under his employment agreement, Anthony E. Malkin has agreed not to engage in certain business activities in competition with us (both during, and for a period of time following, his employment with us). We may choose not to enforce, or to enforce less vigorously, our rights under this agreement because of our desire to maintain our ongoing relationship with our Chairman and Chief Executive Officer given his significant knowledge of our business, relationships with our customers and significant equity ownership in us, and this could have a material adverse effect on our business.
Our rights and the rights of our securityholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interest.
Our charter limits the liability of our present and former directors and officers to us and our securityholders for money damages to the maximum extent permitted under Maryland law. Under current Maryland law, our present and former directors and officers will not have any liability to us or our securityholders for money damages other than liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action. As a result, we and our securityholders may have limited rights against our present and former directors and officers, as well as persons who served as members, managers, shareholders, directors, partners, officers, controlling persons certain agents of our predecessor, which could limit your recourse in the event of actions not in your best interest.
Conflicts of interest exist or could arise in the future between the interests of our securityholders and the interests of holders of operating partnership units, which may impede business decisions that could benefit our securityholders.
Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our directors and officers have duties to our company under applicable Maryland law in connection with their management of our company. At the same time, we, as the general partner in our operating partnership, have fiduciary duties and obligations to our operating partnership and its limited partners under Delaware law and the partnership agreement of our operating partnership in connection with the management of our operating partnership. Our fiduciary duties and obligations as general partner to our operating partnership and its partners may come into conflict with the duties of our directors and officers to our company.
Additionally, the partnership agreement provides that we and our directors and officers will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we, or such director or officer acted in good faith. The partnership agreement also provides that we will not be liable to the operating partnership or any partner for monetary damages for losses sustained, liabilities incurred or benefits not derived by the operating partnership or any limited partner, except for liability for our intentional harm or gross negligence. Moreover, the partnership agreement provides that our operating partnership is required to indemnify its directors and officers, us and our directors and officers and authorizes our operating partnership to indemnify present and former members, managers, shareholders, directors, limited

28


partners, general partners, officers or controlling persons of our predecessor and authorizes us to indemnify members, partners, employees and agents of us or our predecessor, in each case for actions taken by them in those capacities from and against any and all claims that relate to the operations of our operating partnership, except (1) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (2) for any transaction for which the indemnified party received an improper personal benefit, in money, property or services or otherwise, in violation or breach of any provision of the partnership agreement or (3) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful. No reported decision of a Delaware appellate court has interpreted provisions similar to the provisions of the partnership agreement of our operating partnership that modify and reduce our fiduciary duties or obligations as the general partner or reduce or eliminate our liability for money damages to the operating partnership and its partners, and we have not obtained an opinion of counsel as to the enforceability of the provisions set forth in the partnership agreement that purport to modify or reduce the fiduciary duties that would be in effect were it not for the partnership agreement.
We could increase or decrease the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval, which could prevent a change in our control and negatively affect the market value of our shares.
Our board of directors, without stockholder approval, has the power under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and set the terms of such newly classified or reclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences, distributions, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock. Any such issuance could dilute our existing securityholders’ interests. Although our board of directors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our securityholders otherwise believe to be in their best interest.
Our operating partnership may issue additional operating partnership units without the consent of our securityholders, which could have a dilutive effect on our securityholders.
Our operating partnership may issue additional operating partnership units to third parties without the consent of our securityholders, which would reduce our ownership percentage in our operating partnership and would have a dilutive effect on the amount of distributions made to us by our operating partnership and, therefore, the amount of distributions we can make to our securityholders. Any such issuances, or the perception of such issuances, could materially and adversely affect the market price of our Class A common stock.
We have limited operating history as a REIT and as a publicly-traded company, and our inexperience could materially and adversely affect us.
We have limited operating history as a REIT and as a publicly-traded company. Our board of directors and senior management team have overall responsibility for our management and, while certain members of our senior management team and directors have extensive experience in real estate marketing, development, management, finance and law, none of our directors or members of our senior management team have prior experience in operating a business in accordance with the requirements under the Code applicable to REITs or in operating a public company other than our Chief Financial Officer and Chief Accounting Officer and certain of our directors. As a publicly-traded REIT, we are required to develop and implement substantial control systems, policies and procedures in order to maintain our REIT qualification and satisfy our periodic U.S. Securities and Exchange Commission ("SEC") reporting and New York Stock Exchange, or NYSE, listing requirements. We cannot assure you that management’s past experience will be sufficient to successfully develop and implement these systems, policies and procedures and to operate our company. Failure to do so could jeopardize our status as a REIT or as a public company, and the loss of such status would materially and adversely affect us.
Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us.
Provisions in the partnership agreement of our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving

29


an unsolicited acquisition of us or change of our control, although some securityholders might consider such proposals, if made, desirable. These provisions include, among others:
•
redemption rights of qualifying parties;
•
transfer restrictions on operating partnership units;
•
our ability, as general partner, in some cases, to amend the partnership agreement and to cause the operating partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us or our operating partnership without the consent of the limited partners;
•
the right of the limited partners to consent to transfers of the general partnership interest and mergers or other transactions involving us under specified circumstances; and
•
a redemption premium payable to the holders of our operating partnership’s preferred units if our operating partnership decides, at its option, to redeem preferred units for cash upon the occurrence of certain fundamental transactions, such as a change of control.
Our charter, bylaws, the partnership agreement of our operating partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our securityholders otherwise believe to be in their best interest.
Our charter contains stock ownership limits, which may delay or prevent a change of control.
In order for us to qualify as a REIT no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year, and at least 100 persons must beneficially own our stock during at least 335 days of a taxable year of 12 months, or during a proportionate portion of a shorter taxable year. “Individuals” for this purpose include natural persons, private foundations, some employee benefit plans and trusts and some charitable trusts. To assist us in complying with these limitations, among other purposes, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock. These ownership limitations could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests. We have entered into waivers of the 9.8% ownership limit with two institutional investors to permit each of these institutional investors to own up to 15% of the outstanding shares of our Class A common stock.
Our charter’s constructive ownership rules are complex and may cause the outstanding shares owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than these percentages of the outstanding shares by an individual or entity could cause that individual or entity to own constructively in excess of these percentages of the outstanding shares and thus violate the share ownership limits. Our charter also provides that any attempt to own or transfer shares of our common stock or preferred stock (if and when issued) in excess of the stock ownership limits without the consent of our board of directors or in a manner that would cause us to be “closely held” under Section 856(h) of the Code (without regard to whether the shares are held during the last half of a taxable year) will result in the shares being deemed to be transferred to a trustee for a charitable trust or, if the transfer to the charitable trust is not automatically effective to prevent a violation of the share ownership limits or the restrictions on ownership and transfer of our shares, any such transfer of our shares will be null and void.
The concentration of our voting power may adversely affect the ability of new investors to influence our policies.
As of December 31, 2014, Anthony E. Malkin, our Chairman and Chief Executive Officer, together with the Malkin Group, has the right to vote 42,100,425 shares of our common stock, which represents approximately 26.5% of the voting power of our outstanding common stock. Consequently, Mr. Malkin has the ability to influence the outcome of matters presented to our securityholders, including the election of our board of directors and approval of significant corporate transactions, including business combinations, consolidations and mergers and the determination of our day-to-day corporate and management policies. Therefore, Mr. Malkin has substantial influence over us and could exercise influence in a manner that is not in the best interests of our other securityholders. This concentration of voting power might also have the effect of delaying or preventing a change of control that our securityholders may view as beneficial.
Our board of directors may change our strategies, policies or procedures without stockholder consent, which may subject us to different and more significant risks in the future.

30


Our investment, financing, leverage and distribution policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, will be determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of the board of directors without notice to or a vote of our securityholders. This could result in our conducting operational matters, making investments or pursuing different business or growth strategies. Under these circumstances, we may expose ourselves to different and more significant risks in the future, which could have a material adverse effect on our business and growth. In addition, the board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements. A change in these policies could have an adverse effect on our financial condition, results of operations, cash flow, per share/unit trading price of our Class A common stock and traded OP units and ability to satisfy our principal and interest obligations and to make distributions to our securityholders.
Our board of directors has approved very broad investment guidelines for our company and will not review or approve each investment decision made by our senior management team.
Our senior management team is authorized to follow broad investment guidelines and, therefore, has great latitude in determining the types of assets that are proper investments for us, as well as the individual investment decisions. Our senior management team may make investments with lower rates of return than those anticipated under current market conditions and/or may make investments with greater risks to achieve those anticipated returns. Our board of directors will not review or approve each proposed investment by our senior management team.
Risks Related to our Common Stock and Traded OP Units
Our cash available for distribution may not be sufficient to make distributions at expected levels.
We intend to make distributions to holders of shares of our common stock and holders of operating partnership units. All dividends and distributions will be made at the discretion of our board of directors and will depend on our earnings, financial condition, maintenance of REIT qualification and other factors as our board of directors may deem relevant from time to time. If sufficient cash is not available for distribution from our operations, we may have to fund distributions from working capital or to borrow to provide funds for such distribution, or to reduce the amount of such distribution. We cannot assure you that our distributions will be made or sustained. Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations.
The market price of shares of our Class A common stock and traded OP units could be adversely affected by our level of cash distributions.
The market value of the equity securities of a REIT is based primarily upon the market’s perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales or refinancings, and is secondarily based upon the real estate market value of the underlying assets. For that reason, our Class A common stock and traded OP units may trade at prices that are higher or lower than our net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our Class A common stock and traded OP units. Our failure to meet the market’s expectations with regard to future earnings and cash distributions likely would adversely affect the market price of our Class A common stock and traded OP units.
Increases in market interest rates may result in a decrease in the value of our Class A common stock and traded OP units.
One of the factors that will influence the price of our Class A common stock and traded OP units will be the dividend yield on the Class A common stock and traded OP units (as a percentage of the price of our Class A common stock and traded OP units) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of shares of our Class A common stock and traded OP units to expect a higher dividend yield and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our Class A common stock and traded OP units to go down.
The number of shares and operating partnership units available for future sale could adversely affect the market price of our Class A common stock and traded OP units.

31


We cannot predict whether future issuances of shares of our Class A common stock or operating partnership units or the availability of shares for resale in the open market will decrease the market price per share/unit of our Class A common stock and traded OP units. Under the terms of the registration rights agreement, investors in the entities we acquired in the formation transactions, including the Malkin Group, and investors in the option properties we acquired, received rights to have shares of common stock held by them registered for resale under the Securities Act and the Malkin Group has rights to demand underwritten offerings with respect to such resales. A shelf registration statement covering the shares held by these investors has been filed and is currently effective. In addition, under the terms of a registration rights agreement, purchasers of our senior unsecured notes received rights to have shares of common stock issuable upon exchange of the notes registered for resale under the Securities Act. We may also issue shares of common stock or operating partnership units in connection with future property, portfolio or business acquisitions. Sales of substantial amounts of shares of our Class A common stock (including shares of our Class A common stock issued pursuant to our equity incentive plan) or operating partnership units in the public market, or upon exchange of operating partnership units, or the perception that such sales might occur could adversely affect the market price of the shares of our Class A common stock and traded OP units. In addition, future sales of shares of our Class A common stock may be dilutive to holders of shares of our common stock.
Future issuances of debt securities or preferred units, which would rank senior to shares of our common stock upon our liquidation, and future issuances of equity securities (including operating partnership units), which would dilute the holdings of our existing common securityholders and may be senior to shares of our common stock for the purposes of making distributions, periodically or upon liquidation, may materially and adversely affect the market price of shares of our Class A common stock and traded OP units.
In the future, we may issue debt or equity securities or make other borrowings. Upon liquidation, holders of our debt securities, preferred units and other loans and preferred shares will receive a distribution of our available assets before holders of shares of our common stock. We are not required to offer any such additional debt or equity securities to existing securityholders on a preemptive basis. Therefore, additional shares of our common stock issuances, directly or through convertible or exchangeable securities (including operating partnership units), warrants or options, will dilute the holdings of our existing common securityholders and such issuances or the perception of such issuances may reduce the market price of shares of our common stock. Our preferred units or shares, if issued, would likely have a preference on distribution payments, periodically or upon liquidation, which could limit our ability to make distributions to holders of shares of our common stock. Because our decision to issue debt or equity securities or otherwise incur debt in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future capital raising efforts. Thus, holders of shares of our common stock bear the risk that our future issuances of debt or equity securities or our other borrowings will reduce the market price of shares of our Class A common stock and traded OP units and dilute their ownership in us.
Our balance sheet includes significant amounts of goodwill. The impairment of a significant portion of this goodwill could negatively affect our business, financial condition and results of operations.
Our balance sheet includes goodwill of approximately $491.5 million at December 31, 2014 . These assets consist primarily of goodwill associated with our acquisition of the controlling interest in Empire State Building Company L.L.C. and 501 Seventh Avenue Associates L.L.C. We also expect to engage in additional acquisitions, which may result in our recognition of additional goodwill. Under accounting standards goodwill is not amortized. On an annual basis and whenever events or changes in circumstances indicate the carrying value or goodwill may be impaired, we are required to assess whether there have been impairments in the carrying value of goodwill. If the carrying value of the asset is determined to be impaired, then it is written down to fair value by a charge to operating earnings. An impairment of goodwill could have a material adverse effect on our business, financial condition and results of operations.
Tax Risks Related to Ownership of Our Shares
Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to our securityholders.
We have been organized and we intend to operate in a manner that we believe will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2013. We have not requested and do not intend to request a ruling from the Internal Revenue Service, or the IRS, that we qualify as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions and Treasury Regulations promulgated thereunder for which there are limited judicial and administrative interpretations. The complexity of these provisions and of applicable Treasury Regulations is greater in the case of a REIT that, like us, holds its assets through partnerships. To qualify as a REIT,

32


we must meet, on an ongoing basis, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares, and the amount of our distributions. Our ability to satisfy these asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. Thus, while we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. These considerations also might restrict the types of assets that we can acquire in the future.
If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to our securityholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money, sell assets, or reduce or even cease making distributions in order to pay our taxes. Our payment of income tax would reduce significantly the amount of cash available for distribution to our securityholders. Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our net taxable income to our securityholders. In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify.
Complying with the REIT requirements may cause us to forego and/or liquidate otherwise attractive investments.
To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually. In addition, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our total assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-backed securities. The remainder of our investment in securities (other than government securities, securities of corporations that are treated as Taxable REIT Subsidiaries ("TRSs") and qualified REIT real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more TRSs. If we fail to comply with these asset requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
To meet these tests, we may be required to take or forgo taking actions that we otherwise would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forego investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions to securityholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could have the effect of reducing our income and amounts available for distribution to our securityholders. Thus, compliance with the REIT requirements may hinder our investment performance.
The REIT distribution requirements could require us to borrow funds during unfavorable market conditions or subject us to tax, which would reduce the cash available for distribution to our securityholders.
In order to qualify as a REIT, we must distribute to our securityholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. In addition, we will be subject to U.S. federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our net income to our securityholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax.
In addition, our taxable income may exceed our net income as determined by GAAP because, for example, realized capital losses will be deducted in determining our GAAP net income, but may not be deductible in computing our taxable income. In addition, we may incur nondeductible capital expenditures or be required to make debt or amortization payments. As a result of the foregoing, we may generate less cash flow than taxable income in a particular year and we may incur U.S. federal income tax

33


and the 4% nondeductible excise tax on that income if we do not distribute such income to securityholders in that year. In that event, we may be required to use cash reserves, incur debt or liquidate assets at rates or times that we regard as unfavorable or make a taxable distribution of our shares in order to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax in that year.
If our operating partnership is treated as a corporation for U.S. federal income tax purposes, we will cease to qualify as a REIT.
We believe our operating partnership qualifies as a partnership for U.S. federal income tax purposes. Assuming that it qualifies as a partnership for U.S. federal income tax purposes, our operating partnership will not be subject to U.S. federal income tax on its income. Instead, each of its partners, including us, is required to pay tax on its allocable share of the operating partnership’s income. No assurance can be provided, however, that the IRS will not challenge our operating partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating our operating partnership as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, therefore, cease to qualify as a REIT and our operating partnership would become subject to U.S. federal, state and local income tax. The payment by our operating partnership of income tax would reduce significantly the amount of cash available to our partnership to satisfy obligations to make principal and interest payments on its debt and to make distribution to its partners, including us.
Even if we qualify as a REIT, we may incur tax liabilities that reduce our cash flow.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, and state or local income, franchise, property and transfer taxes, including mortgage recording taxes. In addition, ESRT Observatory TRS, L.L.C., a New York limited liability company, or Observatory TRS, ESRT Holdings TRS, L.L.C., a Delaware limited liability company, or Holding TRS, and any other TRSs we own will be subject to U.S. federal, state and local corporate income taxes. In order to meet the REIT qualification requirements, or to avoid the imposition of a 100% tax that applies to certain gains derived by a REIT from sales of inventory or property held primarily for sale to customers in the ordinary course of business, we will hold some of our assets through taxable C corporations, including TRSs. Any taxes paid by such subsidiary corporations would decrease the cash available for distribution to our securityholders.
If we are not able to continue to lease the Empire State Building observatory to a TRS in a manner consistent with the ruling that we have received from the IRS, or if we are not able to maintain our broadcast licenses in a manner consistent with the ruling we have received from the IRS, we would be required to restructure our operations in a manner that could adversely affect the value of our stock.
Rents from real property are generally not qualifying income for purposes of the REIT gross income tests if the rent is treated as “related party rent.” Related party rent generally includes (i) any rent paid by a corporation if the REIT (or any person who owns 10% or more of the stock of the REIT by value) directly or indirectly owns 10% or more of the stock of the corporation by vote or value and (ii) rent paid by a partnership if the REIT (or any person who owns 10% or more of the stock of the REIT by value) directly or indirectly owns an interest of 10% or more in the assets or net profits of the partnership. Under an exception to this rule, related party rent is treated as qualifying income for purposes of the REIT gross income tests if it is paid by a TRS of the REIT and (i) at least 90% of the leased space in the relevant property is rented to persons other than either TRSs or other related parties of the REIT, and (ii) the amounts paid to the REIT as rent from real property are substantially comparable to the rents paid by unrelated tenants of the REIT for comparable space.
Income from admissions to the Empire State Building observatory, and certain other income generated by the observatory, would not likely be qualifying income for purposes of the REIT gross income tests. We jointly elected with Observatory TRS, which is the current lessee and operator of the observatory and which is wholly owned by our operating partnership, for Observatory TRS to be treated as a TRS of ours for U.S. federal income tax purposes. Observatory TRS leases the Empire State Building observatory from the operating partnership pursuant to a lease that provides for fixed base rental payments and variable rental payments equal to certain percentages of Observatory TRS’s gross receipts from the operation of the observatory. Given the unique nature of the real estate comprising the observatory, we do not believe that there is any space in the Empire State Building or in the same geographic area as the Empire State Building that is likely to be considered sufficiently comparable to the observatory for the purpose of applying the exception to related party rent described above. We have received from the IRS a private letter ruling that the rent that our operating partnership receives from Observatory TRS pursuant to the lease of the Empire State Building observatory is qualifying income for purposes of the REIT gross income tests so long as such rent reflects the fair market rental value of the Empire State Building observatory as determined by an appraisal rendered by a qualified third party appraiser.

34


In addition, our operating partnership has acquired various license agreements (i) granting certain third party broadcasters the right to use space on the tower on the top of the Empire State Building for certain broadcasting and other communication purposes and (ii) granting certain third party vendors the right to operate concession stands in the observatory. We have received from the IRS a private letter ruling that the license fees that our operating partnership receives under the license agreements described above constitute qualifying income for purposes of the REIT gross income tests.
We are entitled to rely upon these private letter rulings only to the extent that we did not misstate or omit a material fact in the ruling request and that we continue to operate in accordance with the material facts described in such request, and no assurance can be given that we will always be able to do so. If we were not able to treat the rent that our operating partnership receives from Observatory TRS as qualifying income for purposes of the REIT gross income tests, we would be required to restructure the manner in which we operate the observatory, which would likely require us to cede operating control of the observatory by leasing the observatory to an affiliate or third party operator. If we were not able to treat the license fees that our operating partnership will receive from the license agreements described above as qualifying income for purposes of the REIT gross income tests, we would be required to enter into the license agreements described above through a TRS, which would cause the license fees to be subject to U.S. federal income tax and accordingly reduce the amount of our cash flow available to be distributed to our securityholders. In either case, if we are not able to appropriately restructure our operations in a timely manner, we would likely realize significant income that does not qualify for the REIT gross income tests, which could cause us to fail to qualify as a REIT.
Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own TRSs, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
We have jointly elected with each of Observatory TRS and Holding TRS, for each of Observatory TRS and Holding TRS to be treated as a TRS under the Code for U.S. federal income tax purposes following the completion of the formation transactions. Observatory TRS, Holding TRS, and any other TRSs that we form pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income is available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification. Although we monitor the aggregate value of the securities of such TRSs and intend to conduct our affairs so that such securities will represent less than 25% of the value of our total assets, there can be no assurance that we will be able to comply with the TRS limitation in all market conditions.
Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our Class A common stock.
The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. securityholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income when paid to such securityholders. Although the reduced U.S. federal income tax rate applicable to dividend income from regular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our Class A common stock.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both

35


the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS.
The ability of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our securityholders.
Our charter provides that the board of directors may revoke or otherwise terminate our REIT election, without the approval of our securityholders, if the board determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be required to distribute any of our net taxable income to our securityholders, which may have adverse consequences on our total return to our securityholders.
We may have inherited tax liabilities from the entities that have been merged into our company or our subsidiaries in the formation transactions.
Pursuant to the formation transactions, Malkin Properties of Connecticut, Inc., a Connecticut corporation, or Malkin Properties CT, and Malkin Construction Corp., a Connecticut corporation, or Malkin Construction merged with and into a subsidiary of ours, with the subsidiary surviving, in a transaction that was intended to be treated as a reorganization under the Code. Each of Malkin Properties CT and Malkin Construction had previously elected to be treated as an S Corporation for U.S. federal income tax purposes under Section 1361 of the Code with respect to periods preceding our formation transaction. If either of Malkin Properties CT or Malkin Construction had failed to qualify as an S corporation with respect to periods preceding our formation transaction, we could have assumed material U.S. federal income tax liabilities in connection with the formation transactions and/or may be subject to certain other adverse tax consequences. In addition, to qualify as a REIT under these circumstances, we would be required to distribute, prior to the close of our first taxable year in which we elect to be taxed as a REIT under the Code, any earnings and profits of these entities to which we were deemed to succeed. No rulings from the IRS were requested and no opinions of counsel were rendered regarding the U.S. federal income tax treatment of any of Malkin Properties CT or Malkin Construction with respect to periods preceding our formation transaction. Accordingly, no assurance can be given that Malkin Properties CT or Malkin Construction qualified as an S corporation for U.S. federal income tax purposes during such periods, or that these entities did not have any other tax liabilities. In addition, the supervisor merged with a subsidiary of our operating partnership in the formation transactions, and as a result, we may have inherited any liabilities, including any tax liabilities, of the supervisor.
Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our securityholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.
Your investment has various tax risks.
Although this section describes certain tax risks relevant to an investment in shares of our Class A common stock, you should consult your tax advisor concerning the effects of U.S. federal, state, local and foreign tax laws to you with regard to an investment in shares of our Class A common stock.


ITEM 1B. UNRESOLVED STAFF COMMENTS

As of December 31, 2014, we did not have any unresolved comments with the staff of the SEC.
    


36


ITEM 2. PROPERTIES

Our Portfolio Summary
As of December 31, 2014 , our portfolio consisted of 14 office properties and six standalone retail properties totaling approximately 10.0 million rentable square feet and was approximately 88.6% occupied, yielding approximately $430.3 million of annualized rent. Giving effect to leases signed but not yet commenced, our portfolio was approximately 89.6% leased as of December 31, 2014 . In addition, we owned entitled land that will support the development of an approximately 380,000 rentable square foot office building and garage (Metro Tower) at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties. The table below presents an overview of our portfolio as of December 31, 2014 .
 
 
 
 
 
 
 
 Annualized
 
 
 
 
Rentable
 
 
 
Rent per
 
 
 
Year Built/
Square
Percent
 
Annualized
Occupied
Number of
Property Name
Location or Sub-Market
Renovated (1)
Feet (2)
Occupied (3)
 
Rent (4)
Square Foot (5)
Leases (6)
Manhattan Office Properties - Office



 



The Empire State Building (7)
Penn Station -Times Sq. South
1931/In process
2,657,171

84.4
%
 
$
103,758,255

$
46.28

187

One Grand Central Place
Grand Central
1930/In process
1,185,760

88.4
%
 
51,608,389

49.25

280

1400 Broadway (13) (15)
Penn Station -Times Sq. South
1930/In process
890,650

89.2
%
 
31,897,395

40.15

63

112 West 34th Street (14) (15)
Penn Station -Times Sq. South
1954/In process
650,828

78.8
%
 
23,425,275

45.70

31

250 West 57th Street
Columbus Circle - West Side
1921/In process
478,093

84.7
%
 
20,086,792

49.59

150

501 Seventh Avenue
Penn Station -Times Sq. South
1923/In process
456,017

95.1
%
 
18,185,475

41.93

34

1359 Broadway
Penn Station -Times Sq. South
1924/In process
446,106

97.4
%
 
19,482,497

44.86

34

1350 Broadway (8)
Penn Station -Times Sq. South
1929/In process
368,359

91.1
%
 
15,697,008

46.78

69

1333 Broadway
Penn Station -Times Sq. South
1915/In process
292,296

98.7
%
 
12,894,262

44.70

9

Manhattan Office Properties - Office

7,425,280

87.5
%
 
297,035,348

45.74

857






 



Manhattan Office Properties - Retail



 



The Empire State Building  (9)
Penn Station -Times Sq. South
1931/In process
142,586

93.4
%
 
15,438,567

115.88

17

One Grand Central Place
Grand Central
1930/In process
66,303

92.3
%
 
6,593,422

107.80

17

1400 Broadway (13) (15)
Penn Station -Times Sq. South
1930/In process
17,587

71.6
%
 
1,347,584

106.94

8

112 West 34th Street (14) (15)
Penn Station -Times Sq. South
1954/In process
92,455

97.5
%
 
3,592,267

39.87

2

250 West 57th Street
Columbus Circle - West Side
1921/In process
49,534

84.7
%
 
5,139,251

122.52

7

501 Seventh Avenue
Penn Station -Times Sq. South
1923/In process
35,495

96.4
%
 
1,912,656

55.90

9

1359 Broadway
Penn Station -Times Sq. South
1924/In process
25,123

36.0
%
 
1,250,211

138.30

5

1350 Broadway
Penn Station -Times Sq. South
1929/In process
31,714

100.0
%
 
6,336,660

199.81

6

1333 Broadway
Penn Station -Times Sq. South
1915/In process
62,666

95.6
%
 
6,683,350

111.52

4

Manhattan Office Properties - Retail

523,463

90.5
%
 
48,293,968

101.90

75

Sub-Total/Weighted Average Manhattan Office Properties - Office and Retail
7,948,743

87.7
%
 
345,329,316

49.55

932






 



Greater New York Metropolitan Area Office Properties



 



First Stamford Place (10)
Stamford, CT
1986/2003
794,589

91.4
%
 
29,925,326

41.21

53


37


Metro Center
Stamford, CT
1987/1999
282,433

96.9
%
 
15,009,846

54.85

30

383 Main Street
Norwalk, CT
1985/1996
260,255

87.2
%
 
7,354,822

32.41

20

500 Mamaroneck Avenue
Harrison, NY
1986/2004
294,772

91.7
%
 
7,834,185

28.97

35

10 Bank Street
White Plains, NY
1989/2001
229,297

86.9
%
 
7,074,508

35.49

29

Sub-Total/Weighted Average Greater New York Metropolitan Office Properties
1,861,346

91.1
%
 
67,198,687

39.61

167






 



Standalone Retail Properties



 



10 Union Square
Union Square
1988/1997
58,005

100.0
%
 
6,049,873

104.30

14

1542 Third Avenue
Upper East Side
1993 (11)
56,250

100.0
%
 
3,274,958

58.22

4

1010 Third Avenue
Upper East Side
1963/2007
44,662

100.0
%
 
3,281,277

73.47

2

77 West 55th Street
Midtown
1962 (11)
24,102

100.0
%
 
2,518,656

104.50

3

69-97 Main Street
Westport, CT
1922/2005
16,826

100.0
%
 
2,068,956

122.96

5

103-107 Main Street
Westport, CT
1900 (11)
4,330

100.0
%
 
581,040

134.19

1

Sub-Total/Weighted Average Standalone Retail Properties

204,175

100.0
%
 
17,774,760

87.06

29

Portfolio Total

10,014,264

88.6
%
 
$
430,302,763

$
48.51

1,128






 



Total/Weighted Average Office Properties

9,286,626

88.2
%
 
$
364,234,035

$
44.47

1,024

Total/Weighted Average Retail Properties  (12)

727,638

93.2
%
 
66,068,728

97.43

104

Portfolio Total

10,014,264

88.6
%
 
$
430,302,763

$
48.51

1,128


(1)
For more information regarding the status of ongoing redevelopment s at certain of our properties, see “Propertie s - R edevelopment and Repositioning”
(2)
Office property measurements are based on the Real Estate Board of New York measurement standards; retail property measurements are based on useable square feet. Excludes (i) 151,172 square feet of space across our portfolio attributable to building management use and tenant amenities and (ii) 69,757 square feet of space attributable to our observatory.
(3)
Based on leases signed and commenced as of December 31, 2014 and calculated as (i) rentable square feet less available square feet divided by (ii) rentable square feet.
(4)
Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.
(5)
Represents annualized rent under leases commenced as of December 31, 2014 divided by occupied square feet.
(6)
Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations.
(7)
Includes 86,902 rentable square feet of space leased by our broadcasting tenants.
(8)
Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to us, of approximately 36 years (expiring July 31, 2050).
(9)
Includes 5,300 rentable square feet of space leased by Host Services of New York, a licensee of our observatory.
(10)
First Stamford Place consists of three buildings.
(11)
No major redevelopment activity was undertaken at this property.
(12)
Includes 523,463 rentable square feet of retail space in our Manhattan office properties.
(13)
Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 49 years (expiring December 31, 2063).
(14)
Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 63 years (expiring May 31, 2077).
(15)
Property was acquired by the Company on July 15, 2014.


Tenant Diversification
As of December 31, 2014 , our office and retail portfolios were leased to a diverse tenant base consisting of approximately 1,128 leases. Our tenants represent a broad array of industries as follows:

38


Diversification by Industry
Percent (1)
Arts and entertainment
2.0
%
Broadcast
1.2
%
Education
0.8
%
Consumer goods
22.4
%
Financial services or real estate
18.2
%
Healthcare
1.6
%
Industrials and natural resources
1.8
%
Legal services
4.3
%
Media and advertising
3.4
%
Non-profit
2.6
%
Professional services (not including legal services)
11.4
%
Retail
13.4
%
Technology
5.1
%
Others
11.8
%
Total
100.0
%
 
 
(1)  Based on annualized rent.
 
The following table sets forth information regarding the 20 largest tenants in our portfolio based on annualized rent as of December 31, 2014 .

39


 
 
 
 
Weighted
 
Percent of
 
 
 
 
 
 
 
Average
Total
Portfolio
 
 
Percent of
 
Number
Number
 
Remaining
Occupied
Rentable
 
 
Portfolio
 
of
of
Lease
Lease
Square
Square
 
Annualized
Annualized
Tenant
Leases
Properties
Expiration (1)
Term (2)
Feet (3)
Feet (4)
 
Rent (5)
Rent (6)
Global Brands Group
3

2

 Oct. 2021-Oct. 2027
 12.8 years
698,488

7.0
%
 
$
29,079,744

6.8
%
Coty
1

1

 Jan. 2030
 15.0 years
311,242

3.1
%
 
15,501,116

3.6
%
PVH Corp.
1

1

 Oct. 2028
 13.8 years
215,988

2.2
%
 
9,213,027

2.0
%
Thomson Reuters
4

2

 Apr. 2018-Apr. 2020
4.3 years
147,208

1.5
%
 
7,615,166

1.8
%
LinkedIn
1

1

Feb. 2026
11.2 years
152,411

1.5
%
 
7,207,894

1.7
%
Li & Fung
3

1

 Oct. 2021-Oct. 2027
12.8 years
147,641

1.5
%
 
6,478,122

1.5
%
Urban Outfitters
1

1

 Sept. 2029
 14.8 years
56,730

0.6
%
 
6,200,000

1.4
%
Legg Mason
1

1

 Sept. 2024
9.8 years
138,868

1.4
%
 
6,129,370

1.4
%
Federal Deposit Insurance Corp.
1

1

 Feb 2020
5.2 years
121,879

1.1
%
 
6,037,013

1.4
%
Duane Reade/Walgreen's
3

3

Feb. 2021-Sept. 2027
12.8 years
46,976

0.5
%
 
5,897,357

1.4
%
Footlocker
2

1

Apr. 2016
1.3 years
170,187

1.7
%
 
5,377,020

1.2
%
Host Services of New York
1

1

May 2020
5.4 years
5,300

0.1
%
 
5,064,790

1.2
%
Kohl's Department Store
1

1

May 2029
14.4 years
111,834

1.1
%
 
4,404,896

1.0
%
Aeropostale
2

1

Nov. 2015-Nov. 2016
1.9 years
88,760

0.9
%
 
4,118,948

1.0
%
Odyssey Reinsurance
1

1

Sept. 2022
7.8 years
101,619

1.0
%
 
3,843,803

0.9
%
The Interpublic Group of Companies
1

1

Aug. 2024
9.6 years
86,561

0.9
%
 
3,767,237

0.9
%
Shutterstock
1

1

Sept. 2024
9.8 years
82,331

0.7
%
 
3,658,715

0.9
%
Bank of America
3

3

Apr. 2015- Feb. 2018
3.2 years
29,671

0.3
%
 
3,363,542

0.8
%
Reed Elsevier
1

1

Nov. 2019
4.9 years
96,727

0.9
%
 
3,252,809

0.8
%
Human Rights Watch
1

1

Oct. 2026
11.8 years
65,660

0.7
%
 
3,209,214

0.7
%
  Total
33





2,876,081,000

28.7
%
 
$
139,419,783

32.4
%


(1)
Expiration dates are per lease and do not assume exercise of renewal or extension options. None of these leases contain early termination options. For tenants with more than two leases, the lease expiration is shown as a range.
(2)
Represents the weighted average lease term, based on annualized rent.
(3)
Based on leases signed and commenced as of December 31, 2014 .
(4)
Represents the percentage of rentable square feet of our office and retail portfolios in the aggregate.
(5)
Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.
(6)
Represents the percentage of annualized rent of our office and retail portfolios in the aggregate.

Lease Expirations
We expect to benefit from the re-leasing of 11.6% , or approximately 861,874 rentable square feet, of our Manhattan office leases expiring through December 31, 2015, which we generally believe are currently at below-market rates. During 2012, 2013 and 2014, we have generally been obtaining higher base rents on new and renewed leases at our Manhattan office properties. These increased rents are partly due to an increase in the total rentable square footage of such space as a result of remeasurement and application of market loss factors to our space.

During the year ended December 31, 2014 , we entered into new and renewed leases at our Manhattan office properties representing approximately 621,224 rentable square feet. The last weighted average annualized fully escalated gross rent prior to the renewal or re-leasing of these leases was $40.86 per rentable square foot compared to $50.42 per rentable square foot based on the weighted average annualized contractual first monthly base rent (after free rent periods) for the

40


new and renewed leases. During the year ended December 31, 2013, we entered into new and renewed leases at our Manhattan office properties representing approximately 948,320 rentable square feet. The last weighted average annualized fully escalated gross rent prior to the renewal or re-leasing of these leases was $39.18 per rentable square foot compared to $44.54 per rentable square foot based on the weighted average annualized contractual first monthly base rent (after free rent periods) for the new and renewed leases.

The following table sets forth a summary schedule of the lease expirations for leases in place as of December 31, 2014 plus available space for each of the ten calendar years beginning with the year ending December 31, 2015 at the properties in our portfolio. The information set forth in the table assumes that tenants exercise no renewal options and all early termination rights.

All properties
 
 
 
Percent of
 
 
 
 
 
 
 
Rentable
Portfolio
 
 
Percent of
 
 Annualized
 
Number
Square
Rentable
 
 
Portfolio
 
 Rent Per
 
of Leases
Feet
Square Feet
 
Annualized
Annualized
 
 Rentable
Year of Lease Expiration
Expiring (1)
Expiring (2)
Expiring
 
Rent (3)
Rent (4)
 
 Square Foot
Available
—

1,036,926

10.3
%
 
$
—

—
%
 
$
—

Signed leases not commenced
26

108,481

1.1
%
 
—

—
%
 
—

2015
314

998,150

10.0
%
 
45,751,551

10.6
%
 
45.84

2016
147

720,912

7.2
%
 
30,719,392

7.1
%
 
42.61

2017
155

714,998

7.1
%
 
34,662,475

8.1
%
 
48.48

2018
137

777,689

7.8
%
 
35,670,139

8.3
%
 
45.87

2019
96

690,106

6.9
%
 
31,584,024

7.3
%
 
45.77

2020
82

788,814

7.9
%
 
41,307,280

9.6
%
 
52.37

2021
47

511,960

5.1
%
 
26,407,436

6.1
%
 
51.58

2022
42

419,738

4.2
%
 
23,160,205

5.4
%
 
55.18

2023
35

522,138

5.2
%
 
26,820,968

6.2
%
 
51.37

2024
30

541,677

5.4
%
 
28,216,031

6.6
%
 
52.09

Thereafter
43

2,182,675

21.8
%
 
106,003,263

24.7
%
 
48.57

Total
1,154

10,014,264

100.0
%
 
$
430,302,764

100.0
%
 
$
48.51


Manhattan Office Properties (5)  

41


 
 
 
Percent of
 
 
 
 
 
 
 
Rentable
Portfolio
 
 
Percent of
 
 Annualized
 
Number
Square
Rentable
 
 
Portfolio
 
 Rent Per
 
of Leases
Feet
Square Feet
 
Annualized
Annualized
 
 Rentable
Year of Lease Expiration
Expiring (1)
Expiring (2)
Expiring
 
Rent (3)
Rent (4)
 
 Square Foot
Available
—

855,059

11.5
%
 
$
—

—
%
 
$
—

Signed leases not commenced
18

75,986

1.0
%
 
—

—
%
 
—

2015
271

861,874

11.6
%
 
38,349,249

12.9
%
 
44.50

2016
116

468,927

6.3
%
 
20,872,910

7.0
%
 
44.51

2017
125

522,870

7.0
%
 
24,689,143

8.3
%
 
47.22

2018
97

485,645

6.5
%
 
23,506,839

7.9
%
 
48.40

2019
70

397,683

5.4
%
 
18,389,329

6.2
%
 
46.24

2020
52

515,029

6.9
%
 
22,753,483

7.7
%
 
44.18

2021
34

364,528

4.9
%
 
16,816,440

5.7
%
 
46.13

2022
26

187,639

2.5
%
 
9,618,492

3.2
%
 
51.26

2023
24

360,307

4.9
%
 
16,793,314

5.7
%
 
46.61

2024
14

336,658

4.6
%
 
15,412,628

5.2
%
 
45.78

Thereafter
28

1,993,075

26.9
%
 
89,833,522

30.2
%
 
45.07

Total
875

7,425,280

100.0
%
 
$
297,035,349

100.0
%
 
$
45.74


Greater New York Metropolitan Area Office Properties
 
 
 
Percent of
 
 
 
 
 
 
 
Rentable
Portfolio
 
 
Percent of
 
 Annualized
 
Number
Square
Rentable
 
 
Portfolio
 
 Rent Per
 
of Leases
Feet
Square Feet
 
Annualized
Annualized
 
 Rentable
Year of Lease Expiration
Expiring (1)
Expiring (2)
Expiring
 
Rent (3)
Rent (4)
 
 Square Foot
Available
—

132,343

7.1
%
 
$
—

—
%
 
$
—

Signed leases not commenced
8

32,495

1.7
%
 
—

—
%
 
—

2015
27

103,306

5.6
%
 
4,282,828

6.4
%
 
41.46

2016
16

74,533

4.0
%
 
2,993,986

4.5
%
 
40.17

2017
23

145,308

7.8
%
 
5,841,872

8.7
%
 
40.20

2018
34

266,141

14.3
%
 
9,827,780

14.6
%
 
36.93

2019
20

265,476

14.3
%
 
10,258,396

15.3
%
 
38.64

2020
19

210,119

11.3
%
 
8,229,074

12.2
%
 
39.16

2021
7

118,495

6.4
%
 
5,122,248

7.6
%
 
43.23

2022
6

168,044

9.0
%
 
6,578,957

9.8
%
 
39.15

2023
5

114,106

6.1
%
 
4,823,205

7.2
%
 
42.27

2024
2

174,448

9.4
%
 
7,063,701

10.5
%
 
40.49

Thereafter
8

56,532

3.0
%
 
2,176,640

3.2
%
 
38.50

Total
175

1,861,346

100.0
%
 
$
67,198,687

100.0
%
 
$
39.61













42


Retail (6)  
 
 
 
Percent of
 
 
 
 
 
 
 
Rentable
Portfolio
 
 
Percent of
 
 Annualized
 
Number
Square
Rentable
 
 
Portfolio
 
 Rent Per
 
of Leases
Feet
Square Feet
 
Annualized
Annualized
 
 Rentable
Year of Lease Expiration
Expiring (1)
Expiring (2)
Expiring
 
Rent (3)
Rent (4)
 
 Square Foot
Available
—

49,524

6.8
%
 
$
—

—
%
 
$
—

Signed leases not commenced
—

—

—
%
 
—

—
%
 
—

2015
16

32,970

4.5
%
 
3,119,474

4.7
%
 
94.47

2016
15

177,452

24.4
%
 
6,852,496

10.4
%
 
38.62

2017
7

46,820

6.4
%
 
4,131,460

6.3
%
 
88.24

2018
6

25,903

3.6
%
 
2,335,520

3.5
%
 
90.16

2019
6

26,947

3.7
%
 
2,936,299

4.4
%
 
108.97

2020
11

63,666

8.7
%
 
10,324,723

15.6
%
 
162.17

2021
6

28,937

4.0
%
 
4,468,748

6.8
%
 
154.43

2022
10

64,055

8.8
%
 
6,962,756

10.5
%
 
108.70

2023
6

47,725

6.6
%
 
5,204,449

7.9
%
 
109.05

2024
14

30,571

4.2
%
 
5,739,702

8.7
%
 
187.75

Thereafter
7

133,068

18.3
%
 
13,993,101

21.2
%
 
105.16

Total
104

727,638

100.0
%
 
$
66,068,728

100.0
%
 
$
97.43


The Empire State Building (7)  
 
 
 
Percent of
 
 
 
 
 
 
 
Rentable
Portfolio
 
 
Percent of
 
 Annualized
 
Number
Square
Rentable
 
 
Portfolio
 
 Rent Per
 
of Leases
Feet
Square Feet
 
Annualized
Annualized
 
 Rentable
Year of Lease Expiration
Expiring (1)
Expiring (2)
Expiring
 
Rent (3)
Rent (4)
 
 Square Foot
Available
—

373,367

14.1
%
 
$
—

—
%
 
$
—

Signed leases not commenced
6

41,796

1.6
%
 
—

—
%
 
—

2015
43

216,616

8.2
%
 
9,433,984

9.1
%
 
43.55

2016
16

76,060

2.9
%
 
3,387,163

3.3
%
 
44.53

2017
24

82,276

3.1
%
 
4,355,598

4.2
%
 
52.94

2018
23

92,923

3.5
%
 
4,113,765

4.0
%
 
44.27

2019
14

62,989

2.4
%
 
2,955,249

2.8
%
 
46.92

2020
21

250,411

9.4
%
 
11,300,880

10.9
%
 
45.13

2021
11

83,520

3.1
%
 
3,926,672

3.8
%
 
47.01

2022
11

48,869

1.8
%
 
2,386,718

2.3
%
 
48.84

2023
7

35,699

1.3
%
 
1,899,009

1.8
%
 
53.20

2024
7

140,386

5.3
%
 
6,853,793

6.6
%
 
48.82

Thereafter
10

1,152,259

43.3
%
 
53,145,424

51.2
%
 
46.12

Total
193

2,657,171

100.0
%
 
$
103,758,255

100.0
%
 
$
46.28


(1)
If a lease has two different expiration dates, it is considered to be two leases (for the purposes of lease count and square footage).
(2)
Office property measurements are based on Real Estate Board of New York measurement standards; retail property measurements are based on useable square feet. Excludes (i) 151,172 rentable square feet across our portfolio attributable to building management use and tenant amenities and (ii) 69,757 square feet of space attributable to our observatory.
(3)
Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.
(4)
Represents the percentage of annualized rent of our office and retail portfolios in the aggregate.
(5)
Excludes (i) retail space in our Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations.
(6)
Includes an aggregate of 523,463 rentable square feet of retail space in our Manhattan office properties. Excludes the Empire State Building broadcasting licenses and observatory operations.
(7)
Excludes retail space, broadcasting licenses and observatory operations.

43


Undeveloped Properties
We own entitled land that will support the development of a 17-story, multi-tenanted commercial office building that is expected to comprise approximately 380,000 rentable square feet on 13 floors of office space, which we refer to as Metro Tower. The site is directly adjacent to Metro Center, one of our office properties, and the Stamford Transportation Center. All required zoning approvals have been obtained to allow for development of Metro Tower.
Redevelopment and Repositioning

From 20 02 through 2006, we gradually gained full control of the day-to-day management of our Manhattan office properties (with the estate of Leona M. Helmsley previously holding certain approval rights at some of these properties as a result of its interest in the entities owning the properties). Since then, we have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties. Since we assumed full control of the day-to-day management of our Manhattan office properties beginning with One Grand Central Place in 2002, and through December 31, 2014 , we have invested a total of approximately $594.0 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties pursuant to this program. The $594.0 million includes amounts invested at our recently acquired properties, 1400 Broadway and 112 West 34th Street. Of the $594.0 million invested pursuant to this program, $291.0 million was invested at the Empire State Building. We currently estimate that between $75.0 million and $115.0 million of capital is needed beyond 2014 to complete substantially the redevelopment and repositioning program at our Manhattan office properties. We expect the redevelopment program at the Empire State Building to continue until the end of 2016 due to the size and scope of our remaining work and our desire to minimize tenant disruptions from certain aspects of the program at the property. These estimates are based on our current budgets (which do not include tenant improvement and leasing commission costs) and are subject to change.

We intend to fund these capital improvements through a combination of operating cash flow and borrowings. These improvements, within our redevelopment and repositioning program, include restored, renovated and upgraded or new lobbies; elevator modernization; renovated public areas and bathrooms; refurbished or new windows; upgrade and standardization of retail storefront and signage; façade restorations; modernization of building-wide systems; and enhanced tenant amenities. These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy; raise our rental rates; increase our rentable square feet; increase our aggregate rental revenue; lengthen our average lease term; increase our average lease size; and improve our tenant credit quality. We have also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants and to offer new, pre-built suites with improved layouts. This strategy has shown what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future. We believe we will continue to enhance our tenant base and improve rents as our pre-redevelopment leases continue to expire and be re-leased.


ITEM 3. LEGAL PROCEEDINGS
Please see Footnote 10 “Commitments and Contingencies” to the financial statements on page F-32 of this Annual Report in Form 10-K for a description of such legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.


44


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information
Our Class A common stock is listed on the New York Stock Exchange (the "NYSE"), under the symbol "ESRT." Our Class B common stock is not listed on any exchange and is not traded. Each share of Class B common stock may be converted to one share of Class A common stock at any time.
Our operating partnership has four series of partnership units ("OP Units") - Series PR OP Units, Series ES OP Units, Series 60 OP Units and Series 250 OP Units. The Series ES OP Units, Series 60 OP Units and Series 250 OP Units (together the "traded OP units") are listed on the NYSE Arca, Inc. exchange ("NYSE Arca") under the symbols "ESBA," "OGCP," and "FISK," respectively. The Series PR OP Units are not listed on any exchange and are not traded.
On February 23, 2015, the last sales price for our Class A common stock on the NYSE was $17.99 per share.
The following table sets forth the high and low sales prices per share of our Class A common stock reported on the NYSE and the distributions declared and paid by us during the calendar quarters of 2014 and 2013:
 
Class A common stock
 
 
 
"ESRT"
 
Dividend
Quarter Ended
High
Low
 
Per Share
December 31, 2014
$18.10
$14.72
 
$0.0850
September 30, 2014
$16.80
$14.86
 
$0.0850
June 30, 2014
$17.34
$14.60
 
$0.0850
March 31, 2014
$15.53
$14.08
 
$0.0850
 
 
 
 
 
December 31, 2013
$15.61
$12.65
 
$0.0795

Our Class A common stock began trading on the NYSE on October 2, 2013. As a result, we have not set forth quarterly information with respect to the high and low sales prices for our Class A common stock and the dividends declared on our Class A common stock for the periods prior to October 2, 2013. Prior to that time there was no public market for our Class A common stock.
Holders
As of February 23, 2015, we had 568 registered holders of our Class A common stock and 829 registered holders of our Class B common stock. As of February 23, 2015, our operating partnership had 897 registered holders of Series PR OP Units, 2,682 registered holders of Series ES OP Units, 866 registered holders of Series 60 OP Units and 602 registered holders of Series 250 OP Units. Such information was obtained through our registrar and transfer agent. Certain shares of common stock and OP Units are held in "street" name and accordingly, the number of beneficial owners of such shares of common stock and OP Units is not known or included in the foregoing number.
Dividends
We intend to pay regular quarterly dividends to holders of our Class A common stock and Class B common stock. Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations. Our actual results of operations will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. Distributions declared by us will be authorized by our board of directors in its sole discretion out of funds legally available therefore and will be dependent upon a number of factors, including restrictions under applicable law, the capital requirements of our company and the distribution requirements necessary to maintain our qualification as a REIT. See Item 1A, "Risk Factors," and Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations," of this Annual Report on Form 10-K, for information regarding

45


the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to make distributions to our securityholders.
During 2014 and 2013, we declared the following quarterly dividends on our Class A common stock and Class B common stock:
Declaration Date
 
Record Date
 
Payment Date
 
Amount per Share
December 1, 2014
 
December 15, 2014
 
December 31, 2014
 
$0.0850
September 2, 2014
 
September 15, 2014
 
September 30, 2014
 
$0.0850
May 22, 2014
 
June 13, 2014
 
June 30, 2014
 
$0.0850
February 21, 2014
 
March 14, 2014
 
March 31, 2014
 
$0.0850
 
 
 
 
 
 
 
December 5, 2013
 
December 16, 2013
 
December 30, 2013
 
$0.0795

Earnings and profits, which determine the tax treatment of distributions to securityholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes, including, but not limited to, treatment of loss on extinguishment of debt, revenue recognition, compensation expense, and basis of depreciable assets and estimated useful lives used to compute depreciation. The 2014 dividends of $0.34 per share are classified for income tax purposes as 100.0% taxable ordinary dividends.
Stockholder Return Performance
The following graph is a comparison of the cumulative total stockholder return on our Class A common stock, the Standard & Poor's 500 Index (the "S&P 500 Index"), the NAREIT All Equity Index (the "NAREIT All Equity Index") and the NAREIT Office Index ("NAREIT Office Index"). The graph assumes that $100.00 was invested on October 7, 2013 and dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.

46


 
October 7, 2013
 
December 31, 2013
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
Empire State Realty Trust, Inc.
$
100.00

 
$
115.77

 
$
114.99

 
$
126.22

 
$
115.50

 
$
135.85

S&P 500 Index
$
100.00

 
$
110.84

 
$
112.84

 
$
118.75

 
$
120.09

 
$
126.01

NAREIT All Equity Index
$
100.00

 
$
99.83

 
$
108.33

 
$
116.05

 
$
113.17

 
$
127.81

NAREIT Office Index
$
100.00

 
$
100.71

 
$
112.01

 
$
118.62

 
$
112.46

 
$
126.75

The graph shall not be deemed incorporated by reference by any general statement of incorporation by reference in any filing made under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act" and, together with the Securities Act, the "Acts"), and shall not otherwise be deemed filed under such Acts.
Securities Authorized For Issuance Under Equity Compensation Plans
During 2013, we adopted our Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2013 Equity Incentive Plan (the "Plan"). The Plan provides for grants of stock options, shares of restricted Class A common stock, dividend equivalent rights and other equity-based awards, including LTIP Units, up to an aggregate of 5% of the issued and outstanding shares of our Class A common stock as of the last closing date of the exercise of the underwriters' option to purchase additional shares in the Offering (on a fully diluted basis). For a further discussion of the Plan, see Note 11 to the consolidated and combined financial statements included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
The following table presents certain information about our equity compensation plans as of December 31, 2014 :

47


 
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
Weighted-average exercise price of outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plan Category
 
 
 
Equity compensation plans approved by securityholders
 
N/A
 
N/A
 
10,682,451

Equity compensation plans not approved by securityholders
 
—

 
—

 
—

Total
 
N/A
 
N/A
 
10,682,451


As of December 31, 2014 , we issued 152,361 shares of restricted stock and 1,385,703 LTIP units under the Plan.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
None.

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data" and Item 7, "Management's

48


Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K.
 
The Company
 
The Predecessor
 
Year Ended December 31, 2014
 
October 7, through December 31, 2013
 
January 1, through October 6, 2013
 
Year Ended December 31,
(amounts in thousands, except per share data)
 
 
 
2012
 
2011
 
2010
Operating Data
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
635,326

 
$
127,583

 
$
206,072

 
$
260,294

 
$
294,788

 
$
246,545

Operating expenses:
 
 

 

 

 
 
 
 
Property operating expenses
151,048

 
34,055

 
41,297

 
55,707

 
57,102

 
60,356

Ground rent expenses
5,339

 
398

 
—

 
—

 
—

 
—

Marketing, general, and administrative expenses
39,037

 
16,379

 
23,600

 
20,963

 
15,688

 
27,581

Observatory expenses
29,041

 
5,687

 
—

 
—

 
—

 
—

Construction expenses
38,596

 
5,468

 
19,821

 
19,592

 
46,230

 
13,924

Real estate taxes
82,131

 
17,191

 
24,331

 
30,406

 
29,160

 
27,585

Formation transaction expenses
—

 
—

 
4,507

 
2,247

 
2,845

 
807

Acquisition expenses
3,382

 
138,140

 
—

 
—

 
—

 
—

Depreciation and amortization
145,431

 
27,375

 
38,963

 
42,690

 
35,513

 
34,041

Total operating expenses
494,005

 
244,693

 
152,519

 
171,605

 
186,538

 
164,294

Operating income (loss)
141,321

 
(117,110
)
 
53,553

 
88,689

 
108,250

 
82,251

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Equity in net income of non-controlled entities
—

 
—

 
14,875

 
14,348

 
3,893

 
15,324

Interest expense
(66,456
)
 
(13,147
)
 
(50,660
)
 
(54,394
)
 
(54,746
)
 
(52,264
)
Settlement expense
—

 
—

 
(55,000
)
 
—

 
—

 
—

Gain on consolidation of non-controlled entities
—

 
322,563

 
—

 
—

 
—

 
—

Income (loss) before income taxes
74,865

 
192,306

 
(37,232
)
 
48,643

 
57,397

 
45,311

Income tax (expense) benefit
(4,655
)
 
1,125

 
—

 
—

 
—

 
—

Net income (loss)
70,210

 
193,431

 
$
(37,232
)
 
$
48,643

 
$
57,397

 
$
45,311

Private perpetual preferred unit distributions
(476
)
 
—

 
—

 
—

 
—

 
—

Net income attributable to non-controlling interests
(43,067
)
 
(118,186
)
 
—

 
—

 
—

 
—

Net income (loss) attributable to the predecessor
—

 
—

 
37,232

 
(48,643
)
 
(57,397
)
 
(45,311
)
Net income attributable to common stockholders
$
26,667

 
$
75,245

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Dividends and distributions declared and paid per share
$
0.34

 
$
0.0795

 
 
 
 
 
 
 
 
Net income per share attributable to common stockholders
 - basic and diluted
$
0.27

 
$
0.79

 
 
 
 
 
 
 
 
Total weighted average shares - basic
97,941

 
95,463

 
 
 
 
 
 
 
 
Total weighted average shares - diluted
254,506

 
244,420

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate properties, at cost
$
2,139,863

 
$
1,649,423

 
 
 
$
939,330

 
$
856,151

 
$
796,008

Total assets
$
3,296,495

 
$
2,476,061

 
 
 
$
1,052,553

 
$
1,004,971

 
$
910,743

Mortgages and other loans payable, term loan and credit facility and senior unsecured notes
$
1,611,652

 
$
1,208,112

 
 
 
$
996,489

 
$
939,705

 
$
869,063

Equity
$
1,381,097

 
$
1,003,185

 
 
 
$
—

 
$
—

 
$
—

Predecessor owners' equity (deficit)
$
—

 
$
—

 
 
 
$
(10,859
)
 
$
1,294

 
$
(11,565
)
 
 
 
 
 
 
 
 
 
 
 
 
Other Data
 
 
 
 
 
 
 
 
 
 
 
Funds from operations (1)
$
214,849

 
$
220,783

 
$
7,432

 
$
97,943

 
$
99,761

 
$
85,020

Modified funds from operations (2)
$
219,452

 
$
221,181

 
$
7,432

 
$
97,943

 
$
99,761

 
$
85,020

Core funds from operations (3)
$
227,422

 
$
41,793

 
$
62,432

 
$
97,943

 
$
99,761

 
$
85,020

Net cash (used in) provided by operating activities
$
138,558

 
$
(131,927
)
 
$
73,381

 
$
94,353

 
$
47,682

 
$
73,574

Net cash used in investing activities
$
(299,057
)
 
$
(620,307
)
 
$
(56,450
)
 
$
(108,281
)
 
$
(60,527
)
 
$
(34,837
)
Net cash provided by (used in) financing activities
$
145,488

 
$
696,017

 
$
48,530

 
$
(20,889
)
 
$
11,130

 
$
(44,793
)
______________

49


(1)
We compute Funds From Operations ("FFO") in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another. For a reconciliation of FFO, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations."
(2)
Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the third quarter 2014 acquisition of the two option properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.
(3)
Core FFO adds back to traditionally defined FFO the following items associated with our initial public offering, or IPO, and formation transactions: gain on consolidation of non-controlling entities, acquisition expenses, severance expenses and retirement equity compensation expenses. It also adds back private perpetual preferred exchange offering expenses, acquisition expenses, prepayment penalty and deferred financing costs write-off and gain on settlement of lawsuit related to the Observatory, net of income taxes and ground lease amortization. We present Core FFO because we consider it an important supplemental measure of our operating performance in that it excludes items associated with the Offering and formation transactions. There can be no assurance that Core FFO presented by us is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. For a reconciliation of Core FFO, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Core Funds from Operations."


50



ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Section. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. In particular, statements pertaining to our capital resources, portfolio performance, dividend policy and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our portfolio from operations, acquisitions and anticipated market conditions, demographics and results of operations are forward-looking statements. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• the factors included in this Annual Report on Form 10-K, including those set forth under the heading "Business," Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations";
• changes in our industry and changes in the real estate markets in particular, either nationally or in Manhattan or the greater New York metropolitan area;
• resolution of the litigations and arbitration involving our company;
• reduced demand for office or retail space;
• changes in our business strategy;
• defaults on, early terminations of or non-renewal of leases by tenants;
• bankruptcy or insolvency of a major tenant or a significant number of smaller tenants;
• litigation;
• fluctuations in interest rates and increased operating costs;
• declining real estate valuations and impairment charges;
• availability, terms and deployment of capital;
• our failure to obtain necessary outside financing;
• our expected leverage;
• decreased rental rates or increased vacancy rates;
• breach of or the expiration of our ground leases;
• our failure to generate sufficient cash flows to service our outstanding indebtedness;
• our failure to redevelop and reposition properties successfully or on the anticipated timeline or at the anticipated costs;
• risks of real estate acquisitions, dispositions and development (including our Metro Tower development site), including the cost of construction delays and cost overruns;
• our failure to operate acquired properties and operations successfully;
• our ability to manage our growth effectively;
• estimates relating to our ability to make distributions to our securityholders in the future;
• our failure to qualify as a REIT;
• a future terrorist event in the U.S.;
• environmental uncertainties and risks related to adverse weather conditions and natural disasters;
• lack or insufficient amounts of insurance;
• financial market fluctuations;
• availability of and our ability to attract and retain qualified personnel;
• changes in real estate and zoning laws and increases in real property tax rates; and
• our ability to comply with the laws, rules and regulations applicable to companies and, in particular, public companies.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying

51


assumptions or factors, of new information, data or methods, future events or other changes after the date of this Annual Report on Form 10-K, except as required by applicable law. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled “Risk Factors" beginning on page 12 of this Annual Report on Form 10-K. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us.    
Overview
Unless the context otherwise requires or indicates, references in this section to "we," "our" and "us" refer to (i) our company and its consolidated subsidiaries (including our operating partnership) after giving effect to our initial public offering, or the Offering, and the formation transactions and (ii) our predecessor before giving effect to the Offering and the formation transactions.
With the completion of the Offering and the formation transactions, the historical operations of our predecessor and the properties that have been operated through our predecessor, were combined with our company, our operating partnership and/or their subsidiaries. The following discussion and analysis should be read in conjunction with "Selected Financial Data," and our consolidated financial statements as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 and the notes related thereto which are included in this Annual Report on Form 10-K.     

•
Achieved Core FFO of $227.4 million, or $0.89 per fully diluted share, and net income attributable to common stockholders of $26.7 million, or $0.27 per fully diluted share;
•
Executed 239 leases, representing 784,801 rentable square feet across the total portfolio, achieving a 20.2% increase in mark-to-market rent over previously fully escalated rents on new, renewal, and expansion leases; 181 of these leases, representing 621,224 rentable square feet, were within the Manhattan office portfolio capturing a 23.4% increase in mark-to-market rent over previously fully escalated rents on new, renewal and expansion leases;
•
Signed 98 new leases representing 457,052 rentable square feet in 2014 for the Manhattan office portfolio (excluding the retail component of these properties), achieving an increase of 31.5% in mark-to-market rent over expired previously fully escalated rents;
•
Acquired the ground and operating leases at 112 West 34th Street and the ground lease at 1400 Broadway for a total of approximately $734 million in assumption of debt, cash, common stock and operating partnership units;
•
The Empire State Building Observatory revenue grew 9.5% to $111.5 million, from $101.8 million in 2013; and
•
Declared and paid aggregate dividends of $0.34 per share and operating partnership unit during 2014.
As of December 31, 2014 , our total portfolio, containing 10.0 million rentable square feet of office and retail space, was 88.6% occupied. Including signed leases not yet commenced, our total portfolio was 89.6% leased at December 31, 2014 . Our Manhattan area office properties were 87.5% occupied (or 88.5% giving effect to leases signed but not yet commenced as of that date) and our greater New York metropolitan area office properties were 91.1% occupied (or 92.9% giving effect to leases signed but not yet commenced as of that date). Our office properties as a whole were 88.2% occupied (or 89.4% giving effect to leases signed but not yet commenced as of that date). Our ability to increase occupancy and rental revenue at our office properties depends on the successful completion of our repositioning program as described below and market conditions. The other component of our real estate segment, retail leasing, comprises both standalone retail properties and retail space in our Manhattan office properties. Our retail properties, including retail space in our Manhattan office properties, were 93.2% occupied (or 93.2% giving effect to leases signed but not yet commenced as of that date) as of December 31, 2014 .
The Empire State Building is our flagship property. The Empire State Building provides us with a diverse source of revenue through its office and retail leases, observatory operations and broadcasting licenses, and related leased space. During the years ended December 31, 2014 and 2013, respectively, we generated approximately $171.8 million and $140.1 million of revenue from the Empire State Building, excluding observatory operations. During the years ended December 31, 2014 and 2013, the observatory operations of the Empire State Building generated revenue of approximately $111.5 million and $101.8 million , respectively, of revenue from its observatory operations. Our observatory operations is a separate accounting segment following the Offering and related formation transactions. Our observatory operations are subject to regular patterns of tourist activity in Manhattan. During the past ten years of our annual observatory revenue, approximately 16% to 18% was realized in

52


the first quarter, 26.0% to 28.0% was realized in the second quarter, 31.0% to 33.0% was realized in the third quarter, and 23.0% to 25.0% was realized in the fourth quarter. The components of the Empire State Building revenue are as follows:
 
Year Ended December 31,
 
2014
 
2013
Office leases
37.4
%
 
33.8
%
Retail leases
3.4
%
 
4.0
%
Tenant reimbursements & other income
12.5
%
 
11.8
%
Observatory operations
39.4
%
 
42.1
%
Broadcasting licenses
7.3
%
 
8.3
%
Total
100.0
%
 
100.0
%
From 20 02 through 2006, we gradually gained full control of the day-to-day management of our Manhattan office properties (with the estate of Leona M. Helmsley previously holding certain approval rights at some of these properties as a result of its interest in the entities owning the properties). Since then, we have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties. Since we assumed full control of the day-to-day management of our Manhattan office properties beginning with One Grand Central Place in 2002, and through December 31, 2014 , we have invested a total of approximately $594.0 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties pursuant to this program. The $594.0 million includes amounts invested at our recently acquired properties, 1400 Broadway and 112 West 34th Street. Of the $594.0 million invested pursuant to this program, $291.0 million was invested at the Empire State Building. We currently estimate that between $75.0 million and $115.0 million of capital is needed beyond 2014 to complete substantially the redevelopment and repositioning program at our Manhattan office properties. We expect the redevelopment program at the Empire State Building to continue until the end of 2016 due to the size and scope of our remaining work and our desire to minimize tenant disruptions at the property. These estimates are based on our current budgets (which do not include tenant improvement and leasing commission costs) and are subject to change.

We intend to fund these capital improvements through a combination of operating cash flow and borrowings. These improvements, within our redevelopment and repositioning program, include restored, renovated and upgraded or new lobbies; elevator modernization; renovated public areas and bathrooms; refurbished or new windows; upgrade and standardization of retail storefront and signage; façade restorations; modernization of building-wide systems; and enhanced tenant amenities. These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy; raise our rental rates; increase our rentable square feet; increase our aggregate rental revenue; lengthen our average lease term; increase our average lease size; and improve our tenant credit quality. We have also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants and to offer new, pre-built suites with improved layouts. This strategy has shown what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future. We believe we will continue to enhance our tenant base and improve rents as our pre-redevelopment leases continue to expire and be re-leased.
As of December 31, 2014 , excluding principal amortization, we have approximately $44.1 million of debt maturing in 2015 and no maturities in 2016, and we have total debt outstanding of approximately $1.6 billion , with a weighted average interest rate of 3.55% and a weighted average maturity of 3.6 years and 62.2% of which is fixed-rate indebtedness.

Results of Operations
Overview
The discussion below relates to the financial condition and results of operations for the years ended December 31, 2014, 2013, and 2012. The results of operations for January 1, 2013 through October 6, 2013 (predecessor) and October 7, 2013 through December 31, 2013 (company) have been combined to provide a meaningful comparison to the results of operations for the years ended December 31, 2014 and December 31, 2012.
Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013
The following table summarizes the historical results of operations for the years ended December 31, 2014 and 2013:

53


 
Year Ended December 31,
 
 
 
 
 
2014
 
2013
 
Change
 
%
Revenues:
 
 
 
 
 
 
 
Rental revenue (1)
$
400,825

 
$
228,677

 
$
172,148

 
75.3
 %
Tenant expense reimbursement
67,651

 
37,108

 
30,543

 
82.3
 %
Observatory revenue
111,541

 
23,735

 
87,806

 
369.9
 %
Construction revenue
38,648

 
23,901

 
14,747

 
61.7
 %
Third-party management and other fees
2,376

 
5,617

 
(3,241
)
 
(57.7
)%
Other revenues and fees
14,285

 
14,617

 
(332
)
 
(2.3
)%
Total revenues
635,326

 
333,655

 
301,671

 
90.4
 %
Operating expenses:
 
 
 
 

 
 
Property operating expenses
151,048

 
75,352

 
75,696

 
100.5
 %
Ground rent expenses
5,339

 
398

 
4,941

 
1,241.5
 %
Marketing, general and administrative expenses
39,037

 
39,979

 
(942
)
 
(2.4
)%
Observatory expenses
29,041

 
5,687

 
23,354

 
410.7
 %
Construction expenses
38,596

 
25,289

 
13,307

 
52.6
 %
Real estate taxes
82,131

 
41,522

 
40,609

 
97.8
 %
Formation transaction expenses
—

 
4,507

 
(4,507
)
 
(100.0
)%
Acquisition expenses
3,382

 
138,140

 
(134,758
)
 
(97.6
)%
Depreciation and amortization
145,431

 
66,338

 
79,093

 
119.2
 %
Total operating expenses
494,005

 
397,212

 
96,793

 
24.4
 %
Operating income (loss)
141,321

 
(63,557
)
 
204,878

 
(322.4
)%
Other income (expense):
 
 
 
 

 
 
Equity in net income of non-controlled entities
—

 
14,875

 
(14,875
)
 
(100.0
)%
Interest expense
(66,456
)
 
(63,807
)
 
(2,649
)
 
4.2
 %
Settlement expense
—

 
(55,000
)
 
55,000

 
(100.0
)%
Gain on consolidation of non-controlled entities
—

 
322,563

 
(322,563
)
 
(100.0
)%
Income before income taxes
74,865

 
155,074

 
(80,209
)
 
(51.7
)%
Income tax (expense) benefit
(4,655
)
 
1,125

 
(5,780
)
 
(513.8
)%
Net income
70,210

 
156,199

 
(85,989
)
 
(55.1
)%
Private perpetual preferred unit distributions
(476
)
 
—

 
(476
)
 
(2)  

Net income attributable to non-controlling interests
(43,067
)
 
(118,186
)
 
75,119

 
(63.6
)%
Net income attributable to Predecessor
—

 
37,232

 
(37,232
)
 
(100.0
)%
Net income attributable to common shareholders
$
26,667

 
$
75,245

 
$
(48,578
)
 
(64.6
)%
_______________
(1)
Includes $26,300 of leasehold rent for the year ended December 31, 2013.
(2)
Not meaningful.
 
Rental Revenue
The increase in rental revenue income was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased rental revenue by $134.2 million and by the acquisition of two properties during July 2014 which contributed $33.2 million. Remaining increase is primarily due to higher occupancies and higher rental rates.
Tenant Expense Reimbursement
The increase in tenant expense reimbursement is primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased tenant expense reimbursement by $25.2 million and the acquisition of two properties during July 2014 which contributed $4.2 million. Remaining increase is primarily due to increased reimbursements related to higher utility expenses and real estate taxes.

54


Observatory Revenue
Observatory revenue increased by $87.8 million and is attributable to the acquisition of the observatory operations from the non-controlled entity Empire State Building Company, L.L.C., upon the completion of the Offering and related formation transactions on October 7, 2013, and the operations of the observatory are now included in our consolidated results. On a non-consolidated basis, observatory revenue increased $9.7 million due to higher ticket prices.
Construction Revenue
The increase in construction revenue is attributable to a larger volume of significant construction projects during the year ended December 31, 2014 compared to the year ended December 31, 2013. The increase in the number of projects is primarily due to the timing of the short duration projects.
Third-Party Management and Other Fees
The decrease in third party management and other fees revenue is primarily due to acquisition of the four non-controlled entities upon completion of the Offering and related formation transactions on October 7, 2013 and of 1400 Broadway and 112 West 34th Street, the two option properties, on July 15, 2014 and the subsequent elimination of fees due to consolidation of these properties.
Other Revenues and Fees
The decrease in other revenues and fees was primarily due to 2013 income received as a voluntary reimbursement of legal expenses previously incurred which was partially offset by higher lease cancellation income earned in 2014.
Property Operating Expenses
The increase in property operating expenses is primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased property operating expenses by $67.2 million and by the acquisition of two properties during July 2014 which increased property operating expenses by $7.2 million.
Ground Rent Expenses
Ground rent expenses include $1.3 million from the acquisition of one of the non-controlled properties upon completion of the Offering and related formation transactions on October 7, 2013 and $3.6 million of ground rent expenses from the two properties acquired during July 2014.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses decreased due to lower professional fees incurred in the year ended December 31, 2014. Professional fees in the year ended December 31, 2013 were $7.7 million higher due to non-capitalizable costs associated with the consolidation and the Offering. This was partially offset by 2014 private perpetual preferred exchange offering costs of $1.4 million, higher marketing expenses of $1.0 million and higher corporate-related expenses in 2014.
Observatory Expenses
Observatory expenses increased by $23.4 million and is attributable to the acquisition of the observatory operations from the non-controlled entity Empire State Building Company, L.L.C., upon the completion of the Offering and related formation transactions on October 7, 2013, and the operations of the observatory are now included in our consolidated results. On a non-consolidated basis, observatory expenses increased $4.7 million due to higher audio tour payroll and higher advertising and legal expenses.
Construction Expenses
The construction expenses increase correlates with the increase in the new construction projects as noted above in Construction Revenue.
Real Estate Taxes
The increase in real estate taxes is primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased real estate taxes by

55


$33.9 million and by the acquisition of two properties during July 2014 which increased real estate taxes by $5.1 million. Remaining increase is primarily due to higher assessments or tax rates, or both, at the existing properties.
Acquisition and Formation Transaction Expenses
Acquisition and formation transaction expenses decreased by $139.3 million due to the completion of the formation transactions in 2013. Acquisition expenses in 2014 are related to the acquisition of the option properties.
Depreciation and Amortization
The increase in depreciation and amortization is primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased depreciation and amortization by $58.9 million and by the acquisition of two properties during July 2014 which increased depreciation and amortization by $19.8 million.
Interest Expense
Interest expense increased due to higher principal balances as a result of the acquisition of the non-controlled properties upon completion of the Offering and related formation transaction on October 7, 2013, the acquisition of the option properties during July 2014, the issuance of senior unsecured notes in August 2014 and capital expenditures related to leasing costs and our renovation and redevelopment programs.  The costs of the higher principal balances were offset by our ability to refinance debt at lower interest rates and lower interest costs.  Interest expense for the year ended December 31, 2014 included $3.8 million for prepayment penalties and deferred finance cost write-off related to the early refinancing of the Metro Center mortgage loan. 

Settlement Expense
Settlement expense of $55.0 million reflects costs associated with the settlement of litigation during the year ended December 31, 2013. On September 28, 2012, a Stipulation of Settlement resolving the Original Class Actions was entered into. The terms of the settlement included, amongst other things, a payment of $55.0 million, with a minimum of 80% in cash and a maximum of 20% in freely-tradable shares of common stock and/or operating partnership units. As the payment was fully made by the principal owners of certain predecessor entities, $55.0 million was recorded as settlement expense in our predecessor's statement of operations, with a corresponding $55.0 million capital contribution to our predecessor at that time.

Gain on Consolidation of Non-controlled Entities
The gain on consolidation of non-controlled entities in 2013 reflects gains associated with the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013. The gain is primarily a result of the fair value exceeding the book value of our predecessor ownership interests in the four non-controlled entities plus the elimination of the intercompany ground and building leases.
Income taxes
Income taxes increased due to taxable income activities within our TRSs, primarily taxable income related to our Observatory operations, third party management fees, construction income, and certain cleaning income.

Private Perpetual Preferred Unit Distributions
Represents distributions to holders of private perpetual preferred units.

Net Income Attributable to Non-controlling Interests
The variance reflects lower income attributable to non-controlled interests in 2014. 2013 net income attributable to non-controlled interests included their share of 2013 gain on consolidation of non-controlled entities.


Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012
The following table summarizes the historical results of operations of our predecessor for years ended December 31, 2013 and 2012 (amounts in thousands):


56


 
Year Ended December 31,
 
 
 
 
2013
 
2012
 
Change
%
Revenues:
 
 
 
 
 
 
Rental revenue ( 1)  
$
228,677

 
$
196,187

 
$
32,490

16.6
 %
Tenant expense reimbursement
37,108

 
29,483

 
7,625

25.9
 %
Observatory revenue
23,735

 
—

 
23,735

(2)  

Construction revenue
23,901

 
18,902

 
4,999

26.4
 %
Third-party management and other fees
5,617

 
5,103

 
514

10.1
 %
Other revenues and fees
14,617

 
10,619

 
3,998

37.6
 %
Total revenues
333,655

 
260,294

 
73,361

28.2
 %
Operating expenses:
 
 
 
 
 


Property operating expenses
75,352

 
55,707

 
19,645

35.3
 %
Ground rent expenses
398

 
—

 
398

(2)  

Marketing, general and administrative expenses
39,979

 
20,963

 
19,016

90.7
 %
Observatory expenses
5,687

 
—

 
5,687

(2)  

Construction expenses
25,289

 
19,592

 
5,697

29.1
 %
Real estate taxes
41,522

 
30,406

 
11,116

36.6
 %
Formation transaction expenses
4,507

 
2,247

 
2,260

100.6
 %
Acquisition expenses
138,140

 
—

 
138,140

(2)  

Depreciation and amortization
66,338

 
42,690

 
23,648

55.4
 %
Total operating expenses
397,212


171,605

 
225,607

131.5
 %
Operating (loss) income
(63,557
)
 
88,689

 
(152,246
)
(171.7
)%
Other income (expense):
 
 
 
 



Equity in net income of non-controlled entities
14,875

 
14,348

 
527

3.7
 %
Interest expense
(63,807
)
 
(54,394
)
 
(9,413
)
17.3
 %
Settlement expense
(55,000
)
 
—

 
(55,000
)
(2)  

Gain on consolidation of non-controlled entities
322,563

 
—

 
322,563

(2)  

Income before income taxes
155,074

 
48,643

 
106,431

218.8
 %
Income tax benefit
1,125

 
—

 
1,125

(2)  

Net income
156,199

 
48,643

 
107,556

221.1
 %
Net income attributable to non-controlling interests
(118,186
)
 
—

 
(118,186
)
(2)  

Net loss (income) attributable to the Predecessor
37,232

 
(48,643
)
 
85,875

(176.5
)%
Net income attributable to common shareholders
$
75,245

 
$
—

 
$
75,245

(2)  

__________________
(1) Includes $26,300 and $39,415 of leasehold rent for the years ended December 31, 2013 and 2012, respectively.
(2) Not meaningful.

Rental Revenue
The increase rental revenue income was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased rental revenue by $43.3 million, offset by the reduction of overage rent at the Empire State Building, which decreased rental revenue by $13.3 million, due to the acquisition and consolidation of this property.
Tenant Expense Reimbursement
The increase tenant expense reimbursement was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased tenant expense reimbursement by $9.3 million, offset by decreased electric income of $2.3 million primarily due to new tenants generally having their space metered resulting in lower profit margins on electric than previous tenants billed on a non-metered basis.
Observatory Revenue

57


Observatory revenue increased by $23.7 million and was attributable to the acquisition of the observatory operations from the non-controlled entity Empire State Building Company, L.L.C., upon the completion of the Offering and related formation transactions on October 7, 2013, and the operations of the observatory are now included in our consolidated results.
Construction Revenue
The increase in construction revenue was attributable to a higher number of construction projects during the year ended December 31, 2013 compared to the year ended December 31, 2012.
Third-Party Management and Other Fees
The increase in third-party management and other fees was primarily attributable to additional income from professional services performed of $0.4 million.
Other Revenues and Fees
The increase in other revenues and fees was primarily due to $4.2 million of income received as a voluntary reimbursement of legal expenses previously incurred.
Property Operating Expenses
The increase in property operating expenses was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013 which increased property operating expenses by $21.1 million.
Marketing, General and Administrative Expenses
The increase in marketing, general and administrative expenses primarily reflects an increase of $7.7 million in professional fees generally related to non-capitalizable costs associated with the consolidation and the Offering and related formation transactions and increased payroll costs of $10.0 million which includes severance expenses of $2.7 million, retirement equity compensation expenses of $2.3 million, higher incentive compensation and increases in personnel.
Observatory Expenses
Observatory expenses increased by $5.7 million and was attributable to the acquisition of the observatory operations from the non-controlled entity Empire State Building Company, L.L.C., upon the completion of the Offering and related formation transactions on October 7, 2013, and the operations of the observatory are now included in our consolidated results.
Construction Expenses
The construction expenses increase correlates with the increase in the new construction projects as noted above in Construction Revenue.
Real Estate Taxes
The real estate taxes increase was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013, which increased real estate taxes by $9.4 million. The remaining increase was primarily attributable to an aggregate increase of $1.4 million at 250 West 57th Street, 1359 Broadway, One Grand Central Place and 1542 Third Avenue.
Formation Transaction Expenses
The formation transaction expenses increase was due to greater external legal, accounting, and proxy solicitation expenses, and investor relation services costs related to structuring the formation transactions.

Acquisition Expenses
Acquisition expenses of $138.1 million reflect costs associated with the Offering and the related formation transactions, including transfer taxes paid and reimbursement of costs previously paid by the non-controlling entities and the option property entities.
Depreciation and Amortization

58


The increase in depreciation and amortization was primarily attributable to the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013. The remaining increase in depreciation and amortization was primarily the result of improvements made at the Empire State Building and One Grand Central Place.
Interest Expense
The increase in interest expense was primarily attributable to a $5.9 million write-off of deferred financing costs and net increase in interest expense due to higher loan balances, in particular to finance the redevelopment and repositioning at the Empire State Building.

Settlement Expense
Settlement expense of $55.0 million reflects costs associated with the settlement of litigation during the year ended December 31, 2013. On September 28, 2012, a Stipulation of Settlement resolving the Original Class Actions was entered into. The terms of the settlement include, amongst other things, a payment of $55.0 million, with a minimum of 80% in cash and a maximum of 20% in freely-tradable shares of common stock and/or operating partnership units. As the payment is to be fully made by the principal owners of certain predecessor entities, $55.0 million was recorded as settlement expense in our predecessor's statement of operations, with a corresponding $55.0 million capital contribution to our predecessor at that time.

Net income attributable to non-controlling interests
The variance reflects net income attributable to non-controlled interests including their share of 2013 gain on consolidation of non-controlled entities.

Gain on Consolidation of Non-controlled Entities
The gain on consolidation of non-controlled entities reflects gains associated with the acquisition of the four non-controlled properties upon the completion of the Offering and related formation transactions on October 7, 2013. The gain is primarily a result of the fair value exceeding the book value of our predecessor ownership interests in the four non-controlled entities plus the elimination of the intercompany ground and building leases.
Liquidity and Capital Resources
At December 31, 2014 , we had approximately $45.7 million available in cash and cash equivalents and there was $330.0 million available under our secured revolving credit facility.
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, including lease-up costs, fund our redevelopment and repositioning programs, acquire properties, make distributions to our securityholders and other general business needs. Based on the historical experience of our management and our business strategy, in the foreseeable future we anticipate we will generate positive cash flows from operations. In order to qualify as a REIT, we are required under the Code to distribute to our securityholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. We expect to make quarterly distributions to our securityholders.
While we may be able to anticipate and plan for certain liquidity needs, there may be unexpected increases in uses of cash that are beyond our control and which would affect our financial condition and results of operations. For example, we may be required to comply with new laws or regulations that cause us to incur unanticipated capital expenditures for our properties, thereby increasing our liquidity needs. Even if there are no material changes to our anticipated liquidity requirements, our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or needed. Our primary sources of liquidity will generally consist of cash on hand and cash generated from our operating activities, mortgage financings and unused borrowing capacity under our secured revolving and term credit facility. We expect to meet our short-term liquidity requirements, including distributions, operating expenses, working capital, debt service, and capital expenditures from cash flows from operations, debt issuances, and available borrowing capacity under our loans and secured revolving and term credit facility. The availability of these borrowings is subject to the conditions set forth in the applicable loan agreements. We expect to meet our long-term capital requirements, including acquisitions, redevelopments and capital expenditures through our cash flows from operations, our secured revolving and term credit facility, mortgage financings, debt issuances, common and/or preferred equity issuances and asset sales. Our properties require periodic investments of capital for individual lease related tenant improvements allowances, general capital improvements and costs associated with capital expenditures. Our overall leverage will depend on our mix of investments and the cost of leverage. Our charter does not restrict the amount of leverage that we may use.

59


As of December 31, 2014 , we had approximately $1.6 billion of total consolidated indebtedness outstanding, with a weighted average interest rate of 3.55% and a weighted average maturity of 3.6  years. As of December 31, 2014, exclusive of principal amortization, we have approximately $44.1 million of debt maturing in 2015 and no maturities in 2016. Given our current liquidity, including availability under our secured revolving credit facility, and the low leverage financing of our single 2015 balloon maturity, we believe we will be able to refinance the maturing debt.
Secured Revolving and Term Credit Facility
Our secured revolving and term credit facility has a maximum aggregate original principal amount of up to $800.0 million. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) acted as joint lead arranger and joint bookrunner, Bank of America, N.A. (“Bank of America”), an affiliate of Merrill Lynch, acts as administrative agent and Goldman Sachs Bank USA (“Goldman Sachs”), an affiliate of Goldman Sachs & Co., acts as syndication agent, joint lead arranger and joint bookrunner, with respect to the revolving credit and term loan facilities, which are collectively referred to herein as the secured revolving and term credit facility. The secured revolving and term credit facility is comprised of a term loan A and a term loan B, which are referred to herein as the term loan, and a revolving credit facility, which is referred to herein as the revolving credit facility, in the maximum original principal amount of the difference between $800.0 million and the original balance under the term loan. The secured revolving and term credit facility contains an accordion feature that will allow us to increase the maximum aggregate principal amount to $1.25 billion under specified circumstances. We expect to use the secured revolving and term credit facility to, among other things, fund capital expenditures and tenant improvements and leasing commissions, potential acquisitions, development and redevelopment of real estate properties, general corporate matters and working capital. As of December 31, 2014 , the outstanding balance on the secured revolving and term credit facility was $470.0 million .
Financial Covenants . The secured revolving and term credit facility includes the following financial covenants: (i) maximum leverage ratio of total indebtedness to total asset value (as defined in the secured revolving and term credit facility agreement) of the loan parties and their consolidated subsidiaries will not exceed 60%, (ii) consolidated secured indebtedness (excluding the secured revolving and term credit facility) will not exceed 40% of total asset value, (iii) tangible net worth will not be less than the sum of 80% of tangible net worth at the closing of the secured revolving and term credit facility plus 75% of net equity proceeds received by us after the closing date (other than proceeds received by us in connection with any dividend reinvestment program), (iv) adjusted EBITDA (as defined in the secured revolving and term credit facility) to consolidated fixed charges will not be less than 1.50x, (v) consolidated variable rate debt will not exceed 25% of total asset value and (vi) consolidated secured recourse indebtedness (excluding the secured revolving and term credit facility) will not exceed 10% of total asset value. Subject to certain customary exceptions and excluding dividends and distributions payable solely in our common stock, we are restricted from paying dividends or other distributions in excess of the greater of (x) 95% of funds from operations (as defined in the secured revolving and term credit facility) and (y) the amount of dividends and other distributions we are required to pay in order to maintain our qualification as a REIT and (other than during an event of default) to avoid the payment of federal or state income or excise tax; provided, that if certain events of default exist, we may be precluded from paying any dividends or other distributions. As of December 31, 2014 , we were in compliance with the covenants:
Financial covenant
Required
December 31, 2014
Maximum total leverage
< 60%

29.9
%
Maximum secured debt
< 40%

16.8
%
Minimum fixed charge coverage
> 1.5x

3.5x

Maximum variable rate indebtedness
< 25%

11.2
%
Maximum secured recourse indebtedness
<10%

—
%
Minimum tangible net worth
$
689,800

$
933,930

Unsecured Revolving Credit Facility
On January 23, 2015, we entered into an unsecured revolving credit agreement, which is referred to herein as the “unsecured revolving credit facility,” with Bank of America, Merrill Lynch, Goldman Sachs and the other lenders party thereto. Merrill Lynch acted as joint lead arranger; Bank of America acted as administrative agent; and Goldman Sachs acted as syndication agent and joint lead arranger.
Concurrently with the entering into the unsecured revolving credit facility, on January 23, 2015, we terminated the secured revolving and term credit facility. In connection with the termination of the existing facility, all of the guarantors

60


thereunder were released from their guaranty obligations, all liens created thereby were terminated, and all collateral pledged thereunder was released.
Amount. The unsecured revolving credit facility is comprised of a revolving credit facility in the maximum original principal amount of $800.0 million. The unsecured revolving credit facility contains an accordion feature that would allow us to increase the maximum aggregate principal amount to $1.25 billion under specified circumstances.
Guarantors. Certain of our subsidiaries are guarantors of our obligations under the unsecured revolving credit facility.
Interest. Amounts outstanding under the unsecured revolving credit facility will bear interest at a floating rate equal to, at our election, (x) a Eurodollar rate, plus a spread that we expect will range from 0.875% to 1.600% depending upon its leverage ratio and credit rating; or (y) a base rate, plus a spread that we expect will range from 0.000% to 0.600% depending upon its leverage ratio and credit rating. In addition, the unsecured revolving credit facility permits us to borrow at competitive bid rates determined in accordance with the procedures described in the unsecured revolving credit facility.
Fees. We will pay certain customary fees and expense reimbursements.
Maturity. The unsecured revolving credit facility will have an initial term of four years. We have the option to extend the initial term of the unsecured revolving credit facility for up to two additional six-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.075% of the then outstanding commitments under the unsecured revolving credit facility.
Financial Covenants. The unsecured revolving credit facility includes the following financial covenants: (i) maximum leverage ratio of total indebtedness to total asset value of the loan parties and their consolidated subsidiaries will not exceed 60%, (ii) consolidated secured indebtedness will not exceed 40% of total asset value, (iii) tangible net worth will not be less than the sum of 80% of tangible net worth as of September 30, 2014 plus 75% of net equity proceeds received by the operating partnership (other than proceeds received within ninety (90) days after the redemption, retirement or repurchase of ownership or equity interests in the operating partnership up to the amount paid by the operating partnership in connection with such redemption, retirement or repurchase, where, the net effect is that the operating partnership shall not have increased its net worth as a result of any such proceeds), (iv) adjusted EBITDA (as defined in the unsecured revolving credit facility) to consolidated fixed charges will not be less than 1.50x, (v) the aggregate net operating income with respect to all unencumbered eligible properties to the portion of interest expense attributable to unsecured indebtedness will not be less than 1.75x, (vi) the ratio of total unsecured indebtedness to unencumbered asset value will not exceed 60%, and (vii) consolidated secured recourse indebtedness will not exceed 10% of total asset value (provided, however, this covenant shall not apply at any time after either the company or the operating partnership achieves a debt ratings from at least two of Moody’s, S&P and Fitch, and such debt ratings are Baa3 or better (in the case of a rating by Moody’s) or BBB- or better (in the case of a rating by S&P or Fitch)).
Other Covenants. The unsecured revolving credit facility contains customary covenants, including limitations on liens, investment, debt, fundamental changes, and transactions with affiliates, and will require certain customary financial reports.
Events of Default. The unsecured revolving credit facility contains customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, invalidity of loan documents, loss of real estate investment trust qualification, and occurrence of a change of control (defined in the definitive documentation for the unsecured credit facility.
Senior Unsecured Notes

During August 2014, we issued $250.0 million principal amount of 2.625% Exchangeable Senior Notes (“Senior Notes”) due August 2019. In connection with this offering, we received net proceeds of $246.9 million, after deducting the related underwriting discounts and commissions and issuance costs.
Mortgage debt
As of December 31, 2014 , we had mortgage debt outstanding of $904.0 million .
During 2015,
(i)
we extended the maturity date of a mortgage collateralized by 1359 Broadway to August 2015.
During 2014,

61


(i)
we refinanced early the Metro Center mortgage loan with a new $100.0 million mortgage loan due 2024 which bears interest at a fixed rate of 3.59% and a 30 year amortization;
(ii)
we repaid the second lien mortgage collateralized by 1350 Broadway;
(iii)
we repaid the first and second lien mortgages collateralized by 501 Seventh Avenue;
(iv)
we repaid a mortgage collateralized by 500 Mamaroneck Avenue, and
(v)
we refinanced the three One Grand Central Place mortgage loans with a new $91.0 million mortgage loan due 2017 which bears interest at LIBOR plus 1.35%.
During 2013,
(i)
we borrowed $81.0 million on the Empire State Building secured term loan (which was repaid in connection with the Offering). The advance bore interest at 250 basis points over the 30-day LIBOR rate and was used to fund improvements at the Empire State Building as part of our redevelopment and repositioning program;
(ii)
we closed on a $9.5 million loan collateralized by 69-97 Main Street, Westport, CT. The loan bears interest at LIBOR plus 1.40% or Prime plus 0.50%. The loan matures on April 29, 2015 and has two one-year extension options. The proceeds of the loan were used to pay off the existing loan on 69-97 Main Street which matured on May 1, 2013. This loan was repaid in December 2013;
(iii)
we closed on a $12.0 million loan collateralized by One Grand Central Place. At closing, $0.4 million was drawn and $6.0 million was drawn as of September 2013. The loan bears interest at the greater of (i) Prime plus 0.5% and (ii) 3.75% and matures on November 5, 2014. The net proceeds of this loan were used for tenant improvement and capital improvement costs at the property;
(iv)
we drew $3.0 million on a loan collateralized by 1350 Broadway. The proceeds of this draw were used in connection with improvements made at the property;
(v)
we extended the maturity of the $47.0 million loan collateralized by 501 Seventh Avenue from August 1, 2013 to August 1, 2014;
(vi)
we closed on a loan made to fund cash needs including the payment of leasing commissions and expenditures on tenant installations at First Stamford Place which was made by an entity controlled by Anthony E. Malkin and Peter L. Malkin. The loan was repaid as part of the formation transactions; and
(vii)
we drew $6.1 million on a loan collateralized by 250 West 57th Street. The proceeds of this draw were used to fund leasing commissions, tenant improvements and redevelopment expenditures.

Leverage Policies
We expect to employ leverage in our capital structure in amounts determined from time to time by our board of directors. Although our board of directors has not adopted a policy that limits the total amount of indebtedness that we may incur, we anticipate that our board of directors will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or floating rate. Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur nor do they restrict the form in which our indebtedness will be taken (including, but not limited to, recourse or non-recourse debt and cross collateralized debt). Our overall leverage will depend on our mix of investments and the cost of leverage, however, we initially intend to maintain a level of indebtedness consistent with our plan to seek an investment grade credit rating. Our board of directors may from time to time modify our leverage policies in light of the then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors.
Capital expenditures
The following table summarizes our tenant improvement costs, leasing commission costs and our capital expenditures for our 20 properties as if they were consolidated for each of the periods presented (dollars in thousands, except per square foot amounts). The tables include expenditures for option properties after the acquisition date.
Office Properties (1)

62


   
Year Ended December 31,
Total New Leases, Expansions, and Renewals
2014
 
2013
 
2012
Number of leases signed (2)
229

 
218

 
248

Total square feet
766,635

 
1,061,216

 
1,057,476

Leasing commission costs (3)
$
10,000

 
$
16,032

 
$
15,483

Tenant improvement costs (3)
34,720

 
49,284

 
45,842

Total leasing commissions and tenant improvement costs (3)
$
44,720

 
$
65,316

 
$
61,325

Leasing commission costs per square foot (3)
$
13.04

 
$
15.11

 
$
14.64

Tenant improvement costs per square foot (3)
45.29

 
46.44

 
43.35

Total leasing commissions and tenant improvement costs per square foot (3)
$
58.33

 
$
61.55

 
$
57.99

Retail Properties (4)
   
Year Ended December 31,
Total New Leases, Expansions, and Renewals
2014
 
2013
 
2012
Number of leases signed (2)
10

 
12

 
17

Total Square Feet
18,166

 
76,976

 
42,968

Leasing commission costs (3)
$
1,116

 
$
5,416

 
$
1,887

Tenant improvement costs (3)
448

 
62

 
—

Total leasing commissions and tenant improvement costs (3)
$
1,564

 
$
5,478

 
$
1,887

Leasing commission costs per square foot (3)
$
61.43

 
$
70.36

 
$
43.92

Tenant improvement costs per square foot (3)
24.66

 
0.81

 
—

Total leasing commissions and tenant improvement costs per square foot (3)
$
86.09

 
$
71.17

 
$
43.92

_______________
(1)
Excludes an aggregate of 523,463 rentable square feet of retail space in our Manhattan office properties. Includes the Empire State Building broadcasting licenses and observatory operations.
(2)
Presents a renewed and expansion lease as one lease signed.
(3)
Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.
(4)
Includes an aggregate of 523,463 rentable square feet of retail space in our Manhattan office properties. Excludes the Empire State Building broadcasting licenses and observatory operations.
   
Year Ended December 31,
Total New Leases, Expansions, and Renewals
2014
 
2013
 
2012
Total Portfolio
 
 
 
 
 
Capital expenditures (1)
$
64,788

 
$
80,285

 
$
57,421

_______________
(1)
Includes all capital expenditures, excluding tenant improvements and leasing commission costs, which are primarily attributable to the redevelopment and repositioning program conducted at our Manhattan office properties.
As of December 31, 2014 , we expect to incur additional costs relating to obligations under signed new leases of approximately $57.4 million during the year ending December 31, 2015. This consists of approximately $56.2 million for tenant improvements and other improvements related to new leases and approximately $1.2 million on leasing commissions expected to be incurred in the year ending December 31, 2015. We intend to fund the tenant improvements and leasing commission costs through a combination of operating cash flow and borrowings under the secured revolving and term credit facility.
Capital expenditures are considered part of both our short-term and long-term liquidity requirements. We currently estimate that between $75.0 million and $115.0 million of capital is needed beyond 2014 to complete substantially the redevelopment program at our Manhattan office properties, which we expect to occur by the end of 2016 due to the size and scope of our remaining work and our desire to minimize tenant disruptions. However, these estimates are based on current budgets and are subject to change. We intend to fund the capital improvements to complete the redevelopment and repositioning program through a combination of operating cash flow and borrowings under the secured revolving and term credit facility.

63


Contractual Obligations
The following table summarizes the amounts due in connection with our contractual obligations described below for the years ending December 31, 2015 through 2019 and thereafter (amounts in thousands).
 
 
Year Ended December 31
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Mortgages and other debt (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
$
56,317

 
$
55,542

 
$
45,424

 
$
17,257

 
$
9,824

 
$
14,816

 
$
199,180

Amortization
11,772

 
12,387

 
10,070

 
2,880

 
2,188

 
11,975

 
51,272

Principal repayment
44,146

 
—

 
616,760

 
562,210

 
250,000

 
77,674

 
1,550,790

Ground lease
1,518

 
1,518

 
1,518

 
1,518

 
1,518

 
58,248

 
65,838

Tenant improvement and leasing commission costs
57,446

 
—

 
—

 
—

 
—

 
—

 
57,446

Total
$
171,199

 
$
69,447

 
$
673,772

 
$
583,865

 
$
263,530

 
$
162,713

 
$
1,924,526

_______________
(1)
Assumes no extension options are exercised.
(2)
Does not include various standing or renewal service contracts with vendors related to our property management.
Off-Balance Sheet Arrangements
As of December 31, 2014 , we did not have any off-balance sheet arrangements.
Distribution Policy
In order to qualify as a REIT, we must distribute to our securityholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. In addition, we will be subject to U.S. federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our net income to our securityholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax liability on our income and the 4% nondeductible excise tax.
Before we pay any distribution, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and obligations to make payments of principal and interest, if any. However, under some circumstances, we may be required to use cash reserves, incur debt or liquidate assets at rates or times that we regard as unfavorable or make a taxable distribution of our shares in order to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax in that year.
Cash Flows
Comparison of Year Ended December 31, 2014 to the Year Ended December 31, 2013
Net cash . Cash on hand was $ 45.7 million and $60.7 million , respectively, as of December 31, 2014 and 2013 .
Operating activities . Net cash provided by (used in) operating activities increased by $197.1 million to $138.6 million for the year ended December 31, 2014 compared to ($58.5 million) for the year ended December 31, 2013. This is primarily due to the acquisition expenses in 2013.
Investing activities . Net cash used in investing activities decreased by $377.7 million to $299.1 million for the year ended December 31, 2014 compared to $676.8 million for the year ended December 31, 2013. The decrease is due to the cash paid in the formation transactions to acquire the non-controlled properties during 2013. This was partially offset by cash paid in 2014 to acquire the option properties and higher expenditures on building improvements.
Financing activities . Net cash provided by financing activities decreased by $599.0 million to $145.5 million for the year ended December 31, 2014 compared to $744.5 million for the year ended December 31, 2013. 2013 included net proceeds from the sale of Class A common stock of $992.9 million, offset by cash paid for equity interests in the formation transactions of $143.2 million.


64


Comparison of Year Ended December 31, 2013 to the Year Ended December 31, 2012
Net cash . Cash on hand was $60.7 million and $51.5 million, respectively, as of December 31, 2013 and 2012.
Operating activities . Net cash provided by (used in) operating activities decreased by $152.9 million to ($58.5 million) for the year ended December 31, 2013 compared to $94.4 million for the year ended December 31, 2012. This decrease is primarily due to the payment of acquisition costs of $138.1 million and a $23.0 million increase in tenant receivables, prepaid assets, and other assets, which primarily increased due to an expected refund on certain transfer taxes and due to increased prepaid real estate taxes at the Empire State Building and the other acquired non-controlled properties.
Investing activities . Net cash used in investing activities increased by $568.5 million to $676.8 million for the year ended December 31, 2013 compared to $108.3 million for the year ended December 31, 2012. The increase is due to the cash paid in the formation transactions to acquire the non-controlled properties.
Financing activities . Net cash provided by (used in) financing activities increased by $765.4 million to $744.5 million for the year ended December 31, 2013 compared to ($20.9 million) million for the year ended December 31, 2012. The increase is due to the net proceeds from the sale of Class A common stock of $992.9 million, offset by cash paid for equity interests in the formation transactions of $143.2 million and increased distributions of $92.2 million. The increased distributions are due to final distributions made to investors in our predecessor entities, including reimbursement of expenses incurred in connection with the formation transactions and the Offering.

Net Operating Income
Our financial reports include a discussion of property net operating income, or NOI. NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by; (i) the cost of funds of the property owner, (i) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses and formation transaction expenses, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed, purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue, generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.
NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding the components of net income that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not-be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following table presents a reconciliation of our company and predecessor net income, the most directly comparable

65


GAAP measure, to NOI for the periods presented (amounts in thousands):
 
The Company
 
The Predecessor
 
Year Ended December 31, 2014
 
Period from October 7, 2013 to December 31, 2013
 
Period from January 1, 2013 to October 6, 2013
 
Year Ended December 31, 2012
 
 
 
Net income (loss)
$
70,210

 
$
193,431

 
$
(37,232
)
 
$
48,643

Add:

 

 

 

Marketing, general and administrative expenses
39,037

 
16,379

 
23,600

 
20,963

Total depreciation and amortization (1)
145,431

 
27,375

 
44,792

 
49,642

Interest expense (2)
66,456

 
13,147

 
53,703

 
58,265

Construction expenses
38,596

 
5,468

 
19,821

 
19,592

Acquisition expenses
3,382

 
138,140

 
—

 
—

Income tax expense (benefit)
4,655

 
(1,125
)
 
—

 
—

Formation transaction expenses (3)
—

 
—

 
4,507

 
2,247

Settlement expense
—

 
—

 
55,000

 
—

Less:

 

 

 

Construction revenue
(38,648
)
 
(5,265
)
 
(18,636
)
 
(18,902
)
Third-party management and other fees
(2,376
)
 
(550
)
 
(5,067
)
 
(5,103
)
Gain on settlement of lawsuit related to the Observatory
(975
)
 
—

 
—

 
—

Gain on consolidation of non-controlled entities
—

 
(322,563
)
 
—

 
—

Net operating income
$
325,768

 
$
64,437

 
$
140,488

 
$
175,347

 
 
 
 
 
 
 
 
Other Net Operating Income Data
 
 
 
 
 
 
 
Straight line rental revenue
$
39,715

 
$
8,932

 
$
25,470

 
$
2,568

Net increase in rental revenue from the amortization of above and below-market lease assets and liabilities
$
14,095

 
$
1,911

 
$
—

 
$
—

Amortization of acquired below-market ground lease (4)
$
4,603

 
$
398

 
$
—

 
$
—

Ground rent earned from non-controlled entities
$
—

 
$
—

 
$
26,300

 
$
39,415

Management fees from non-controlled entities
$
—

 
$
—

 
$
1,688

 
$
4,251

_______________
(1)
Includes adjustment for proportionate share of depreciation and amortization expense relating to non-controlled entities of $5,829 and $6,952 for the period January 1, 2013 to October 6, 2013 and the year ended December 31, 2012, respectively.
(2)
Includes adjustment for proportionate share of interest expense, net related to non-controlled entities of $3,043 and $3,871 for the period January 1, 2013 to October 6, 2013 and the year ended December 31, 2012, respectively.
(3)
Includes external offering costs incurred that are not directly attributable to the consent solicitation of investors in the existing entities and this offering.

Funds from Operations ("FFO")
We present below a discussion of FFO. We compute FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITS. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by

66


securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of its performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.

Modified Funds From Operations ("Modified FFO")
Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the third quarter 2014 acquisition of the two option properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

Core Funds From Operations ("Core FFO")
Core FFO adds back to traditionally defined FFO the following items associated with the Company's initial public offering, or IPO, and formation transactions: gain on consolidation of non-controlling entities, acquisition expenses, severance expenses and retirement equity compensation expenses. It also adds back private perpetual preferred exchange offering expenses, prepayment penalty expense, deferred financing costs write-off, acquisition expenses, and gain on settlement of lawsuit related to the Observatory, net of income taxes and ground lease amortization. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes items associated with its IPO and formation transactions and other non-recurring items. There can be no assurance that Core FFO presented by the Company is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.

The following table presents a reconciliation of our company and predecessor net income (loss), the most directly comparable GAAP measure, to FFO and Core FFO for the periods presented (amounts in thousands, except per share amounts):

67


 
The Company
 
The Predecessor
 
For the Year Ended December 31, 2014
 
Period from October 7, 2013 to December 31, 2013
 
Period from January 1, 2013 to October 6, 2013
 
For the Year Ended December 31, 2012
 
 
 
 
Net income (loss)
$
70,210

 
$
193,431

 
$
(37,232
)
 
$
48,643

 
Preferred unit distributions
(476
)
 
—

 
—

 
—

 
Real estate depreciation and amortization (1)
145,115

 
27,352

 
44,664

 
49,300

 
Funds from operations
214,849

 
220,783

 
7,432

 
97,943

 
Amortization of below-market ground leases
4,603

 
398

 
—

 
—

 
Modified funds from operations
219,452

 
221,181

 
7,432

 
97,943

 
Gain on settlement of lawsuit related to the Observatory, net of income taxes
(540
)
 
—

 
—

 
—

 
Private perpetual preferred exchange offering expenses
1,357

 
—

 
—

 
—

 
Prepayment penalty expense and deferred financing costs write-off
3,771

 
—

 
—

 
—

 
Acquisition expenses
3,382

 
138,140

 
—

 
—

 
Gain on consolidation of non-controlled entities
—

 
(322,563
)
 
—

 
—

 
Severance expenses
—

 
2,738

 
—

 
—

 
Retirement equity compensation expense
—

 
2,297

 
—

 
—

 
Settlement expense
—

 
—

 
55,000

 
—

 
Core funds from operations
$
227,422

 
$
41,793

 
$
62,432

 
$
97,943

 
 
 
 
 
 
 
 
 
 
Weighted average shares and Operating Partnership units
 
 
 
Basic
254,506

 
244,420

 
 
 
 
 
Diluted
254,506

 
244,420

 
 
 
 
 
 


 


 
 
 
 
 
FFO per share


 


 
 
 
 
 
Basic
$
0.84

 
$
0.90

 
 
 
 
 
Diluted
$
0.84

 
$
0.90

 
 
 
 
 
 


 


 
 
 
 
 
Modified FFO per share
 
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.90

 
 
 
 
 
Diluted
$
0.86

 
$
0.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share


 


 
 
 
 
 
Basic
$
0.89

 
$
0.17

 
 
 
 
 
Diluted
$
0.89

 
$
0.17

 
 
 
 
 
_______________
(1)
Includes adjustment for proportionate share of real estate depreciation and amortization expense relating to non-controlled entities of $5,701 and $6,772 for the period January 1, 2013 to October 6, 2013 and the year ended December 31, 2012.

Distribution to Equity Holders
Distributions and dividends have been made to equity holders in 2012, 2013 and 2014 as follows (amounts in thousands):
Year ended December 31, 2012
$
62,903

Period from January 1, 2013 through October 6, 2013
155,112

Period from October 6, 2013 through December 31, 2013
19,516

Year ended December 31, 2014
87,721


68


Factors That May Influence Future Results of Operations
Rental Revenue
We derive revenues primarily from rents, rent escalations, expense reimbursements and other income received from tenants under existing leases at each of our properties. “Escalations and expense reimbursements” consist of payments made by tenants to us under contractual lease obligations to reimburse a portion of the property operating expenses and real estate taxes incurred at each property.
We believe that the average rental rates for in-place leases at our properties are generally below the current market rates, although individual leases at particular properties presently may be leased above, at or below the current market rates within its particular submarket.
The amount of net rental income and reimbursements that we receive depends principally on our ability to lease currently available space, re-lease space to new tenants upon the scheduled or unscheduled termination of leases or renew expiring leases and to maintain or increase our rental rates. Factors that could affect our rental incomes include, but are not limited to: local, regional or national economic conditions; an oversupply of, or a reduction in demand for, office or retail space; changes in market rental rates; our ability to provide adequate services and maintenance at our properties; and fluctuations in interest rates could adversely affect our rental income in future periods. Future economic or regional downturns affecting our submarkets or downturns in our tenants’ industries could impair our ability to lease vacant space and renew or re-lease space as well as the ability of our tenants to fulfill their lease commitments, and could adversely affect our ability to maintain or increase the occupancy at our properties.
Tenant Credit Risk
The economic condition of our tenants may also deteriorate, which could negatively impact their ability to fulfill their lease commitments and in turn adversely affect our ability to maintain or increase the occupancy level and/or rental rates of our properties. Potential tenants may look to consolidate, reduce overhead and preserve operating capital and may also defer strategic decisions, including entering into new, long-term leases at properties.
Leasing
On a combined basis, we, our predecessor and the non-controlled entities, signed 0.8 million, 1.1 million, and 1.1 million rentable square feet of new leases, expansions and lease renewals, for the years ended December 31, 2014, 2013, and 2012, respectively.
Due to the relatively small number of leases that are signed in any particular quarter, one or more larger leases may have a disproportionately positive or negative impact on average rent, tenant improvement and leasing commission costs for that period. As a result, we believe it is more appropriate when analyzing trends in average rent and tenant improvement and leasing commission costs to review activity over multiple quarters or years. Tenant improvement costs include expenditures for general improvements occurring concurrently with, but that are not directly related to, the cost of installing a new tenant. Leasing commission costs are similarly subject to significant fluctuations depending upon the length of leases being signed and the mix of tenants from quarter to quarter.
As of December 31, 2014 , there were approximately 1.0 million rentable square feet of space in our portfolio available to lease (excluding leases signed but not yet commenced) representing 10.3% of the net rentable square footage of the properties in our portfolio. In addition, leases representing 10.0% and 7.2% of net rentable square footage of the properties in our portfolio will expire in 2015 and in 2016, respectively. These leases are expected to represent approximately 11.2% and 7.2% , respectively, of our annualized rent for such periods. Our revenues and results of operations can be impacted by expiring leases that are not renewed or re-leased or that are renewed or re-leased at base rental rates equal to above or below the current average base rental rates. Further, our revenues and results of operations can also be affected by the costs we incur to re-lease available space, including payment of leasing commissions, redevelopments and build-to-suit remodeling that may not be borne by the tenant.
We believe that as we complete the redevelopment and repositioning of our properties we will, over the long-term, experience increased occupancy levels and rents. Over the short term, as we renovate and reposition our properties, which includes aggregating smaller spaces to offer large blocks of space, we may experience lower occupancy levels as a result of having to relocate tenants to alternative space and the strategic expiration of existing leases. We believe that despite the short-term lower occupancy levels we may experience, we will continue to experience increased rental revenues as a result of the increased rents which we expect to obtain in following the redevelopment and repositioning of our properties.

69


Market Conditions
The properties in our portfolio are located in Manhattan and the greater New York metropolitan area, which includes Fairfield County, Connecticut and Westchester County, New York. Positive or negative changes in conditions in these markets, such as business hirings or layoffs or downsizing, industry growth or slowdowns, relocations of businesses, increases or decreases in real estate and other taxes, costs of complying with governmental regulations or changed regulation, can impact our overall performance.
Observatory Operations
The Empire State Building Observatory revenue for the fourth quarter 2014 grew 10.9% to $28.2 million , from $25.4 million in the fourth quarter of 2013, due to higher admissions, higher admission pricing and a better mix of tickets purchased. The Observatory hosted approximately 997,000 visitors in the fourth quarter 2014, representing a 1.8% increase from the same period of 2013.
For the year ended December 31, 2014 , the Empire State Building Observatory hosted 4.3 million visitors, a 0.7% increase from the same period in 2013. Observatory revenue was $111.5 million , a 9.5% increase from $101.8 million for the twelve months ended December 31, 2013.
Observatory revenues and admissions are dependent upon the following: (i) the number of tourists (domestic and international) that come to New York City and visit the observatory, as well as any related tourism trends; (ii) the prices per admission that can be charged; (iii) seasonal trends affecting the number of visitors to the observatory; (iv) competition, in particular from the observatories at One World Trade Center and Rockefeller Center; and (v) weather trends.
Operating Expenses
Our operating expenses generally consist of depreciation and amortization, real estate taxes, ground lease expenses, repairs and maintenance, security, utilities, property-related payroll, insurance and bad debt expense and prior to the Offering and related formation transactions, third-party management fees. Factors that may affect our ability to control these operating costs include: increases in insurance premiums, tax rates, the cost of periodic repair, redevelopment costs and the cost of re-leasing space, the cost of compliance with governmental regulation, including zoning and tax laws, the potential for liability under applicable laws and interest rate levels. Also, as a public company, our annual general and administrative expenses may be meaningfully higher compared to historical expenses due to legal, insurance, accounting and other expenses related to corporate governance, SEC reporting, other compliance matters and the costs of operating as a public company. If our operating costs increase as a result of any of the foregoing factors, our future cash flow and results of operations may be adversely affected.
 
The expenses of owning and operating a property are not necessarily reduced when circumstances, such as market factors and competition, cause a reduction in income from the property. If revenues drop, we may not be able to reduce our expenses accordingly. Costs associated with real estate investments, such as real estate taxes and maintenance generally, will not be materially reduced even if a property is not fully occupied or other circumstances cause our revenues to decrease. As a result, if revenues decrease in the future, static operating costs may adversely affect our future cash flow and results of operations. If similar economic conditions exist in the future, we may experience future losses.
Cost of Funds and Interest Rates
We expect future changes in interest rates will impact our overall performance. Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. While we may seek to manage our exposure to future changes in rates, portions of our overall outstanding debt will likely remain at floating rates. As of December 31, 2014 , our floating rate debt represented 37.8% of our indebtedness and 9.6% of total enterprise value. This floating rate debt included $605.1 million of borrowings as of December 31, 2014 . Our floating rate debt may increase to the extent we use available borrowing capacity under our loans to fund capital improvements. We continually evaluate our debt maturities, and, based on management’s current assessment, believe we have viable financing and refinancing alternatives that will not materially adversely impact our expected financial results. As of December 31, 2014 , excluding principal amortization, we have approximately $44.1 million of debt maturities in 2015 and no maturities in 2016.
Competition
The leasing of real estate is highly competitive in Manhattan and the greater New York metropolitan market in which we operate. We compete with numerous acquirers, developers, owners and operators of commercial real estate, many of which own or may seek to acquire or develop properties similar to ours in the same markets in which our properties are located. The

70


principal means of competition are rent charged, location, services provided and the nature and condition of the facility to be leased. In addition, we face competition from other real estate companies including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others that may have greater financial resources or access to capital than we do or that are willing to acquire properties in transactions which are more highly leveraged or are less attractive from a financial viewpoint than we are willing to pursue. In addition, competition from observatory and/or broadcasting operations at One World Trade Center and, to a lesser extent, from the existing observatory at Rockefeller Center and the existing broadcasting facility at Four Times Square, could have a negative impact on revenues from our observatory and/or broadcasting operations. Adverse impacts on domestic travel and changes in foreign currency exchange rates may also decrease demand in the future, which could have a material adverse effect on our results of operations. If our competitors offer space at rental rates below current market rates, below the rental rates we currently charge our tenants, in better locations within our markets or in higher quality facilities, we may lose potential tenants and may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire.

Critical Accounting Estimates
Basis of Presentation and Principles of Consolidation and Combination
The accompanying consolidated and combined financial statements have been prepared in conformity with GAAP and with the rules and regulations of the SEC represent our assets and liabilities and operating results. The consolidated financial statements include our accounts and our wholly-owned subsidiaries as well as our operating partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. For purposes of comparison, certain items shown in the 2012 and 2013 consolidated financial statements have been reclassified to conform to the presentation used for 2014.
    Our predecessor's financial statements include all the accounts and operations of our predecessor. The real estate entities included in the accompanying financial statements have been combined on the basis that, for the periods presented, such entities were under common control, common management and common ownership of the sponsors. Equity interests in the combining entities that were not controlled by the sponsors are shown as investments in non-controlled entities. We acquired these interests as a result of the formation transactions in 2013.
Our predecessor consolidated variable interest entities, or VIEs, in which it was considered a primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. We had no VIEs as of December 31, 2014 or 2013.
We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, the entity’s tax return before filing, and leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment. Such agreements could also contain certain protective rights such as the requirement of partner approval to sell, finance or refinance the investment and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan.
A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the combined balance sheets and in the combined statements of operations by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests. As the financial statements of our predecessor have been prepared on a combined basis, there is no non-controlling interest for our predecessor for the periods presented.
Revenue Recognition
Construction Revenue

71


Revenues from construction contracts are recognized under the percentage-of completion method. Under this method, progress towards completion is recognized according to the ratio of incurred costs to estimated total costs. This method is used because management considers the “cost-to-cost” method the most appropriate in the circumstances.
Contract costs include all direct material, direct labor and other direct costs and an allocation of certain overhead related to contract performance. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Goodwill
Goodwill is tested annually for impairment and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill. Non-amortizing intangible assets, such as trade names and trademarks, are subject to an annual impairment test based on fair value and amortizing intangible assets are tested whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Income Taxes
We elected to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2013 and believe we qualify as a REIT at December 31, 2014. REITs are subject to a number of organizational and operational requirements, including a requirement that 90% of ordinary “REIT taxable income” (as determined without regard to the dividends paid deduction or net capital gains) be distributed. As a REIT, we will generally not be subject to U.S. federal income tax to the extent that we meet the organizational and operational requirements and our distributions equal or exceed REIT taxable income. For all periods subsequent to the effective date of our REIT election, we have met the organizational and operational requirements and distributions have exceeded net taxable income. Accordingly, no provision has been made for federal and state income taxes.
We have elected to treat ESRT Observatory TRS, L.L.C., our subsidiary which holds our observatory operations, and ESRT Holdings TRS, L.L.C., our subsidiary that holds our third party management, construction, restaurant, health club and certain cleaning operations, as taxable REIT subsidiaries. Taxable REIT subsidiaries may participate in non-real estate activities and/or perform non-customary services for tenants and their operations are generally subject to regular corporate income taxes. Our taxable REIT subsidiaries accounts for its income taxes in accordance with GAAP, which includes an estimate of the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. The calculation of the taxable REIT subsidiaries' tax provisions may require interpreting tax laws and regulations and could result in the use of judgments or estimates which could cause its recorded tax liability to differ from the actual amount due. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The taxable REIT subsidiaries periodically assess the realizability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, or federal statutory tax audits or estimates and judgments used.
We apply provisions for measuring and recognizing tax benefits associated with uncertain tax positions. Penalties and interest, if incurred, would be recorded as a component of income tax expense. As of December 31, 2014 and 2013, we do not have a liability for uncertain tax positions. As of December 31, 2014, the tax years ended December 31, 2011 through December 31, 2014 remain open for an audit by the Internal Revenue Service and state authorities. We have not received a notice of audit from the Internal Revenue Service or state authorities for any of the open tax years.
During the periods presented, the entities included in our predecessor's consolidated financial statements are treated as partnerships or S corporations for U.S. federal and state income tax purposes and, accordingly, are not subject to entity-level tax. Rather, each entity’s taxable income or loss is allocated to its owners. Therefore, no provision or liability for U.S. federal or state income taxes has been included in the accompanying consolidated financial statements for those periods.
Two of the limited liability companies in our Predecessor had non-real estate income subject to New York City unincorporated business tax (“NYCUBT”). In 2013 and 2012, one of these entities generated a loss for NYCUBT purposes while the other entity generated income. No provision or liability for U.S. federal, state, or local income taxes has been included in our Predecessor's consolidated financial statements as 2013 taxable income as referred to above was fully offset by a NYCUBT net operating loss carry forward from previous years.

72


As a result of the consolidation and concurrent liquidation of the entities that had previously been subject to the NYCUBT, the NYCUBT net operating loss carryforward of $13.4 million at October 6, 2013 can no longer be used.
Share-Based Compensation
Share-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. The determination of fair value of these awards is subjective and involves significant estimates and assumptions including expected volatility of our stock, expected dividend yield, expected term, and assumptions of whether these awards will achieve parity with other operating partnership units or achieve performance thresholds. We believe that the assumptions and estimates utilized are appropriate based on the information available to management at the time of grant.
Segment Reporting
We have identified two reportable segments: (1) Real Estate and (2) Observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets. Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and different marketing strategies. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. We include our construction operation in "Other" and includes all activities related to providing construction services to tenants and to other entities within and outside our company.
Inflation
Substantially all of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above. We do not believe inflation has had a material impact on our historical financial position or results of operations.
Seasonality
We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism trends and weather, and therefore does experience some seasonality. During the past ten years of our annual observatory revenue, approximately 16% to 18% was realized in the first quarter, 26.0% to 28.0% was realized in the second quarter, 31.0% to 33.0% was realized in the third quarter and 23.0% to 25.0% was realized in the fourth quarter.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. One of the principal market risks facing us is interest rate risk on our floating rate indebtedness. As of December 31, 2014 , our floating rate mortgage debt represented 9.6% of our total enterprise value. This floating rate debt included $470.0 million of borrowings under the secured revolving and term credit facility.
Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. Our primary objectives when undertaking hedging transactions and derivative positions will be to reduce our floating rate exposure and to fix a portion of the interest rate for anticipated financing and refinancing transactions. This in turn will reduce the risk that the variability of cash flows will impose on floating rate debt. However, we can provide no assurances that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility on our portfolio. We are not subject to foreign currency risk.
We are exposed to interest rate changes primarily through property-specific floating rate mortgages. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower our overall borrowing costs. To achieve these objectives, we may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps or caps in order to mitigate our interest rate risk on a related floating rate financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.

73


As of December 31, 2014 , we had total outstanding floating rate debt obligations of $605.1 million . Based on our variable balances, interest expense would have increased by approximately $6.1 million for the year ended December 31, 2014 , if short-term interest rates had been 1% higher. As of December 31, 2014 , the weighted average interest rate on the $996.9 million of fixed-rate indebtedness outstanding was 4.80% per annum, each with maturities at various dates through November 5, 2024.
As of December 31, 2014 , the fair value of our outstanding debt was approximately $1.6 billion which was approximately $9.6 million more than the historical book value as of such date. Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements beginning on Page F-1 of this Annual Report on Form 10-K are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of December 31, 2014 , the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures at the end of the period covered by this Report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No significant changes to our internal control over financial reporting were identified in connection with the evaluation referenced above that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.     
(a) Management's Report on Internal Control over Financial Reporting
Management of Empire State Realty Trust, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13(a)-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 as required by the Securities Exchange Act of 1934 Rule 13(a)-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). Based on our evaluation under the COSO criteria, our management concluded

74


that our internal control over financial reporting was effective as of December 31, 2014 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Ernst & Young LLP, an independent registered public accounting firm that audited our Financial Statements included in this Annual Report, has issued an attestation report on our internal control over financial reporting as of December 31, 2014, which appears in paragraph (b) of this Item 9A.
Empire State Realty Trust, Inc.
New York, New York
February 27, 2015

(b) Attestation report of the independent registered public accounting firm

Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Empire State Realty Trust, Inc.
We have audited Empire State Realty Trust, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Empire State Realty Trust, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
    We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
    A company’s 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 for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Empire State Realty Trust, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2014 (Successor) and 2013 (Successor), and the related consolidated statements of operations, stockholders’ equity/owners’ equity/(deficit) (Predecessor), and cash flows for the year ended December 31, 2014 (Successor), for the period from October 7, 2013 through December 31, 2013 (Successor), for the period from January 1, 2013 to October 6, 2013 (Predecessor) and for the year ended December 31, 2012 (Predecessor) and our report dated February 27, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP

75


New York, New York
February 27, 2015


ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 will be set forth in our Definitive Proxy Statement for our 2015 Annual Meeting of Stockholders (which is scheduled to be held on June 17, 2015), to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, on or about April 28, 2015, or our Proxy Statement, and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 will be set forth in our Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 will be set forth in our Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 will be set forth in our Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information regarding principal accounting fees and services and the audit committee's pre-approval policies and procedures required by this Item 14 will be set forth in our Proxy Statement and is incorporated herein by reference.



PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

1.
Financial Statements: See "Index to Financial Statements" at Page F-1 below.
2.
Financial Statement Schedule: See "Schedule III-Real Estate and Accumulated Depreciation" and Page F-45 below.
3.
Exhibits: The index of exhibits below are incorporated herein by reference.

76


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EMPIRE STATE REALTY TRUST, INC.

Date: February 27, 2015                             By: /s/ Anthony E. Malkin     
Chairman and Chief Executive Officer

Date: February 27, 2015                             By: /s/ David A. Karp     
Executive Vice President, Chief Financial Officer and Treasurer

Date: February 27, 2015                             By: /s/ Andrew J. Prentice     
Senior Vice President
Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Anthony E. Malkin
 
Chairman of the Board of Directors and Chief Executive Officer
 
February 27, 2015
Anthony E. Malkin
 
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ David A. Karp
 
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
 
February 27, 2015
David A. Karp
 
 
 
 
 
 
 
 
/s/ Andrew J. Prentice
 
Senior Vice President, Chief Accounting Officer
 
February 27, 2015
Andrew J. Prentice
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ William H. Berkman
 
Director
 
February 27, 2015
William H. Berkman
 
 
 
 
 
 
 
 
 
/s/ Alice M. Connell
 
Director
 
February 27, 2015
Alice M. Connell
 
 
 
 
 
 
 
 
 
/s/ Thomas J. DeRosa
 
Director
 
February 27, 2015
Thomas J. DeRosa
 
 
 
 
 
 
 
 
 
/s/ Steven J. Gilbert
 
Director
 
February 27, 2015
Steven J. Gilbert
 
 
 
 
 
 
 
 
 
/s/ S. Michael Giliberto
 
Director
 
February 27, 2015
S. Michael Giliberto
 
 
 
 
 
 
 
 
 
/s/ James D. Robinson IV
 
Director
 
February 27, 2015
James D. Robinson IV
 
 
 
 


77



Exhibit Index

Exhibit No.
Description
3.1
Articles of Amendment and Restatement of Empire State Realty Trust, Inc., incorporated by reference to Exhibit 3.1 to Amendment No. 8 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
3.2*
Amended and Restated Bylaws of Empire State Realty Trust, Inc., incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the SEC on February 19, 2015.

4.1
Specimen Class A Common Stock Certificate of Empire State Realty Trust, Inc., incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on November 2, 2012.
4.2
Specimen Class B Common Stock Certificate of Empire State Realty Trust, Inc., incorporated by reference to Exhibit 4.2 to Amendment No. 3 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on November 2, 2012.
4.3
Indenture, dated August 12, 2014, by and among Empire State Realty OP, L.P., as issuer, Empire State Realty Trust, Inc., and Wilmington Trust, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the SEC on August 12, 2014.
4.4
Form of Global Note representing Empire State Realty OP, L.P.’s 2.625% Exchangeable Senior Notes due 2019 (included in Exhibit 4.3).
10.1
Contribution Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P. and certain members of the Malkin Group listed on the signature pages thereto, dated November 28, 2011, incorporated by reference to Exhibit 10.8 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on February 13, 2012.
10.2
Amended and Restated Contribution Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P. and certain entities affiliated with the Helmsley estate listed on the signature pages thereto, dated July 2, 2012, incorporated by reference to Exhibit 10.11 to Amendment No. 7 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 19, 2013.
10.3
Form of Contribution Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P. and each of the private existing entities that contributed properties in the consolidation, incorporated by reference to Exhibit 10.10 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on February 13, 2012.
10.4
Form of Contribution Agreement among Empire State Realty Trust, Inc., Empire Realty OP, L.P. and each of the public existing entities that contributed properties in the consolidation, incorporated by reference to Exhibit 10.11 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on February 13, 2012.
10.5
Representation, Warranty and Indemnity Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P., Anthony E. Malkin, Cynthia M. Blumenthal and Scott D. Malkin, dated November 28, 2011, incorporated by reference to Exhibit 10.13 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on February 13, 2012.
10.6
Form of Merger Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P. and each of the predecessor management companies, incorporated by reference to Exhibit 10.12 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on February 13, 2012.
10.7
Amended and Restated Option Agreement among,  inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 112 West 34th Street Associates L.L.C., dated September 16, 2013, incorporated by reference to Exhibit 10.17 to Amendment No. 8 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
10.8
Amended and Restated Option Agreement among, inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 112 West 34th Street Company L.L.C., dated September 16, 2013, incorporated by reference to Exhibit 10.18 to Amendment No. 8 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
10.9
Amended and Restated Option Agreement among, inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 1400 Broadway Associates L.L.C. dated September 16, 2013, incorporated by reference to Exhibit 10.19 to Amendment No. 8 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
10.10+
Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2013 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Registrant's Form S-8, filed with the SEC on October 7, 2013.
10.11+
Form of Restricted Stock Agreement (Performance-Based)), incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K, filed with the SEC on March 24, 2014.
10.12+
Form of Restricted Stock Agreement (Time-Based), incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-K, filed with the SEC on March 24, 2014.

78


10.13+
Form of LTIP Agreement (Performance-Based), incorporated by reference to Exhibit 10.31 to the Registrant’s Form 10-K, filed with the SEC on March 24, 2014.
10.14+
Form of LTIP Agreement (Time-Based), incorporated by reference to Exhibit 10.14 to the Registrant’s Form 10-K, filed with the SEC on March 24, 2014.
10.15
Amended and Restated Agreement of Limited Partnership of Empire State Realty OP, L.P., dated October 1, 2013, incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.16
Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Empire State Realty OP, L.P., dated August 26, 2014, incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on August 26, 2014.
10.17
Registration Rights Agreement among Empire State Realty Trust, Inc. and the persons named therein, dated October 7, 2013, incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.18
Tax Protection Agreement among Empire State Realty Trust, Inc., Empire State Realty OP, L.P., and the parties named therein, dated October 7, 2013, incorporated by reference to Exhibit 10.3 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.19
Indemnification Agreement among Empire State Realty Trust, Inc. and Peter L. Malkin, dated October 7, 2013, incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.20
Indemnification Agreement among Empire State Realty Trust, Inc. and Anthony E. Malkin, dated October 7, 2013, incorporated by reference to Exhibit 10.5 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.21
Indemnification Agreement among Empire State Realty Trust, Inc. and David A. Karp, dated October 7, 2013, incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.22
Indemnification Agreement among Empire State Realty Trust, Inc. and Thomas P. Durels, dated October 7, 2013, incorporated by reference to Exhibit 10.7 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.23
Indemnification Agreement among Empire State Realty Trust, Inc. and Thomas N. Keltner, Jr., dated October 7, 2013, incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.24*
Indemnification Agreement among Empire State Realty Trust, Inc. and John B. Kessler, dated February 1, 2015.
10.25
Indemnification Agreement among Empire State Realty Trust, Inc. and William H. Berkman, dated October 7, 2013, incorporated by reference to Exhibit 10.9 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.26
Indemnification Agreement among Empire State Realty Trust, Inc. and Alice M. Connell, dated October 7, 2013, incorporated by reference to Exhibit 10.10 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.27
Indemnification Agreement among Empire State Realty Trust, Inc. and Thomas J. DeRosa, dated October 7, 2013, incorporated by reference to Exhibit 10.11 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.28
Indemnification Agreement among Empire State Realty Trust, Inc. and Steven J. Gilbert, dated October 7, 2013, incorporated by reference to Exhibit 10.12 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.29
Indemnification Agreement among Empire State Realty Trust, Inc. and S. Michael Giliberto, dated October 7, 2013, incorporated by reference to Exhibit 10.13 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.30
Indemnification Agreement among Empire State Realty Trust, Inc. and Lawrence E. Golub, dated October 7, 2013, incorporated by reference to Exhibit 10.14 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.31*
Indemnification Agreement among Empire State Realty Trust, Inc. and James D. Robinson IV, dated December 23, 2014.
10.32+
Employment Agreement between Empire State Realty Trust, Inc. and Anthony E. Malkin, dated October 7, 2013, incorporated by reference to Exhibit 10.15 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.33+
Change in Control Severance Agreement between Empire State Realty Trust, Inc. and David A. Karp, dated October 7, 2013, incorporated by reference to Exhibit 10.16 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.

79


10.34+
Change in Control Severance Agreement between Empire State Realty Trust, Inc. and Thomas N. Keltner, Jr., dated October 7, 2013, incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.35+
Change in Control Severance Agreement between Empire State Realty Trust, Inc. and Thomas P. Durels, dated October 7, 2013, incorporated by reference to Exhibit 10.18 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.36* +
Change in Control Severance Agreement between Empire State Realty Trust, Inc. and John B. Kessler, dated February 1, 2015.
10.37*
Credit Agreement (Unsecured Revolving Credit Facility) dated January 23, 2015 among Empire State Realty OP, L.P., ESRT Empire State Building, L.L.C., Empire State Realty Trust, Inc., the subsidiaries of Empire State Realty OP, L.P. from time to time party thereto, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Bank USA and the other lenders party thereto.
10.38
Secured Revolving and Term Credit Facility dated October 7, 2013 among Empire State Realty OP, L.P., ESRT Empire State Building, L.L.C., Empire State Realty Trust, Inc., the subsidiaries of Empire State Realty OP, L.P. from time to time party thereto, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Bank USA and the other lenders party thereto, incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-Q filed with the SEC on November 12, 2013.
10.39
First Amendment to Credit Agreement (Secured Revolving and Term Credit Facility) dated May 7, 2014 among Empire State Realty OP, L.P., ESRT Empire State Building, L.L.C., Empire State Realty Trust, Inc., the subsidiaries of Empire State Realty OP, L.P. from time to time party thereto, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Bank USA and the other lenders party thereto, incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q filed with the SEC on August 5, 2014.
10.40
Second Amendment to Credit Agreement (Secured Revolving and Term Credit Facility) dated May 21, 2014 among Empire State Realty OP, L.P., ESRT Empire State Building, L.L.C., Empire State Realty Trust, Inc., the subsidiaries of Empire State Realty OP, L.P. from time to time party thereto, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Bank USA and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on May 22, 2014.
10.41
Third Amendment to Credit Agreement (Secured Revolving and Term Credit Facility) dated October 31, 2014 among Empire State Realty OP, L.P., ESRT Empire State Building, L.L.C., Empire State Realty Trust, Inc., the subsidiaries of Empire State Realty OP, L.P. from time to time party thereto, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Bank USA and the other lenders party thereto, incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-Q filed with the SEC on November 10, 2014.
10.42
Registration Rights Agreement among Empire State Realty Trust, Inc. and the persons named therein, dated July 15, 2014, incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K filed with the SEC on July 21, 2014.
10.43
Registration Rights Agreement, dated August 12, 2014, by and among Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and Goldman, Sachs & Co., incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on August 12, 2014.
10.44
Form of Asset and Property Management Agreement, incorporated by reference to Exhibit 10.18 to Amendment No. 6 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 6, 2013.
10.45
Form of Services Agreement, incorporated by reference to Exhibit 10.19 to Amendment No. 6 to the Registrant's Form S-11 (Registration No. 333-179485), filed with the SEC on September 6, 2013.
21.1*
Subsidiaries of Registrant
23.1*
Consent of Ernst & Young LLP
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Document

80


101.DEF*
XBRL Taxonomy Extension Definitions Document
101.LAB*
XBRL Taxonomy Extension Labels Document
101.PRE*
XBRL Taxonomy Extension Presentation Document
Notes:
 
* Filed herewith.
+ Indicates management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K.


81



EMPIRE STATE REALTY TRUST

INDEX TO FINANCIAL STATEMENTS
 
 
PAGE
 
Report of Independent Registered Public Accounting Firm
 
Consolidated Balance Sheets of the Company as of December 31, 2014 and 2013
 
 
 
 
Consolidated Statements of Operations of the Company for the year ended December 31, 2014, and for the period October 7, 2013 to December 31, 2013 and Empire State Realty Trust, Inc. Predecessor for the period from January 1, 2013 to October 6, 2013 and the year ended December 31, 2012
 
 
 
 
Consolidated Statements of Stockholders' Equity of the Company for the year ended December 31, 2014 and for the period October 7, 2013 to December 31, 2013 and Empire State Realty Trust, Inc. Predecessor Owners' Deficit for the period January 1, 2013 to October 6, 2013 and the year ended December 31, 2012
 
 
 
 
Consolidated Statements of Cash Flows of the Company for the year ended December 31, 2014 and for the period October 7, 2013 to December 31, 2013 and Empire State Realty Trust, Inc. Predecessor for the period January 1, 2013 to October 6, 2013 and the year ended December 31, 2012
 
 
 
 
Notes to Consolidated Financial Statements of the Company and Empire State Realty Trust, Inc. Predecessor
 
 
 
 
Financial Statement Schedules -
 
 
Schedule II - Valuation and Qualifying Accounts
 
Schedule III - Real Estate and Accumulated Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


82


Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Empire State Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of Empire State Realty Trust, Inc. (the Company or Successor) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders' equity/owners’ equity/(deficit) (Predecessor), and cash flows for the year ended December 31, 2014 (Successor), for the period from October 7, 2013 through December 31, 2013 (Successor), for the period from January 1, 2013 to October 6, 2013 (Predecessor) and for the year ended December 31, 2012 (Predecessor). Our audits also included the financial statement schedules listed in the Index at Item 15(a)(2). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Empire State Realty Trust, Inc. at December 31, 2014 (Successor) and 2013 (Successor), and the consolidated results of its operations and its cash flows for the year ended December 31, 2014 (Successor), for the period from October 7, 2013 through December 31, 2013 (Successor), for the period from January 1, 2013 to October 6, 2013 (Predecessor) and for the year ended December 31, 2012 (Predecessor), in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Empire State Realty Trust, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
February 27, 2015














F-1




Empire State Realty Trust, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share and per share amounts)
 
The Company
 
December 31, 2014
 
December 31, 2013
ASSETS
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land
$
201,196

 
$
187,566

Development costs
6,986

 
6,459

Building and improvements
1,931,681

 
1,455,398

 
2,139,863

 
1,649,423

Less: accumulated depreciation
(377,552
)
 
(295,351
)
Commercial real estate properties, net
1,762,311

 
1,354,072

Cash and cash equivalents
45,732

 
60,743

Restricted cash
60,273

 
55,621

Tenant and other receivables, net of allowance of $1,427 and $499 in 2014 and 2013, respectively
23,745

 
24,817

Deferred rent receivables, net of allowance of $420 and $216 in 2014 and 2013, respectively
102,104

 
62,689

Prepaid expenses and other assets
48,504

 
35,407

Deferred costs, net
80,212

 
78,938

Acquired below market ground lease, net
391,887

 
62,312

Acquired lease intangibles, net
290,248

 
249,983

Goodwill
491,479

 
491,479

Total assets
$
3,296,495

 
$
2,476,061

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgage notes payable
$
903,985

 
$
883,112

Term loan and credit facility
470,000

 
325,000

Senior unsecured notes
237,667

 
—

Accounts payable and accrued expenses
96,563

 
81,908

Acquired below market leases, net
138,859

 
129,882

Deferred revenue and other liabilities
27,876

 
21,568

Tenants’ security deposits
40,448

 
31,406

Total liabilities
1,915,398

 
1,472,876

Commitments and contingencies
 
 
 
Equity:
 
 
 
Empire State Realty Trust, Inc. stockholders' equity:
 
 
 
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued or outstanding
—

 
—

Class A common stock, $0.01 par value per share, 400,000,000 shares authorized, 106,044,560 shares issued and 106,030,449 shares outstanding in 2014 and 94,484,023 shares issued and outstanding in 2013
1,060

 
945

Class B common stock, $0.01 par value per share, 50,000,000 shares authorized, 1,161,438 and 1,122,130 shares issued and outstanding in 2014 and 2013, respectively
12

 
11

Additional paid-in capital
406,853

 
316,558

Retained earnings
60,713

 
67,644

Total Empire State Realty Trust, Inc.'s stockholders' equity
468,638

 
385,158

Non-controlling interests in operating partnership
904,455

 
618,027

Private perpetual preferred units, $16.62 per unit liquidation preference, 1,560,360 and 0 issued and outstanding in 2014 and 2013, respectively
8,004

 
—

Total equity
1,381,097

 
1,003,185

Total liabilities and equity
$
3,296,495

 
$
2,476,061

The accompanying notes are an integral part of these financial statements  

F-2



Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Consolidated Statements of Operations
(amounts in thousands, except per share amounts)
 
The Company
 
The Predecessor
 
Year Ended December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
 
Period from January 1, 2013 through October 6, 2013
 
Year Ended December 31, 2012
  
 
 
 
Revenues:
 
 
 
 
 
 
 
Rental revenue
$
400,825

 
$
79,987

 
$
148,690

 
$
196,187

Tenant expense reimbursement
67,651

 
15,836

 
21,272

 
29,483

Observatory revenue
111,541

 
23,735

 
—

 
—

Construction revenue
38,648

 
5,265

 
18,636

 
18,902

Third-party management and other fees
2,376

 
550

 
5,067

 
5,103

Other revenue and fees
14,285

 
2,210

 
12,407

 
10,619

Total revenues
635,326

 
127,583

 
206,072

 
260,294

Operating expenses:
 
 
 
 
 
 
 
Property operating expenses
151,048

 
34,055

 
41,297

 
55,707

Ground rent expenses
5,339

 
398

 
—

 
—

Marketing, general, and administrative expenses
39,037

 
16,379

 
23,600

 
20,963

Observatory expenses
29,041

 
5,687

 
—

 
—

Construction expenses
38,596

 
5,468

 
19,821

 
19,592

Real estate taxes
82,131

 
17,191

 
24,331

 
30,406

Formation transaction expenses
—

 
—

 
4,507

 
2,247

Acquisition expenses
3,382

 
138,140

 
—

 
—

Depreciation and amortization
145,431

 
27,375

 
38,963

 
42,690

Total operating expenses
494,005

 
244,693

 
152,519

 
171,605

Total operating income (loss)
141,321

 
(117,110
)
 
53,553

 
88,689

Other income (expense):
 
 
 
 
 
 
 
Equity in net income of non-controlled entities
—

 
—

 
14,875

 
14,348

Interest expense
(66,456
)
 
(13,147
)
 
(50,660
)
 
(54,394
)
Settlement expense
—

 
—

 
(55,000
)
 
—

Gain on consolidation of non-controlled entities
—

 
322,563

 
—

 
—

Income (loss) before income taxes
74,865

 
192,306

 
(37,232
)
 
48,643

Income tax (expense) benefit
(4,655
)
 
1,125

 
—

 
—

Net income (loss)
70,210

 
193,431

 
(37,232
)
 
48,643

Private perpetual preferred unit distributions
(476
)
 
—

 
—

 
—

Net income attributable to non-controlling interests
(43,067
)
 
(118,186
)
 
—

 
—

Net loss (income) attributable to the predecessor
—

 
—

 
37,232

 
(48,643
)
Net income attributable to common stockholders
$
26,667

 
$
75,245

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Total weighted average shares:
 
 
 
 
 
 
 
Basic
97,941

 
95,463

 
 
 
 
Diluted
254,506

 
244,420

 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic earnings per share
$
0.27

 
$
0.79

 


 


Diluted earnings per share
$
0.27

 
$
0.79

 


 



The accompanying notes are an integral part of these financial statements

F-3



Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Consolidated Statements of Stockholders' Equity and Owners' Deficit
(amounts in thousands)
 
Number of Class A Common Shares
 
Class A Common Stock
 
Number of Class B Common Shares
 
Class B Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Total Stockholders' Equity
 
Predecessor's Owners' Deficit
 
Non-controlling Interests
 
Private Perpetual Preferred Units
 
Total Equity
Balance at December 31, 2011
—

 
$
—

 
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,294

 
$
—

 
$
—

 
$
1,294

Net income
—

 
—

 
—

 
—

 
—

 
—

 
—

 
48,643

 
—

 
—

 
48,643

Contributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2,107

 
—

 
—

 
2,107

Distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(62,903
)
 
—

 
—

 
(62,903
)
Balance at December 31, 2012
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(10,859
)
 
—

 
—

 
(10,859
)
Net loss
—

 
—

 


 
—

 
—

 
—

 
—

 
(37,232
)
 
—

 
—

 
(37,232
)
Contributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
8,223

 
—

 
—

 
8,223

Deemed contribution
—

 
—

 
—

 
—

 
—

 
—

 
—

 
55,000

 
—

 
—

 
55,000

Distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(155,112
)
 
—

 
—

 
(155,112
)
Balance at October 6, 2013
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(139,980
)
 
—

 
—

 
(139,980
)
The Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of Class A Common Stock, net of costs
82,225

 
822

 
—

 
—

 
959,746

 
—

 
960,568

 
—

 
—

 
—

 
960,568

Issuance of Class A Common Stock, Class B Common Stock, and non-controlling interests related to the formation transactions
12,106

 
121

 
1,122

 
11

 
—

 
—

 
132

 
—

 
738,818

 
—

 
738,950

Payments in cash to certain holders that are non-accredited investors or who elected to receive cash for their equity interests in the formation transactions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(733,262
)
 
—

 
(733,262
)
Equity allocation for the equity consideration paid to continuing investors in the formation transactions
—

 
—

 
—

 
—

 
(643,559
)
 
—

 
(643,559
)
 
139,980

 
503,579

 
—

 
0

Net income
—

 
—

 
—

 
—

 
—

 
75,245

 
75,245

 
—

 
118,186

 
—

 
193,431

Equity compensation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
—

 
0

LTIP units
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2,621

 
—

 
2,621

Restricted stock
153

 
2

 
—

 
—

 
371

 
—

 
373

 
—

 
—

 
—

 
373

Dividends and distributions
—

 
—

 
—

 
—

 
—

 
(7,601
)
 
(7,601
)
 
—

 
(11,915
)
 
—

 
(19,516
)
Balance at December 31, 2013
94,484

 
945

 
1,122

 
11

 
316,558

 
67,644

 
385,158

 
—

 
618,027

 
—

 
1,003,185


The accompanying notes are an integral part of these financial statements















F-4



Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Consolidated Statements of Stockholders' Equity and Owners' Deficit
(amounts in thousands)
 
Number of Class A Common Shares
 
Class A Common Stock
 
Number of Class B Common Shares
 
Class B Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Total Stockholders' Equity
 
Predecessor's Owners' Deficit
 
Non-controlling Interests
 
Private Perpetual Preferred Units
 
Total Equity
The Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of Class A common stock, Class B common stock, and non-controlling interests related to the acquisition of the option properties
2,556

 
25

 
110

 
1

 
44,372

 
—

 
44,398

 
—

 
334,930

 
—

 
379,328

Redemption of operating partnership units
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(829
)
 
—

 
(829
)
Issuance of private perpetual preferred units in exchange for common units
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(8,004
)
 
8,004

 
—

Equity component of senior unsecured notes
—

 
—

 
—

 
—

 
4,857

 
—

 
4,857

 
—

 
8,347

 
—

 
13,204

Conversion of operating partnership units and Class B shares to Class A shares
8,995

 
90

 
(71
)
 
—

 
40,611

 
—

 
40,701

 
—

 
(40,701
)
 
—

 
—

Net income
—

 
—

 
—

 
—

 
—

 
26,667

 
26,667

 
—

 
43,067

 
476

 
70,210

Equity compensation:
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 


LTIP units
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
3,265

 
—

 
3,265

Restricted stock, net of forfeitures
(5
)
 
—

 
—

 
—

 
455

 
—

 
455

 
—

 
—

 
—

 
455

Dividends and distributions
—

 
—

 
—

 
—

 
—

 
(33,598
)
 
(33,598
)
 
—

 
(53,647
)
 
(476
)
 
(87,721
)
Balance at December 31, 2014
106,030

 
$
1,060

 
1,161

 
$
12

 
$
406,853

 
$
60,713

 
$
468,638

 
$
—

 
$
904,455

 
$
8,004

 
$
1,381,097


The accompanying notes are an integral part of these financial statements




F-5



Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Consolidated Statements of Cash Flows
(amounts in thousands)
 
The Company
 
The Predecessor
 
Year Ended December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
 
Period from January 1, 2013 through October 6, 2013
 
Year Ended December 31, 2012
  
 
 
 
Cash Flows From Operating Activities
 
 
 
 
 
 
 
Net income (loss)
$
70,210

 
$
193,431

 
$
(37,232
)
 
$
48,643

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
145,431

 
27,375

 
38,963

 
42,690

Amortization of deferred finance costs and debt premiums and discount
3,956

 
152

 
11,512

 
4,881

Amortization of acquired above and below-market leases, net
(14,095
)
 
(1,911
)
 
—

 
—

Amortization of acquired below-market ground lease
4,603

 
426

 
—

 
—

Straight-lining of rental revenue
(39,715
)
 
(8,932
)
 
(3,383
)
 
(2,568
)
Equity based compensation
3,720

 
2,994

 
—

 
—

Gain on consolidation of non-controlled entities
—

 
(322,563
)
 
—

 
—

Equity in net income of non-controlled entities
—

 
—

 
(14,875
)
 
(14,348
)
Distributions of cumulative earnings of non-controlled entities
—

 
—

 
3,391

 
10,095

Deemed contribution for settlement expense
—

 
—

 
55,000

 
—

Increase (decrease) in cash flows due to changes in operating assets and liabilities (excluding the effect of acquisitions):
 
 
 
 
 
 
 
Restricted cash
(4,987
)
 
7,196

 
(633
)
 
4,392

Tenant and other receivables
3,135

 
(7,590
)
 
(80
)
 
4,484

Deferred leasing costs
(12,132
)
 
(8,916
)
 
(9,771
)
 
(14,654
)
Prepaid expenses and other assets
(13,052
)
 
(15,120
)
 
3,084

 
(1,154
)
Accounts payable and accrued expenses
(14,756
)
 
11,917

 
26,481

 
10,383

Deferred revenue and other liabilities
6,240

 
(10,386
)
 
924

 
1,509

Net cash provided by (used in) operating activities
138,558

 
(131,927
)
 
73,381

 
94,353

Cash Flows From Investing Activities
 
 
 
 
 
 
 
Decrease (increase) in restricted cash for investing activities
9,345

 
(344
)
 
(500
)
 
(5,561
)
Acquisition of real estate property, net of cash received
(186,588
)
 
—

 
—

 
—

Cash paid in the formation transactions to acquire the non-controlled properties, net of cash received
—

 
(563,529
)
 
—

 
—

Development costs
(527
)
 
—

 
179

 
(189
)
Increase in due from affiliates for advances for leasehold interests and improvements
—

 
—

 
—

 
(15,061
)
Additions to building and improvements
(121,287
)
 
(56,434
)
 
(56,129
)
 
(87,470
)
Net cash used in investing activities
(299,057
)
 
(620,307
)
 
(56,450
)
 
(108,281
)

The accompanying notes are an integral part of these financial statements










F-6


Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Consolidated Statements of Cash Flows (continued)
(amounts in thousands)
 
The Company
 
The Predecessor
 
Year Ended December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
 
Period from January 1, 2013 through October 6, 2013
 
Year Ended December 31, 2012
  
 
 
 
Cash Flows From Financing Activities
 
 
 
 
 
 
 
Proceeds from mortgage notes payable
191,000

 
—

 
102,947

 
69,000

Repayment of mortgage notes payable
(348,308
)
 
(313,240
)
 
(20,049
)
 
(12,212
)
Proceeds from unsecured loan payable
—

 
—

 
3,750

 
51

Repayment of unsecured notes payable
—

 
(7,350
)
 
—

 
—

Proceeds from senior unsecured notes
250,000

 
—

 
—

 
—

Proceeds from term loan and credit facility
435,600

 
335,000

 
—

 
—

Repayments of term loan and credit facility
(290,600
)
 
(10,000
)
 
—

 
—

Deferred financing costs and equity issuance costs
(4,483
)
 
(15,381
)
 
(3,482
)
 
(4,339
)
Net proceeds from the sale of common stock
—

 
992,887

 
—

 
—

Deferred offering costs
—

 
—

 
(6,595
)
 
(12,593
)
Contributions from owners
—

 
—

 
3,924

 
2,107

Cash paid for equity interests in the formation transactions
—

 
(143,236
)
 
—

 
—

Distributions to Predecessor owners
—

 
(123,147
)
 
(31,965
)
 
(62,903
)
Private perpetual preferred unit distributions
(476
)
 
—

 
—

 
—

Dividends paid to common stockholders
(33,598
)
 
(7,601
)
 
—

 
—

Distributions paid to noncontrolling interests in the operating partnership
(53,647
)
 
(11,915
)
 
—

 
—

Net cash provided by (used in) financing activities
145,488

 
696,017

 
48,530

 
(20,889
)
Net increase (decrease) in cash and cash equivalents
(15,011
)
 
(56,217
)
 
65,461

 
(34,817
)
Cash and cash equivalents—beginning of period
60,743

 
116,960

 
51,499

 
86,316

Cash and cash equivalents—end of period
$
45,732

 
$
60,743

 
$
116,960

 
$
51,499

 
 
 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
Cash paid for interest
$
60,621

 
$
12,648

 
$
38,380

 
$
48,993

Cash paid for income taxes
$
3,690

 
$
329

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
 
 
 
Commercial real estate properties included in accounts payable and accrued expenses
$
36,920

 
$
15,584

 
$
1,812

 
$
1,926

Issuance of Class A Common Stock, Class B Common Stock, and operating partnership units in connection with the acquisition of real estate properties
379,328

 
457,493

 
—

 
—

Debt assumed with the acquisition of real estate properties
182,851

 
136,226

 
—

 
—

Reduction of equity for deferred offering costs
—

 
32,319

 
—

 
—

Acquisition of working capital (deficit), net of cash
(4,749
)
 
6,061

 
—

 
—

Due to affiliates settled in Class A Common Stock, Class B Common Stock, or operating partnership units
—

 
4,299

 
—

 
—

Conversion of operating partnership units and Class B shares to Class A shares
40,611

 
—

 
—

 
—

Redemption of operating partnership units to repay other receivable
829

 
—

 
—

 
—

Accrued distributions to Predecessor owners
—

 
—

 
123,147

 
—

Distribution of real property to owners prior to the formation transactions
—

 
—

 
16,345

 
—

Distribution of unsecured loan and note payable - related party to owners prior to the formation transactions
—

 
—

 
14,739

 
—

The accompanying notes are an integral part of these financial statements

F-7




Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Notes to Consolidated Financial Statements
 
1. Description of Business and Organization
As used in these consolidated financial statements, unless the context otherwise requires, “we,” “us,” "our," the "company,” and "ESRT" mean the predecessor (as defined below) for the periods presented and Empire State Realty Trust, Inc. and its consolidated subsidiaries upon the consummation of its initial public offering of Class A common stock and the formation transactions defined below.
    We are a self-administered and self-managed real estate investment trust, or REIT, that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.
As of December 31, 2014, our total portfolio contained 10.0 million rentable square feet of office and retail space. We owned 14 office properties (including three long-term ground leasehold interest) encompassing approximately 9.3 million rentable square feet of office space. Nine of these properties are located in the midtown Manhattan market and encompass in the aggregate approximately 7.4 million rentable square feet of office space, including the Empire State Building. Our Manhattan office properties also contain an aggregate of 523,463 rentable square feet of premier retail space on their ground floor and/or lower levels. Our remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.9 million rentable square feet. The majority of square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation. Additionally, we have entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 380,000 rentable square foot office building and garage, which we refer to herein as Metro Tower. As of December 31, 2014, our portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 204,175 rentable square feet in the aggregate.
We were organized as a Maryland corporation on July 29, 2011. We did not have any assets other than cash and did not have any meaningful operating activity until the consummation of the initial public offering of our Class A common stock (the "Offering") and the related acquisition of our predecessor and certain non-controlled entities controlled by our predecessor on October 7, 2013.
    In connection with the Offering, on October 7, 2013, the following transactions were completed:
•
We issued a total of approximately 82.2 million shares of our Class A common stock at $13.00 per share.
•
We acquired, through a series of formation transactions (as more fully described below), certain assets of our predecessor and certain other entities. In exchange for such assets, the prior investors in such assets that were accredited investors were issued a total of approximately 12.1 million shares of Class A common stock, approximately 1.1 million shares of Class B common stock, and approximately 149.0 million common units of limited partnership interests in our operating partnership, with an aggregate value of approximately $2.1 billion , and non-accredited prior investors and prior investors who elected to receive cash for their equity interests were paid a total of approximately $733.3 million in cash from the net proceeds of the Offering for an aggregate consideration of approximately $2.8 billion .
•
We entered into an $800 million secured revolving and term credit facility with an accordion feature to increase the availability to $1 billion under certain circumstances.
Our operations commenced upon completion of the Offering and related formation transactions on October 7, 2013. Empire State Realty OP, L.P. (the "operating partnership") holds substantially all of our assets and conducts substantially all of our business. As of December 31, 2014 , we owned approximately 40.1% of the aggregate operating partnership units in our operating partnership. We, as the sole general partner in our operating partnership, have responsibility and discretion in the management and control of our operating partnership, and the limited partners in our operating partnership, in such capacity, have no authority to transact business for, or participate in the management activities of our operating partnership. Accordingly, our operating partnership has been consolidated by us. We elected to be taxed as a REIT and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013.

F-8


We formed and acquired two entities that have elected to be treated as taxable REIT subsidiaries, or TRSs, and are owned by our operating partnership. The TRSs, through several wholly-owned limited liability companies, conduct third-party services businesses, which include the Empire State Building Observatory, cleaning services, cafeteria, restaurant and fitness center, property management and leasing, construction, and property maintenance.
    We entered into a series of formation transactions (the “formation transactions”), pursuant to which we acquired, substantially currently with the completion of the Offering through a series of contributions and merger transactions, our portfolio of real estate assets that comprise our portfolio, the ownership interests in the certain management entities of our predecessor and one development parcel. Our operating partnership used the net proceeds of the Offering to pay cash to certain holders of interests in the existing entities (as defined herein) that were non-accredited investors or who elected to receive cash for their equity interests in certain of such entities; pay fees associated with our secured revolving and term credit facility; pay fees in connection with the assumption of indebtedness; pay expenses incurred in connection with the Offering and the formation transactions; repay a loan that was made to one of the existing entities by certain investors in such entity; and for general working capital purposes and to fund potential future acquisitions. On September 28, 2012, a Stipulation of Settlement resolving the original class actions was entered into. The terms of the settlement include, amongst other things, a payment of $55.0 million , with a minimum of 80% in cash and a maximum of 20% in freely-tradable shares of common stock and/or operating partnership units. As the payment is to be fully made by the principal owners of certain predecessor entities, $55.0 million was recorded as settlement expense in our predecessor's statement of operations, with a corresponding $55.0 million capital contribution to our predecessor at that time.
For all periods prior to the completion of the Offering and formation transactions, our predecessor results of operations contain unconsolidated results for certain non-controlled entities (as defined below) that owned interests in the Empire State Building, 1350 Broadway, 1333 Broadway, and 501 Seventh Avenue, which were accounted for by our predecessor under the equity method of accounting and make up a significant portion of our company subsequent to the completion of the Offering and formation transactions. Our results of operations for the year ended December 31, 2012 and for the period January 1, 2013 to October 6, 2013 reflect the financial condition and results of operations of our predecessor. Our financial condition as of December 31, 2014 and 2013 and results of operations for the period October 7, 2013 to December 31, 2013 and December 31, 2014 reflect the financial condition and results of operations of our predecessor consolidated with the non-controlling interests in those four properties we acquired at the time of the Offering and formation transactions.
The Predecessor
Our predecessor is not a legal entity but rather a combination of (i) controlling interests in (a)  16 office and retail properties, (b)  one development parcel, and (c) certain management companies, which were owned by certain entities that Anthony E. Malkin and Peter L. Malkin, as sponsors, owned interests in and controlled, which we collectively refer to as the controlled entities, and (ii) non-controlling interests in four office properties (which include two of the 16 properties set forth in (i) above), held through entities which we collectively refer to as the non-controlled entities, and are presented as uncombined entities in our combined financial statements. Specifically, the term “our predecessor” means (i) Malkin Holdings LLC, a New York limited liability company that acted as the supervisor of, and performed various asset management services and routine administration with respect to, certain of the existing entities, which we refer to as “the supervisor;” (ii) the limited liability companies or limited partnerships that previously (a) owned, directly or indirectly and either through a fee interest or a long-term leasehold in the underlying land, and/or (b) operated, directly or indirectly and through a fee interest, an operating lease, an operating sublease or an operating sub-sublease, the 18 office and retail properties (which include non-controlling interests in four office properties for which Malkin Holdings LLC acted as the supervisor but that are not consolidated into our predecessor for accounting purposes) and entitled land that will support the development of an approximately 380,000 rentable square foot office building and garage that we own after the formation transactions, which we refer to as the “existing entities;” (iii) Malkin Properties, L.L.C., a New York limited liability company that served as the manager and leasing agent for certain of the existing entities in Manhattan, which we refer to as “Malkin Properties;” (iv) Malkin Properties of New York, L.L.C., a New York limited liability company that served as the manager and leasing agent for certain of the existing entities in Westchester County, New York, which we refer to as “Malkin Properties NY;” (v) Malkin Properties of Connecticut, Inc., a Connecticut corporation that served as the manager and leasing agent for certain of the existing entities in the State of Connecticut, which we refer to as “Malkin Properties CT;” and (vi) Malkin Construction Corp., a Connecticut corporation that is a general contractor and provided services to certain of the existing entities and third parties (including certain tenants at the properties in our portfolio), which we refer to as “Malkin Construction.” The term “the predecessor’s management companies” refers to the supervisor, Malkin Properties, Malkin Properties NY, Malkin Properties CT and Malkin Construction, collectively. Our predecessor accounted for its investment in the non-controlled entities under the equity method of accounting.
Controlled Entities:

F-9


Properties that the sponsors owned interests in and controlled, and whose operations were 100% consolidated into the financial statements of our predecessor include:
Office:
One Grand Central Place, New York, New York
250 West 57th Street, New York, New York
1359 Broadway, New York, New York
First Stamford Place, Stamford, Connecticut
Metro Center, Stamford, Connecticut
383 Main Avenue, Norwalk, Connecticut
500 Mamaroneck Avenue, Harrison, New York
10 Bank Street, White Plains, New York
Fee ownership position of 350 Fifth Avenue (Empire State Building), New York, New York
Fee ownership position of 501 Seventh Avenue, New York, New York
Retail:
10 Union Square, New York, New York
1010 Third Avenue, New York, New York
77 West 55th Street, New York, New York
1542 Third Avenue, New York, New York
69-97 Main Street, Westport, Connecticut
103-107 Main Street, Westport, Connecticut
Land Parcels:
We own entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties that will support the development of an approximately 380,000 rentable square foot office building and garage.
The acquisition of interests in our predecessor were recorded at historical cost at the time of the formation transactions.  
Non-Controlled Entities:
Properties in which the sponsors owned and controlled non-controlling interests and whose operations are reflected in our predecessor’s combined financial statements as an equity interest include:
Office:
Master operating lease position of 350 Fifth Avenue, New York, New York—Empire State Building Company L.L.C.
Master operating lease position of 1350 Broadway, New York, New York—1350 Broadway Associates L.L.C. (long term ground lease)
1333 Broadway, New York, New York—1333 Broadway Associates L.L.C.
Master operating lease position of 501 Seventh Avenue, New York, New York—501 Seventh Avenue Associates L.L.C.     


F-10


2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (the "SEC") represent our assets and liabilities and operating results. The consolidated financial statements include our accounts and our wholly-owned subsidiaries as well as our operating partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
    Our predecessor's consolidated financial statements include all the accounts and operations of our predecessor. The real estate entities included in the accompanying combined financial statements have been combined on the basis that, for the periods presented, such entities were under common control, common management and common ownership of the Sponsors. Equity interests in the combining entities that were not controlled by the sponsors are shown as investments in non-controlled entities. We acquired these interests as a result of the formation transactions.
Our predecessor consolidated variable interest entities, or VIEs, in which it was considered a primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
We had no VIEs as of December 31, 2014 or December 31, 2013.
We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, the entity’s tax return before filing, and leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment. Such agreements could also contain certain protective rights such as the requirement of partner approval to sell, finance or refinance the investment and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan.
A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the combined balance sheets and in the combined statements of operations by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests. As the financial statements of our predecessor have been prepared on a combined basis, there is no non-controlling interest for our predecessor for the periods presented.
Accounting Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties and other long-lived assets, estimate of percentage of completion on construction contracts, valuation of the allowance for doubtful accounts, and valuation of senior unsecured notes and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates.
Revenue Recognition
Rental Revenue
Rental revenue includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease which includes the effects of rent steps and rent

F-11


abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and the leased space is substantially ready for its intended use. In addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. We account for all of our leases as operating leases. Deferred rent receivables, including free rental periods and leasing arrangements allowing for increased base rent payments are accounted for in a manner that provides an even amount of fixed lease revenues over the respective non-cancellable lease terms. Differences between rental income recognized and amounts due under the respective lease agreements are recognized as an increase or decrease to deferred rents receivable.
The timing of rental revenue recognition is impacted by the ownership of tenant improvements and allowances. When we are the owner of the tenant improvements, revenue recognition commences after both the improvements are completed and the tenant takes possession or control of the space. In contrast, if we determine that the tenant allowances we are funding are lease incentives, then we commence revenue recognition when possession or control of the space is turned over to the tenant. Tenant improvement ownership is determined based on various factors including, but not limited to, whether the lease stipulates how and on what a tenant improvement allowance may be spent, whether the tenant or landlord retains legal title to the improvements at the end of the lease term, whether the tenant improvements are unique to the tenant or general-purpose in nature, and whether the tenant improvements are expected to have any residual value at the end of the lease.
In addition to base rent, our tenants also generally will pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in an index such as the Consumer Price Index over the index value in effect during a base year.
We will recognize rental revenue of acquired in-place above- and below-market leases at their fair values over the terms of the respective leases, including, for below-market leases, fixed option renewal periods, if any.
Lease cancellation fees are recognized when the fees are determinable, tenant vacancy has occurred, collectability is reasonably assured, we have no continuing obligation to provide services to such former tenants and the payment is not subject to any conditions that must be met or waived. Total lease cancellation fees for the years ended December 31, 2014 , 2013, and 2012 were $6.1 million , $1.6 million , and $3.9 million , respectively. Such fees are included in other income and fees in our consolidated and combined statements of operations.
Observatory Revenue
Revenue from the sale of Observatory tickets are recognized upon admission or ticket expirations. Deferred income related to unused and unexpired tickets as of December 31, 2014 and 2013 was $4.5 million and $3.7 million , respectively.
Construction Revenue
Revenues from construction contracts are recognized under the percentage-of completion method. Under this method, progress towards completion is recognized according to the ratio of incurred costs to estimated total costs. This method is used because management considers the “cost-to-cost” method the most appropriate in the circumstances.
Contract costs include all direct material, direct labor and other direct costs and an allocation of certain overhead related to contract performance. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Gains on Sale of Real Estate
We record a gain on sale of real estate when title is conveyed to the buyer and we have no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, we defer some or all of the gain recognition and accounts for the continued operations of the property by applying the finance, leasing, profit sharing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met.
Third-Party Management, Leasing and Other Fees
We earn revenue arising from contractual agreements with affiliated entities of the sponsors that are not presented as controlled entities. This revenue is recognized as the related services are performed under the respective agreements in place.

F-12


Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred. The expense for the years ended December 31, 2014 , 2013, and 2012 was $10.0 million , $4.2 million and $1.3 million , respectively, and is included within operating expenses in our consolidated statements of operations.
Offering Costs and Formation Transaction Expenses
In connection with the Offering and formation transactions, we incurred incremental accounting fees, legal fees and other professional fees. Approximately $33.5 million was previously deferred and recorded as a reduction of proceeds of the Offering. Certain costs associated with the Offering and formation transactions not directly attributable to the solicitation of consents of investors in the existing entities and the Offering, but rather related to structuring the formation transactions, are expensed as incurred.
Real Estate Properties and Related Intangible Assets
Land and buildings and improvements are recorded at cost less accumulated depreciation and amortization. The recorded cost includes cost of acquisitions, development and construction and tenant allowances and improvements. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. Significant replacements and betterments which improve or extend the life of the asset are capitalized. Tenant improvements which improve or extend the life of the asset are capitalized. If a tenant vacates its space prior to the contractual termination of its lease, the unamortized balance of any tenant improvements are written off if they are replaced or have no future value. For developed properties, direct and indirect costs that clearly relate to projects under development are capitalized. Costs include construction costs, professional services such as architectural and legal costs, travel expenses, capitalized interest and direct payroll and other acquisition costs. We begin capitalization when the project is probable. Capitalization of interest ceases when the property is ready for its intended use, which is generally near the date that a certificate of occupancy is obtained.
Depreciation and amortization are computed using the straight-line method for financial reporting purposes. Buildings and improvements are depreciated over the shorter of 39 years, the useful life, or the remaining term of any leasehold interest. Tenant improvement costs, which are included in building and improvements in the consolidated balance sheets, are depreciated over the shorter of (i) the related remaining lease term or (ii) the life of the improvement. Corporate equipment, which is included in “Other assets,” is depreciated over three to seven years.
Acquisitions of properties are accounted for utilizing the acquisition method and accordingly the purchase cost is allocated to tangible and intangible assets and liabilities based on their fair values. The fair value of tangible assets acquired is determined by valuing the property as if it were vacant, applying methods similar to those used by independent appraisers of income-producing property. The resulting value is then allocated to land, buildings and improvements, and tenant improvements based on our determination of the fair value of these assets. The assumptions used in the allocation of fair values to assets acquired are based on our best estimates at the time of evaluation.
Fair value is assigned to above-market and below-market leases based on the difference between (a) the contractual amounts to be paid by the tenant based on the existing lease and (b) our estimate of current market lease rates for the corresponding in-place leases, over the remaining terms of the in-place leases. Capitalized above-market lease amounts are amortized as a decrease to rental revenue over the remaining terms of the respective leases. Capitalized below-market lease amounts are amortized as an increase to rental revenue over the remaining terms of the respective leases. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off.
The aggregate value of other acquired intangible assets consists of acquired ground leases and acquired in-place leases and tenant relationships. The fair value allocated to acquired in-place leases consists of a variety of components including, but not necessarily limited to: (a) the value associated with avoiding the cost of originating the acquired in-place leases (i.e. the market cost to execute a lease, including leasing commissions and legal fees, if any); (b) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period (i.e. real estate taxes, insurance and other operating expenses); (c) the value associated with lost rental revenue from existing leases during the assumed lease-up period; and (d) the value associated with any other inducements to secure a tenant lease.
We assess the potential for impairment of our long-lived assets, including real estate properties, annually or whenever events occur or a change in circumstances indicate that the recorded value might not be fully recoverable. We determine whether impairment in value has occurred by comparing the estimated future undiscounted cash flows expected from the use

F-13


and eventual disposition of the asset to its carrying value. If the undiscounted cash flows do not exceed the carrying value, the real estate is adjusted to fair value and an impairment loss is recognized. Assets held for sale are recorded at the lower of cost or fair value less costs to sell. We do not believe that the value of any of our properties and intangible assets were impaired during the years ended December 31, 2014, 2013 and 2012.
    All operations and gains and losses associated with sales of real estate property or assets classified as held for sale are reclassified and presented as discontinued operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term liquid investments with original maturities of three months or less when purchased. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit. To date, we have not experienced any losses on our invested cash.
Restricted Cash
Restricted cash consists of amounts held by lenders and/or escrow agents to provide for future real estate tax expenditures and insurance expenditures, tenant vacancy related costs, debt service obligations and amounts held for tenants in accordance with lease agreements such as security deposits.
Allowance for Doubtful Accounts
We maintain an allowance against tenant and other receivables and deferred rents receivables for future potential tenant credit losses. The credit assessment is based on the estimated accrued rental revenue that is recoverable over the term of the respective lease. The computation of this allowance is based on the tenants’ payment history and current credit status. If our estimate of collectability differs from the cash received, then the timing and amount of our reported revenue could be impacted. Bad debt expense is included in operating expenses on our consolidated statements of operations and includes the impact of changes in the allowance for doubtful accounts on our consolidated balance sheets.
Deferred Lease Costs
Deferred lease costs consist of fees and direct costs incurred to initiate and renew leases, are amortized on a straight-line basis over the related lease term and the expense is included in depreciation and amortization in our consolidated statements of operations. Upon the early termination of a lease, unamortized deferred leasing costs are charged to expense.
Deferred Financing Costs
Fees and costs incurred to obtain long-term financing have been deferred and are being amortized as a component of interest expense in our consolidated statements of operations over the life of the respective long-term financing on the straight-line method which approximates the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking debt, which do not close, are expensed in the period in which it is determined that the financing will not close.
Equity Method Investments
We account for investments under the equity method of accounting where we do not have control but have the ability to exercise significant influence. Under this method, investments are recorded at cost, and the investment accounts are adjusted for our share of the entities’ income or loss and for distributions and contributions. Equity income (loss) is allocated based on the portion of the ownership interest that is controlled by us. The agreements may designate different percentage allocations among investors for profits and losses; however, our recognition of the entity’s income or loss generally follows the entity’s distribution priorities, which may change upon the achievement of certain investment return thresholds.
To the extent that we contributed assets to an entity, our investment in the entity is recorded at cost basis in the assets that were contributed to the entity. Upon contributing assets to an entity, we make a judgment as to whether the economic substance of the transaction is a sale. If so, gain or loss is recognized on the portion of the asset to which the other partners in the entity obtain an interest.

F-14


To the extent that the carrying amount of these investments on our combined balance sheets is different than the basis reflected at the entity level, the basis difference would be amortized over the life of the related asset and included in our share of equity in net income of the entity.
On a periodic basis, we assess whether there are any indicators that the carrying value of our investments in entities may be impaired on an other than temporary basis. An investment is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment on an other than temporary basis. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying value of the investment over the fair value of the investment. None of our predecessor's investments are other than temporarily impaired.
Our predecessor recognized incentive income in the form of overage fees from certain uncombined entities (which include non-controlled and other properties not included in our predecessor) as income to the extent it has been earned and not subject to a clawback feature.
If our predecessor's share of distributions and net losses exceeds our investments for certain of the equity method investments and if our predecessor remained liable for future obligations of the entity or was otherwise committed to provide future additional financial support, the investment balances would have been presented in the accompanying combined balance sheets as liabilities. The effects of material intercompany transactions with these equity method investments are eliminated. None of the entity debt is recourse to us.
As of December 31, 2014 and 2013, we had no equity method investments.
Goodwill
Goodwill is tested annually for impairment and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill. Non-amortizing intangible assets, such as trade names and trademarks, are subject to an annual impairment test based on fair value and amortizing intangible assets are tested whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Fair Value
Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the Financial Accounting Standards Board ("FASB") guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
We use the following methods and assumptions in estimating fair value disclosures for financial instruments.
For cash and cash equivalents, restricted cash, tenant and other receivables, prepaid expenses and other assets, deferred revenue, tenant security deposits, accounts payable and accrued expenses in our consolidated balance sheets approximate their fair value due to the short term maturity of these instruments.
The fair value of our mortgage notes payable, term loan and credit facility, and senior unsecured notes which are determined using Level 3 inputs, are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us.
The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:
Level 1 - Quoted prices in active markets for identical instruments.
Level 2 - Valuations based principally on other observable market parameters, including:
•
Quoted prices in active markets for similar instruments;
•
Quoted prices in less active or inactive markets for identical or similar instruments;

F-15


•
Other observable inputs (such as risk free interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates); and
•
Market corroborated inputs (derived principally from or corroborated by observable market data).
Level 3 - Valuations based significantly on unobservable inputs, including:
•
Valuations based on third-party indications (broker quotes or counterparty quotes) which were, in turn, based significantly on unobservable inputs or were otherwise not supportable as Level 3 valuations; and
•
Valuations based on internal models with significant unobservable inputs.
These levels form a hierarchy. We follow this hierarchy for our financial instruments measured or disclosed at fair value on a recurring and nonrecurring basis and other required fair value disclosures. The classifications are based on the lowest level of input that is significant to the fair value measurement.
Income Taxes
We elected to be taxed as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2013 and believe we qualify as a REIT at December 31, 2014. REITs are subject to a number of organizational and operational requirements, including a requirement that 90% of ordinary “REIT taxable income” (as determined without regard to the dividends paid deduction or net capital gains) be distributed. As a REIT, we will generally not be subject to U.S. federal income tax to the extent that we meet the organizational and operational requirements and our distributions equal or exceed REIT taxable income. For all periods subsequent to the effective date of our REIT election, we have met the organizational and operational requirements and distributions have exceeded net taxable income. Accordingly, no provision has been made for federal and state income taxes.
We have elected to treat ESRT Observatory TRS, L.L.C., our subsidiary which holds our observatory operations, and ESRT Holdings TRS, L.L.C., our subsidiary that holds our third party management, construction, restaurant, health club and certain cleaning operations, as taxable REIT subsidiaries. Taxable REIT subsidiaries may participate in non-real estate activities and/or perform non-customary services for tenants and their operations are generally subject to regular corporate income taxes. Our taxable REIT subsidiaries accounts for its income taxes in accordance with GAAP, which includes an estimate of the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. The calculation of the taxable REIT subsidiaries' tax provisions may require interpreting tax laws and regulations and could result in the use of judgments or estimates which could cause its recorded tax liability to differ from the actual amount due. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The taxable REIT subsidiaries periodically assess the realizability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, or federal statutory tax audits or estimates and judgments used.
We apply provisions for measuring and recognizing tax benefits associated with uncertain tax positions. Penalties and interest, if incurred, would be recorded as a component of income tax expense. As of December 31, 2014 and 2013, we do not have a liability for uncertain tax positions. As of December 31, 2014, the tax years ended December 31, 2011 through December 31, 2014 remain open for an audit by the Internal Revenue Service or state authorities. We have not received a notice of audit from the Internal Revenue Service and state authorities for any of the open tax years.
During the periods presented, the entities included in our predecessor's consolidated financial statements are treated as partnerships or S corporations for U.S. federal and state income tax purposes and, accordingly, are not subject to entity-level tax. Rather, each entity’s taxable income or loss is allocated to its owners. Therefore, no provision or liability for U.S. federal or state income taxes has been included in the accompanying consolidated financial statements for those periods.
Two of the limited liability companies in our Predecessor had non-real estate income subject to New York City unincorporated business tax (“NYCUBT”). In 2013 and 2012, one of these entities generated a loss for NYCUBT purposes while the other entity generated income. No provision or liability for U.S. federal, state, or local income taxes has been included in our Predecessor's consolidated financial statements as 2013 taxable income referred to above was fully offset by a NYCUBT net operating loss carry forward from previous years.
As a result of the consolidation and concurrent liquidation of the entities that had previously been subject to the NYCUBT, the NYCUBT net operating loss carryforward of $13.4 million at October 6, 2013 can no longer be used.

F-16


Share-Based Compensation
Share-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. The determination of fair value of these awards is subjective and involves significant estimates and assumptions including expected volatility of our stock, expected dividend yield, expected term, and assumptions of whether these awards will achieve parity with other operating partnership units or achieve performance thresholds. We believe that the assumptions and estimates utilized are appropriate based on the information available to management at the time of grant.
Per Share Data
Basic and diluted earnings per share are computed based upon the weighted average number of shares outstanding during the respective period.
Segment Reporting
We have identified two reportable segments: (1) Real Estate and (2) Observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets. Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and different marketing strategies. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. We include our construction operation in "Other" and it includes all activities related to providing construction services to tenants and to other entities within and outside our company.
Reclassification

Certain prior year balances have been reclassified to conform to our current year presentation primarily in order to present ground rent expense and income tax expense accounts separately and to reclassify acquisition expenses from other expenses to operating expenses.

Recently Issued or Adopted Accounting Standards
During February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-02, Consolidation (Topic 810)—Amendments to the Consolidation Analysis, which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. ASU 2015-02 is effective for annual periods, and interim periods therein, beginning after December 15, 2015. We are evaluating the impact of adopting this new accounting standard on our financial statements.
During January 2015, the FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01 eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual or in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. ASU 2015-01 is effective for periods beginning after December 15, 2015. We are evaluating the impact of adopting this new accounting standard on our financial statements.
During May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers". This new standard will replace all current U.S. GAAP guidance related to revenue recognition and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning in 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the impact of adopting this new accounting standard on our financial statements.
During April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. ASU No. 2014-08 changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s

F-17


operations and financial results. This guidance is effective prospectively for fiscal years beginning after December 15, 2014. The adoption of ASU 2014-08 did not have a material impact on our financial statements.    
3. Acquisitions
2014 Acquisitions
On July 15, 2014, we acquired the ground and operating lease at 112 West 34th Street (and the fee title to 122 West 34th Street) for $423.6 million , consisting of $87.7 million by assumption of existing mortgage debt, $106.9 million in cash and $229.0 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, we issued 1,217,685 shares of Class A common stock and 77,945 shares of Class B common stock at a share price of $16.65 and 12,457,379 Series PR OP Units at a unit price of $16.65 .
On July 15, 2014, we acquired the ground lease at 1400 Broadway for $310.0 million , consisting of $80.0 million by assumption of existing mortgage debt, $79.7 million in cash and $150.3 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, we issued 1,338,488 shares of Class A common stock and 32,452 shares of Class B common stock at a share price of $16.65 and 7,658,516 Series PR OP Units at a unit price of $16.65 .
The purchase price is allocated between net tangible and intangible assets based on their estimated fair values as determined by management using information available at the time the acquisition closed. The remaining weighted-average amortization period as of December 31, 2014, is 26.4 years, 4.9 years, 4.2 years and 4.4 years for below-market ground leases, in-place leases and deferred leasing costs, above-market leases and below-market leases, respectively.
The following table is an allocation of the purchase price for the assets and liabilities acquired (amounts in thousands):
Consideration paid:
 
Cash and issuance of Class A Common Stock, Class B Common Stock, and Series PR OP units
$
565,916

Debt assumed
167,684

Total consideration paid
$
733,600

 
 
Net assets acquired:
 
Land and building and improvements
$
354,429

Acquired below-market ground leases
334,178

Acquired above-market leases
13,088

Acquired in place lease value and deferred leasing costs
88,374

Mortgage notes payable, inclusive of premium
(182,851
)
Acquired below-market leases
(36,553
)
Other liabilities, net of other assets
(4,749
)
Total net assets acquired
$
565,916

2013 Acquisitions
On October 7, 2013, as discussed in Note 1, through the Offering and formation transactions we acquired the assets and liabilities of the four entities in which our predecessor held non-controlling interests. The contribution or acquisition of assets in these entities was accounted for as an acquisition under the acquisition method of accounting and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such contribution or acquisition. Prior to the acquisition, our predecessor had a 23.75% , 50.0% , 50.0% , and 20.469% non-controlling interest in Empire State Building Company, L.L.C., 1333 Broadway Associates, L.L.C., 1350 Broadway Associates, L.L.C., and 501 Seventh Avenue Associates, L.L.C., respectively.
Upon acquisition, we remeasured the assets and liabilities we acquired from the non-controlled entities at fair value and recorded gains of $214.3 million , which are classified as gain on consolidation of non-controlled entities in the accompanying

F-18


statement of operations. This gain was calculated based on the difference between the total consideration value of our predecessor’s ownership interests of $302.7 million compared to our predecessor’s historical cost interests of $88.4 million . We determined that the fair values of the assets acquired from and assumed liabilities for 1333 Broadway Associates, L.L.C. and 1350 Broadway Associates, L.L.C. were greater than the consideration granted and we recorded gains of $41.0 million and $32.1 million , respectively, which were classified as gain on consolidation of non-controlled entities in the accompanying statement of operations. There are operating leases between one of our predecessor entities and Empire State Building Company, L.L.C. and 501 Seventh Avenue Associates, L.L.C. Based upon current market rates for similar arrangements, we determined that the current market rent would be less than the pre-existing contractual rent existing at the time of the Offering and formation transactions under the operating leases. Accordingly, upon elimination of the leasehold position and the related liability for the above-market leases, we recorded gains of $35.2 million , which are classified as gain on consolidation of non-controlled entities in the accompanying statement of operations.
The purchase price is allocated between net tangible and intangible assets based on their estimated fair values as determined by management using information available at the time the acquisition closed. The remaining weighted-average amortization period as of December 31, 2014, is 26.4 years, 4.9 years, 4.2 years and 4.4 years for below-market ground leases, in-place leases and deferred leasing costs, above-market leases and below-market leases, respectively.
The following table is an allocation of the purchase price for the assets and liabilities acquired in the formation transactions (amounts in thousands).
Consideration paid:
 
Cash and issuance of Class A Common Stock, Class B Common Stock, and OP units
$
1,047,487

Debt assumed
124,354

Total consideration paid
$
1,171,841

 
 
Net assets acquired:
 
Land
$
91,435

Building and improvements
516,344

Acquired below-market ground lease
62,738

Acquired above-market leases
72,123

Acquired in place lease value and deferred leasing costs
186,415

Goodwill
491,479

Other assets, net of other liabilities
6,061

Mortgage notes payable
(136,226
)
Acquired below-market leases
(134,651
)
Total net assets acquired
$
1,155,718

 
 
Gain on the elimination of leasehold positions
$
35,147

Fair values of the assets acquired and assumed liabilities were greater than the consideration granted:
 
1333 Broadway Associates L.L.C.
40,962

1350 Broadway Associates L.L.C.
32,122

Total
$
108,231

We acquired Empire State Building Company, L.L.C. and 501 Seventh Avenue Associates, L.L.C. for an amount in excess of their net tangible and identified intangible assets and liabilities and as a result we recorded goodwill related to the transaction (see also Note 5). Goodwill was allocated $227.5 million to the observatory operations of the Empire State Building, $250.8 million to Empire State Building Company, L.L.C., and $13.2 million to 501 Seventh Avenue Associates, L.L.C. No amount of goodwill is deductible for tax purposes.
The following summary of selected unaudited pro forma results of operations presents information as if the 2014 acquisitions had occurred on January 1, 2013 and the 2013 acquisitions had occurred on January 1, 2012. The unaudited pro forma information is provided for informational purposes only and is not indicative of results that would have occurred or which may occur in the future (amounts in thousands, expect per share amounts).

F-19


 
 
For the Year Ended December 31,
 
 
2014
 
2013
Total revenues
 
$
671,952

 
$
652,150

Net income
 
$
68,594

 
$
9,689

Net income attributable to Empire State Realty Trust, Inc.
 
$
25,448

 
$
20,036

Net income attributable to Empire State Realty Trust, Inc. per share - basic and diluted
 
$
0.26

 
$
0.20


The following table summarizes the revenues and earnings related to all the acquired properties since the respective acquisition dates that are included in our consolidated statements of operations for the year ended December 31, 2014 and for the period October 7, 3013 through December 31, 2013 (amounts in thousands):
 
 
2014
 
2013
Total revenues
 
$
392,615

 
$
76,989

Operating expenses
 
$
289,433

 
$
48,538

Operating income
 
$
103,182

 
$
28,451

Net income attributable to common stockholders
 
$
35,002

 
$
10,722


4. Investments in Non-controlled Entities
We had no investment in in non-controlled entities as of December 31, 2014 and 2013.
On October 7, 2013, as part of the Offering and formation transactions, we acquired the assets and liabilities held by the four non-controlled entities (see discussion in Note 3). The investments in non-controlled entities consisted of the following for the year ended December 31, 2012 and for the period January 1, 2013 through October 6, 2013:
Entity
Property
Nominal % Ownership
Empire State Building Company, L.L.C.
350 Fifth Ave, New York, NY
23.750
%
1333 Broadway Associates, L.L.C.
1333 Broadway, New York, NY
50.000
%
1350 Broadway Associates, L.L.C.
1350 Broadway, New York, NY
50.000
%
501 Seventh Avenue Associates, L.L.C.
501 Seventh Ave, New York, NY
20.469
%
Empire State Building Company, L.L.C. was the operating lessee of the property at 350 Fifth Avenue. The land and fee owner, Empire State Building Associates L.L.C., was a predecessor controlled entity whose operations are included in our predecessor's combined financial statements.
1333 Broadway Associates, L.L.C. owned the fee and leasehold positions at the same address.
1350 Broadway Associates, L.L.C. was the operating lessee of the property at the same address.
501 Seventh Avenue Associates L.L.C. was the operating lessee of the property at the same address. The fee owner, Seventh Avenue Building Associates L.L.C., was a predecessor controlled entity whose operations are included in our predecessor's combined financial statements.
Our predecessor's share of income from these entities may have exceeded nominal ownership percentages based on the achievement of certain income thresholds as set forth in the relevant partnership agreements.
The following reflects summarized financial information of the non-controlled entities for the period January 1, 2013 through October 6, 2013 and for the year ended December 31, 2012 (amounts in thousands):



F-20


  
Period from January 1, 2013 to October 6, 2013
Statements of Operations
Empire
State
Building
Co.
 
1333
Broadway
Associates
 
1350
Broadway
Associates
 
501
Seventh
Avenue
Associates
 
Total
Revenue:
 
 
 
 
 
 
 
 
 
Rental revenue and other
$
101,496

 
$
11,711

 
$
16,439

 
$
13,991

 
$
143,637

Observatory revenue
76,687

 
—

 
—

 
—

 
76,687

Total revenue
178,183

 
11,711

 
16,439

 
13,991

 
220,324

Expenses:
 
 
 
 
 
 
 
 
 
Operating expenses—rental
89,670

 
5,766

 
7,989

 
10,830

 
114,255

Operating expenses—overage rent
10,894

 
—

 
—

 
106

 
11,000

Operating expenses—observatory
17,150

 
—

 
—

 
—

 
17,150

Interest
—

 
3,620

 
2,461

 
—

 
6,081

Depreciation and amortization
10,997

 
2,186

 
3,264

 
1,127

 
17,574

Total expenses
128,711

 
11,572

 
13,714

 
12,063

 
166,060

Net income
$
49,472

 
$
139

 
$
2,725

 
$
1,928

 
$
54,264

Our predecessor's share of equity in net income of non-controlled entities
$
13,467

 
$
70

 
$
1,179

 
$
159

 
$
14,875


 
For the year ended December 31, 2012
Statements of Operations
Empire
State
Building
Co.
 
1333
Broadway
Associates
 
1350
Broadway
Associates
 
501
Seventh
Avenue
Associates
 
Total
Revenue:
 
 
 
 
 
 
 
 
 
Rental revenue and other
$
133,666

 
$
14,539

 
$
21,275

 
$
18,827

 
$
188,307

Observatory revenue
91,870

 
—

 
—

 
—

 
91,870

Total revenue
225,536

 
14,539

 
21,275

 
18,827

 
280,177

Expenses:
 
 
 
 
 
 
 
 
 
Operating expenses—rental
119,482

 
7,528

 
10,667

 
13,101

 
150,778

Operating expenses—overage rent
24,199

 
—

 
—

 
2,497

 
26,696

Operating expenses—observatory
20,709

 
—

 
—

 
—

 
20,709

Interest
—

 
4,748

 
2,993

 
—

 
7,741

Depreciation and amortization
13,615

 
1,112

 
3,489

 
1,496

 
19,712

Total expenses
178,005

 
13,388

 
17,149

 
17,094

 
225,636

Net income
$
47,531

 
$
1,151

 
$
4,126

 
$
1,733

 
$
54,541

Our predecessor's share of equity in net income of non-controlled entities
$
11,015

 
$
576

 
$
2,063

 
$
694

 
$
14,348


5. Deferred Costs, Acquired Lease Intangibles and Goodwill
Deferred costs, net, consisted of the following at December 31, (amounts in thousands):  
 
2014
 
2013
 
Gross Amount
 
Accumulated Amortization
 
Gross Amount
 
Accumulated Amortization
Leasing costs
$
100,653

 
$
(33,439
)
 
$
90,198

 
$
(27,459
)
Financing costs
17,334

 
(4,336
)
 
27,416

 
(11,217
)
Total deferred costs
$
117,987

 
$
(37,775
)
 
$
117,614

 
$
(38,676
)

F-21


Amortization expense related to deferred leasing costs was $9.7 million , $10.6 million , and $7.4 million and deferred financing costs was $7.6 million , $12.7 million , and $4.9 million , for the years ended December 31, 2014 , 2013, and 2012, respectively.
Amortizing acquired intangible assets and liabilities consisted of the following at December 31, (amounts in thousands):
 
2014
 
2013
 
Gross Amount
 
Accumulated Amortization
 
Gross Amount
 
Accumulated Amortization
Acquired below-market ground lease
$
396,916

 
$
(5,029
)
 
$
62,738

 
(426
)
Acquired in-place lease value and deferred leasing costs
304,916

 
(83,540
)
 
186,415

 
(5,697
)
Acquired above-market leases
84,633

 
(15,761
)
 
72,123

 
(2,858
)
Acquired below-market leases
(169,805
)
 
30,946

 
(134,651
)
 
4,769

Amortization expense related to acquired lease intangibles was $33.7 million and $5.3 million for the years ended December 31, 2014 and 2013. There were no acquired lease intangibles in 2012. Rental revenue related to the amortization of below market leases, net of above market leases was $14.1 million and $1.9 million for the years ended December 31, 2014 and 2013. There were no acquired above or below-market leases in 2012. The remaining weighted-average amortization period as of December 31, 2014 is 26.4 years, 4.9 years, 4.2 years and 4.4 years for below-market ground leases, in-place leases and deferred leasing costs, above-market leases and below-market leases, respectively. We expect to recognize amortization expense and rental revenue from the acquired intangible assets and liabilities as follows (amounts in thousands):
For the year ending:
Future Ground Rent Amortization
 
Future Amortization Expense
 
Future Rental Revenue
2015
$
7,831

 
$
47,217

 
$
19,687

2016
7,831

 
33,131

 
9,166

2017
7,831

 
25,576

 
5,656

2018
7,831

 
19,539

 
6,337

2019
7,831

 
16,736

 
6,591

Thereafter
352,732

 
79,177

 
22,551

 
$
391,887

 
$
221,376

 
$
69,988

As of December 31, 2014 , we had goodwill of $491.5 million . In 2013, we acquired the interests in Empire State Building Company, L.L.C. and 501 Seventh Avenue Associates, L.L.C. for an amount in excess of their net tangible and identified intangible assets and liabilities and as a result we recorded goodwill related to the transaction (see also Note 3). Goodwill was allocated $227.5 million to the observatory operations of the Empire State Building, $250.8 million to Empire State Building Company, L.L.C., and $13.2 million to 501 Seventh Avenue Associates, L.L.C.
We performed an annual review of goodwill for impairment as of December 31, 2014 and concluded there was no impairment of goodwill. Our methodology to review goodwill impairment, which includes a significant amount of judgment and estimates, provides a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether or not goodwill is impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in future periods.

6. Debt
Debt consisted of the following as of December 31, 2014 and 2013 (amounts in thousands):

 
 
 
 
 
As of December 31, 2014
 
 
Principal Balance as
of December 31, 2014
 
Principal Balance as
of December 31, 2013
 
Stated
Rate
 
Effective
Rate (1)
 
Maturity
Date (2)
 
Mortgage debt collateralized by:
 
 
 
 
 
 
 
 
 
 
Fixed rate mortgage debt
 
 
 
 
 
 
 
 
 
 
10 Union Square
$
20,641

 
$
20,972

 
6.00
%
 
6.77
%
 
5/1/2017
 

F-22


10 Bank Street
32,847

 
33,444

 
5.72
%
 
6.21
%
 
6/1/2017
 
1542 Third Avenue
18,628

 
19,011

 
5.90
%
 
6.60
%
 
6/1/2017
 
First Stamford Place
242,294

 
245,629

 
5.65
%
 
6.15
%
 
7/5/2017
 
383 Main Avenue
29,852

 
30,403

 
5.59
%
 
6.09
%
 
7/5/2017
 
1010 Third Avenue and 77 West 55th Street
27,595

 
28,096

 
5.69
%
 
6.20
%
 
7/5/2017
 
1333 Broadway
69,575

 
70,447

 
6.32
%
 
3.82
%
 
1/5/2018
 
1400 Broadway
 
 
 
 
 
 
 
 
 
 
(first lien mortgage loan)
69,689

 
—

 
6.12
%
 
3.80
%
 
2/5/2018
 
(second lien mortgage loan)
9,803

 
—

 
3.35
%
 
1.00
%
 
2/5/2018
 
112 West 34th Street
 
 
 
 
 
 
 
 
 
 
(first lien mortgage loan)
77,484

 
—

 
6.01
%
 
3.45
%
 
4/5/2018
 
(second lien mortgage loan)
9,763

 
—

 
6.56
%
 
4.01
%
 
4/5/2018
 
1350 Broadway (first lien mortgage loan)
38,900

 
39,420

 
5.87
%
 
3.60
%
 
4/5/2018
 
Metro Center (3)
99,845

 
96,158

 
3.59
%
 
3.66
%
 
11/5/2024
 
One Grand Central Place
 
 
 
 
 
 
 
 
 
 
(first lien mortgage loan) (4)
—

 
71,723

 
 
 
 
 
 
 
(second lien mortgage loan) (4)
—

 
14,884

 
 
 
 
 
 
 
500 Mamaroneck Avenue (5)
—

 
32,620

 
 
 
 
 
 
 
250 West 57th Street
 
 
 
 
 
 
 
 
 
 
(first lien mortgage loan) (5)
—

 
25,621

 
 
 
 
 
 
 
(second lien mortgage loan) (5)
—

 
11,252

 
 
 
 
 
 
 
501 Seventh Avenue
 
 
 
 
 
 
 
 
 
 
(Note 1) (6)
—

 
1,037

 
 
 
 
 
 
 
(Note 2) (6)
—

 
31,459

 
 
 
 
 
 
 
(Note 2) (6)
—

 
6,889

 
 
 
 
 
 
 
1359 Broadway
 
 
 
 
 
 
 
 
 
 
(first lien mortgage loan) (7)
—

 
9,579

 
 
 
 
 
 
 
(second lien mortgage loan) (7)
—

 
5,561

 
 
 
 
 
 
 
(second lien mortgage loan) (7)
—

 
11,311

 
 
 
 
 
 
 
(second lien mortgage loan) (7)
—

 
18,572

 
 
 
 
 
 
 
Total fixed rate mortgage debt
746,916

 
824,088

 
 
 
 
 
 
 

F-23


Floating rate mortgage debt
 
 
 
 
 
 
 
 
 
 
1359 Broadway (7)
44,146

 
—

 
(7)  
 
(7)  
 
8/1/2015
 
One Grand Central Place (4)
91,000

 
—

 
(4)  
 
(4)  
 
11/5/2017
 
One Grand Central Place (third lien mortgage loan) (4)
—

 
6,382

 
 
 
 
 
 
 
250 West 57th Street (third lien mortgage loan) (5)
—

 
21,000

 
 
 
 
 
 
 
501 Seventh Avenue (second lien mortgage loan) (6)
—

 
6,540

 
 
 
 
 
 
 
1350 Broadway (second lien mortgage loan) (8)
—

 
13,409

 
 
 
 
 
 
 
Total floating rate mortgage debt
135,146

 
47,331

 
 
 
 
 
 
 
Total mortgage debt
882,062

 
871,419

 
 
 
 
 
 
 
Secured revolving credit facility
170,000

 
25,000

 
(9)  
 
(9)  
 
10/5/2017
 
Secured term credit facility
300,000

 
300,000

 
(10)  
 
(10)  
 
10/5/2018
 
Senior unsecured notes
250,000

 
—

 
2.63
%
 
3.95
%
 
8/15/2019
 
Total principal
1,602,062

 
1,196,419

 
 
 
 
 
 
 
Unamortized premiums, net of unamortized discount
9,590

 
11,693

 
 
 
 
 
 
 
Total
$
1,611,652

 
$
1,208,112

 
 
 
 
 
 
 
______________

(1)
The effective rate is the yield as of December 31, 2014, including the effects of debt issuance costs.
(2)
Pre-payment is generally allowed for each loan upon payment of a customary pre-payment penalty.
(3)
The loan was refinanced in November 2014 prior to the original maturity of January 1, 2016. We paid a discounted prepayment fee of $2.8 million .
(4)
The first, second and third mortgage loans were refinanced with a new loan in November 2014. The new loan bears interest at 30 day LIBOR plus 1.35% . The rate at December 31, 2014 was 1.52% .
(5)
The loans were repaid in December 2014 with proceeds from our secured revolving credit facility.
(6)
The fixed rate loans were consolidated in February 2014; the consolidated loan was repaid in December 2014 together with the floating rate loan.
(7)
The loan was consolidated in February 2014. The new loan bears interest at 30 day LIBOR plus 1.75% . The rate at December 31, 2014 was 1.92% . Subsequent to December 31, 2014, the maturity date was extended to August 1, 2015.
(8)
The loan was repaid in October 2014 using available cash and cash equivalents.
(9)
Floating at 30 day LIBOR plus 1.20% . The rate at December 31, 2014 was 1.37% .
(10)
Floating at 30 day LIBOR plus 1.35% . The rate at December 31, 2014 was 1.52% .
Principal Payments
Aggregate required principal payments at December 31, 2014 are as follows (amounts in thousands):
 
Year
Amortization
 
Maturities
 
Total
2015
$
11,772

 
$
44,146

 
$
55,918

2016
12,387

 
—

 
12,387

2017
10,070

 
616,760

 
626,830

2018
2,880

 
562,210

 
565,090

2019
14,163

 
327,674

 
341,837

Total principal maturities
$
51,272

 
$
1,550,790

 
$
1,602,062


Secured Revolving and Term Credit Facility
Our secured revolving and term credit facility has a maximum aggregate original principal amount of up to $800.0 million with an accordion feature to increase the availability to $1.25 billion under certain circumstances. The secured revolving and term credit facility had an outstanding balance of $470.0 million at December 31, 2014 .
Amounts outstanding under the term loan bear interest at a floating rate equal to, at our election, (x) a Eurodollar rate, plus a spread ranging from 1.00% to 2.00% depending upon our leverage ratio and credit rating which, at December 31, 2014, was 1.35% ; or (y) a base rate, plus a spread ranging from 0.00% to 1.00% depending upon our leverage ratio and credit rating which, at December 31, 2014, was 0.35% . Amounts outstanding under the revolving credit facility bear interest at a floating rate equal to, at our election, (x) a Eurodollar rate, plus a spread ranging from 0.925% to 1.70%

F-24


depending upon our leverage ratio and credit rating which, at December 31, 2014, was 1.20% ; or (y) a base rate, plus a spread ranging from 0.00% to 0.70% depending upon our leverage ratio and credit rating which, at December 31, 2014 , was 0.20% . In addition, the revolving credit facility permits us to borrow at competitive bid rates determined in accordance with the procedures described in the revolving credit facility.

The term loan has a term of five years and the revolving credit facility has an initial term of four years. We have the option to extend the initial term of the revolving credit facility for an additional one -year period, subject to certain conditions, including the payment of an extension fee equal to 0.20% of the then-outstanding commitments under the revolving credit facility. The secured revolving and term credit facility also includes an unused facility fee of 0.20% . In addition, the secured revolving and term credit facility includes covenants which may restrict our ability to pay distributions if we fail to meet certain tests.

As of December 31, 2014 , we were in compliance with the covenants under the secured revolving and term credit facility.
Unsecured Revolving Credit Facility

On January 23, 2015, we entered into an unsecured revolving credit agreement, which is referred to herein as the “unsecured revolving credit facility,” with Bank of America, Merrill Lynch, Goldman Sachs and the other lenders party thereto. Merrill Lynch acted as joint lead arranger; Bank of America acted as administrative agent; and Goldman Sachs acted as syndication agent and joint lead arranger.

Concurrently with the entering into the unsecured revolving credit facility, on January 23, 2015, we terminated the secured revolving and term credit facility. In connection with the termination of the existing facility, all of the guarantors thereunder were released from their guaranty obligations, all liens created thereby were terminated, and all collateral pledged thereunder was released.

The unsecured revolving credit facility is comprised of a revolving credit facility in the maximum original principal amount of $800.0 million . The unsecured revolving credit facility contains an accordion feature that would allow us to increase the maximum aggregate principal amount to $1.25 billion under specified circumstances.

Amounts outstanding under the unsecured revolving credit facility will bear interest at a floating rate equal to, at our election, (x) a Eurodollar rate, plus a spread that we expect will range from 0.875% to 1.600% depending upon our leverage ratio and credit rating; or (y) a base rate, plus a spread that we expect will range from 0.000% to 0.600% depending upon our leverage ratio and credit rating. In addition, the unsecured revolving credit facility permits us to borrow at competitive bid rates determined in accordance with the procedures described in the unsecured revolving credit facility. We will pay certain customary fees and expense reimbursements.

We paid certain customary fees and expense reimbursements.

The unsecured revolving credit facility has an initial term of 4 years. We have the option to extend the initial term of the unsecured revolving credit facility for up to two additional 6 -month periods, subject to certain conditions, including the payment of an extension fee equal to 0.075% of the then outstanding commitments under the unsecured revolving credit facility.

The unsecured revolving credit facility includes the following financial covenants: (i) maximum leverage ratio of total indebtedness to total asset value of the loan parties and their consolidated subsidiaries will not exceed 60% , (ii) consolidated secured indebtedness will not exceed 40% of total asset value, (iii) tangible net worth will not be less than the sum of 80% of tangible net worth as of September 30, 2014 plus 75% of net equity proceeds received by us (other than proceeds received within ninety (90) days after the redemption, retirement or repurchase of ownership or equity interests in us up to the amount paid by us in connection with such redemption, retirement or repurchase, where, the net effect is that we shall not have increased our net worth as a result of any such proceeds), (iv) adjusted EBITDA (as defined in the unsecured revolving credit facility) to consolidated fixed charges will not be less than 1.50 x, (v) the aggregate net operating income with respect to all unencumbered eligible properties to the portion of interest expense attributable to unsecured indebtedness will not be less than 1.75 x, (vi) the ratio of total unsecured indebtedness to unencumbered asset value will not exceed 60% , and (vii) consolidated secured recourse indebtedness will not exceed 10% of total asset value (provided, however, this covenant shall not apply at any time after we achieve a debt ratings from at least two of Moody’s, S&P and Fitch, and such debt ratings are Baa3 or better (in the case of a rating by Moody’s) or BBB- or better (in the case of a rating by S&P or Fitch)).

F-25



The unsecured revolving credit facility contains customary covenants, including limitations on liens, investment, debt, fundamental changes, and transactions with affiliates, and will require certain customary financial reports. The unsecured revolving credit facility contains customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, invalidity of loan documents, loss of real estate investment trust qualification, and occurrence of a change of control (defined in the definitive documentation for the unsecured credit facility).

Senior Unsecured Notes

During August 2014, we issued $250.0 million principal amount of 2.625% Exchangeable Senior Notes (“Senior Notes”) due August 15, 2019. In connection with this offering, we received net proceeds of $246.9 million , after deducting the related underwriting discounts and commissions and issuance costs.

Interest on the Senior Notes will be payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2015. The Senior Notes are our senior unsecured obligations and rank equally in right of payment with all of our other senior unsecured indebtedness and effectively subordinated in right of payment to all of our secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and structurally subordinated to all liabilities and preferred equity of our subsidiaries.

The Senior Notes will mature on August 15, 2019, unless earlier exchanged, redeemed or repurchased. Holders may exchange their Senior Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2019 only under the following circumstances: (i) during any calendar quarter beginning after September 30, 2014 (and only during such quarter) if the closing sale price of our Class A common stock is more than 130% of the then current exchange price for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading days ending on the last trading day of the previous calendar quarter; (ii) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price per 1,000 principal amount of the Senior Notes for each trading day during such five trading-day period was less than 98% of the closing sale price of our Class A common stock, for each trading day during such five trading-day period multiplied by the then current exchange rate; (iii) if we call any or all of the Senior Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate transactions (significant consolidation, sale, merger, share exchange, fundamental change, etc.).
The if-converted value of the Senior Notes did not exceed their principal at December 31, 2014 and as such has no effect on our earnings per share.

On or after May 15, 2019, and on or prior to the second scheduled trading day immediately preceding the maturity date, holders may exchange their notes without regard to the foregoing conditions.
The Senior Notes will be exchangeable into cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election. We have asserted it is our intent and ability to settle the principal amount of the Senior Notes in cash. The initial exchange rate of Senior Notes is 51.4059 shares per $1,000 principal amount of notes (equivalent to an initial exchange price of approximately $19.45 per share of Class A common stock), subject to adjustment, as described in the related indenture governing the Senior Notes.

Following certain corporate transactions which constitute a make-whole fundamental change (defined in the indenture), we will increase the exchange rate for holders who elect to exchange their Senior Notes in connection with such make whole fundamental change in certain circumstances. Following certain corporate transactions which constitute a fundamental change, holders may require us to repurchase the Senior Notes for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date.

We have separately accounted for the liability and equity components of the Senior Notes by bifurcating gross proceeds between the indebtedness, or liability component, and the embedded conversion option, or the equity component. The bifurcation was done by estimating an effective interest rate as of the date of the issuance for similar notes which do not contain an embedded conversion option. This effective interest rate was estimated to be 3.8% and was used to compute the fair value at the time of issuance for the indebtedness of $236.6 million . The gross proceeds from the issuance of the Senior Notes less the initial amount allocated to the indebtedness resulted in a $13.4 million allocation to the embedded conversion option which has been reflected in the Equity, net of financing costs, in the consolidated balance sheet as of December 31, 2014 . The resulting debt discount is being amortized over the five year period in which the Senior Notes are expected to be outstanding (that is,

F-26


through maturity date) as additional non-cash interest expense. As of December 31, 2014 , the unamortized discount was $12.3 million . The additional non-cash interest expense attributable to the Senior Notes will increase in subsequent reporting periods through the maturity date as the Senior Notes accrete to their par value over the same period.

Underwriting discounts and commissions and issuance costs totaled $3.1 million and were allocated to the indebtedness and the embedded conversion option on a pro-rata basis and accounted for as debt issuance costs and equity issuance costs, respectively. In this connection, $2.9 million attributable to the indebtedness was recorded as part of Deferred Costs, to be subsequently amortized using the effective interest method as interest expense over the expected term of the Senior Notes, and $0.2 million attributable to the embedded conversion option was recorded as a reduction to Equity in the consolidated balance sheet as of December 31, 2014 .

For the year ended December 31, 2014 , total interest expense related to the Senior Notes was $3.8 million consisting of (i) the contractual interest expense of $2.5 million , (ii) the additional non-cash interest expense of $1.1 million related to the accretion of the debt discount, and (iii) the amortization of deferred financing costs of $0.2 million related to the Senior Notes.

7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following as of December 31, 2014 and 2013 (amounts in thousands):
 
2014
 
2013
Accounts payable and accrued expenses
$
68,488

 
$
57,657

Payable to the estate of Leona M. Helmsley (1)
18,367

 
18,367

Accrued interest payable
5,953

 
4,074

Due to affiliated companies
3,755

 
1,810

Accounts payable and accrued expenses
$
96,563

 
$
81,908

___________
(1)
Reflects a payable to the estate of Leona M. Helmsley for New York City transfer taxes.

8. Fair Value of Financial Instruments
The following disclosures of estimated fair value at December 31, 2014 and 2013 were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of borrowings, which is classified as Level 3 is estimated by discounting the contractual cash flows of each debt to their present value using adjusted market interest rates, which is provided by a third-party specialist. The following table presents the aggregate carrying value of our debt and the corresponding estimates of fair value as of December 31, 2014 and 2013 (amounts in thousands):
 
 
2014
 
2013
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Mortgage notes payable
$
903,985

 
$
912,365

 
$
883,112

 
$
900,064

Term loan and credit facility
470,000

 
470,000

 
325,000

 
325,000

Senior unsecured notes
237,667

 
253,469

 
—

 
—

Disclosure about fair value of financial instruments is based on pertinent information available to us as of December 31, 2014 and 2013 . Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

9. Rental Income

F-27


We lease various office spaces to tenants over terms ranging from one to 16 years. Certain leases have renewal options for additional terms. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Operating expense reimbursements are reflected in our consolidated statements of operations as tenant expense reimbursement.

As of December 31, 2014 , we were entitled to the following future contractual minimum lease payments on non-cancellable operating leases to be received which expire on various dates through 2030 (amounts in thousands):
2015
 
 
$
401,615

2016
 
 
369,166

2017
 
 
341,395

2018
 
 
302,143

2019
 
 
275,509

Thereafter
 
 
1,298,926

 
 
 
$
2,988,754

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.
10. Commitments and Contingencies
Legal Proceedings
Litigation
Except as described below, as of December 31, 2014 , we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants. We believe that the costs and related liabilities, if any, which may result from such actions, will not materially affect our consolidated financial position, operating results or liquidity.
In March 2012, five putative class actions, or the "Original Class Actions," were filed in New York State Supreme Court, New York County by investors in certain of the existing entities (constituting the predecessor and the non-controlled entities) (the "existing entities") on March 1, 2012, March 7, 2012, March 12, 2012, March 14, 2012 and March 19, 2012. The plaintiffs asserted claims against our predecessor’s management companies, Anthony E. Malkin, Peter L. Malkin, the estate of Leona M. Helmsley, our operating partnership and us for breach of fiduciary duty, unjust enrichment and/or aiding and abetting breach of fiduciary duty. They alleged, among other things, that the terms of the consolidation and the process by which it was structured (including the valuation that was employed) are unfair to the investors in the existing entities, the consolidation provides excessive benefits to Malkin Holdings LLC (now our subsidiary) and its affiliates and the then-draft prospectus/consent solicitation with respect to the consolidation filed with the SEC failed to make adequate disclosure to permit a fully-informed decision about the consolidation. The complaints sought money damages and injunctive relief preventing the consolidation. The Original Class Actions were consolidated and co-lead plaintiffs’ counsel were appointed by the New York State Supreme Court by order dated June 26, 2012. Furthermore, an underlying premise of the Original Class Actions, as noted in discussions among plaintiffs' counsel and defendants' counsel, was that the consolidation had been structured in such a manner that would cause investors in Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C. (the “subject LLCs”) immediately to incur substantial tax liabilities.
The parties entered into a Stipulation of Settlement dated September 28, 2012, resolving the Original Class Actions. The Stipulation of Settlement recites that the consolidation was approved by overwhelming consent of the investors in the existing entities. The Stipulation of Settlement states that counsel for the plaintiff class satisfied themselves that they have received adequate access to relevant information, including the independent valuer's valuation process and methodology, that the disclosures in the Registration Statement on Form S-4, as amended, are appropriate, that the consolidation presents potential benefits, including the opportunity for liquidity and capital appreciation, that merit the investors' serious consideration and that each of the named class representatives intends to support the consolidation as modified. The Stipulation of Settlement further states that counsel for the plaintiff class are satisfied that the claims regarding tax implications, enhanced disclosures, appraisals and exchange values of the properties that would be consolidated into our company, and the interests of the investors in the existing entities, have been addressed adequately, and they have concluded that the settlement pursuant to the Stipulation

F-28


of Settlement and opportunity to consider the proposed consolidation on the basis of revised consent solicitations are fair, reasonable, adequate and in the best interests of the plaintiff class.
The defendants in the Stipulation of Settlement denied that they committed any violation of law or breached any of their duties and did not admit that they had any liability to the plaintiffs.
The terms of the settlement include, among other things (i) a payment of $55.0 million , with a minimum of 80% in cash and maximum of 20% in freely-tradable shares of common stock and/or freely-tradable operating partnership units to be distributed, after reimbursement of plaintiffs' counsel's court-approved expenses and payment of plaintiffs' counsel's court-approved attorneys' fees (which are included within the $55.0 million settlement payment) and, in the case of shares of common stock and/or operating partnership units, after the termination of specified lock-up periods, to investors in the existing entities pursuant to a plan of allocation to be prepared by counsel for plaintiffs; (ii) defendants' agreement that (a) the Offering would be on the basis of a firm commitment underwriting; (b) if, during the solicitation period, any of the three subject LLCs' percentage of total exchange value is lower than what was stated in the final prospectus/consent solicitation with respect to the consolidation by 10% or more, such decrease would be promptly disclosed by defendants to investors in the subject LLCs; and (c) unless total gross proceeds of $600.0 million are raised in the Offering, defendants will not proceed with the consolidation without further approval of the subject LLCs; and (iii) defendants' agreement to make additional disclosures in the prospectus/consent solicitation with respect to the consolidation regarding certain matters (which are included therein). Investors in the existing entities will not be required to bear any portion of the settlement payment. The payment in settlement of the Original Class Actions will be made by the estate of Leona M. Helmsley and affiliates of Malkin Holdings LLC (provided that none of Malkin Holdings LLC's affiliates that would become our direct or indirect subsidiary in the consolidation will have any liability for such payment) and certain investors, in the existing entities who agree to contribute. We will not bear any of the settlement payment.
The settlement further provides for the certification of a class of investors in the existing entities, other than defendants and other related persons and entities, and a release of any claims of the members of the class against the defendants and related persons and entities, as well as underwriters and other advisors. The release in the settlement excludes certain claims, including but not limited to, claims arising from or related to any supplement to the Registration Statement on Form S-4 that is declared effective to which the plaintiffs' counsel objects in writing, which objection will not be unreasonably made or delayed, so long as plaintiffs' counsel has had adequate opportunity to review such supplement. There was no such supplement that plaintiff's counsel objected to in writing. The settlement was subject to court approval. It is not effective until such court approval is final, including the resolution of any appeal. Defendants continue to deny any wrongdoing or liability in connection with the allegations in the Original Class Actions.
On January 18, 2013, the parties jointly moved for preliminary approval of the settlement, for permission to send notice of the settlement to the class, and for the scheduling of a final settlement hearing. On January 28, 2013, six of the investors in Empire State Building Associates L.L.C. filed an objection to preliminary approval, and cross-moved to intervene in the Original Class Actions and for permission to file a separate complaint on behalf of the investors in Empire State Building Associates L.L.C. On February 21, 2013, the court denied the cross motion of such objecting investors, and the court denied permission for such objecting investors to file a separate complaint as part of the Original Class Actions, but permitted them to file a brief solely to support their allegation that the buyout would deprive non-consenting investors in Empire State Building Associates L.L.C. of “fair value” in violation of the New York Limited Liability Company Law. The court rejected the objecting investors’ assertion that preliminary approval be denied and granted preliminary approval of the settlement.
Pursuant to a decision issued on April 30, 2013, the court rejected the allegation regarding the New York Limited Liability Company Law and ruled in Malkin Holdings LLC’s favor, holding that such buyout provisions are legally binding and enforceable and that investors do not have the rights they claimed under the New York Limited Liability Company Law.
On May 2, 2013, the court held a hearing regarding final approval of the Original Class Actions settlement, at the conclusion of which the court stated that it intended to approve the settlement. On May 17, 2013, the court issued its Opinion and Order. The court rejected the objections by all objectors and upheld the settlement in its entirety. Of the approximately 4,500 class members who are investors in all of the existing entities included in the consolidation, 12 opted out of the settlement. Those who opted out will not receive any share of the settlement proceeds, but can pursue separate claims for monetary damages. The settlement was not to become final until resolution of any appeal.
Also on May 17, 2013, the court issued its Opinion and Order on attorneys’ fees. Class counsel applied for an award of $15.0 million in fees and $295,895 in expenses, which the court reduced to $11.59 million in fees and $265,282 in expenses (which are included within the $55.0 million settlement payment).

F-29


The investors who challenged the buyout provision filed a notice of appeal of the court’s April 30, 2013 decision and moved before the appellate court for a stay of all proceedings relating to the settlement, including such a stay as immediate interim relief. On May 1, 2013, their request for immediate interim relief was denied. On May 13, 2013, Malkin Holdings LLC filed its brief in opposition to the motion for the stay. On June 18, 2013, the appellate court denied the motion for the stay. On July 16, 2013, these investors filed their brief and other supporting papers on their appeal of the April 30, 2013 decision, which are required to perfect the appeal. On September 4, 2013, Malkin Holdings LLC filed its brief on the appeal, and also moved to dismiss the appeal on the grounds that these investors lack standing to pursue it. Malkin Holdings LLC contended that these investors were not entitled to appraisal under the New York Limited Liability Company Law because, among other reasons (i) they are not members of Empire State Building Associates L.L.C., and only members have such rights; (ii) the transaction in question is not a merger or consolidation as defined by statute, and appraisal only applies in those transactions; and (iii) when Empire State Building Associates L.L.C. was converted into a limited liability company, the parties agreed that no appraisal would apply. Moreover, Malkin Holdings LLC contended that only the 12 investors who opted out of the class action settlement could pursue appraisal, because that settlement contains a broad release of (and there is an associated bar order from the court preventing) any such claims. Malkin Holdings LLC further noted that of the six investors attempting to pursue the appeal, only two had in fact opted out of the class action settlement. On September 13, 2013, these investors filed their reply brief on the appeal, and opposed the motion to dismiss. On September 19, 2013, Malkin Holdings LLC filed its reply brief on the motion to dismiss. On October 3, 2013, the appeals court denied the motion to dismiss without prejudice to address the matter directly on the appeal, effectively referring the issues raised in the motion to the panel that will hear the appeal itself. The appeals court heard argument on November 21, 2013, and in a Decision and Order dated February 25, 2014, it affirmed the trial court’s ruling.
In addition, on June 20, 2013, these same investors, and one additional investor who also opposed the settlement of the Original Class Action, filed additional notices of appeal from the trial court’s rulings in the Original Class Actions. These notices of appeal related to (i) the order entered February 22, 2013 granting preliminary approval of the Original Class Action settlement and setting a hearing for final approval; (ii) the order entered February 26, 2013, refusing to sign a proposed order to show cause for a preliminary injunction regarding the consolidation; (iii) an order entered April 2, 2013, denying the motion to intervene and to file a separate class action on behalf of Empire State Building Associates L.L.C. investors; (iv) the order entered April 10, 2013, refusing to sign the order to show cause seeking to extend the deadline for class members to opt out of the Original Class Action settlement; (v) the Final Judgment and Order entered May 17, 2013; (vi) the order entered May 17, 2013 approving the Original Class Action settlement; and (vii) the order entered May 17, 2013 awarding class counsel attorneys’ fees and costs. On January 6, 2014, Class counsel moved to dismiss these additional appeals on the grounds that they were not timely perfected by filing an appellate brief and record. On February 6, 2014, the appeals court granted the motion unless the appeals are perfected by March 17, 2014.
On March 27, 2014, the investors who challenged the buyout provision moved in the appellate court for reargument or in the alternative for leave to appeal the appeals court’s ruling to the New York Court of Appeals. Opposition to the motion was filed on April 7, 2014. The appellate court denied the motion on May 22, 2014. The investors moved in the New York Court of Appeals for leave to appeal on June 26, 2014. Opposition to this motion was filed on July 11, 2014 and the court dismissed the motion by order dated September 18, 2014. On October 20, 2014, the investors moved to re-argue that dismissal. That motion was denied on December 17, 2014, and counsel for these investors has represented that the investors do not intend to pursue further appellate review of the court’s April 30, 2013 ruling rejecting the challenge to the buyout provision. Accordingly, that ruling is now final and together with Class counsel in the Original Class Action defendants have commenced the process of seeking permission to distribute the settlement fund to the Class members, which requires a court order.
On March 14, 2014, one of the investors who had filed a notice of appeal from the trial court’s rulings in the Original Class Actions noted above perfected an appeal from the court’s May 17, 2013 Final Judgment and Order and orders approving the Original Class Action Settlement and awarding class counsel attorneys’ fees and costs. By stipulation of all counsel to the appeal dated September 12, 2014, the appeal was dismissed with prejudice. No other appeals were filed by the March 17, 2014 deadline set by the appeals court in its February 6, 2014 order.

In addition, commencing December 24, 2013, four putative class actions, or the "Second Class Actions," were filed in New York State Supreme Court, New York County, against Malkin Holdings LLC, Peter L. Malkin, Anthony E. Malkin and Thomas N. Keltner, Jr. on behalf of former investors in Empire State Building Associates L.L.C. Generally, the Second Class Actions alleged that the defendants breached their fiduciary duties and were unjustly enriched. One of the Second Class Actions named us and our operating partnership as defendants, alleging that they aided and abetted the breaches of fiduciary duty. The Second Class Actions were consolidated on consent and co-lead class counsel was appointed by order dated February 11, 2014. A Consolidated Amended Complaint was filed February 7, 2014, which did not name us or our operating

F-30


partnership as defendants. It seeks monetary damages. On March 7, 2014, defendants filed a motion to dismiss the Second Class Actions, which the plaintiffs opposed and was fully submitted to the court on April 28, 2014. The court heard oral arguments on the motion on July 7, 2014, and the motion was granted in a ruling entered July 21, 2014. The plaintiffs filed a notice of appeal on August 8, 2014. On January 12, 2015, the plaintiffs filed a motion to supplement the record on appeal to include additional materials from the Original Class Action, which the defendants opposed. The plaintiffs have yet to perfect this appeal by filing their brief and the appellate record with the court.

We will incur costs in connection with this litigation. If an appeal is successful and the court were ultimately to rule against the defendants there is a risk that it could have a material adverse effect on us, which could take the form of monetary damages or other equitable relief.

On or about October 14, 2014, the 12 investors (out of approximately 4,500 investors covered by the Original Class Action) who opted out of the Original Class Action filed an arbitration with the American Arbitration Association against Peter L. Malkin, Anthony E. Malkin, Thomas N. Keltner, Jr., and Malkin Holdings LLC, as respondents, alleging breach of fiduciary duty and related claims in connection with the consolidation. The statement of claim in that arbitration seeks monetary damages and declaratory relief. The respondents filed an answering statement and counterclaims. On December 18, 2014, these claimants also filed a complaint in the United States District Court for the Southern District of New York alleging the same claims that they asserted in the arbitration. As alleged in the complaint, the claimants filed this lawsuit to toll the statute of limitations on their claims in the event it is determined that the claims are not subject to arbitration, and they plan to move to stay the lawsuit in favor of the pending arbitration. On February 2, 2015, the claimants filed an amended complaint adding an additional claim and making other non-substantive modifications to the original complaint.

The arbitration is in its very early stages, and, as with the prior claims challenging the consolidation and related matters, the defendants believe these allegations are entirely without merit and they intend to defend vigorously.
  
In connection with the Offering and formation transactions, we entered into indemnification agreements with our directors, executive officers and chairman emeritus, providing for the indemnification by us for certain liabilities and expenses incurred as a result of actions brought, or threatened to be brought, against them. As a result, Anthony E. Malkin, Peter L. Malkin and Thomas N. Keltner, Jr. have defense and indemnity rights from us with respect to the Second Class Actions.
Additionally, there is a risk that other third parties will assert claims against us, Malkin Holdings LLC, or any other party entitled to defense and indemnity from us, including, without limitation, claims that Malkin Holdings LLC breached its fiduciary duties to investors in the existing entities or that the consolidation violates the relevant operating agreements, and third parties may commence litigation related to such claims. As a result, we may incur costs associated with defending or settling such litigation or paying any judgment if we lose.
Ground Lease Commitments
We make payments under ground leases related to three of our properties. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the leases. The ground leases are due to expire between the years 2050 and 2077. Future minimum lease payments to be paid over the terms of the leases are as follows (amounts in thousands):
2015
 
 
$
1,518

2016
 
 
1,518

2017
 
 
1,518

2018
 
 
1,518

2019
 
 
1,518

Thereafter
 
 
58,248

Total
 
 
$
65,838


Unfunded Capital Expenditures
At December 31, 2014 , we estimate that we will incur approximately $57.4 million of capital expenditures (including tenant improvements and leasing commissions) on our wholly-owned properties pursuant to existing lease agreements. We expect to fund these capital expenditures with operating cash flow, additional property level mortgage financings, our secured credit facility, and cash on hand. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect that these financing requirements will be met in a similar fashion.


F-31


Concentration of Credit Risk
Financial instruments that subject us to credit risk consist primarily of cash, restricted cash, tenant and other receivables and deferred rent receivables.
Beginning January 1, 2013, non‑interest bearing transaction accounts are no longer insured separately from depositors' other accounts at the same Federal Deposit Insurance Corporation ("FDIC") Insured Depository Institution ("IDI"). Instead, non‑interest bearing transaction accounts are added to any of a depositor's other accounts in the applicable ownership category, and the aggregate balance will be insured up to at least the standard maximum deposit insurance amount of $0.25 million , per depositor, at each separately chartered IDI. At December 31, 2014 , we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the FDIC.

Real Estate Investments
Our properties are located in Manhattan, New York; Fairfield County, Connecticut; and Westchester County, New York. The latter locations are suburbs of the city of New York. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate. We perform ongoing credit evaluations of our tenants for potential credit losses.

Tenant Credit Evaluations
Our investments in real estate properties are subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in general economic conditions, trends in the real estate industry, creditworthiness of tenants, competition of tenants and customers, changes in tax laws, interest rate levels, the availability and cost of financing, and potential liability under environmental and other laws.

We may require tenants to provide some form of credit support such as corporate guarantees and/or other financial guarantees and we perform ongoing credit evaluations of tenants. Although the tenants operate in a variety of industries, to the extent we have a significant concentration of rental revenue from any single tenant, the inability of that tenant to make its lease payments could have an adverse effect on our company.
Major Customers and Other Concentrations
For the year ended December 31, 2014, three tenants were major tenants who made up more than 10% of the revenues in the aggregate. These tenants represent approximately 8.17% , 4.17% and 2.28% (total of 14.62% ) of 2014 revenues. For the year ended December 31, 2013, three tenants were major tenants who made up more than 10% of the revenues in the aggregate. These tenants represent approximately 6.01% , 2.72% , and 2.68% (total of 11.41% ) of 2013 revenues.
For the year ended December 31, 2014 and 2013, three properties accounted for more than 10% of total revenues in the aggregate. For the year ended December 31, 2014, Empire State Building represented approximately 33.86% of total revenues, One Grand Central Place represented approximately 13.47% , and First Stamford Place represented approximately 6.95% . For the year ended December 31, 2013, Empire State Building represented approximately 13.01% of total revenues, One Grand Central Place represented approximately 20.99% of total revenues and First Stamford Place represented approximately 11.62% .
Asset Retirement Obligations
We are required to accrue costs that we are legally obligated to incur on retirement of our properties which result from acquisition, construction, development and/or normal operation of such properties. Retirement includes sale, abandonment or disposal of a property. Under that standard, a conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control and a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified asbestos or asbestos-containing building materials in certain of our properties. As of December 31, 2014 , management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates. As such, we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligation. However ongoing asbestos abatement, maintenance programs and other required documentation are carried out as required and related costs are expensed as incurred.
Other Environmental Matters

F-32


Certain of our properties have been inspected for soil contamination due to pollutants, which may have occurred prior to our ownership of these properties or subsequently in connection with its development and/or its use. Required remediation to such properties has been completed and as of December 31, 2014 , management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents. All such maintenance costs are expensed as incurred. We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated and combined financial condition, results of operations or liquidity. However, we cannot be certain that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise.
Insurance Coverage
We carry insurance coverage on our properties of types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.

Multiemployer Pension and Defined Contribution Plans
We contribute to a number of multiemployer defined benefit pension plans under the terms of
collective bargaining agreements that cover our union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

•
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

•
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•
If we choose to stop participating in some of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

We participate in various unions. The union which has significant employees and costs is as follows:
32BJ
We participate in the Building Service 32BJ, or Union, Pension Plan and Health Plan. The Pension Plan is a multi-employer, non-contributory defined benefit pension plan that was established under the terms of collective bargaining agreements between the Service Employees International Union, Local 32BJ, the Realty Advisory Board on Labor Relations, Inc. and certain other employees. This Pension Plan is administered by a joint board of trustees consisting of union trustees and employer trustees and operates under employer identification number 13-1879376. The Pension Plan year runs from July 1 to June 30. Employers contribute to the Pension Plan at a fixed rate on behalf of each covered employee. Separate actuarial information regarding such pension plans is not made available to the contributing employers by the union administrators or trustees, since the plans do not maintain separate records for each reporting unit. However, on September 28, 2011 and September 28, 2012, the actuary certified that for the plan years beginning July 1, 2010, July 1, 2011 and July 1, 2012, respectively, the Pension Plan was in critical status under the Pension Protection Act of 2006. The Pension Plan trustees adopted a rehabilitation plan consistent with this requirement. For each of the years ended June 30, 2014, 2013 and 2012, the Pension Plan received contributions from employers totaling $224.5 million, $221.9 million and $212.7 million , respectively.
The Health Plan was established under the terms of collective bargaining agreements between the Union, the Realty Advisory Board on Labor Relations, Inc. and certain other employers. The Health Plan provides health and other benefits to eligible participants employed in the building service industry who are covered under collective bargaining agreements, or other written agreements, with the Union. The Health Plan is administered by a Board of Trustees with equal representation by the employers and the Union and operates under employer identification number 13-2928869. The Health Plan receives contributions in accordance with collective bargaining agreements or participation agreements. Generally, these agreements provide that the employers contribute to the Health Plan at a fixed rate on behalf of each covered employee. For the years ended June 30, 2013 and 2012, the Health Plan received contributions from employers totaling $923.5 million and $893.3 million, respectively. Information on contributions from employers to the Health Plan for the year ended June 30, 2014 is currently not available.


F-33


Terms of Collective Bargaining Agreements
The most recent collective bargaining agreement for Local 32BJ commenced from January 1, 2012 through December 31, 2015 (prior agreement was from January 1, 2008 through December 31, 2011).

Contributions
Contributions we made to the multi-employer plans for the years ended December 31, 2014, 2013 and 2012 are included in the table below (amounts in thousands):
Benefit Plan
 
2014
 
2013
 
2012
Pension Plans (pension and annuity) *  
 
$
2,871

 
$
1,201

 
$
768

Health Plans **  
 
7,628

 
3,319

 
2,013

Other ***  
 
319

 
232

 
160

Total plan contributions  
 
$
10,818

 
$
4,752

 
$
2,941

*
Pension plans include $0.8 million, $0.4 million and $0.3 million for the years ended 2014, 2013 and 2012, respectively, from multiemployer plans not discussed above.
** Health plans include $1.5 million, $0.8 million and $0.5 million for the years ended 2014, 2013 and 2012, respectively, from multiemployer plans not discussed above.
*** Other includes $0.08 million, $0.05 million and $0.08 million for the years ended 2014, 2013 and 2012, respectively, in connection with other multiemployer plans not discussed above for union costs which were not itemized between pension and health plans.
    
The significant increase in plan contributions in 2014 is due to new business acquisitions (see Note 3) resulting in more employees becoming covered by these benefit plans.

11. Equity
Shares and Units
An operating partnership unit ("OP Unit") and a share of our common stock have essentially the same economic characteristics as they receive the same per unit profit distributions of our operating partnership. An OP Unit may be tendered for redemption for cash, however, we have sole and absolute discretion and the authorized common stock to exchange for shares of common stock on a one-for-one basis.
Long-term incentive plan ("LTIP") units are a special class of partnership interests in our operating partnership. Each LTIP unit awarded will be deemed equivalent to an award of one share of stock under the 2013 Equity Incentive Plan ("2013 Plan"), reducing the availability for other equity awards on a one-for-one basis. The vesting period for LTIP units, if any, will be determined at the time of issuance. Cash distributions on each LTIP unit, whether vested or not, will be the same as those made on the OP Units. Under the terms of the LTIP units, our operating partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of OP unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with OP unitholders, LTIP units are convertible into OP Units in our operating partnership on a one-for-one basis.
The following is net income attributable to common stockholders and the issuance of our class A shares in exchange for the conversion of OP units into common stock (amounts in thousands):
 
Year ended December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
Net income attributable to common stockholders
$
26,667

 
$
75,245

Increase in additional paid-in capital for the conversion of OP units into common stock
40,611

 
—

Change from net income attributable to common stockholders and transfers from noncontrolling interests
$
67,278

 
$
75,245


F-34


As of December 31, 2014 , there were approximately 267.1 million OP Units outstanding, of which approximately 107.2 million , or 40.1% , were owned by us and approximately 159.9 million , or 59.9% , were owned by other partners, including certain directors, officers and other members of executive management.
Private Perpetual Preferred Units

During August 2014, we completed an exchange offer whereby we issued 1,560,360 new Private Perpetual Preferred Units ("Preferred Units") in exchange for OP Units on a one-for-one basis, in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. The exchange offer was made only to then current holders of OP Units and was not made or offered to the public or holders of our common stock or any other security. The Preferred Units have a liquidation preference of $16.62 per unit and are entitled to receive cumulative preferential annual cash distributions of $0.60 per unit payable in arrears on a quarterly basis. The Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. In connection with this exchange offer, we incurred $1.4 million of costs, which were expensed as incurred and included in marketing, general, and administrative expenses.

Dividends and Distributions
The following table summarizes the dividends declared and paid on our Class A common stock and Class B common stock for the year ended December 31, 2014 and the period from October 7, 2013 to December 31, 2013:
Declaration Date
 
Record Date
 
Payment Date
 
Amount per Share
December 1, 2014
 
December 15, 2014
 
December 31, 2014
 
$0.0850
September 2, 2014
 
September 15, 2014
 
September 30, 2014
 
$0.0850
May 22, 2014
 
June 13, 2014
 
June 30, 2014
 
$0.0850
February 21, 2014
 
March 14, 2014
 
March 31, 2014
 
$0.0850
 
 
 
 
 
 
 
December 5, 2013
 
December 16, 2013
 
December 30, 2013
 
$0.0795 (1)
(1) Represents a pro-ration of a full quarter distribution of $0.085 per share.
The following table summarizes the dividends declared and paid on our Preferred Units for the year ended December 31, 2014:    
Declaration Date
 
Record Date
 
Payment Date
 
Amount per Preferred Unit
December 1, 2014
 
December 15, 2014
 
December 31, 2014
 
$0.1500
September 2, 2014
 
September 15, 2014
 
September 30, 2014
 
$0.1500
Total dividends paid to common securityholders during 2014 and 2013 were $33.6 million and $7.6 million , respectively. Total distributions paid to OP unitholders, excluding inter-company distributions, during 2014 and 2013 totaled $53.6 million and $11.9 million , respectively. Total distributions paid to Preferred unitholders during 2014 was $0.5 million .
Earnings and profits, which determine the tax treatment of distributions to securityholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes, including, but not limited to, treatment of loss on extinguishment of debt, revenue recognition, compensation expense, and basis of depreciable assets and estimated useful lives used to compute depreciation. The 2014 dividends of $0.34 per share and 2013 dividends of $0.0795 per share are classified for income tax purposes as 100.0% taxable ordinary dividend.
Incentive and Share-Based Compensation
The 2013 Plan provides for grants to our directors, employees and consultants consisting of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards. An aggregate of approximately 12.2 million shares of our common stock are authorized for issuance under awards granted pursuant to the 2013 Plan, and as of December 31, 2014 , approximately 10.7 million shares of common stock remain available for future issuance.

F-35


In October 2014, we made grants of restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 1,571 shares of restricted stock that are subject to time-based vesting and 1,571 shares of restricted stock that are subject to performance-based vesting, with fair market values of $0.02 million for the time-based vesting awards and $0.01 million for the performance -based vesting awards. The awards subject to time-based vesting vest ratably over four years from the date of the grant, subject generally to the grantee's continued employment. The first installment will vest on October 28, 2015 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three -year performance period, commencing on October 28, 2014. Following the completion of the three -year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on October 28, 2017 and the second installment vesting on October 28, 2018, subject generally to the grantee's continued employment on those dates.
In June 2014, we made grants of LTIP units to our non-employee directors under the 2013 Plan. At such time, we granted a total of 32,196 LTIP units that are subject to time-based vesting, with fair market values of $0.5 million . The awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors.
In April 2014, we made a grant of LTIP units to an employee under the 2013 Plan. We granted a total of 48,923 LTIP units with a fair market value of $0.7 million . The award is subject to time-based vesting of 30% after three years (April 2017), 30% after four years (April 2018), and 40% after five years (April 2019), subject to the grantee's continued employment.
In January 2014, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted a total of 180,260 LTIP units that are subject to time-based vesting and 180,263 LTIP units that are subject to performance-based vesting, with fair market values of $2.5 million for the time-based vesting awards and $0.9 million for the performance-based vesting awards. The awards subject to time-based vesting vest ratably over four years from the date of the grant, subject generally to the grantee's continued employment. The first installment vests on January 1, 2015 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three -year performance period, commencing on January 1, 2014. Following the completion of the three -year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on January 1, 2017 and the second installment vesting on the January 1, 2018, subject generally to the grantee's continued employment on those dates.
In January and April 2014, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 23,487 LTIP units and 7,061 shares of restricted stock that are subject to time-based vesting and 23,484 LTIP units and 7,059 shares of restricted stock that are subject to performance-based vesting, with fair market values of $0.4 million for the time-based vesting awards and $0.2 million for the performance-based vesting awards. These shares are subject to time-based and performance-based vesting, with the terms described above.
Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted a total of 440,192 LTIP units that are subject to time-based vesting and 146,730 LTIP units that are subject to performance-based vesting, with fair market values of $5.4 million for the time-based vesting awards and $0.9 million for the performance-based vesting awards. The awards subject to time-based vesting vest in four substantially equal installments, subject to the grantee's continued employment. The first installment vests on the first anniversary of the grant date and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three -year performance period, commencing on October 2, 2013. Following the completion of the three -year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP units award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on the third anniversary of the grant date and the second installment vesting on the fourth anniversary of the grant date, subject to the grantee's continued employment on those dates.
Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 193,059 LTIP units and 119,146 shares of restricted stock that are subject to time-based vesting and 64,352 LTIP units and 39,706 shares of restricted

F-36


stock that are subject to performance-based vesting, with fair market values of $3.9 million for the time-based vesting awards and $0.6 million for the performance-based vesting awards. These shares are subject to time-based and performance-based vesting, with the terms described above.

Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units to our non-employee directors under the 2013 Plan. At such time, we granted a total of 69,228 LTIP units that are subject to time-based vesting, with fair market values of $0.9 million . The awards vest in three substantially equal installments, subject to the director's continued service on our Board of Directors. The first installment vests on the first anniversary of the grant date and the remainder will vest thereafter in two equal annual installments.

For the performance-based LTIP units and restricted stock awards, the fair value of the awards was estimated using a Monte Carlo Simulation model.  Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process.  Geometric Brownian motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero .  The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six -year look-back period.  The expected growth rate of the stock prices over the performance period is determined with consideration of the risk free rate as of the grant date.  For LTIP units and restricted stock grants that are time-vesting, we estimate the stock compensation expense based on the fair value of the stock at the grant date.
    
LTIP units and restricted stock issued during the year ended December 31, 2014 and 2013 were valued at $5.4 million and $11.7 million , respectively. The weighted-average per unit or share fair value was $10.65 and $10.89 for grants in 2014 and 2013, respectively. The per unit or share granted in 2014 was estimated on the date of grant using the following assumptions: an expected life of 3 years, a dividend rate of 2.60% a risk-free interest rate of 0.8% , and an expected price volatility of 26.0% . The per unit or share granted in 2013 was estimated on the date of grant using the following assumptions: an expected life of 3.0 years, a dividend rate of 2.60% , a risk-free interest rate of 0.66% , and an expected price volatility of 28.0% .

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2014 and 2013.
The following is a summary of restricted stock and LTIP unit activity for the years ended December 31, 2014 and 2013:
 
Restricted Stock
 
LTIP Units
 
Weighted Average Grant Price
Granted
158,852

 
913,561

 
$
13.00

Vested
(12,607
)
 
—

 
13.00

Forfeited
(1,874
)
 
—

 
13.00

Unvested balance at December 31, 2013
144,371

 
913,561

 
$
13.00

Vested
(37,458
)
 
(191,043
)
 
13.01

Granted
17,262

 
488,613

 
15.04

Forfeited
(21,879
)
 
(16,471
)
 
13.60

Unvested balance at December 31, 2014
102,296

 
1,194,660

 
$
13.78

The total fair value of LTIP units and restricted stock that vested during 2014 was $3.0 million .
The LTIP unit and restricted stock award agreements will immediately vest when a grantee attains the (i) age of 60 and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates. For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the performance-based awards, and accordingly we recognized $0.2 million and $2.3 million for the year ended December 31, 2014 and the period October 7, 2013 through December 31, 2013, respectively. Unrecognized compensation expense was $0.2 million at December 31, 2014, which will be recognized over a weighted average period of 1.8 years.
For the remainder of the LTIP unit and restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $3.5 million and $0.7 million in noncash compensation expense for the

F-37


year ended December 31, 2014 and the period October 7, 2013 through December 31, 2013, respectively. Unrecognized compensation expense was $9.6 million at December 31, 2014, which will be recognized over a weighted average period of 2.8 years.
Earnings Per Share
Earnings per share for the year ended December 31, 2014 and for the period October 7, 2013 through December 31, 2013 is computed as follows (amounts in thousands, except per share amounts):
 
Year ended December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
Numerator - Basic:
 
 
 
Net income
$
70,210

 
$
193,431

Preferred unit distributions
(476
)
 
—

Net income attributable to non-controlling interests
(43,067
)
 
(118,186
)
Earnings allocated to unvested shares
(33
)
 
(84
)
Net income attributable to common stockholders - basic
$
26,634

 
$
75,161

 
 
 
 
Numerator - Diluted:
 
 
 
Net income
$
70,210

 
$
193,431

Preferred unit distributions
(476
)
 
—

Earnings allocated to unvested shares and LTIP units
(482
)
 
(804
)
Net income attributable to common stockholders - diluted
$
69,252

 
$
192,627

 
 
 
 
Denominator:
 
 
 
Weighted average shares outstanding - basic
97,941

 
95,463

Operating partnership units
156,565

 
148,957

Weighted average shares outstanding - diluted
254,506

 
244,420

 
 
 
 
Earnings per share - basic and diluted
$
0.27

 
$
0.79

There were 631,251 antidilutive shares and LTIP units for the year ended December 31, 2014 . There were 500,828 antidilutive shares and LTIP units for the period from October 7, 2013 through December 31, 2013.
12. Related Party Transactions

Formation Transactions
Each property, except for 1400 Broadway and 112 West 34th Street, that is owned by us through our operating partnership was owned directly or indirectly by the entities comprising our predecessor or was a property in which our predecessor had a non-controlling interest. Each of the existing entities had entered into a contribution agreement with us and our operating partnership in connection with the formation transactions, pursuant to which substantially concurrently with the completion of the Offering it contributed its assets (including its ownership interests in any of the properties) and liabilities to our operating partnership or our operating partnership’s subsidiaries in exchange for shares of our common stock, operating partnership units and/or cash, which it distributed to its equity owners in accordance with their individual elections. Each of our predecessor’s management companies had entered into a merger agreement with us and our operating partnership in connection with the formation transactions, pursuant to which certain subsidiaries of our operating partnership merged with and into such management company or pursuant to which such management company merged with and into subsidiaries of us in exchange for shares of our common stock and/or operating partnership units, which was issued to the equity owners of such management company. In addition, each of (i) the Malkin Group (as defined below) and (ii) the estate of Leona M. Helmsley and entities affiliated therewith, including the Leona M. and Harry B. Helmsley Charitable Trust, entered into contribution agreements and merger agreements with us and our operating partnership, pursuant to which each of them contributed their direct or indirect

F-38


interests in certain existing entities to us in exchange for operating partnership units, shares of common stock and/or cash. The operating partnership units and shares of common stock that we issued in the formation transactions to investors in the public existing entities were registered pursuant to a registration statement on Form S-4 that we separately filed with the SEC. To the extent that we or our subsidiaries (other than our operating partnership and its subsidiaries) were a party directly to certain mergers in the formation transactions, we contributed the assets and liabilities received in such merger transactions to our operating partnership in exchange for operating partnership units. The value of the shares of our common stock and operating partnership units that we issued, and the amount of cash that we paid, in connection with the formation transactions aggregated $2.8 billion based on the actual public Offering price of our Class A common stock in the Offering. The existing entities and our predecessor’s management companies declared final distributions, inclusive of reimbursement of expenses incurred in connection with the formation transactions, to the investors in such entities, including members of our senior management team and certain of our directors, in an amount of approximately $180.0 million in the aggregate, and of which $38.9 million was paid to the Malkin Group, including Peter L. Malkin and Anthony E. Malkin, in accordance to their ownership interests in each applicable existing entity and predecessor management company.
Under the contribution and merger agreements, Anthony E. Malkin directly and/or indirectly received  210,289 shares of our Class A common stock,  586,095 shares of our Class B common stock, and  28,718,631 operating partnership units, representing, in aggregate, a  12.0% beneficial interest in our company on a fully diluted basis, and Peter L. Malkin directly and/or indirectly received  2,772 shares of our Class A common stock, 100,084 shares of our Class B common stock, and  6,027,867 operating partnership units representing, in aggregate, a 2.5% beneficial interest in our company on a fully diluted basis. The Malkin Group, which includes Anthony E. Malkin, Peter L. Malkin and their related parties and affiliates, directly and/or indirectly received 396,025 shares of our Class A common stock, 747,435 shares of our Class B common stock, and 37,748,249 operating partnership units, representing, in aggregate, a 15.8% beneficial interest in our company on a fully diluted basis. Other members of our senior management team received an aggregate of 1,167,336 operating partnership units, and 2,407 shares of our Class B common stock representing a  0.5% interest on a fully diluted basis.
We did not conduct arm’s-length negotiations with the parties involved regarding the terms of the formation transactions. In the course of structuring the formation transactions, certain members of our senior management team and other contributors had the ability to influence the type and level of benefits they received from us.
The term “Malkin Group” means all of the following, as a group: Anthony E. Malkin, Peter L. Malkin and each of their spouses and lineal descendants (including spouses of such descendants), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin or any permitted successor in such entity for the benefit of any of the foregoing; provided, however that solely with respect to tax protection rights and parties who entered into the contribution agreements described in this Annual Report on Form 10-K, the Malkin Group shall also include the lineal descendants of Lawrence A. Wien and his spouse (including spouses of such descendants), any estates of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of the foregoing.
Tax Protection Agreement
In connection with the completion of the Offering and the related formation transactions, we entered into a tax protection agreement with Anthony E. Malkin and Peter L. Malkin that is intended to protect the Malkin Group and an additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property) against certain of the tax consequences described above to a limited extent.
First, this agreement provides that our operating partnership will not sell, exchange, transfer or otherwise dispose of four properties, which we refer to in this section as protected assets, or any interest in a protected asset until October 7, 2025, with respect to First Stamford Place and the later of (x) October 7, 2021 or (y) the death of Peter L. Malkin and Isabel W. Malkin who are 81 and 78 years old, respectively, for the three other protected assets, Metro Center, 10 Bank Street and 1542 Third Avenue, unless:
(1) Anthony E. Malkin consents to the sale, exchange, transfer or other disposition; or
(2) our operating partnership delivers to each protected party thereunder a cash payment intended to approximate the tax liability arising from the recognition of the pre-contribution built-in gain resulting from the sale, exchange, transfer or other disposition of such protected asset (with the pre-contribution “built-in gain” being not more than the taxable gain that would have been recognized by such protected party had the protected asset been sold for fair market value in a taxable transaction at

F-39


the time of the consolidation) plus an additional amount so that, after the payment of all taxes on amounts received pursuant to the agreement (including any tax liability incurred as a result of receiving such payment), the protected party retains an amount equal to such protected party’s total tax liability incurred as a result of the recognition of the pre-contribution built-in gain pursuant to such sale, exchange, transfer or other disposition; or
(3) the disposition does not result in a recognition of any built-in gain by the protected party.
Second, with respect to the Malkin Group, including Anthony E. Malkin and Peter L. Malkin, and one additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property), to protect against gain recognition resulting from a reduction in such continuing investor’s share of the operating liabilities, the agreement provides that during the period from October 7, 2013 until such continuing investor owns less than the aggregate number of operating partnership units and shares of common stock equal to 50% of the aggregate number of such units and shares they received in the related formation transactions, which we refer to in this section as the tax protection period, our operating partnership will (i) refrain from prepaying any amounts outstanding under any indebtedness secured by the protected assets and (ii) use its commercially reasonable efforts to refinance such indebtedness at or prior to maturity at its current principal amount, or, if our operating partnership is unable to refinance such indebtedness at its current principal amount, at the highest principal amount possible. The agreement also provides that, during the tax protection period, our operating partnership will make available to such continuing investors the opportunity (i) to enter into a “bottom dollar” guarantee of their allocable share of $160.0 million of aggregate indebtedness of our operating partnership meeting certain requirements or (ii) in the event our operating partnership has recourse debt outstanding and such a continuing investor agrees in lieu of guaranteeing debt pursuant to clause (i) above, to enter into a deficit restoration obligation, in each case, in a manner intended to provide an allocation of operating partnership liabilities to the continuing investor. In the event that a continuing investor guarantees debt of our operating partnership, such continuing investor will be responsible, under certain circumstances, for the repayment of the guaranteed amount to the lender in the event that the lender would otherwise recognize a loss on the loan, such as, for example, if property securing the loan was foreclosed and the value was not sufficient to repay a certain amount of the debt. A deficit restoration obligation is a continuing investor’s obligation, under certain circumstances, to contribute a designated amount of capital to our operating partnership upon our operating partnership’s liquidation in the event that the assets of our operating partnership are insufficient to repay our operating partnership liabilities.
Because we expect that our operating partnership will at all times have sufficient liabilities to allow it to meet its obligations to allocate liabilities to its partners that are protected parties under the tax protection agreement, our operating partnership’s indemnification obligation with respect to “certain tax liabilities” would generally arise only in the event that the operating partnership disposes in a taxable transaction of a protected asset within the period specified above in a taxable transaction. In the event of such a disposition, the amount of our operating partnership’s indemnification obligation would depend on several factors, including the amount of “built-in gain,” if any, recognized and allocated to the indemnified partners with respect to such disposition and the effective tax rate to be applied to such gain at the time of such disposition.
The operating partnership agreement requires that allocations with respect to such acquired property be made in a manner consistent with Section 704(c) of the Code. Treasury Regulations issued under Section 704(c) of the Code provide partnerships with a choice of several methods of allocating book-tax differences. Under the tax protection agreement, our operating partnership has agreed to use the “traditional method” for accounting for book-tax differences for the properties acquired by our operating partnership in the consolidation. Under the traditional method, which is the least favorable method from our perspective, the carryover basis of the acquired properties in the hands of our operating partnership (i) may cause us to be allocated lower amounts of depreciation and other deductions for tax purposes than would be allocated to us if all of the acquired properties were to have a tax basis equal to their fair market value at the time of acquisition and (ii) in the event of a sale of such properties, could cause us to be allocated gain in excess of its corresponding economic or book gain (or taxable loss that is less than its economic or book loss), with a corresponding benefit to the partners transferring such properties to our operating partnership for interests in our operating partnership.
Registration Rights
We entered into a registration rights agreement with certain persons receiving shares of our common stock or operating partnership units in the formation transactions, including certain members of our senior management team and our other continuing investors. In connection therewith, on October 7, 2014, which we refer to as the shelf effective date, we filed an automatically effective shelf registration statement, along with a prospectus supplement, with respect to, among other things, shares of our Class A common stock that may be issued upon redemption of operating partnership units or issued upon conversion of shares of Class B common stock to continuing investors in the public existing entities. Pursuant to the registration rights agreement, under certain circumstances, we will also be required to undertake an underwritten offering upon

F-40


the written request of the Malkin Group, which we refer to as the holder, provided (i) the registrable shares to be registered in such offering will have a market value of at least $150.0 million , (ii) we will not be obligated to effect more than two underwritten offerings during any 12 -month period following the shelf effective date; and (iii) the holder will not have the ability to effect more than four underwritten offerings. In addition, if we file a registration statement with respect to an underwritten offering for our own account or on behalf of the holder, the holder will have the right, subject to certain limitations, to register such number of registrable shares held by him, her or it as each such holder requests. With respect to underwritten offerings on behalf of the holder, we will have the right to register such number of primary shares as we request; provided, however, that if cut backs are required by the managing underwriters of such an offering, our primary shares shall be cutback first (but in no event will our shares be cut back to less than $25.0 million ).
We have also agreed to indemnify the persons receiving rights against specified liabilities, including certain potential liabilities arising under the Securities Act, or to contribute to the payments such persons may be required to make in respect thereof. We have agreed to pay all of the expenses relating to the registration and any underwritten offerings of such securities, including, without limitation, all registration, listing, filing and stock exchange or FINRA fees, all fees and expenses of complying with securities or “blue sky” laws, all printing expenses and all fees and disbursements of counsel and independent public accountants retained by us, but excluding underwriting discounts and commissions, any out-of-pocket expenses (except we will pay any holder’s out-of-pocket fees (including disbursements of such holder’s counsel, accountants and other advisors) up to $25,000 in the aggregate for each underwritten offering and each filing of a resale shelf registration statement or demand registration statement), and any transfer taxes. In connection with the shelf registration statement that we filed on October 7, 2014, we incurred expenses of approximately (0.5) million .
Employment Agreement and Change in Control Severance Agreements
We entered into an employment agreement with Anthony E. Malkin, which provides for salary, bonuses and other benefits, including among other things, severance benefits upon a termination of employment under certain circumstances and the issuance of equity awards. In addition, we entered into change in control severance agreements with David A. Karp, Thomas P. Durels, Thomas N. Keltner, Jr. and, subsequent to year end on February 1, 2015, John B. Kessler.
Indemnification of Our Directors and Officers
We entered into indemnification agreements with each of our directors, executive officers, chairman emeritus and certain other parties, providing for the indemnification by us for certain liabilities and expenses incurred as a result of actions brought, or threatened to be brought, against (i) our directors, executive officers and chairman emeritus and (ii) our executive officers, chairman emeritus and certain other parties who are former members, managers, securityholders, directors, limited partners, general partners, officers or controlling persons of our predecessor in their capacities.
Option Properties
On July 15, 2014, we acquired the ground lease at 1400 Broadway (the “1400 Property”) and the ground and operating leases at 112 West 34th Street (including fee title interest in a small connected structure at 122 West 34th Street) (the “112 Property”), both office properties in midtown Manhattan (together, the “option properties”), from affiliates of our predecessor, pursuant to option agreements we had executed in connection with the Offering. Our subsidiary supervised each of the option properties pursuant to a management agreement entered into by our subsidiary and the owners of the option properties.
The 112 Property was acquired for approximately $423.6 million , consisting of assumption of existing mortgage debt, cash and shares of our Class A and Class B common stock and our operating partnership’s Series PR operating partnership units. In connection with the acquisition of the 112 Property, Anthony E. Malkin directly and/or indirectly received approximately $39.4 million , Peter L. Malkin directly and/or indirectly received approximately $2.7 million , and the Malkin Group, which includes Anthony E. Malkin, Peter L. Malkin and their related parties and affiliates, directly and/or indirectly received approximately $44.9 million , in each case consisting of a combination of shares of our Class B common stock and Series PR operating partnership units, and the estate of Leona M. Helmsley (a member of affiliates of our predecessor and of the owners of the option properties) directly and/or indirectly received approximately $92.4 million in cash. The 1400 Property was acquired for approximately $310.0 million , consisting of assumption of existing mortgage debt, cash and shares of our Class A and Class B common stock and our operating partnership’s Series PR operating partnership units. In connection with the acquisition of the 1400 Property, Anthony E. Malkin directly and/or indirectly received approximately $23.3 million , and the Malkin Group, which includes Anthony E. Malkin, Peter L. Malkin and their related parties and affiliates, directly and/or indirectly received approximately $23.5 million , in each case consisting of a combination of shares of our Class B common stock and Series PR operating partnership units, and the estate of Leona Helmsley directly and/or indirectly received

F-41


approximately $56.6 million in cash. The purchase price for each of the option properties was based on an appraisal by independent third parties utilizing the appraisal process set forth in the option agreements. As part of the option agreements, we agreed that Anthony E. Malkin, our Chairman and Chief Executive Officer, would not participate in the negotiations and valuation process on our behalf. Our Chairman Emeritus, Peter L. Malkin, also agreed not to participate in the process. In addition our Board of Directors appointed a special committee consisting of independent members of such Board to review the appraisal process on its behalf. The independent members of our Board of Directors unanimously approved the price and terms of the acquisition of interests in each of the option properties. The purchase price was payable in a combination of cash, shares of our common stock and operating partnership units, but the estate of Leona M. Helmsley (a member of affiliates of our predecessor and of the owners of option properties) received all cash. Reference is made to Note 3.
In connection with the closing of the transaction, we entered into a registration rights agreement covering the resale of all shares of our Class A common stock issued in connection with the transactions, and all shares of our Class A common stock that may be issued upon redemption of Series PR operating partnership units or upon conversion of our Class B common stock issued in connection with the transactions. To satisfy our obligation under the registration rights agreement, we registered the issuance of the shares of Class A common stock that may be issued upon redemption of Series PR operating partnership units or upon conversion of Class B common stock as part of the automatically effective shelf registration statement that we filed on October 7, 2014. Additionally, the shares of Class A common stock issued to the Malkin family in connection with the transactions are subject to the demand and piggy-back rights that the Malkin family has under the registration rights agreement we entered into in connection with the consolidation and initial public offering of our Class A common stock. See “-Registration Rights” above.
Excluded Properties and Businesses
Our portfolio is partially comprised of all of our predecessor’s Manhattan and greater New York metropolitan area office and retail assets in which it held a controlling interest and other metropolitan area office properties in which it had a non-controlling interest. The Malkin Group, including Anthony E. Malkin, our Chairman and Chief Executive Officer, owns non-controlling interests in, and Anthony E. Malkin and Peter L. Malkin control the general partners or managers of, the entities that own interests in five multi-family properties, three net leased retail properties, one single tenant retail property in Greenwich, Connecticut, and a parcel that is being developed for residential use. The Malkin Group also owns non-controlling interests in one Manhattan office property, two Manhattan retail properties and several retail properties outside of Manhattan, none of which were contributed to us in the formation transactions. We refer to the non-controlling interests described above collectively as the excluded properties. In addition, the Malkin Group owns interests in six mezzanine and senior equity funds, three industrial funds, and five residential property managers, none of which were contributed to us in the formation transactions, and which we refer to collectively as the excluded businesses. The Malkin Group owns certain non-real estate family investments that were not contributed to us in the formation transactions. Other than the Greenwich retail property, we do not believe that the excluded properties or the excluded businesses are consistent with our portfolio geographic or property type composition, management or strategic direction.
Pursuant to management and/or service agreements with the owners of interests in those excluded properties and services agreements with the five residential property managers and the managers of certain other excluded businesses which historically were managed by affiliates of our predecessor, we are designated as the manager of the excluded properties and will provide services to the owners of certain of the excluded properties and the five residential property managers and provide services and access to office space to the existing managers of the other excluded businesses. As the manager or service provider, we are paid a management or other fee with respect to those excluded properties and excluded businesses where our predecessor had previously received a management fee on the same terms as the fee paid to our predecessor, and reimbursed for our costs in providing the management and other services to those excluded properties and businesses where our predecessor had not previously received a management fee. Our management of the excluded properties and provision of services to the five residential property managers and the existing managers of the other excluded businesses represent a minimal portion of our overall business. There is no established time period in which we will manage such properties or provide services to the owners of certain of the excluded properties and the five residential property managers and provide services and access to office space to the existing managers of the other excluded businesses and Peter L. Malkin and Anthony E. Malkin expect to sell certain of these properties or unwind certain of these businesses over time. We are not precluded from acquiring all or certain interests in the excluded properties or businesses. If we were to attempt any such acquisition, we anticipate that Anthony E. Malkin, our Chairman and Chief Executive Officer, will not participate in the negotiation process on our behalf with respect to our potential acquisition of any of these excluded properties or businesses and the approval of a majority of our independent directors will be required to approve any such acquisition.

F-42


Reimbursement of Pre-Closing Transaction Costs
As part of the contribution and option agreements, $103.8 million of expenses incurred in connection with the formation transactions and the Offering were reimbursed from the proceeds of the Offering. The existing entities and our predecessor's management companies declared final distributions, inclusive of reimbursement of these expenses, to the investors in such entities, including members of our senior management team and certain of our directors, in an amount of approximately $180.0 million in the aggregate, and of which $38.9 million was paid to the Malkin Group, including Peter L. Malkin and Anthony E. Malkin, in accordance to their ownership interests in each applicable existing entity and predecessor management company.
Repayment of Loans to Property Owning Entities
We used a portion of the net proceeds from the Offering to repay a loan in the amount of $3.6 million made in connection with 500 Mamaroneck Avenue to fund leasing costs at the property, of which approximately $1.2 million of such loan was made by Anthony E. Malkin and Peter L. Malkin. In addition, we assumed a loan in the amount of $3.8 million , made by an entity that was controlled by, and interests in which were held by, Anthony E. Malkin and Peter L. Malkin, to fund cash needs including the payment of leasing commissions and expenditures on tenant installations at First Stamford Place. We used our secured revolving and term credit facility to fully repay this loan shortly after the closing of the Offering.
Releases of Guarantees
Peter L. Malkin and Anthony E. Malkin were released from or otherwise indemnified for liabilities arising under certain guarantees and indemnities with respect to approximately $1.3 billion of mortgage loans (including undrawn amounts) on our properties, which were assumed by us upon closing of the formation transactions in respect of obligations arising after the closing. The guarantees and indemnities with respect to all of the indebtedness are, in most instances, limited to losses incurred by the applicable lender arising from acts such as fraud, misappropriation of funds, intentional breach, bankruptcy and certain environmental matters. In connection with our assumption of these mortgage loans, we had the guarantors and/or indemnitors released from these guarantees and indemnities and our operating partnership assumed any such guarantee and indemnity obligations as replacement guarantor and/or indemnitor, except with respect to one $250.0 million mortgage loan on First Stamford Place. Our operating partnership entered into an indemnification agreement with Peter L. Malkin and Anthony E. Malkin pursuant to which our operating partnership is obligated to indemnify Peter L. Malkin and Anthony E. Malkin for any amounts paid by them under the guarantees and/or indemnities with respect to this mortgage loan.
Services are and were provided by us or our predecessor to affiliates of the sponsors. These affiliates were related parties because beneficial interests were or are held, directly or indirectly, by the sponsors, their affiliates and their family members.
During the years ended December 31, 2014 , 2013 and 2012, we or our predecessor engaged in various transactions with affiliates of the sponsors and their family members. These transactions are reflected in our and our predecessor's consolidated statements of operations as third-party management and other fees and the unpaid balances are reflected in the due from affiliated companies on our predecessor's consolidated balance sheets.
Supervisory Fee Revenue
We or our predecessor earned supervisory fees from affiliated entities not included in our and our predecessor's consolidated financial statements of $2.0 million , $2.8 million and $1.9 million during the years ended December 31, 2014 , 2013 and 2012, respectively. These fees are included within third-party management and other fees.
We or our predecessor earned supervisory fees from unconsolidated entities included in our predecessor's consolidated financial statements on the equity method of $0.6 million and $0.8 million during the years ended December 31, 2013 and 2012. There were no such revenues in the year ended December 31, 2014. These fees are included within third-party management and other fees.
Property Management Fee Revenue

F-43


We or our predecessor earned property management fees from affiliated entities not included in our and our predecessor's consolidated financial statements of $0.4 million , $1.6 million and $1.0 million during the years ended December 31, 2014 , 2013 and 2012 respectively. These fees are included within third-party management and other fees.
We or our predecessor earned property management fees from unconsolidated entities included in our predecessor's consolidated financial statements on the equity method of $0.1 million and $1.2 million during the years ended December 31, 2013 and 2012, respectively. There were no such revenues in the year ended December 31, 2014. These fees are included within third-party management and other fees.
Profit Share
We or our predecessor received additional payments equal to a specified percentage of distributions in excess of specified amounts, both being defined, from affiliated entities not included in our and our predecessor's consolidated financial statements. Our profits interest totaled $3.3 million and $0.7 million during the years ended December 31, 2013 and 2012, respectively. There were no such revenues in the year ended December 31, 2014. These fees are included within other income and fees.
We or our predecessor received additional payments equal to a specified percentage of distributions in excess of specified amounts, both being defined, from unconsolidated entities included in our predecessor's consolidated financial statements on the equity method. Our predecessor's profits interest totaled $0.4 million and $0.9 million during the years ended December 31, 2013 and 2012, respectively. There were no such revenues in the year ended December 31, 2014. These fees are included within other income and fees.
Other Fees and Disbursements from Non-Controlled Affiliates
We or our predecessor earned other fees and disbursements from affiliated entities not included in our and our predecessor's consolidated financial statements of $0.02 million and $0.6 million during the years ended December 31, 2013 and 2012, respectively. There were no such revenues in the year ended December 31, 2014. These fees are included within other income and fees.
Our predecessor earned other fees and disbursements from unconsolidated subsidiaries included in its consolidated financial statements on the equity method of $1.1 million and $1.3 million during the years ended December 31, 2013 and 2012, respectively. There were no such revenues in the year ended December 31, 2014. These fees are included within other income and fees.
Included in these other fees are reimbursements from unconsolidated entities included in our predecessor's consolidated financial statements on the equity method for offering costs related to the Offering of $1.1 million and $1.3 million during the years ended December 31, 2013 and 2012, respectively, of which $0.4 million was included in due from affiliated companies as of December 31, 2012. There were no such revenues in the year ended December 31, 2014.
Family Office Services
In 2014, family office services comprise the temporary provision of office space, equipment, and administrative support as was done prior to our formation. We are reimbursed at allocable cost. During the years ended December 31, 2013 and 2012, our predecessor provided certain accounting and bookkeeping services. The sponsors reimbursed us in the amount of $0.1 million , $1.1 million and $0.8 million , in 2014, 2013 and 2012, respectively.
13. Income Taxes
TRS Holdings and Observatory TRS are taxable entities and their consolidated provision for income taxes consisted of the following for the year ended December 31, 2014 and the period October 7, 2013 through December 31, 2013 (amounts in thousands):

F-44


 
December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
Current:
 
 
 
Federal
$
(3,253
)
 
$
844

State and local
(1,792
)
 
281

Total current
(5,045
)
 
1,125

Deferred:
 
 
 
Federal
247

 
—

State and local
143

 
—

Total deferred
390

 
—

Income tax (expense) benefit
$
(4,655
)
 
$
1,125

The effective income tax rate is 44.3% and 45.3% for the year ended December 31, 2014 and the period from October 7, 2013 through December 31, 2013, respectively. The actual tax provision differed from that computed at the federal statutory corporate rate as follows (amounts in thousands):
 
December 31, 2014
 
Period from October 7, 2013 through December 31, 2013
Federal tax (expense) benefit at 34% statutory rate
$
(3,576
)
 
$
844

State income taxes, net of federal benefit
(1,079
)
 
281

Income tax (expense) benefit
$
(4,655
)
 
$
1,125

The income tax effects of temporary differences that give rise to deferred tax assets are presented below (amounts in thousands):
 
2014
 
Period from October 7, 2013 through December 31, 2013
Deferred tax assets:
 
 
 
Deferred revenue on unredeemed observatory admission ticket sales
$
390

 
$
—

Loss carryforwards
—

 
1,125

Total deferred tax assets
390

 
1,125

Deferred tax liabilities:
 
 
 
Total deferred tax liabilities
—

 
—

Total
$
390

 
$
1,125

Deferred tax asset of $0.4 million at December 31, 2014 is attributable to the inclusion of deferred revenue on Observatory admission ticket sales not redeemed at year-end in determining income for tax reporting purposes. No valuation allowance has been recorded against the deferred tax asset because the Company believes that the deferred tax asset will, more likely than not, be realized. This determination is based on the Observatory TRS’s anticipated future taxable income and the reversal of the deferred tax asset.

Deferred tax asset of $1.1 million at December 31, 2013 is attributable to the Observatory TRS’s loss during the period from October 7, 2013 through December 31, 2013 as a result of increased percentage rent. Percentage rent is based on gross receipts and the highest percentage is reached in the fourth quarter. The loss was fully absorbed by the Observatory TRS’s profit in 2014. At December 31, 2014, the TRS entities have no amount of unrecognized tax benefits.

For tax years 2014 and 2013, the United States federal and state tax returns are open for examination.

F-45



14. Segment Reporting
We have identified two reportable segments: (1) Real Estate and (2) Observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets. Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and different marketing strategies. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. We include our construction operation in "Other" and it includes all activities related to providing construction services to tenants and to other entities within and outside our company.

The following tables provides components of segment profit for each segment for the years ended December 31, 2014 , 2013 and 2012, as reviewed by management (amounts in thousands):
 
 
2014
 
 
Real Estate
 
Observatory
 
Other
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
Rental revenue
 
$
400,825

 
$
—

 
$
—

 
$
—

 
$
400,825

Intercompany rental revenue
 
69,293

 
—

 
—

 
(69,293
)
 
—

Tenant expense reimbursement
 
67,651

 
—

 
—

 
—

 
67,651

Observatory revenue
 
—

 
111,541

 
—

 
—

 
111,541

Construction revenue
 
—

 
—

 
44,989

 
(6,341
)
 
38,648

Third-party management and other fees
 
2,376

 
—

 
—

 
—

 
2,376

Other revenue and fees
 
13,280

 
982

 
23

 
—

 
14,285

Total revenues
 
553,425

 
112,523

 
45,012

 
(75,634
)
 
635,326

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Property operating expenses
 
151,048

 
—

 
—

 
—

 
151,048

Intercompany rent expense
 
—

 
69,293

 
—

 
(69,293
)
 
—

Ground rent expense
 
5,339

 
—

 
—

 
—

 
5,339

Marketing, general, and administrative expenses
 
39,037

 
—

 
—

 
—

 
39,037

Observatory expenses
 
—

 
29,041

 
—

 
—

 
29,041

Construction expenses
 
—

 
—

 
44,185

 
(5,589
)
 
38,596

Real estate taxes
 
82,131

 
—

 
—

 
—

 
82,131

Acquisition expenses
 
3,382

 
—

 
—

 
—

 
3,382

Depreciation and amortization
 
145,121

 
295

 
15

 
—

 
145,431

Total operating expenses
 
426,058

 
98,629

 
44,200

 
(74,882
)
 
494,005

Total operating income (loss)
 
127,367

 
13,894

 
812

 
(752
)
 
141,321

Interest expense
 
(66,456
)
 
—

 
—

 
—

 
(66,456
)
Income (loss) before income taxes
 
60,911

 
13,894

 
812

 
(752
)
 
74,865

Income tax expense
 
(1,437
)
 
(2,876
)
 
(342
)
 
—

 
(4,655
)
Net income (loss)
 
$
59,474

 
$
11,018

 
$
470

 
$
(752
)
 
$
70,210

Segment assets
 
$
3,036,087

 
$
252,376

 
$
8,032

 
$
—

 
$
3,296,495

Expenditures for segment assets
 
$
497,645

 
$
99

 
$
—

 
$
—

 
$
497,744




F-46


 
 
Period from October 7, 2013 through December 31, 2013
 
 
Real Estate
 
Observatory
 
Other
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
Rental revenue
 
$
79,987

 
$
—

 
$
—

 
$
—

 
$
79,987

Intercompany rental revenue
 
20,134

 
—

 
—

 
(20,134
)
 
 
Tenant expense reimbursement
 
15,836

 
—

 
—

 
—

 
15,836

Observatory revenue
 
—

 
23,735

 
—

 
—

 
23,735

Construction revenue
 
—

 
—

 
6,801

 
(1,536
)
 
5,265

Third-party management and other fees
 
550

 
—

 
—

 
—

 
550

Other revenue and fees
 
2,211

 
—

 
—

 
(1
)
 
2,210

Total revenues
 
118,718

 
23,735

 
6,801

 
(21,671
)
 
127,583

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Property operating expenses
 
34,055

 
—

 
—

 
—

 
34,055

Intercompany rent expense
 
—

 
20,134

 
—

 
(20,134
)
 
 
Ground rent expense
 
398

 
—

 
—

 
—

 
398

Marketing, general, and administrative expenses
 
16,375

 
—

 
—

 
4

 
16,379

Observatory expenses
 
—

 
5,687

 
—

 
—

 
5,687

Construction expenses
 
—

 
—

 
6,792

 
(1,324
)
 
5,468

Real estate taxes
 
17,191

 
—

 
—

 
—

 
17,191

Acquisition expenses
 
138,140

 
—

 
—

 
—

 
138,140

Depreciation and amortization
 
27,376

 
4

 
5

 
(10
)
 
27,375

Total operating expenses
 
233,535

 
25,825

 
6,797

 
(21,464
)
 
244,693

Total operating income (loss)
 
(114,817
)
 
(2,090
)
 
4

 
(207
)
 
(117,110
)
Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(13,147
)
 
—

 
—

 
—

 
(13,147
)
Gain on consolidation of non-controlled entities
 
322,563

 
—

 
—

 
—

 
322,563

Income (loss) before income taxes
 
194,599

 
(2,090
)
 
4

 
(207
)
 
192,306

Income tax benefit
 
—

 
1,125

 
—

 
—

 
1,125

Net income (loss)
 
$
194,599

 
$
(965
)
 
$
4

 
$
(207
)
 
$
193,431

Segment assets
 
$
2,218,143

 
$
249,084

 
$
8,834

 
$
—

 
$
2,476,061

Expenditures for segment assets
 
$
56,434

 
$
—

 
$
—

 
$
—

 
$
56,434



F-47


 
 
Period from January 1, 2013 through October 6, 2013
 
 
Real Estate
 
Other
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
148,690

 
$
—

 
$
—

 
$
148,690

Intercompany rental revenue
 
56

 
—

 
(56
)
 
 
Tenant expense reimbursement
 
21,272

 
—

 
—

 
21,272

Construction revenue
 
—

 
25,473

 
(6,837
)
 
18,636

Third-party management and other fees
 
5,067

 
—

 
—

 
5,067

Other revenue and fees
 
12,407

 
—

 
—

 
12,407

Total revenues
 
187,492

 
25,473

 
(6,893
)
 
206,072

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
41,297

 
—

 
—

 
41,297

Marketing, general, and administrative expenses
 
23,600

 
—

 
—

 
23,600

Construction expenses
 
—

 
25,824

 
(6,003
)
 
19,821

Real estate taxes
 
24,331

 
—

 
—

 
24,331

Formation transaction expenses
 
4,507

 
—

 
—

 
4,507

Depreciation and amortization
 
38,963

 
19

 
(19
)
 
38,963

Total operating expenses
 
132,698

 
25,843

 
(6,022
)
 
152,519

Total operating income (loss)
 
54,794

 
(370
)
 
(871
)
 
53,553

Other income (expense):
 
 
 
 
 
 
 
 
Equity in net income of non-controlled entities
 
14,875

 
—

 
—

 
14,875

Interest expense
 
(50,660
)
 
—

 
—

 
(50,660
)
Settlement expense
 
(55,000
)
 
—

 
—

 
(55,000
)
Net loss
 
$
(35,991
)
 
$
(370
)
 
$
(871
)
 
$
(37,232
)
Segment assets
 
$
1,023,333

 
$
10,585

 
$
—

 
$
1,033,918

Investment in non-controlled entities
 
$
88,304

 
$
—

 
$
—

 
$
88,304

Expenditures for segment assets
 
$
55,820

 
$
130

 
$
—

 
$
55,950



F-48


 
 
2012
 
 
Real Estate
 
Other
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
196,187

 
$
—

 
$
—

 
$
196,187

Intercompany rental revenue
 
74

 
—

 
(74
)
 
—

Tenant expense reimbursement
 
29,483

 
—

 
—

 
29,483

Construction revenue
 
—

 
24,616

 
(5,714
)
 
18,902

Third-party management and other fees
 
5,103

 
—

 
—

 
5,103

Other revenue and fees
 
10,619

 
—

 
—

 
10,619

Total revenues
 
241,466

 
24,616

 
(5,788
)
 
260,294

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
55,442

 
—

 
265

 
55,707

Marketing, general, and administrative expenses
 
20,963

 
—

 
—

 
20,963

Construction expenses
 
—

 
24,734

 
(5,142
)
 
19,592

Real estate taxes
 
30,406

 
—

 
—

 
30,406

Formation transaction expenses
 
2,247

 
—

 
—

 
2,247

Depreciation and amortization
 
42,661

 
29

 
—

 
42,690

Total operating expenses
 
151,719

 
24,763

 
(4,877
)
 
171,605

Total operating income (loss)
 
89,747

 
(147
)
 
(911
)
 
88,689

Other income (expense):
 
 
 
 
 
 
 
 
Equity in net income of non-controlled entities
 
14,348

 
—

 
—

 
14,348

Interest expense
 
(54,394
)
 
—

 
—

 
(54,394
)
Net income
 
$
49,701

 
$
(147
)
 
$
(911
)
 
$
48,643

Segment assets
 
$
964,160

 
$
11,514

 
$
—

 
$
975,674

Investment in non-controlled entities
 
$
76,879

 
$
—

 
$
—

 
$
76,879

Expenditures for segment assets
 
$
87,659

 
$
—

 
$
—

 
$
87,659



15. Summary of Quarterly Financial Information (unaudited)

The quarterly results of operations of our company and our predecessor for the years ended December 31, 2014 and 2013 are as follows (amounts in thousands):

F-49


 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
Revenues
$
140,306

 
$
155,168

 
$
169,441

 
$
170,411

Operating income
$
24,088

 
$
42,539

 
$
43,412

 
$
31,282

Net income
$
11,231

 
$
25,281

 
$
22,734

 
$
10,964

Net income attributable to common stockholders
$
4,369

 
$
9,834

 
$
8,322

 
$
4,142

Net income per share attributable to common stockholders
 
 
 
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
$
0.05

 
$
0.10

 
$
0.09

 
$
0.04

 
 
 
 
 
 
 
 
 
March 31, 2013
 
June 30, 2013
 
September 30, 2013
 
December 31, 2013 (1)
Revenues
$
62,420

 
$
59,569

 
$
62,278

 
$
149,388

 
 
 
 
 
 
 
 
Net income
$
1,930

 
$
3,071

 
$
2,281

 
$
148,917

Net income attributable to non-controlling interests
 
 
 
 
 
 
$
(118,186
)
Net income attributable to common stockholders

 

 

 
$
30,731

Basic and diluted net income per share attributable to common stockholders
 
 
 
 
 
 
$
0.79

___________
(1)
The results of operations of our predecessor for October 1, 2013 through October 6, 2013 and the results of operations of our company for October 7, 2013 through December 31, 2013 have been combined .


16. Subsequent Events
On January 23, 2015, we entered into an unsecured revolving credit agreement. Concurrent with entering into the unsecured revolving credit facility, on January 23, 2015, we terminated the secured revolving and term credit facility, dated as of October 7, 2013. Reference is made to Note 6.     
On February 18, 2015, we announced that our Board of Directors declared a dividend of $0.085 per share for the first quarter 2015, payable to holders of our Class A common stock and Class B common stock and to holders of Empire State Realty OP, L.P.'s Series ES, Series 250 and Series 60 OP Units (NYSE Arca: ESBA, FISK and OGCP, respectively) and Series PR OP Units. The dividend will be payable in cash on March 31, 2015 to securityholders of record at the close of business on March 13 2015.

    
 







    

F-50


Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Schedule II—Valuation and Qualifying Accounts
(amounts in thousands)
 
Description
 
Balance At
Beginning
of Year
 
Additions
Charged
Against
Operations
 
Uncollectible
Accounts
Written-Off
 
Balance
at End of
Year
Year ended December 31, 2014
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
715

 
$
2,006

 
$
(874
)
 
$
1,847

Year ended December 31, 2013
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
923

 
$
(448
)
 
$
240

 
$
715

Year ended December 31, 2012
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
1,652

 
$
498

 
$
(1,227
)
 
$
923

    

F-51


Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Schedule III—Real Estate and Accumulated Depreciation
(amounts in thousands)
 
 
 
 
 
 
Initial Cost to
the Company
 
Cost Capitalized
Subsequent to
Acquisition
 
Gross Amount at
which Carried
at 12/31/14
 
 
 
 
 
 
Development
 
Type
 
Encumbrances
 
Land
 
Building &
Improvements
 
Improvements
 
Carrying
Costs
 
Land
 
Buildings &
Improvements
 
Total
 
Accumulated
Depreciation
 
Date of
Construction
 
Date
Acquired
 
Life on
which
depreciation
in latest
income
statement is
computed
112 West 34th Street, New York, NY
 
office /
retail
 
$
94,720

 
$
13,630

 
$
244,461

 
$
4,936

 
n/a

 
$
13,630

 
$
249,397

 
$
263,027

 
$
(4,092
)
 
1954
 
2014
 
various
1400 Broadway, New York, NY
 
office /
retail
 
85,256

 
—

 
96,338

 
4,413

 
—

 
—

 
100,750

 
100,750

 
(3,396
)
 
1930
 
2014
 
various
1333 Broadway, New York, NY
 
office /
retail
 
75,330

 
91,435

 
120,190

 
2,582

 
n/a

 
91,435

 
122,772

 
214,207

 
(5,243
)
 
1915
 
2013
 
various
1350 Broadway, New York, NY
 
office /
retail
 
41,831

 
—

 
102,518

 
5,526

 
n/a

 
—

 
108,044

 
108,044

 
(4,974
)
 
1929
 
2013
 
various
250 West 57th Street, New York, NY
 
office/
retail
 
—

 
2,117

 
5,041

 
71,959

 
n/a

 
2,117

 
77,000

 
79,117

 
(23,125
)
 
1921
 
1953
 
various
501 Seventh Avenue, New York, NY
 
office/
retail
 
—

 
1,100

 
2,600

 
87,992

 
n/a

 
1,100

 
90,592

 
91,692

 
(30,127
)
 
1923
 
1950
 
various
1359 Broadway, New York, NY
 
office/
retail
 
44,146

 
1,233

 
1,809

 
45,398

 
n/a

 
1,233

 
47,207

 
48,440

 
(17,187
)
 
1924
 
1953
 
various
350 Fifth Avenue (Empire State Building), New York, NY
 
office/
retail
 
—

 
21,551

 
38,934

 
539,630

 
n/a

 
21,551

 
578,564

 
600,115

 
(71,225
)
 
1930
 
2013
 
various
One Grand Central Place,
New York, NY
 
office/
retail
 
91,000

 
7,240

 
17,490

 
161,039

 
n/a

 
7,222

 
178,546

 
185,768

 
(66,999
)
 
1930
 
1954
 
various
First Stamford Place, Stamford, CT
 
office
 
242,294

 
22,952

 
122,739

 
40,321

 
n/a

 
24,861

 
161,150

 
186,011

 
(58,595
)
 
1986
 
2001
 
various
One Station Place, Stamford, CT (Metro Center)
 
office
 
99,845

 
5,313

 
28,602

 
10,067

 
n/a

 
5,313

 
38,669

 
43,982

 
(24,443
)
 
1987
 
1984
 
various
383 Main Avenue, Norwalk, CT
 
office
 
29,852

 
2,262

 
12,820

 
11,145

 
n/a

 
2,262

 
23,965

 
26,227

 
(9,125
)
 
1985
 
1994
 
various
500 Mamaroneck Avenue, Harrison, NY
 
office
 
—

 
4,571

 
25,915

 
16,011

 
n/a

 
4,571

 
41,925

 
46,496

 
(17,328
)
 
1987
 
1999
 
various
10 Bank Street, White Plains, NY
 
office
 
32,847

 
5,612

 
31,803

 
10,813

 
n/a

 
5,612

 
42,616

 
48,228

 
(16,032
)
 
1989
 
1999
 
various
10 Union Square, New York, NY
 
retail
 
20,641

 
5,003

 
12,866

 
1,535

 
n/a

 
5,003

 
14,401

 
19,404

 
(6,162
)
 
1987
 
1996
 
various
1542 Third Avenue, New York, NY
 
retail
 
18,628

 
2,239

 
15,266

 
382

 
n/a

 
2,239

 
15,648

 
17,887

 
(6,079
)
 
1991
 
1999
 
various
1010 Third Avenue, New York, NY and 77 West 55th Street, New York, NY
 
retail
 
27,595

 
4,462

 
15,817

 
774

 
n/a

 
4,462

 
16,593

 
21,055

 
(6,889
)
 
1962
 
1998
 
various
69-97 Main Street, Westport, CT
 
retail
 
—

 
2,782

 
15,766

 
918

 
n/a

 
2,782

 
16,684

 
19,466

 
(5,034
)
 
1922
 
2003
 
various
103-107 Main Street, Westport, CT
 
retail
 
—

 
1,243

 
7,043

 
131

 
n/a

 
1,260

 
7,157

 
8,417

 
(1,497
)
 
1900
 
2006
 
various
Property for development at the Transportation Hub in Stamford CT
 
land
 
—

 
4,542

 
—

 
6,986

 
—

 
4,542

 
6,986

 
11,528

 
—

 
n/a
 
n/a
 
n/a
Totals
 
 
 
$
903,985

 
$
199,287

 
$
918,018

 
$
1,022,558

 
$
—

 
$
201,196

 
$
1,938,667

 
$
2,139,863

 
$
(377,552
)
 
 
 
 
 
 






F-52



Empire State Realty Trust, Inc. and Empire State Realty Trust, Inc. Predecessor
Notes to Schedule III—Real Estate and Accumulated Depreciation
(amounts in thousands)
1 . Reconciliation of Investment Properties
The changes in our investment properties for the years ended December 31, 2014, 2013 and 2012 are as follows:
 
 
2014
 
2013
 
2012
Balance, beginning of year
$
1,649,423

 
$
939,330

 
$
856,151

Acquisition of new properties
354,429

 
607,779

 
—

Improvements
143,315

 
130,346

 
85,409

Distribution of real property to owners prior to the formation transactions
—

 
(16,345
)
 
—

Disposals
(7,304
)
 
(11,687
)
 
(2,230
)
Balance, end of year
$
2,139,863

 
$
1,649,423

 
$
939,330

The unaudited aggregate cost of investment properties for federal income tax purposes as of December 31, 2014 was $1,843,184 .
2 . Reconciliation of Accumulated Depreciation
The changes in our accumulated depreciation for the years ended December 31, 2014, 2013 and 2012 are as follows:
 
 
 
2014
 
2013
 
2012
Balance, beginning of year
 
$
295,351

 
$
257,091

 
$
224,019

Depreciation expense
 
89,505

 
49,947

 
35,302

Disposals
 
(7,304
)
 
(11,687
)
 
(2,230
)
Balance, end of year
 
$
377,552

 
$
295,351

 
$
257,091

Depreciation of investment properties reflected in the combined statements of operations is calculated over the estimated original lives of the assets as follows:
 
Buildings
 
39 years
Building improvements
 
39 years or useful life
Tenant improvements
 
Term of related lease


F-53



Exhibit 3.2


EMPIRE STATE REALTY TRUST, INC.

AMENDED AND RESTATED BYLAWS

ARTICLE I

Offices

Section 1.01. Principal Office . The principal office of the Corporation in the State of Maryland shall be located at such place as the Board of Directors may designate.

Section 1.02. Additional Offices . The Corporation may have additional offices, including a principal executive office, at such place or places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

Meetings of Stockholders

Section 2.01. Place . All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set in accordance with these Bylaws and stated in the notice of the meeting.

Section 2.02. Annual Meeting . An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on the date and at the time and place set by the Board of Directors. The Corporation shall hold its first annual meeting of stockholders beginning with the calendar year 2013. Failure to hold an annual meeting does not invalidate the Corporation's existence or affect any otherwise valid acts of the Corporation.

Section 2.03. Special Meetings .
    
(a)      General . Each of the chairman of the Board of Directors, chief executive officer, president and Board of Directors may call a special meeting of stockholders. Except as provided in Section 2.03(b)(v), a special meeting of stockholders shall be held on the date and at the time and place set by the chairman of the Board of Directors, chief executive officer, president or Board of Directors, whoever has called the meeting. Subject to Section 2.03(b), a special meeting of stockholders shall also be called by the secretary of the Corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting.
    
(b)      Stockholder-Requested Special Meetings .
    
(i)      Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary of the Corporation (the " Record Date Request Notice ") by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the " Request Record Date "). The Record Date Request Notice shall set forth:
            




(A)      as to the purpose of the special meeting and the matters proposed to be acted on at it and to any business that the requesting stockholder proposes to bring before the special meeting, (a) a reasonably detailed description of such purpose and the business to be conducted, the stockholder’s reasons for proposing such business at the special meeting, and any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom, (b) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (c) a reasonably detailed description of all agreements, arrangements and understandings (i) between or among the stockholder and/or any Stockholder Associated Person or (ii) between or among the stockholder and/or any Stockholder Associated Person, on the one hand, and any other person or entity (including their names), on the other hand, in connection with the request for the special meeting or the business proposed to be conducted at the special meeting;
        
(B)      as to each requesting stockholder and Stockholder Associated Person, (a) the name and address of such stockholder or Stockholder Associated Person, as they appear on the Corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person, and (b) the class, series and number of all shares of stock or other securities of the Corporation or any subsidiary thereof (collectively, the “ Company Securities ”), if any, which are owned (beneficially or of record) by such stockholder or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person; provided, that , for purposes of the foregoing and wherever else used in this Article II, references to “beneficial” ownership or other correlative terms shall be deemed to have the meaning given thereto under Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), except that such person or entity shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such person or entity has a right to acquire beneficial ownership at any time in the future;
        
(C)      as to each requesting stockholder or Stockholder Associated Person, any Disclosable Interests (as defined below);

(D)      all information relating to each requesting stockholder or Stockholder Associated Person and each matter of business proposed to be acted on at the special meeting that must be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act and the rules and regulations promulgated thereunder; and

(E)      the signature and date of signature of each requesting stockholder (or of their agents, duly authorized in a writing accompanying the Record Date Request Notice).

In addition, each stockholder submitting a Record Date Request Notice and each Stockholder Associated Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a Request Record Date.
    
(ii)      Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date,




the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the secretary. If the Board of Directors shall determine that any request to fix a record date or demand to call and hold a special meeting was not properly made in accordance with this Article II, or shall determine that the stockholder or stockholders requesting that the Board of Directors fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Article II, then the Board of Directors shall not be required to fix a Request Record Date and the secretary shall not be required to call a special meeting of stockholders.

(iii)      In order for any stockholder to request a special meeting to act on any matter described in a Record Date Request Notice that may properly be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the " Special Meeting Request ") signed and dated by stockholders of record (or their agents duly authorized in a writing accompanying the Special Meeting Request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the " Special Meeting Percentage ") shall be delivered to the secretary. No business may be considered at a special meeting called by the secretary in accordance with Section 2.03(b) (a "S tockholder-Requested Special Meeting "), except as described in the applicable Record Date Request Notice or at the direction of the Board of Directors. The Special Meeting Request shall be sent to the secretary by registered mail, return receipt requested, and be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its Special Meeting Request at any time by written revocation delivered to the secretary.

Each stockholder providing a Special Meeting Request (other than a stockholder that provides a Special Meeting Request in response to a solicitation made pursuant to a solicitation statement filed on Schedule 14A pursuant to, and in accordance with, Regulation 14A under the Exchange Act) shall provide the information about such stockholder and any Stockholder Associated Person required to be provided in a Record Date Request Notice pursuant to Section 2.03(b)(i) (or, if applicable, shall update any information provided by such stockholder in a Record Date Request Notice), so that such information with respect to the stockholder and each Stockholder Associated Person is true and correct as of the record date for the Stockholder-Requested Special Meeting (the “ Meeting Record Date ”) and as of the date that is ten Business Days (as defined below) prior to the date of the Stockholder-Requested Special Meeting and the date(s) of any adjournment or postponement thereof. Any such update and supplement shall be sent to the secretary by courier or registered mail, return receipt requested, and shall be received by the secretary, in the case of information required to be provided as of the Meeting Record Date, not later than five (5) Business Days after the Meeting Record Date and, in the case of information required to be provided as of the date that is ten Business Days prior to the date of such Stockholder-Requested Special Meeting and the date(s) of any adjournment or postponement thereof, not later than eight (8) Business Days prior to the date of the Stockholder-Requested Special Meeting or, if practicable, the date(s) of any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the Stockholder-Requested Special Meeting has been adjourned or postponed). In addition, each stockholder providing a Special Meeting Request and each Stockholder Associated Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to call a Stockholder-Requested Special Meeting.

(iv)      The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation's proxy materials). The secretary shall not be required to call a Stockholder-Requested Special Meeting and such meeting shall not be held unless, in addition to the Special Meeting Request




required by Section 2.03(b)(iii), the secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(v)      In the case of any Stockholder-Requested Special Meeting, such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder-Requested Special Meeting shall be not more than 90 days after the Meeting Record Date; and provided, further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the " Delivery Date "), a date and time for a Stockholder-Requested Special Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day; and provided, further that in the event that the Board of Directors fails to designate a place for a Stockholder-Requested Special Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any Stockholder-Requested Special Meeting, the Board of Directors may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or other special meeting. The Board of Directors may revoke the notice for any Stockholder-Requested Special Meeting in the event that the requesting stockholders fail to comply with the provisions of Section 2.03(b)(iv).
        
(vi)      If written revocations of the Special Meeting Request have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the secretary: (a) if the notice of meeting has not already been delivered, the secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (b) if the notice of meeting has been delivered and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation's intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (i) the secretary may revoke the notice of the meeting at any time before ten days before the commencement of the meeting or (ii) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

(vii)      The chairman of the Board of Directors, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been delivered to the secretary until the earlier of (a) five Business Days after receipt by the secretary of such purported request and (b) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph (vii) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement,




prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(viii)      For purposes of this Article II, “ Stockholder Associated Person ” of any stockholder means (a) the beneficial owner or beneficial owners, if different, of shares of stock of the Corporation at whose request the notice is given pursuant to this Article II, (b) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or, if applicable, such beneficial owner and (c) any other person with whom such stockholder or, if applicable, such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

(ix)      For purposes of this Article II, a person shall be deemed to be “ Acting in Concert ” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (a) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (b) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Regulation 14A under the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

(x)      For purposes of these Bylaws, " Business Day " shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

Section 2.04. Notice. Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, by mail, by presenting it to such stockholder personally, by leaving it at the stockholder's residence or usual place of business, by electronic transmission or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder's address as it appears on the records of the Corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless a stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

Subject to Section 2.11(a) hereof, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is




required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. The Corporation may postpone or cancel a meeting of stockholders by making a public announcement (as defined in Section 2.11(c)(iii) hereof) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to such date and otherwise in the manner set forth in this section.

Section 2.05. Organization and Conduct . Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the chairman of the Board of Directors or, in the case of a vacancy in the office or absence of the chairman of the Board of Directors, by one of the following officers present at the meeting in the following order: the vice chairman of the Board of Directors, if there is one, the chief executive officer, the president, the vice presidents in their order of rank and seniority, the secretary or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary or, in the secretary's absence, an assistant secretary or, in the absence of both the secretary and assistant secretaries, an individual appointed by the Board of Directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of stockholders, an assistant secretary or, in the absence of all assistant secretaries, an individual appointed by the Board of Directors or the chairman of the meeting shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of the chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation: (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments; (e) determining when and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting to a later date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.06. Quorum; Adjournment . At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation (the " Charter ") for the vote necessary for the approval of any matter. If such quorum is not established at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.





The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than would be required to establish a quorum.

Section 2.07. Voting . A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Unless otherwise provided by statute or by the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot or otherwise.

Section 2.08. Proxies . A holder of record of shares of stock of the Corporation may cast votes in person or by proxy executed by the stockholder or by the stockholder's duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than 11 months after its date unless otherwise provided in the proxy.

Section 2.09. Voting of Stock by Certain Holders . Stock of the Corporation registered in the name of a corporation, partnership, trust, limited liability company or other entity, if entitled to be voted, may be voted by the president or a vice president, general partner, trustee or managing member thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or fiduciary may vote stock registered in the name of such person in the capacity of such director or fiduciary, either in person or by proxy.
    
Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt by the Corporation of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.

Section 2.10. Inspectors . The Board of Directors or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector. The inspectors, if any, shall (a) determine the number of shares of stock represented at the meeting, in person




or by proxy, and the validity and effect of proxies, (b) receive and tabulate all votes, ballots or consents, (c) report such tabulation to the chairman of the meeting, (d) hear and determine all challenges and questions arising in connection with the right to vote, and (e) do such acts as are proper to fairly conduct the election or vote. Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 2.11. Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals .

(a)      Annual Meetings of Stockholder s.
        
(i)      At an annual meeting of the stockholders, nominations of individuals for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who (i) was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 2.11(a) and at the time of the annual meeting, (ii) is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and (iii) has complied with this Section 2.11(a). Except for proposals properly made pursuant to, and in accordance with, Rule 14a-8 under the Exchange Act, and included in the notice of meeting given by or at the direction of the Board of Directors, the foregoing clause (c) shall be the exclusive means for a stockholder to nominate individuals for election to the Board of Directors and propose other business to be brought before an annual meeting of the stockholders.
        
(ii)      For any nomination or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of Section 2.11(a)(i), the stockholder must have given timely notice (as defined below) thereof in writing and in proper form to the secretary and provided any updates or supplements to such notice at the times and in the forms required by this Section 2.11 and any such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder's notice shall set forth all information required under this Section 2.11 and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 2.11(c)(iii)) for the preceding year's annual meeting; provided, however, that in connection with the Corporation's first annual meeting or in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting, as originally convened, or the tenth day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder's notice as described above.

(iii)      To be in proper form, such stockholder's notice to the secretary shall set forth:

(A)      as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each, a " Proposed Nominee "), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the




election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act (including the Proposed Nominee's written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

(B)      as to any other business that the stockholder proposes to bring before the meeting, (a) a reasonably detailed description of such business, the stockholder's reasons for proposing such business at the meeting and any material interest in such business of such stockholder or any Stockholder Associated Person, individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom, (b) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (c) a reasonably detailed description of all agreements, arrangements and understandings: (i) between or among the stockholder and/or any Stockholder Associated Person; or (ii) between or among the stockholder and/or any Stockholder Associated Person, on the one hand, and any other person or entity (including their names), on the other hand, in connection with the proposal of such business by such stockholder;

(C)      as to the stockholder giving the notice, any Proposed Nominee and any Stockholder Associated Person,

(1)      the class, series and number of the Company Securities, if any, which are owned (beneficially or of record) by such stockholder, Proposed Nominee or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person,

(2)      the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such stockholder, Proposed Nominee or Stockholder Associated Person,

(3)      (a) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such stockholder, any Proposed Nominee and any Stockholder Associated Person, the purpose or effect of which is to give such stockholder, Proposed Nominee or Stockholder Associated Person economic risk similar to ownership of shares or units of any Company Securities, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares or units of any Company Securities, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares or units of any Company Securities (“ Synthetic Equity Interests ”), which Synthetic Equity Interests shall be disclosed without regard to whether (i) the derivative, swap or other transactions convey any voting rights in such shares or units to such stockholder, Proposed Nominee or Stockholder Associated Person, (ii) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or units or (iii) such stockholder, Proposed Nominee or Stockholder Associated Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (b) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Regulation 14A under the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such stockholder, Proposed Nominee or Stockholder Associated Person has or shares a right to vote any shares or units of any Company Securities, (c) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in,




directly or indirectly, by such stockholder, Proposed Nominee or Stockholder Associated Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares or units of any Company Securities by, manage the risk of price changes for, or increase or decrease the voting power of, such stockholder, Proposed Nominee or Stockholder Associated Person with respect to the shares or units of any Company Securities, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares or units of any Company Securities (“ Short Interests ”), (d) any rights to dividends on the shares or units of any Company Securities owned beneficially by such stockholder, any Proposed Nominee or any Stockholder Associated Person that are separated or separable from the underlying Company Securities, (e) any performance-related fees (other than an asset based fee) that such stockholder, any Proposed Nominee or any Stockholder Associated Person is entitled to based on any increase or decrease in the price or value of shares or units of any Company Securities, or any Synthetic Equity Interests or Short Interests, if any, (f) (i) if such stockholder or any Stockholder Associated Person with an interest in ownership, or that has taken an action referred to in Section 2.11(a)(iii)(B) or (C) (other than this Section 2.11(a)(iii)(C)(3) is not a natural person, the identity of the natural person or persons associated with such stockholder or Stockholder Associated Person responsible for the formulation of and decision to propose the business to be brought before the meeting or nominate any such Proposed Nominee (such person or persons, the “ Responsible Person ”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such stockholder or Stockholder Associated Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared generally by any other record or beneficial holder of the shares or units of any Company Securities and that reasonably could have influenced the decision of such stockholder or Stockholder Associated Person to propose such business to be brought before the meeting or nominate any such Proposed Nominee, and (ii) if such stockholder or any such Stockholder Associated Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares or units of any Company Securities and that reasonably could have influenced the decision of such stockholder or Stockholder Associated Person to propose such business to be brought before the meeting or nominate any such Proposed Nominee, (g) any significant equity interests or any Synthetic Equity Interests or Short Interests in any principal competitor of the Corporation held by such stockholder, any Proposed Nominee and any Stockholder Associated Person, (h) any direct or indirect interest of such stockholder, any Proposed Nominee and any Stockholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (i) any pending or threatened litigation in which such stockholder, any Proposed Nominee or any Stockholder Associated Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (j) any material transaction occurring during the prior twelve months between such stockholder, any Proposed Nominee and any Stockholder Associated Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (k) a summary of any material discussions regarding the business proposed to be brought before the meeting or the nomination or identity of the Proposed Nominee (i) between or among any stockholder, any Proposed Nominee and any Stockholder Associated Person or (ii) between or among any stockholder, any Proposed Nominee and any Stockholder Associated Person and any other record or beneficial holder of the shares or units of any Company Securities (including their names) and (l) any other information relating to such stockholder, any Proposed Nominee and any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such stockholder and any Stockholder Associated Person in support of the business proposed to be brought before the meeting or the election of any Proposed Nominee




pursuant to, and in accordance with, Regulation 14A under the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (a) through (l) are referred to as “ Disclosable Interests ”); provided, however, that the Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner,

(4)      without limiting the foregoing, any other substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the Corporation or any subsidiary thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series, provided, however, that such interests shall not include interests acquired in the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner, and

(5)      a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the stockholder and/or any Stockholder Associated Person, on the one hand, and each Proposed Nominee, his or her respective affiliates and associates and any other persons with whom such Proposed Nominee (or any of his or her respective affiliates and associates) is Acting in Concert, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such stockholder and any Stockholder Associated Person were the “registrant” for purposes of such rule and the Proposed Nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to this paragraph are referred to as “ Nominee Information ”);

(D)      as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in Sections 2.11(a)(iii)(B) or (C) and any Proposed Nominee,

(1)      the name and address of such stockholder, as they appear on the Corporation's stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee and

(2)      the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person; and

(E)      to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder's notice.

(iv)      Such stockholder's notice shall, with respect to any Proposed Nominee, be accompanied by (a) a certificate executed by the Proposed Nominee certifying that such Proposed Nominee (i) will serve as a director of the Corporation if elected; (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance




to, any person or entity as to how such Proposed Nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a " Voting Commitment ") that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such Proposed Nominee's ability to comply, if elected as a director of the Corporation, with such Proposed Nominee's duties under applicable law, (iii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation and (iv) would be in compliance, if elected as a director of the Corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality, stock ownership and trading policies and guidelines of the Corporation; and (b) a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Corporation, upon request, to the stockholder providing the notice and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to, and in accordance with, Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the Corporation are listed or over-the-counter market on which any securities of the Corporation are traded).

(v)      Notwithstanding anything in this Section 2.11(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement for the preceding year's annual meeting, a stockholder's notice required by this Section 2.11(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.
        
(b)      Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected only (a) by or at the direction of the Board of Directors or (b) provided, that the special meeting has been called in accordance with Section 2.03(a) hereof for the purpose of electing directors, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 2.11 and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice procedures set forth in this Section 2.11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the Board of Directors, any stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation's notice of meeting, if the stockholder's notice containing the information required by Section 2.11(a)(iii), is delivered to the secretary at the principal executive office of the Corporation not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder's notice as described above.
 




(c)      General .

(i)      If information submitted pursuant to this Section 2.11 by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 2.11. Any such stockholder shall notify the Corporation of any inaccuracy or change (within two Business Days of becoming aware of such inaccuracy or change) in any such information. Upon written request by the secretary or the Board of Directors, any such stockholder shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), (a) written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 2.11 and (b) a written update of any information (including, if requested, by the Corporation, written confirmation by such stockholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the stockholder pursuant to this Section 2.11 as of an earlier date. If a stockholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Section 2.11.
            
(ii)      Only such individuals who are nominated in accordance with this Section 2.11 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 2.11. The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 2.11.

(iii)      For purposes of this Section 2.11, " the date of the proxy statement " shall have the same meaning as "the date of the company's proxy statement released to shareholders" as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission (the " SEC ") from time to time. " Public announcement " shall mean disclosure (a) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (b) in a document publicly filed by the Corporation with the SEC pursuant to the Exchange Act.

(iv)      Notwithstanding the foregoing provisions of this Section 2.11, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11. Nothing in this Section 2.11 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, or the right of the Corporation to omit a proposal from, the Corporation's proxy statement pursuant to, and in accordance with, Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 2.11 shall require disclosure of revocable proxies received by the stockholder or Stockholder Associated Person pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such stockholder or Stockholder Associated Person pursuant to, and in accordance with, Regulation 14A under the Exchange Act.

Section 2.12. Meeting by Conference Telephone . The Board of Directors or chairman of the meeting may permit one or more stockholders to participate in a meeting of the stockholders by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at the meeting.





Section 2.13. Control Share Acquisition Act. Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law, or any successor statute (the " MGCL "), shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed or amended, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal or amendment, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

Directors

Section 3.01. General Powers . The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 3.02. Number, Tenure, Resignation and Qualifications . At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided, that the number thereof shall never be less than the minimum number required by the MGCL, nor more than 15, and further provided, that the tenure of office of a director shall not be affected by any decrease in the number of directors. Unless otherwise provided in the Charter or these Bylaws, a director shall be elected at the annual meeting of the stockholders, and each director shall be elected to serve until the next annual meeting of the stockholders and until his or her successor is elected and qualifies or until his or her earlier death, resignation or removal. Any director of the Corporation may resign at any time by delivering his or her resignation to the Board of Directors, the chairman of the Board of Directors or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. At all times, except in the case of a vacancy, a majority of the Board of Directors shall be Independent Directors (as defined below). For the purposes of these Bylaws, " Independent Director " shall have the definition set forth in Section 303A.02 of the New York Stock Exchange Listed Company Manual, as amended from time to time, or such superseding definition as is hereafter promulgated by the New York Stock Exchange (the " NYSE ").

Section 3.03. Annual and Regular Meetings. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.
Section 3.04. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the chairman of the Board of Directors, the chief executive officer, the president or a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.
Section 3.05. Notice. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting. Notice by United States mail shall be given at least three days prior to the meeting. Notice by courier shall be given at least




two days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 3.06. Quorum . A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that , if less than a majority of such directors is present at such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided, further that if, pursuant to applicable law, the Charter or these Bylaws, the vote of a majority or other percentage of a particular group of directors is required for action, a quorum must also include a majority or such other percentage of such group.
The directors present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough directors to leave fewer than required to establish a quorum.

Section 3.07. Voting . The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws. If enough directors have withdrawn from a meeting to leave fewer than required to establish a quorum, but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws.

Section 3.08. Organization . At each meeting of the Board of Directors, the chairman of the Board of Directors or, in the absence of the chairman, the vice chairman of the Board of Directors, if any, shall act as chairman of the meeting. In the absence of both the chairman and vice chairman of the Board of Directors, the chief executive officer or, in the absence of the chief executive officer, the president or, in the absence of the president, a director chosen by a majority of the directors present shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation or, in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting shall act as secretary of the meeting.

Section 3.09. Telephone Meetings . Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 3.10. Consent by Directors Without a Meeting . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the Board of Directors.





Section 3.11. Vacancies . If for any reason any or all of the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder. Until such time as the Corporation becomes subject to Section 3-804(c) of the MGCL, any vacancy on the Board of Directors for any cause other than an increase in the number of directors may be filled by a majority of the remaining directors, even if such majority is less than a quorum; any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the entire Board of Directors; and any individual so elected as director shall serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. At such time as the Corporation becomes subject to Section 3-804(c) of the MGCL and except as may be provided by the Board of Directors in setting the terms of any class or series of preferred stock, any vacancy on the Board of Directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is duly elected and qualifies.

Section 3.12. Compensation . Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they perform or engage in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.13. Reliance . Each director and officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person's professional or expert competence, or, with respect to a director, by a committee of the Board of Directors on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.

Section 3.14. Ratification . The Board of Directors or the stockholders may ratify and make binding on the Corporation any action or inaction by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any stockholders' derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

Section 3.15. Certain Rights of Directors and Officers . A director who is not also an officer of the Corporation shall have no responsibility to devote his or her full time to the affairs of the Corporation. Any director or officer, in his or her personal capacity or in a capacity as an affiliate, employee, or agent




of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Corporation.

Section 3.16. Emergency Provisions . Notwithstanding any other provision in the Charter or these Bylaws, this Section 3.16 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Section 3.06 of these Bylaws cannot readily be obtained (an " Emergency "). During any Emergency, unless otherwise provided by the Board of Directors, (a) a meeting of the Board of Directors or a committee thereof may be called by any director or officer by any means feasible under the circumstances; (b) notice of any meeting of the Board of Directors during such an Emergency may be given less than 24 hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio; and (c) the number of directors necessary to constitute a quorum shall be one-third of the entire Board of Directors.

ARTICLE IV

Committees

Section 4.01. Number, Tenure and Qualifications . The Board of Directors may appoint from among its members a Nominating and Corporate Governance Committee, an Audit Committee and a Compensation Committee and may appoint such other committees as it deems appropriate to serve at the pleasure of the Board of Directors. All committees shall be composed of one or more directors; provided, however, that the exact composition of each committee, including the total number of directors and the number of Independent Directors on each such committee, shall at all times comply with the listing requirements and rules and regulations of the NYSE, as modified or amended from time to time, and the rules and regulations of the SEC, as modified or amended from time to time.

Section 4.02. Powers . The Board of Directors may delegate to committees appointed under
Section 4.01 any of the powers of the Board of Directors, except as prohibited by law.

Section 4.03. Meetings . Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board of Directors shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.

Section 4.04. Telephone Meetings . Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 4.05. Consent by Committees Without a Meeting . Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.





Section 4.06. Vacancies . Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill any vacancy, to designate an alternate member to replace any absent or disqualified member or to dissolve any such committee.

ARTICLE V

Officers

Section 5.01. General Provisions . The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the Board of Directors, a vice chairman of the Board of Directors, a chief executive officer, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. Each officer shall serve until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 5.02. Removal and Resignation . Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by delivering his or her resignation to the Board of Directors, the chairman of the Board of Directors, the chief executive officer, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 5.03. Vacancies . A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 5.04. Chief Executive Officer . The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the Board of Directors shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time.

Section 5.05. Chief Operating Officer . The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as determined by the Board of Directors or the chief executive officer.





Section 5.06. Chief Financial Officer . The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as determined by the Board of Directors or the chief executive officer.

Section 5.07. Chairman of the Board of Directors . The Board of Directors may designate from among its members a chairman of the Board of Directors, who shall not, solely by reason of these Bylaws, be an officer of the Corporation. The Board of Directors may designate the chairman of the Board of Directors as an executive or non-executive chairman. The chairman of the Board of Directors shall preside over the meetings of the Board of Directors and of the stockholders at which he or she shall be present. The chairman of the Board of Directors shall perform such other duties as may be assigned to him or her by these Bylaws or the Board of Directors.

Section 5.08. President . In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.

Section 5.09. Vice President . In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the chief executive officer, the president or the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president, senior vice president, or vice president for particular areas of responsibility.

Section 5.10. Secretary . The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors.

Section 5.11. Treasurer . The treasurer shall have the custody of the funds and securities of the Corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.
The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.





Section 5.12. Assistant Secretaries and Assistant Treasurers . The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chief executive officer, the president or the Board of Directors.

Section 5.13. Compensation . The compensation of the officers shall be fixed from time to time by or under the authority of the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director.

ARTICLE VI

Contracts, Loans, Checks and Deposits

Section 6.01. Contracts . The Board of Directors, or a committee thereof, may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when (a) duly authorized or ratified by action of the Board of Directors or such committee and (b) executed by an authorized person.

Section 6.02. Checks and Drafts . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 6.03. Deposits . All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the chief executive officer, the president, the chief financial officer, the treasurer or any other officer designated by the Board of Directors may determine.

ARTICLE VII

Stock

Section 7.01. Certificates . Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in the manner permitted by the MGCL. In the event that the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.
    
Section 7.02. Transfers . All transfers of shares of stock shall be made on the books of the Corporation, by the holder of the shares, in person or by his or her attorney, in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, to the extent then required by




the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates.
The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.
Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 7.03. Replacement Certificate . Any officer of the Corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however , if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the Board of Directors has determined that such certificates may be issued. Unless otherwise determined by an officer of the Corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the Corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the Corporation.

Section 7.04. Fixing of Record Date . The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to 5:00 p.m. Eastern Time on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.
        
When a record date for the determination of stockholders entitled to notice of and to vote at any meeting of stockholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than 120 days after the record date originally fixed for the meeting, in which case a new record date for such meeting may be determined as set forth herein.

Section 7.05. Stock Ledger . The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 7.06. Fractional Stock; Issuance of Units . The Board of Directors may authorize the Corporation to issue fractional stock or authorize the issuance of scrip, all on such terms and under such conditions as it may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

Accounting Year





The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

Distributions

Section 9.01. Authorization . Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or shares of stock of the Corporation, subject to the provisions of law and the Charter.

Section 9.02. Contingencies . Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine, and the Board of Directors may modify or abolish any such reserve.

ARTICLE X

Investment Policy

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

Seal

Section 11.01. Seal . The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words "Incorporated Maryland." The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 11.02. Affixing Seal . Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

Indemnification and Advance of Expenses

The Corporation shall, to the maximum extent permitted by Maryland law in effect from time to time, indemnify, and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former director or officer of the Corporation or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has




served as a director, officer, partner, member, manager or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or any other enterprise, from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in such capacity. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to any (a) present or former member, manager, shareholder, director, limited partner, general partner, officer or controlling person of (1) Malkin Holdings LLC, (2) an entity that owned an interest in one of the 18 real properties or two acres of land that are going to be or were contributed to the Corporation, Empire State Realty OP, L.P. (the " Operating Partnership ") or their subsidiaries (each such entity, a " Contributing Entity ") in the Corporation's initial public offering or (3) any direct or indirect partner or member, or any employee benefit plan or other enterprise thereof ( provided, that , in the case such direct or indirect partner or member owns direct or indirect interests in any properties not being contributed to the Corporation, the Operating Partnership or their subsidiaries in the Corporation's initial public offering, only to the extent such service relates to the business of Malkin Holdings LLC or any Contributing Entity) or (b) any agent for participants in any Contributing Entity or any direct or indirect partner or member thereof ( provided, that , in the case such direct or indirect partner or member owns direct or indirect interests in any properties not being contributed to the Corporation or the Operating Partnership, only to the extent such service relates to the business of Malkin Holdings LLC or any Contributing Entity). The rights to indemnification and advance of expenses provided by the Charter and these Bylaws shall vest immediately upon election of a director or officer. The indemnification and payment or reimbursement of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise. For the avoidance of doubt, the rights of indemnification provided by the Charter and these Bylaws shall protect acts performed by such indemnitees (including by reason of being named a person who is about to become a director) prior to the date of adoption of these Bylaws, including acts performed, or omissions taking place, prior to the formation of the Corporation.
    
Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Charter or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

ARTICLE XIII

Waiver of Notice

Whenever any notice of a meeting is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

ARTICLE XIV

Amendment of Bylaws





The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.

ARTICLE XV

Severability

If any provision of the Bylaws shall be held invalid or unenforceable in any respect, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable any other provision of the Bylaws in any jurisdiction.

ARTICLE XVI

Miscellaneous

Section 16.01. Books and Records . The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of an executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these Bylaws shall be kept at the principal office of the Corporation.

Section 16.02. Voting Stock in Other Companies . Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the chief executive officer, the president, a vice-president, or a proxy appointed by any of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.

Section 16.03. Execution of Documents . A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.

ARTICLE XVII

Exclusive Forum for Certain Litigation

Unless the Corporation consents in writing to the selection of an alternative forum for a particular proceeding, the federal courts of the United States sitting in the Southern District of New York, or, if such courts do not have jurisdiction, the state courts sitting in New York County, New York, shall be the sole and exclusive forum for:

     (a)      any derivative action or proceeding brought on behalf of the Corporation;

     (b)      any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Corporation to the Corporation or to the stockholders of the Corporation;

     (c)      any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the Maryland General Corporation Law, the charter of the Corporation or these Bylaws;





     (d)      any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation that is governed by the internal affairs doctrine; or

     (e)      any other action asserting a claim of any nature brought by or on behalf of any stockholder of the Corporation (which, for purposes of this ARTICLE XVII, shall mean any stockholder of record or any beneficial owner of stock of the Corporation either on his, her or its own behalf or on behalf of any series or class of shares of stock of the Corporation or any group of stockholders of the Corporation) against the Corporation or any director or officer or other employee of the Corporation.

As the Corporation would be irreparably harmed by any action filed in violation of this ARTICLE XVII and could not be adequately compensated by monetary damages alone, the Corporation shall be entitled to specific performance of this ARTICLE XVII and to temporary, preliminary and permanent injunctive relief to specifically enforce the terms of this ARTICLE XVII and to prevent any breach thereof.















 
19

Exhibit 10.24

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (" Agreement ") is made and entered into as of the 1 st day of February 2015, by and among EMPIRE STATE REALTY TRUST, INC., a Maryland corporation (the " Company "), EMPIRE STATE REALTY OP, L.P., a Delaware limited partnership (the " Partnership " and together with the Company, the " Indemnitors "), and John B. Kessler (the " Indemnitee ").

WHEREAS, the Indemnitee is an officer of the Company and/or the Partnership and in such capacity is performing a valuable service for the Company and/or the Partnership;

WHEREAS, to induce the Indemnitee to provide services to the Company and/or the Partnership as an officer, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Charter of the Company (the " Charter ") or the Bylaws of the Company (the " Bylaws "), the Agreement of Limited Partnership of the Partnership (the " Partnership Agreement "), or any acquisition transaction relating to the Company or the Partnership, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein; and

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . For purposes of this Agreement:

(a) " Board of Directors " means the Board of Directors of the Company.

(b) " Change in Control " means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or




form) promulgated under the Securities Exchange Act of 1934, as amended (the " Exchange Act "), whether or not the Company is then subject to such reporting requirement; provided, however , that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date:

(1)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of all of the Company's then-outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person's attaining such percentage interest;

(2)
the consummation by the Company, directly or indirectly, of a merger or consolidation, other than a transaction upon the completion of which 50% or more of the beneficial ownership of the voting power of the Company, the surviving entity or entity directly or indirectly controlling the Company or the surviving entity, as the case may be, is held by the same persons, in substantially the same proportion, as held the "beneficial ownership" (as defined in Rule 13(d)(3) under the Exchange Act) of the voting power of the Company immediately prior to the transaction (except that upon the completion thereof, employees or employee benefit plans of the Company may be a new holder of such beneficial ownership); or

(3)
at any time, a majority of the members of the Board of Directors are not individuals (A) who were directors as of the Effective Date or (B) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by the affirmative vote of at least two-thirds of the directors then in office who were directors as of the Effective Date or whose election or nomination for election was previously so approved.

(c)      " Corporate Status " means the status of a person (i) as a present or former director, officer, employee, agent or controlling person of the Company and/or the Partnership or (ii) as a director, trustee, officer, partner (limited or general), manager, managing member, fiduciary, employee, agent or controlling person of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company and/or the Partnership. As a clarification and without limiting




the circumstances in which the Indemnitee may be serving at the request of the Company or the Partnership, service by the Indemnitee shall be deemed to be at the request of the Company or the Partnership if the Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (i) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (ii) the management of which is controlled directly or indirectly by the Company. The Company shall be deemed to have requested the Indemnitee to serve on an employee benefit plan where the performance of the Indemnitee's duties to the Company also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.

(d)      " Disinterested Director " means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by the Indemnitee.

(e)      " Effective Date " means the date set forth in the first paragraph of this Agreement.

(f)      " ERISA " means the Employee Retirement Income Security Act of 1974, as amended.

(g)      " Expenses " means any and all reasonable and out-of-pocket attorneys' fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties and any other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

(h)      " Independent Counsel " means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company, Malkin Holdings LLC and/or its affiliates , any entity that owned an interest in one of the 18 real properties or two acres of land that were contributed to the Company, the Partnership or their subsidiaries in the Company's initial public offering, or the Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding




giving rise to a claim for indemnification or advancement of Expenses hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing the Company or the Indemnitee in an action to determine the Indemnitee's rights under this Agreement. If a Change in Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of the Indemnitee, which approval shall not be unreasonably withheld. If a Change in Control has occurred, Independent Counsel shall be selected by the Indemnitee, with the approval of the Board of Directors, which approval shall not be unreasonably withheld.

(i)      " Proceeding " means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation (including an internal investigation), inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom in which the Indemnitee was, is or will be involved as a party by reason of the Indemnitee's Corporate Status and, whether or not Indemnitee is an employee of the Company at the time a Proceeding arises, except one initiated by the Indemnitee pursuant to Section 12 of this Agreement to enforce such Indemnitee's rights under this Agreement. If the Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding.

Section 2.      Services by the Indemnitee . The Indemnitee serves as an officer, of the Company and/or the Partnership. However, this Agreement shall not impose any independent obligation on the Indemnitee, the Company or the Partnership to continue the Indemnitee's service to the Company and/or the Partnership. This Agreement shall not be deemed an employment contract between the Company (or any other entity) and the Indemnitee.

Section 3.      General . The Indemnitors shall, jointly and severally, indemnify, and advance Expenses to, the Indemnitee (a) as provided in this Agreement, (b) as provided in the Charter and Bylaws and (c) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however , that no change in Maryland law shall have the effect of reducing the benefits available to the Indemnitee hereunder based on Maryland law as in effect on the Effective Date. The rights of the Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the " MGCL ").





Section 4.      Standard for Indemnification . The Indemnitee shall be entitled to the rights of indemnification provided in this Agreement, including Section 3 and this Section 4 and under applicable law, the Charter, the Bylaws, the Partnership Agreement, any other agreement, or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise if, by reason of the Indemnitee's Corporate Status, the Indemnitee is, or is threatened to be, made a party to or a witness in any Proceeding. Notwithstanding the preceding sentence, the indemnification provided for in this Section 4 shall not cover any Indemnitee's personal tax liabilities (federal, state, foreign or other) resulting from such Indemnitee's Corporate Status as described in (iii) of the definition thereof. For the avoidance of doubt, the rights of indemnification provided in this Agreement in favor of the Indemnitee shall protect the acts performed by such Indemnitee (by reason of such Indemnitee's Corporate Status or by reason of being named as a person who is about to become a director) prior to or on the Effective Date, including acts performed, or omissions taking place, prior to the formation of the Company. Pursuant to this Section 4, the Indemnitee shall be indemnified hereunder, to the maximum extent permitted by Maryland law in effect from time to time ( provided , however , that no change in Maryland law shall have the effect of reducing the benefits available to the Indemnitee hereunder based on Maryland law as in effect on the Effective Date), against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding by reason of his Corporate Status unless it is established that (i) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal Proceeding, the Indemnitee had reasonable cause to believe that his conduct was unlawful.

Section 5.      Certain Limits on Indemnification . Notwithstanding any other provision of this Agreement (other than Section 6), the Indemnitee shall not be entitled to:

(a)      indemnification hereunder if the Proceeding was one by or in the right of the Company and the Indemnitee is adjudged in a final, non-appealable judgment by a court of appropriate jurisdiction to be liable to the Company;

(b)      indemnification hereunder if the Indemnitee is adjudged to be liable on the basis that personal benefit was improperly received by such Indemnitee in any Proceeding charging improper personal benefit to the Indemnitee, whether or not involving action in the Indemnitee's Corporate Status; or

(c)      indemnification or advance of Expenses hereunder if the Proceeding was brought by the Indemnitee unless: (i) the Proceeding was brought to enforce indemnification under this Agreement, and




then only to the extent in accordance with and as authorized by Section 12 of this Agreement or, (ii) the Charter or the Bylaws or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors expressly provides otherwise.

Section 6.      Court-Ordered Indemnification . Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of the Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances:

(a)      if such court determines that the Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case the Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or

(b)      if such court determines that the Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.

Section 7.      Indemnification for Expenses of an Indemnitee Who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, and without limiting any such provision, and in addition to any right to payment of expenses under any such provision, to the extent that the Indemnitee was or is, by reason of his Corporate Status, made a party to (or otherwise becomes a participant in) any Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, the Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Indemnitors shall, jointly and severally, indemnify the Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by him or on his behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis.

Section 8.      Advance of Expenses for an Indemnitee . Notwithstanding anything in this Agreement to the contrary, and in addition to any right under any other provision of this Agreement, if the Indemnitee is or was or becomes a party to or is otherwise involved in any Proceeding, or is or was threatened to be made




a party to or a participant in any Proceeding, by reason of the Indemnitee's Corporate Status, or by reason of (or arising in part out of) any actual or alleged event or occurrence related to the Indemnitee's Corporate Status, or by reason of any actual or alleged act or omission on the part of the Indemnitee taken or omitted in or relating to the Indemnitee's Corporate Status, then the Indemnitors shall, without requiring a preliminary determination of the Indemnitee's ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with such Proceeding within ten (10) days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by the Indemnitee and shall include or be preceded or accompanied by a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of the Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to the Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met by the Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement. To the extent that Expenses advanced to the Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of the Indemnitee and shall be accepted without reference to the Indemnitee's financial ability to repay such advanced Expenses and without any requirement to post security therefor.

Section 9.      Indemnification and Advance of Expenses as a Witness or Other Participant . Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is or may be, by reason of his Corporate Status, made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which the Indemnitee is not a party, he shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith within ten (10) days after the receipt by the Company of a statement or statements requesting any such advance or indemnification from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by the Indemnitee.

Section 10.      Procedure for Determination of Entitlement to Indemnification .





(a)      To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. The Indemnitee may submit one or more such requests from time to time and at such time(s) as the Indemnitee deems appropriate in his sole discretion. The officer of the Company receiving any such request from the Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnitee has requested indemnification.

(b)      Upon written request by the Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to the Indemnitee's entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee, which Independent Counsel shall be selected by the Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten (10) days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b). Any Expenses incurred by the Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors shall indemnify and hold the Indemnitee harmless therefrom.





(c)      The Indemnitors shall pay the reasonable fees and expenses of Independent Counsel, if one is appointed.

Section 11.      Presumptions and Effect of Certain Proceedings .

(a)      In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement if the Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Indemnitors shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

(b)      The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, entry of an order of probation prior to judgment, or by dismissal, with or without prejudice, does not create a presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

(c)      The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to the Indemnitee for purposes of determining any other right to indemnification under this Agreement.

Section 12.      Remedies of the Indemnitee .

(a)      If (i) a determination is made pursuant to Section 10(b) of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 7 or 9 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the Charter or the Bylaws of the Company is not made within ten (10) days after a determination has been made that the Indemnitee is entitled to indemnification, the Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advance of Expenses. Alternatively, the Indemnitee, at his option, may seek an award in arbitration to be




conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however , that the foregoing clause shall not apply to a proceeding brought by the Indemnitee to enforce his rights under Section 7 of this Agreement. Except as set forth herein, the provisions of Maryland law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Indemnitors shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.

(b)      In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement or otherwise and the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. If the Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, the Indemnitee shall not be required to reimburse the Indemnitors for any advances pursuant to Section 8 of this Agreement until a final non-appealable judgment by a court of appropriate jurisdiction is made with respect to the Indemnitee's entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed). The Indemnitors shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Indemnitors are bound by all of the provisions of this Agreement.

(c)      If a determination shall have been made pursuant to Section 10(b) of this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification.

(d)      In the event that the Indemnitee is successful in seeking, pursuant to this Section 12, a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement or otherwise, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought,




the Expenses incurred by the Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

(e)      Interest shall be paid by the Indemnitors to the Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Indemnitors pay or are obligated to pay for the period (i) commencing with either the tenth day after the date on which the Indemnitors were requested to advance Expenses in accordance with Sections 8 or 9 of this Agreement or the 60th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 10(b) above and (ii) ending on the date such payment is made to the Indemnitee by the Indemnitors.

Section 13.      Defense of the Underlying Proceeding .

(a)      The Indemnitee shall notify the Indemnitors promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding. The failure to give any such notice shall not disqualify the Indemnitee from the right, or otherwise affect in any manner any right of the Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Indemnitors' ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

(b)      Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Indemnitors shall have the right to defend the Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however , that the Company shall notify the Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above. The Indemnitors shall not, without the prior written consent of the Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against the Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of the Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of the Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to the Indemnitee or (iii) would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee. This Section 13(b) shall not apply to a Proceeding brought by the Indemnitee under Section 12 of this Agreement.





(c)      Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which the Indemnitee is a party by reason of the Indemnitee's Corporate Status, (i) the Indemnitee reasonably concludes, based upon the advice of counsel approved by the Company, which approval shall not be unreasonably withheld, that he may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) the Indemnitee reasonably concludes, based upon the advice of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between the Indemnitee and the Indemnitors, or (iii) if the Indemnitors fail to assume the defense of such Proceeding in a timely manner, the Indemnitee shall be entitled to be represented by separate legal counsel of the Indemnitee's choice, subject to the prior approval of the Indemnitors of the choice of such counsel, which approval shall not be unreasonably withheld, at the expense of the Indemnitors. In addition, if the Indemnitors fail to comply with any of their obligations under this Agreement or in the event that the Indemnitors or any other person takes any action to declare this Agreement void or unenforceable, or institute any Proceeding to deny or to recover from the Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the Indemnitee shall have the right to retain counsel of the Indemnitee's choice, subject to the prior approval of the Indemnitors, which approval shall not be unreasonably withheld, at the expense of the Indemnitors (subject to Section 12(d) of this Agreement), to represent the Indemnitee in connection with any such matter.

Section 14.      Non-Exclusivity; Survival of Rights; Subrogation .

(a)      The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Charter or the Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. Unless consented to in writing by the Indemnitee, no amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of the Indemnitee under this Agreement in respect of any action taken or omitted by such the Indemnitee in his Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.





(b)      In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

Section 15.      Insurance .

(a)      The Company will use its reasonable best efforts to acquire and maintain directors and officers liability insurance (" D&O Insurance "), on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, that includes coverage for the Indemnitee or any claim made against the Indemnitee by reason of his Corporate Status and coverage for the Indemnitors for any indemnification or advance of Expenses made by the Indemnitors to the Indemnitee for any claims made against the Indemnitee by reason of his Corporate Status. Without in any way limiting any other obligation under this Agreement, the Indemnitors shall indemnify the Indemnitee for any payment by the Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by the Indemnitee in connection with a Proceeding over the coverage of any D&O Insurance. The purchase, establishment and maintenance of any D&O Insurance shall not in any way limit or affect the rights or obligations of the Indemnitors or the Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Indemnitors and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies. If, at the time the Indemnitors receive notice from any source of a Proceeding to which the Indemnitee is a party or a participant (as a witness or otherwise) and the Company has D&O Insurance in effect, the Indemnitors shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

(b)      For a period of six (6) years and one (1) month after the date of termination of the Indemnitee's employment, the Company shall maintain in effect a "tail" directors' and officers' liability insurance policy with coverage in an amount and scope at least as favorable as the Company's existing coverage on the date of termination of the Indemnitee's employment and with at least as highly-rated an insurer; provided , that , in no event shall the Company be required to expend in the aggregate in excess of 200% of the ratable portion of the annual premium paid by the Company for such insurance in effect on the date of termination of the Indemnitee's employment. In the event that 200% of the ratable portion of the annual premium paid by the Company for such existing insurance is insufficient for such coverage, the Company shall spend up to that amount to purchase such lesser coverage as may be obtained with such amount.





Section 16.      Coordination of Payments . The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

Section 17.      Reports to Stockholders . To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amount for indemnification of, or advance of Expenses to, the Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Indemnitors with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

Section 18.      Duration of Agreement; Binding Effect .

(a)      The Indemnitors' obligations under this Agreement with respect to a Proceeding shall continue until and terminate on the date that the Indemnitee is no longer subject to that Proceeding (including any rights of appeal thereto and any Proceeding commenced by the Indemnitee pursuant to Section 12 of this Agreement).

(b)      The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or, substantially all or a substantial part, of the business and/or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company, and shall inure to the benefit of the Indemnitee and his spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(c)      The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.





(d)      The Indemnitors and the Indemnitee agree hereby that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause the Indemnitee irreparable harm. Accordingly, the parties hereto agree that the Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, the Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Indemnitors acknowledge that, in the absence of a waiver, a bond or undertaking may be required of the Indemnitee by a court, and the Indemnitors hereby waive any such requirement of such a bond or undertaking.

Section 19.      Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 20.      Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

Section 21.      Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 22.      Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions




of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 23.      Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed on the day of such delivery or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a)
If to the Indemnitee, to the address set forth on the signature page hereto.

(b)      If to the Indemnitors to:

One Grand Central Place
60 East 42 nd Street
New York, New York 10165
Attn: General Counsel

or to such other address as may have been furnished in writing to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.

Section 24.      Governing Law . The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

Section 25.      Time of the Essence . Time is of the essence regarding all dates and time periods set forth or referred to in this Agreement.

Section 26.      Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

[SIGNATURE PAGE FOLLOWS]


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





COMPANY:

EMPIRE STATE REALTY TRUST, INC.



By: /s/ David A. Karp             
Name: David A. Karp     
Title: Executive Vice President, Chief Financial Officer and Treasurer




INDEMNITEE:



/s/ John B. Kessler             
Name: John B. Kessler
Address: One Grand Central Place, 60 East 42 nd Street, New York, NY 10165







EXHIBIT A
FORM OF AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED

The Board of Directors of EMPIRE STATE REALTY TRUST, Inc.

Re: Affirmation and Undertaking to Repay Expenses Advanced

Ladies and Gentlemen:





This affirmation and undertaking is being provided pursuant to that certain Indemnification Agreement dated the 1 st day of February, 2015, by and among EMPIRE STATE REALTY TRUST, Inc., a Maryland corporation (the " Company "), EMPIRE STATE REALTY OP, L.P., a Delaware limited partnership (the " Partnership " and, together with the Company, or the " Indemnitor ") and the undersigned Indemnitee (the " Indemnification Agreement "), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the " Proceeding ").

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

I am subject to the Proceeding by reason of my actual or alleged Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm my good faith belief that at all times, insofar as I was involved as a member, an officer, a director, an employee, a partner, and/or an agent of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

In consideration of the advance of Expenses by the Indemnitors for reasonable attorneys' fees and related Expenses incurred by me in connection with the Proceeding (the " Advanced Expenses "), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established without interest.
IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ____________________, 20____.


_____________________________







19

Exhibit 10.31

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (" Agreement ") is made and entered into as of the 1 st day of January 2015, by and among EMPIRE STATE REALTY TRUST, INC., a Maryland corporation (the " Company "), EMPIRE STATE REALTY OP, L.P., a Delaware limited partnership (the " Partnership " and together with the Company, the " Indemnitors "), and James D. Robinson IV (the " Indemnitee ").

WHEREAS, the Indemnitee is a member of the Board of Directors of the Company and/or the Partnership and in such capacity is performing a valuable service for the Company and/or the Partnership;

WHEREAS, to induce the Indemnitee to provide services to the Company and/or the Partnership as a member of the Board of Directors, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Charter of the Company (the " Charter ") or the Bylaws of the Company (the " Bylaws "), the Agreement of Limited Partnership of the Partnership (the " Partnership Agreement "), or any acquisition transaction relating to the Company or the Partnership, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein; and

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee do hereby covenant and agree as follows:

Section 1.      Definitions . For purposes of this Agreement:

(a)    " Board of Directors " means the Board of Directors of the Company.

(b)    " Change in Control " means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the " Exchange Act "), whether or not the Company is then subject to such reporting requirement; provided, however , that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date:





(1)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of all of the Company's then-outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two- thirds of the members of the Board of Directors in office immediately prior to such person's attaining such percentage interest;

(2)
the consummation by the Company, directly or indirectly, of a merger or consolidation, other than a transaction upon the completion of which 50% or more of the beneficial ownership of the voting power of the Company, the surviving entity or entity directly or indirectly controlling the Company or the surviving entity, as the case may be, is held by the same persons, in substantially the same proportion, as held the "beneficial ownership" (as defined in Rule 13(d)(3) under the Exchange Act) of the voting power of the Company immediately prior to the transaction (except that upon the completion thereof, employees or employee benefit plans of the Company may be a new holder of such beneficial ownership); or

(3)
at any time, a majority of the members of the Board of Directors are not individuals (A) who were directors as of the Effective Date or (B) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by the affirmative vote of at least two-thirds of the directors then in office who were directors as of the Effective Date or whose election or nomination for election was previously so approved
 

(c)    " Corporate Status " means the status of a person (i) as a present or former director, officer, employee, agent or controlling person of the Company and/or the Partnership, (ii) as a director, trustee, officer, partner (limited or general), manager, managing member, fiduciary, employee, agent or controlling person of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company and/or the Partnership or (iii) as (A) a former member, manager, shareholder, director, limited partner, general partner, officer or controlling person of (1) Malkin Holdings LLC and/or its affiliates (collectively, " Malkin Holdings "), (2) any entity that owned an interest in one of the 18 real properties or two acres of land that are going to be or were contributed to the Company, the Partnership or their subsidiaries (each, a " Contributing Entity ") in the Company's initial




public offering or (3) any direct or indirect partner or member, or any employee benefit plan or other enterprise thereof ( provided, that , in the case such direct or indirect partner or member owns direct or indirect interests in any properties not being contributed to the Company, the Partnership or their subsidiaries in the Company's initial public offering, only to the extent such service relates to the business of Malkin Holdings or any Contributing Entity) or (B) any agent for participants in any Contributing Entity or any direct or indirect partner or member thereof ( provided , that , in the case such direct or indirect partner or member owns direct or indirect interests in any properties not being contributed to the Company or the Partnership, only to the extent such service relates to the business of Malkin Holdings or any Contributing Entity). As a clarification and without limiting the circumstances in which the Indemnitee may be serving at the request of the Company or the Partnership, service by the Indemnitee shall be deemed to be at the request of the Company or the Partnership if the Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (i) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (ii) the management of which is controlled directly or indirectly by the Company. The Company shall be deemed to have requested the Indemnitee to serve on an employee benefit plan where the performance of the Indemnitee's duties to the Company also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.

(d)    " Disinterested Director " means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by the Indemnitee.

(e)    " Effective Date " means the date set forth in the first paragraph of this Agreement.

(f)    "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(g)    " Expenses " means any and all reasonable and out-of-pocket attorneys' fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties and any other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without




limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

(h)    " Independent Counsel " means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company, Malkin Holdings, a Contributing Entity or the Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advancement of Expenses hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing the Company or the Indemnitee in an action to determine the Indemnitee's rights under this Agreement. If a Change in Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of the Indemnitee, which approval shall not be unreasonably withheld. If a Change in Control has occurred, Independent Counsel shall be selected by the Indemnitee, with the approval of the Board of Directors, which approval shall not be unreasonably withheld.

(i)    " Proceeding " means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation (including an internal investigation), inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom in which the Indemnitee was, is or will be involved as a party by reason of the Indemnitee's Corporate Status and, whether or not Indemnitee is an employee of the Company at the time a Proceeding arises, except one initiated by the Indemnitee pursuant to Section 12 of this Agreement to enforce such Indemnitee's rights under this Agreement. If the Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding.

Section 2.     Services by the Indemnitee . The Indemnitee serves or will serve as an officer, employee, agent or member of the Board of Directors of the Company and/or the Partnership. However, this Agreement shall not impose any independent obligation on the Indemnitee, the Company or the Partnership to continue the Indemnitee's service to the Company and/or the Partnership. This Agreement shall not be deemed an employment contract between the Company (or any other entity) and the Indemnitee.





Section 3.     General . The Indemnitors shall, jointly and severally, indemnify, and advance Expenses to, the Indemnitee (a) as provided in this Agreement, (b) as provided in the Charter and Bylaws and (c) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however , that no change in Maryland law shall have the effect of reducing the benefits available to the Indemnitee hereunder based on Maryland law as in effect on the Effective Date. The rights of the Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the " MGCL ").

Section 4.     Standard for Indemnification . The Indemnitee shall be entitled to the rights of indemnification provided in this Agreement, including Section 3 and this Section 4 and under applicable law, the Charter, the Bylaws, the Partnership Agreement, any other agreement, or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise if, by reason of the Indemnitee's Corporate Status, the Indemnitee is, or is threatened to be, made a party to or a witness in any Proceeding. Notwithstanding the preceding sentence, the indemnification provided for in this Section 4 shall not cover any Indemnitee's personal tax liabilities (federal, state, foreign or other) resulting from such Indemnitee's Corporate Status as described in (iii) of the definition thereof. For the avoidance of doubt, the rights of indemnification provided in this Agreement in favor of the Indemnitee shall protect the acts performed by such Indemnitee (by reason of such Indemnitee's Corporate Status or by reason of being named as a person who is about to become a director) prior to or on the Effective Date, including acts performed, or omissions taking place, prior to the formation of the Company. Pursuant to this Section 4, the Indemnitee shall be indemnified hereunder, to the maximum extent permitted by Maryland law in effect from time to time ( provided , however , that no change in Maryland law shall have the effect of reducing the benefits available to the Indemnitee hereunder based on Maryland law as in effect on the Effective Date), against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding by reason of his Corporate Status unless it is established that (i) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal Proceeding, the Indemnitee had reasonable cause to believe that his conduct was unlawful.

Section 5.     Certain Limits on Indemnification . Notwithstanding any other provision of this Agreement (other than Section 6), the Indemnitee shall not be entitled to:





(a)    indemnification hereunder if the Proceeding was one by or in the right of the Company and the Indemnitee is adjudged in a final, non-appealable judgment by a court of appropriate jurisdiction to be liable to the Company;

(b)    indemnification hereunder if the Indemnitee is adjudged to be liable on the basis that personal benefit was improperly received by such Indemnitee in any Proceeding charging improper personal benefit to the Indemnitee, whether or not involving action in the Indemnitee's Corporate Status; or

(c)    indemnification or advance of Expenses hereunder if the Proceeding was brought by the Indemnitee unless: (i) the Proceeding was brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Section 12 of this Agreement or, (ii) the Charter or the Bylaws or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors expressly provides otherwise.

Section 6.     Court-Ordered Indemnification . Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of the Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances:

(a)    if such court determines that the Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case the Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or

(b)    if such court determines that the Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.

Section 7.     Indemnification for Expenses of an Indemnitee Who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, and without limiting any such provision, and in addition to any right to payment of expenses under any such provision, to the extent that the Indemnitee was or is, by reason of his Corporate Status, made a party to (or otherwise becomes a participant in) any




Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, the Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Indemnitors shall, jointly and severally, indemnify the Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by him or on his behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis.

Section 8.     Advance of Expenses for an Indemnitee . Notwithstanding anything in this Agreement to the contrary, and in addition to any right under any other provision of this Agreement, if the Indemnitee is or was or becomes a party to or is otherwise involved in any Proceeding, or is or was threatened to be made a party to or a participant in any Proceeding, by reason of the Indemnitee's Corporate Status, or by reason of (or arising in part out of) any actual or alleged event or occurrence related to the Indemnitee's Corporate Status, or by reason of any actual or alleged act or omission on the part of the Indemnitee taken or omitted in or relating to the Indemnitee's Corporate Status, then the Indemnitors shall, without requiring a preliminary determination of the Indemnitee's ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with such Proceeding within ten (10) days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by the Indemnitee and shall include or be preceded or accompanied by a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of the Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to the Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met by the Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement. To the extent that Expenses advanced to the Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of the Indemnitee and shall be accepted without reference to the Indemnitee's financial ability to repay such advanced Expenses and without any requirement to post security therefor.





Section 9.     Indemnification and Advance of Expenses as a Witness or Other Participant . Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is or may be, by reason of his Corporate Status, made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which the Indemnitee is not a party, he shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith within ten (10) days after the receipt by the Company of a statement or statements requesting any such advance or indemnification from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by the Indemnitee.

Section 10.     Procedure for Determination of Entitlement to Indemnification .

(a)    To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. The Indemnitee may submit one or more such requests from time to time and at such time(s) as the Indemnitee deems appropriate in his sole discretion. The officer of the Company receiving any such request from the Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnitee has requested indemnification.

(b)    Upon written request by the Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to the Indemnitee's entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee, which Independent Counsel shall be selected by the Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so




determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten (10) days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b). Any Expenses incurred by the Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors shall indemnify and hold the Indemnitee harmless therefrom.

(c)    The Indemnitors shall pay the reasonable fees and expenses of Independent Counsel, if one is appointed.

Section 11.     Presumptions and Effect of Certain Proceedings .

(a)    In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement if the Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Indemnitors shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

(b)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, entry of an order of probation prior to judgment, or by dismissal, with or without prejudice, does not create a presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

(c)    The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to the Indemnitee for purposes of determining any other right to indemnification under this Agreement.





Section 12.     Remedies of the Indemnitee .

(a)    If (i) a determination is made pursuant to Section 10(b) of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 7 or 9 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the Charter or the Bylaws of the Company is not made within ten (10) days after a determination has been made that the Indemnitee is entitled to indemnification, the Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advance of Expenses. Alternatively, the Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however , that the foregoing clause shall not apply to a proceeding brought by the Indemnitee to enforce his rights under Section 7 of this Agreement. Except as set forth herein, the provisions of Maryland law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Indemnitors shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.

(b)    In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement or otherwise and the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. If the Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, the Indemnitee shall not be required to reimburse the Indemnitors for any advances pursuant to Section 8 of this Agreement until a final non-appealable judgment by a court of appropriate jurisdiction is made with respect to the Indemnitee's entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed). The Indemnitors shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Indemnitors are bound by all of the provisions of this Agreement.





(c)    If a determination shall have been made pursuant to Section 10(b) of this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification.

(d)    In the event that the Indemnitee is successful in seeking, pursuant to this Section 12, a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement or otherwise, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by the Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

(e)    Interest shall be paid by the Indemnitors to the Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Indemnitors pay or are obligated to pay for the period (i) commencing with either the tenth day after the date on which the Indemnitors were requested to advance Expenses in accordance with Sections 8 or 9 of this Agreement or the 60th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 10(b) above and (ii) ending on the date such payment is made to the Indemnitee by the Indemnitors.

Section 13.     Defense of the Underlying Proceeding .

(a)    The Indemnitee shall notify the Indemnitors promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding. The failure to give any such notice shall not disqualify the Indemnitee from the right, or otherwise affect in any manner any right of the Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Indemnitors' ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.





(b)    Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Indemnitors shall have the right to defend the Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however , that the Company shall notify the Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above. The Indemnitors shall not, without the prior written consent of the Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against the Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of the Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of the Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to the Indemnitee or (iii) would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee. This Section 13(b) shall not apply to a Proceeding brought by the Indemnitee under Section 12 of this Agreement.

(c)    Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which the Indemnitee is a party by reason of the Indemnitee's Corporate Status, (i) the Indemnitee reasonably concludes, based upon the advice of counsel approved by the Company, which approval shall not be unreasonably withheld, that he may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) the Indemnitee reasonably concludes, based upon the advice of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between the Indemnitee and the Indemnitors, or (iii) if the Indemnitors fail to assume the defense of such Proceeding in a timely manner, the Indemnitee shall be entitled to be represented by separate legal counsel of the Indemnitee's choice, subject to the prior approval of the Indemnitors of the choice of such counsel, which approval shall not be unreasonably withheld, at the expense of the Indemnitors. In addition, if the Indemnitors fail to comply with any of their obligations under this Agreement or in the event that the Indemnitors or any other person takes any action to declare this Agreement void or unenforceable, or institute any Proceeding to deny or to recover from the Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the Indemnitee shall have the right to retain counsel of the Indemnitee's choice, subject to the prior approval of the Indemnitors, which approval shall not be unreasonably withheld, at the expense of the Indemnitors (subject to Section 12(d) of this Agreement), to represent the Indemnitee in connection with any such matter.

Section 14.     Non-Exclusivity; Survival of Rights; Subrogation .





(a)    The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Charter or the Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. Unless consented to in writing by the Indemnitee, no amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of the Indemnitee under this Agreement in respect of any action taken or omitted by such the Indemnitee in his Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

(b)    In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

Section 15.     Insurance .

(a)    The Company will use its reasonable best efforts to acquire and maintain directors and officers liability insurance (" D&O Insurance "), on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, that includes coverage for the Indemnitee or any claim made against the Indemnitee by reason of his Corporate Status and coverage for the Indemnitors for any indemnification or advance of Expenses made by the Indemnitors to the Indemnitee for any claims made against the Indemnitee by reason of his Corporate Status. Without in any way limiting any other obligation under this Agreement, the Indemnitors shall indemnify the Indemnitee for any payment by the Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by the Indemnitee in connection with a Proceeding over the coverage of any D&O Insurance. The purchase, establishment and maintenance of any D&O Insurance shall not in any way limit or affect the rights or obligations of the Indemnitors or the Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Indemnitors and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies. If, at the time




the Indemnitors receive notice from any source of a Proceeding to which the Indemnitee is a party or a participant (as a witness or otherwise) and the Company has D&O Insurance in effect, the Indemnitors shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

(b)    For a period of six (6) years and one (1) month after the date of termination of the Indemnitee's employment, the Company shall maintain in effect a "tail" directors' and officers' liability insurance policy with coverage in an amount and scope at least as favorable as the Company's existing coverage on the date of termination of the Indemnitee's employment and with at least as highly-rated an insurer; provided , that , in no event shall the Company be required to expend in the aggregate in excess of 200% of the ratable portion of the annual premium paid by the Company for such insurance in effect on the date of termination of the Indemnitee's employment. In the event that 200% of the ratable portion of the annual premium paid by the Company for such existing insurance is insufficient for such coverage, the Company shall spend up to that amount to purchase such lesser coverage as may be obtained with such amount

Section 16.     Coordination of Payments . The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
 
Section 17.     Reports to Stockholders . To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amount for indemnification of, or advance of Expenses to, the Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Indemnitors with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

Section 18.     Duration of Agreement; Binding Effect .

(a)    The Indemnitors' obligations under this Agreement with respect to a Proceeding shall continue until and terminate on the date that the Indemnitee is no longer subject to that Proceeding (including any rights of appeal thereto and any Proceeding commenced by the Indemnitee pursuant to Section 12 of this Agreement).





(b)    The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or, substantially all or a substantial part, of the business and/or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company, and shall inure to the benefit of the Indemnitee and his spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(c)    The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(d)    The Indemnitors and the Indemnitee agree hereby that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause the Indemnitee irreparable harm. Accordingly, the parties hereto agree that the Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, the Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Indemnitors acknowledge that, in the absence of a waiver, a bond or undertaking may be required of the Indemnitee by a court, and the Indemnitors hereby waive any such requirement of such a bond or undertaking.

Section 19.     Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or




impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 20.     Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

Section 21.     Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 22.     Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 23.     Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed on the day of such delivery or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a)    If to the Indemnitee, to the address set forth on the signature page hereto.

(b)    If to the Indemnitors to:
One Grand Central Place
60 East 42 nd Street
New York, New York 10165
Attn: General Counsel

or to such other address as may have been furnished in writing to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.





Section 24.     Governing Law . The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

Section 25.     Time of the Essence . Time is of the essence regarding all dates and time periods set forth or referred to in this Agreement.

Section 26.     Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

[SIGNATURE PAGE FOLLOWS]

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

INDEMNITORS:

EMPIRE STATE REALTY TRUST, INC.


By:      /s/ David A. Karp                 
Name: David A. Karp
Title: Executive Vice President and Chief Financial Officer

EMPIRE STATE REALTY OP, L.P.
By: Empire State Realty Trust, Inc., its general partner


By:      /s/ David A. Karp                 
Name: David A. Karp
Title: Executive Vice President and Chief Financial Officer


INDEMNITEE


/s/ James D. Robinson IV




Name: James D. Robinson IV
Address:      51 Carlton Road
Bronxville, NY 10708


EXHIBIT A

FORM OF AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED

The Board of Directors of EMPIRE STATE REALTY TRUST, Inc.

Re: Affirmation and Undertaking to Repay Expenses Advanced

Ladies and Gentlemen:

This affirmation and undertaking is being provided pursuant to that certain Indemnification Agreement dated the 1 st day of January 2015, by and among EMPIRE STATE REALTY TRUST, Inc., a Maryland corporation (the " Company "), EMPIRE STATE REALTY OP, L.P., a Delaware limited partnership (the " Partnership " and, together with the Company, or the " Indemnitor ") and the undersigned Indemnitee (the " Indemnification Agreement "), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the " Proceeding ").

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

I am subject to the Proceeding by reason of my actual or alleged Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm my good faith belief that at all times, insofar as I was involved as a director of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

In consideration of the advance of Expenses by the Indemnitors for reasonable attorneys' fees and related Expenses incurred by me in connection with the Proceeding (the " Advanced Expenses "), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money,




property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established without interest.
IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ____________________, 20____.

_____________________________





Exhibit 10.36

CHANGE IN CONTROL
SEVERANCE AGREEMENT

This CHANGE IN CONTROL SEVERANCE AGREEMENT (this “ Agreement ”) is made and entered into as of this 1 st day of February, 2015, by and between Empire State Realty Trust, Inc., a Maryland corporation (the “ Company ”), and John B. Kessler (the “ Executive ”).

W I T N E S S E T H :

WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and

WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change of control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and

WHEREAS, the Company desires to ensure Executive’s continued and undivided dedication to Executive’s duties in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1).

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Executive hereby agree as follows:

Section 1.    Definitions.

(a)
“ Accounting Firm ” shall have the meaning set forth in Section 7 hereof.

(b)
“ Accrued Obligations ” shall mean (i) all accrued but unpaid base salary through the Termination Date, (ii) any unpaid or unreimbursed expenses incurred through the Termination Date in accordance with Company policy, subject to submission of written documentation substantiating such expenses, in a form reasonably acceptable to the Company, (iii) any accrued but unused vacation time through the Termination Date in accordance with the applicable Company Group policy and (iv) any benefits provided under the Company’s employee benefit plans upon a termination of employment, in accordance with the terms contained therein.

(c)
  “ Agreement ” shall have the meaning set forth in the preamble.

(d)
“ Board ” shall mean the Board of Directors of the Company.

(e)
“ Cause ” shall mean (i) fraudulent actions by Executive in the conduct of his/her duties for the Company or the conviction of Executive of a felony, (ii) Executive’s gross neglect of, or willful refusal or failure to perform, the duties assigned to him/her (other than by reason of physical or mental incapacity), (iii) Executive’s material breach of any written agreement with the Company, or (iv) Executive’s material breach of the Code of Business Conduct and Ethics of the Company or any member of the Company Group. Any such occurrence described in clause (ii), (iii) or (iv) in the preceding sentence that is curable shall constitute




“Cause” only after the Company has given Executive sixty (60) days written notice of such violation, and then only if such occurrence is not cured; provided, however , that Executive shall be provided such additional time as is reasonably necessary to cure if Executive has, within such sixty (60) day period, taken reasonable steps designed to cure such violation. Cause shall not exist without (A) advance written notice provided to Executive of not less than fourteen (14) days prior to the Termination Date setting forth the Company’s intention to consider terminating Executive for Cause including a statement of the anticipated date of termination and the basis for such termination for Cause, (B) an opportunity for Executive, together with Executive’s counsel, to be heard before the Board during the fourteen (14) day period preceding the anticipated date of termination, (C) a duly adopted resolution of the Board stating that the actions of Executive constituted Cause and the basis for such termination for Cause, and (D) a written determination provided by the Board setting forth the acts and/or omissions that form the basis of such termination for Cause. Any resolution or determination made by the Board described in the immediately preceding sentence shall require an affirmative vote of at least a two-thirds majority of the members of the Board (other than Executive if Executive is a Board member) and shall be subject to de novo review by an arbitrator. Any purported termination of employment of Executive by the Company which does not meet each requirement described herein shall be treated for all purposes as a termination by the Company other than by reason of a Nonqualifying Termination.

(f)
  “ Change in Control ” shall have the meaning set forth in the Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. 2013 Equity Incentive Plan.

(g)
“ Change in Control Termination Period ” shall mean the period of time beginning with a Change in Control following February 1, 2015 and ending two (2) years following such Change in Control.

(h)
“ Code ” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

(i)
“ Company ” shall have the meaning set forth in the preamble hereto.

(j)
“ Company Group ” shall mean the Company together with any direct or indirect subsidiaries of the Company.

(k)
“ Compensation Committee ” shall mean the Compensation Committee of the Board.

(l)
“ Confidential Information ” shall have the meaning set forth in Section 6(b) hereof.


(m)
“ Delay Period ” shall have the meaning set forth in Section 11(a) hereof.

(n)
“ Disability ” shall mean any physical or mental disability or infirmity of Executive that prevents the performance of Executive’s duties for a period of (i) ninety (90) consecutive days or (ii) one hundred eighty (180) non-consecutive days during any twelve (12) month period. Any question as to the existence, extent, or potentiality of Executive’s Disability upon which Executive and the Company cannot agree shall be determined by a qualified, independent physician mutually agreed to by the Company and Executive. The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

(o)
“ Earned Bonus ” shall have the meaning set forth in Section 2(b) hereof.





(p)
“ Excise Tax ” shall have the meaning set forth in Section 7 hereof.

(q)
“ Executive ” shall have the meaning set forth in the preamble hereto.

(r)
“ Good Reason ” shall mean, without Executive’s written consent, (i) a material breach by the Company of this Agreement, any agreement evidencing an equity grant or other long-term incentive award, or any other written agreement between the Company and Executive, (ii) a diminution of, or reduction or adverse alteration of, Executive’s titles, duties, authorities or responsibilities or reporting lines, (iii) any requirement by the Company that Executive relocate to a principal place of business outside of the New York City metropolitan area, or (iv) a material reduction in Executive’s base salary or target annual bonus opportunity. Good Reason shall not exist without Executive providing thirty (30) days’ written notice of termination to the Company setting forth in reasonable specificity the event that constitutes Good Reason, which written notice to be effective, must be provided to the Company within ninety (90) days of the occurrence of such event. During such thirty (30) day notice period, the Company shall have the right to cure (if curable) the event that constitutes Good Reason.

(s)
“ Nonqualifying Termination ” shall mean a termination of Executive’s employment with the Company (i) by the Company for Cause, (ii) by Executive for any reason other than for Good Reason, (iii) as a result of Executive’s death or (iv) by the Company as a result of Executive’s Disability.

(t)
“Partnership” shall mean the Company’s operarting partnership, Empire State Realty OP, L.P.

(u)
“ Payment ” shall have the meaning set forth in Section 7 hereof.

(v)
“ Person ” shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint‑stock company, trust (charitable or non-charitable), unincorporated organization, or other form of business entity.

(w)
“ Proceeding ” shall mean any threatened or actual action, suit or proceeding, whether civil, criminal, administrative, investigative, appellate or other.

(x)
“ Release of Claims ” shall mean the Release of Claims in the form attached hereto as Exhibit A .

(y)
“ Restricted Period ” shall have the meaning set forth in Section 6(c) hereof.

(z)
“ Safe Harbor Amount ” shall have the meaning set forth in Section 7 hereof.

(aa)
“ Severance Benefits ” shall have the meaning set forth in Section 4 hereof.

(ab)
“ Termination Date ” shall mean the date Executive’s employment with the Company terminates.

Section 2.    Severance Payments.

If Executive’s employment with the Company is terminated during the Change in Control Termination Period other than by reason of a Nonqualifying Termination, then the Company shall pay or provide Executive with the following payments or benefits:





(a)      The Accrued Obligations;

(b)      Any earned but unpaid annual bonus with respect to any completed fiscal year that has ended prior to the Termination Date, which amount shall be paid at such time annual bonuses are generally paid to other senior executives of the Company Group, but in no event later than March 15 th following the end of the fiscal year to which such annual bonus relates (“ Earned Bonus ”);

(c)      Subject to achievement of the applicable performance conditions for the fiscal year of the Company in which Executive’s termination occurs (disregarding any subjective performance goals and any other exercise by the Compensation Committee of negative discretion), payment of the annual bonus that would otherwise have been earned in respect of the fiscal year in which such termination occurred, pro-rated to reflect the number of days Executive was employed during such fiscal year, which amount shall be paid at such time annual bonuses are generally paid to other senior executives of the Company Group, but in no event later than March 15 th following the last day of the fiscal year in which the Termination Date occurred;

(d)      Any service-based vesting or service requirements with respect to any equity grant and other long-term incentive award previously granted to Executive and then outstanding shall become vested and non-forfeitable as of the Termination Date and any performance-based equity grant and other long-term incentive award previously granted to Executive and then outstanding that has not been earned as of the Termination Date shall be earned at a pro-rata amount based on the actual performance for the performance period as of the Termination Date, and, in other respects, such awards shall be governed by the plans, programs, agreements, or other documents, as applicable, pursuant to which such awards were granted;

(e)      An amount equal to two hundred percent (200%) of the sum of (i) Executive’s then-current base salary and (ii) the average annual cash bonus paid to Executive over the most recently completed three (3) fiscal years (or if Executive was not eligible to receive an annual cash bonus with respect to any of the three (3) fiscal years immediately preceding the fiscal year in which the Termination Date occurs, the average shall be determined for that period of fiscal years, if any, for which Executive was eligible to receive an annual cash bonus), which amount shall be paid in a lump-sum on the sixtieth (60 th ) day following the Termination Date; and

(f)      To the extent permitted by applicable law and without penalty to the Company, subject to Executive’s election of COBRA continuation coverage under the Company’s group health plan, on the first regularly scheduled payroll date of each month for the eighteen (18)-month period commencing after the Termination Date, the Company will pay Executive an amount equal to the difference between Executive’s monthly COBRA premium cost and the premium cost to Executive as if Executive were an employee of the Company (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars); provided , that any payments described herein shall cease in the event that Executive becomes eligible to receive health benefits from another employer that are substantially similar to those Executive was entitled to receive immediately prior to the Termination Date.

Section 3.    Payments Upon Nonqualifying Termination of Employment. 

If Executive’s employment with the Company shall terminate during the Change in Control Termination Period by reason of a Nonqualifying Termination, then Executive (or Executive’s beneficiary or estate) shall be entitled to the Accrued Obligations and, unless Executive is terminated by the Company for Cause, the Earned Bonus.





Section 4.    Release.

Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to Section 2 hereof (other than the Accrued Obligations) (collectively, the “ Severance Benefits ”) shall be conditioned upon Executive’s execution, delivery to the Company, and non-revocation of the Release of Claims (and the expiration of any revocation period contained in such Release of Claims) within sixty (60) days following the Termination Date. If Executive fails to execute the Release of Claims in such a timely manner so as to permit any revocation period to expire prior to the end of such sixty (60) day period, or timely revokes his/her acceptance of such release following its execution, Executive shall not be entitled to any of the Severance Benefits. Further, to the extent that any of the Severance Benefits constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code, any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the sixtieth (60th) day following the Termination Date, but for the condition on executing the Release of Claims as set forth herein, shall not be made until the first regularly scheduled payroll date following such sixtieth (60th) day, after which any remaining Severance Benefits shall thereafter be provided to Executive according to the applicable schedule set forth herein.

Section 5.    Resignations.

Upon any termination of Executive’s employment with the Company, except as may otherwise be requested by the Company in writing and agreed upon in writing by Executive, Executive shall resign from any and all directorships, committee memberships, and any other positions Executive holds with the Company or any other member of the Company Group.

Section 6.    Restrictive Covenants.

(a)      General . Executive acknowledges and agrees that (i) the agreements and covenants contained in this Section 6 are (A) reasonable and valid in geographical and temporal scope and in all other respects and (B) essential to protect the value of the Company Group’s business and assets, and (ii) by Executive’s employment with the Company, Executive will obtain knowledge, contacts, know-how, training, and experience, and there is a substantial probability that such knowledge, know-how, contacts, training, and experience could be used to the substantial advantage of a competitor of the Company Group and to the Company Group’s substantial detriment.

(b)      Confidential Information . Except as directed or authorized by the Company, Executive agrees that he/she will not, at any time during his/her employment with the Company or thereafter, make use of or divulge to any other Person any trade or business secret, process, method, or means, or any other confidential information concerning the business or policies of the Company Group that he/she may have learned in connection with his/her employment and that he/she knows to be confidential or proprietary (“ Confidential Information ”). Executive’s obligation under this Section 6(b) shall not apply to any information that (i) is known publicly without the fault of Executive, (ii) is in the public domain or hereafter enters the public domain without the fault of Executive, (iii) is known to Executive prior to his/her receipt of such information from the Company Group, (iv) is hereafter disclosed to Executive by a third party not under an obligation of confidence to the Company Group, or (v) is required to be disclosed by Executive to, or by, any governmental or judicial authority ( provided that Executive provides the Company Group with prior notice of the contemplated disclosure and reasonably cooperates with the Company Group at its expense in seeking a protective order or other appropriate protection of such information). Executive agrees not to remove from the premises of any member of the Company Group, except as an employee, officer or director of the Company Group in pursuit of the business of the




Company Group or except as specifically permitted in writing by the Board, any document or other object containing or reflecting any such Confidential Information. Executive recognizes that all such documents and objects, whether developed by him/her or by someone else, will be the sole exclusive property of the Company Group. Upon termination of Executive’s employment, Executive shall forthwith deliver to the Company Group all such Confidential Information, including, without limitation, all lists of customers, correspondence, accounts, records, and any other documents or property made or held by him/her or under his/her control in relation to the business or affairs of the Company Group, and no copy of any such Confidential Information shall be retained by him/her.

(c)      Non-Competition . Executive covenants and agrees that during the period commencing on February 1, 2015 and ending on the six (6) month anniversary of the Termination Date (the “ Restricted Period ”), Executive shall not, directly or indirectly (individually, or through or on behalf of another entity as owner, partner, agent, employee, consultant, or in any other capacity), engage, participate or assist, as an owner, partner, employee, consultant, director, officer, trustee or agent in any element of the Business (as defined below). Notwithstanding anything herein to the contrary, this Section 6(c) shall not prevent Executive from (i) acquiring as an investment securities representing not more than one percent (1%) of the outstanding voting securities of any publicly held corporation engaged in the Business or from indirectly acquiring securities of any company engaged in the Business as a result of being a passive investor in any mutual fund, hedge fund, private equity fund, or similar pooled account so long as Executive’s interest therein is less than one percent (1%) and he/she has no role in selecting, managing or advising with respect to investments thereof, or (ii) providing services to any entity whose primary business activity is not an element of the Business or a subsidiary, division or unit of any entity that engages in the Business so long as Executive and such subsidiary, division or unit does not engage in the Business so long as Executive provides written notice to the Company at least ten (10) business days prior to the commencement of providing any services to such subsidiary, division or unit. For the purposes of this Section 6(c), the “Business” shall mean the acquisition, development, management, leasing or financing of any office or retail real estate property located in New York County, New York, Fairfield County, Connecticut, Westchester County, New York, and any other geographic area in which the Company engages in such activities and any business activity that represents a significant portion of the business activity of the Company (measured as at least ten percent (10%) of the Company’s revenues on a trailing 12-month basis).

(d)      Non-Interference . During the period commencing on February 1, 2015 and ending on the twenty-four (24) month anniversary of the Termination Date , Executive shall not, directly or indirectly, for his/her own account or for the account of any other Person, (i) encourage, solicit or induce, or in any manner attempt to encourage, solicit or induce, any Person employed by, or providing consulting services to the Company Group to terminate such Person’s employment or services (or, in the case of a consultant, to materially reduce such services) with the Company Group, (ii) hire any Person who was employed by the Company Group within the twelve (12) month period prior to the date of such hiring, or (iii) encourage, solicit or induce, or in any manner attempt to encourage, solicit or induce any tenant, customer, supplier, licensee or other business relation to cease doing business with or reduce the amount of business conducted with the Company Group, or in any way interfering with the relationship of any such tenant, customer, supplier, licensee, or other business relation and the Company Group.

(e)      Mutual Non-Disparagement . During Executive’s employment with the Company and at all times following Executive’s termination of employment for any reason, (i) Executive covenants and agrees that he/she will not, nor induce others to, disparage any member of the Company Group, its past and present officers, directors, employees, products or services and (ii) the Company shall not, and shall instruct members of its Board and the senior executives of the Company Group not to, disparage




Executive. Nothing herein shall prohibit any party (i) from disclosing that Executive is no longer employed by the Company, (ii) from responding truthfully to any governmental investigation, legal process or inquiry related thereto, (iii) from making a good faith rebuttal of the other party’s untrue or misleading statement. For purposes of this Agreement, the term “disparage” means any statements, whether orally, in writing or through any medium (including, but not limited to, the press or other media, computer networks or bulletin boards, or any other form of communication), that intentionally disparage, defame, or otherwise damage or assail the reputation, integrity or professionalism of the other party.

(f)      Post-Termination Cooperation . Executive agrees that following the termination of his/her employment, he/she will continue to provide reasonable cooperation to the Company and/or any other member of the Company Group and its or their respective counsel in connection with any Proceeding relating to any matter that occurred during Executive’s employment in which Executive was involved or of which Executive has knowledge. The Company shall pay Executive at an hourly rate based upon Executive’s Base Salary as of the Termination Date and reimburse Executive for reasonable out-of-pocket expenses incurred with respect to his/her compliance with this Section 6(f). Executive also agrees that, in the event that he/she is subpoenaed by any Person (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding, or otherwise) that in any way relates to his/her employment by the Company and/or any other member of the Company Group, he/she will give prompt notice of such request to the Company and will make no disclosure until the Company Group has had a reasonable opportunity to contest the right of the requesting Person. Without limiting the generality of the foregoing, to the extent any member of the Company Group seeks Executive’s assistance, the Company Group will use reasonable commercial efforts, whenever possible, to provide Executive with reasonable advance notice of its need for him/her and will attempt to coordinate with Executive the time and place at which Executive’s assistance will be provided with the goal of minimizing the impact of such assistance on any other material pre-scheduled business commitment that Executive may have. Executive’s cooperation described in this Section 6(f) shall be subject to the term of the indemnification agreement between Executive, the Company and the Partnership and the indemnification provisions under the Company’s by-laws.

(g)      Blue Pencil . If any court of competent jurisdiction shall at any time deem the duration or the geographic scope of any of the provisions of this Section 6 unenforceable, the other provisions of this Section 6 shall nevertheless stand, and the duration and/or geographic scope set forth herein shall be deemed to be the longest period and/or greatest size permissible by law under the circumstances, and the parties hereto agree that such court shall reduce the time period and/or geographic scope to permissible duration or size.

(h)      Breach of Restrictive Covenants . Without limiting the remedies available to the Company Group, Executive acknowledges that a breach of any of the covenants contained in Section 6 hereof may result in material irreparable injury to the Company Group for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely, and that in the event of such a breach or threat thereof, the Company Group shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach of Section 6 hereof, restraining Executive from engaging in activities prohibited by Section 6 hereof or such other relief as may be required specifically to enforce any of the covenants in Section 6 hereof.

Section 7.     Golden Parachute Tax Provisions .

If there is a change in ownership or control of the Company that would cause any payment or distribution by the Company or any other Person or entity to Executive or for Executive’s benefit (whether




paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “ Payment ”) to be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest or penalties incurred by Executive with respect to such excise tax, the “ Excise Tax ”), then Executive will receive the greatest of the following, whichever gives Executive the highest net after-tax amount (after taking into account federal, state, local and social security taxes): (a) the Payments or (b) one dollar less than the amount of the Payments that would subject Executive to the Excise Tax (the “ Safe Harbor Amount ”). If a reduction in the Payments is necessary so that the Payments equal the Safe Harbor Amount and none of the Payments constitutes nonqualified deferred compensation, then the reduction shall occur in the manner Executive elects in writing prior to the date of payment. If any Payment constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code) or if Executive fails to elect an order, then the Payments to be reduced will be determined in a manner which has the least economic cost to Executive and, to the extent the economic cost is equivalent, will be reduced in the inverse order of when payment would have been made to Executive, until the reduction is achieved. All determinations required to be made under this Section 7, including whether and when the Safe Harbor Amount is required and the amount of the reduction of the Payments and the assumptions to be utilized in arriving at such determination, shall be made by a certified public accounting firm designated by the Company (the “ Accounting Firm ”). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon Company and Executive.

Section 8.    Taxes.

The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges and represents that the Company has not provided any tax advice to him/her in connection with this Agreement and that Executive has been advised by the Company to seek tax advice from his/her own tax advisors regarding this Agreement and payments that may be made to him/her pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Code to such payments.

Section 9.    Scope of Agreement.

Nothing in this Agreement shall be deemed to alter the “at-will” nature of Executive’s employment or entitle Executive to continued employment with the Company.

Section 10.    Set Off; Mitigation.

The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall not be subject to set-off, counterclaim, or recoupment of amounts owed by Executive to the Company or its affiliates. Executive shall not be required to mitigate the amount of any payment provided pursuant to this Agreement by seeking other employment or otherwise, and except as provided in Section 2(f), the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise

Section 11.    Additional Section 409A Provisions.

Notwithstanding any provision in this Agreement to the contrary-

(a)      Any payment otherwise required to be made hereunder to Executive at any date as a result of the termination of Executive’s employment shall be delayed for such period of time as may be necessary




to meet the requirements of Section 409A(a)(2)(B)(i) of the Code (the “ Delay Period ”). On the first business day following the expiration of the Delay Period, Executive shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule set forth herein.

(b)      Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.

(c)      To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided , that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(d)      The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in accordance with such intent.

Section 12.    Successors and Assigns; No Third-Party Beneficiaries.

(a)      The Company . This Agreement shall inure to the benefit of the Company and its respective successors and assigns. Neither this Agreement nor any of the rights, obligations, or interests arising hereunder may be assigned by the Company to a Person (other than another member of the Company Group, or its or their respective successors) without Executive’s prior written consent (which shall not be unreasonably withheld, delayed, or conditioned); provided , however , that in the event of a sale of all or substantially all of the assets of the Company or any direct or indirect division or subsidiary thereof to which Executive’s employment primarily relates, the Company will provide that this Agreement will be assigned to, and assumed by, the acquiror of such assets, it being agreed that in such circumstances, Executive’s consent will not be required in connection therewith.

(b)      Executive . Executive’s rights and obligations under this Agreement shall not be transferable by Executive by assignment or otherwise, without the prior written consent of the Company; provided , however , that if Executive shall die, all amounts then payable to Executive hereunder shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee, or if there be no such designee, to Executive’s estate.

(c)      No Third-Party Beneficiaries . Except as otherwise set forth in Section 12(b) hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Company, the other members of the Company Group, and Executive any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.

Section 13.    Waiver and Amendments.





Any waiver, alteration, amendment, or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by each of the parties hereto; provided , however , that any such waiver, alteration, amendment, or modification must be consented to on the Company’s behalf by the Board. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

Section 14.    Severability.

If any covenants or such other provisions of this Agreement are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision hereof shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision hereof

Section 15.    Governing Law; Interpretation.

This Agreement shall be construed in accordance with and governed for all purposes by the laws and public policy (other than conflict of laws principles) of the State of New York applicable to contracts executed and to be wholly performed therein.

Section 16.      Dispute Resolution.

Except to the extent necessary for the Company or any member of the Company Group or their successors or assigns to seek injunctive relief or other equitable relief described in Section 6(h), arbitration will be the method of resolving disputes under this Agreement. Notwithstanding the foregoing, the parties agree that before proceeding to arbitration, they will attempt in good faith to promptly resolve such dispute by mediation in New York, New York. The mediation will commence within forty-five (45) days of request therefore and will be before a single mediator selected by the Company and Executive from a list provided by Judicial Arbitration and Mediation Services, Inc. (“ JAMS ”). If the parties are unable to mutually select a mediator, then the mediator shall be appointed by JAMS. If any dispute is not resolved to the satisfaction of the parties in mediation or, unless the parties mutually agree otherwise, the dispute remains unresolved following thirty (30) days after the commencement of the mediation, the arbitration shall be held before a single arbitrator selected by the Company and Executive from a list provided by JAMS. All arbitrations arising out of this Agreement shall be conducted in New York, New York in accordance with the JAMS rules then in effect for executive employment disputes and arbitrations. If the Company and Executive cannot agree on a single arbitrator, the arbitration shall be conducted before a panel of three arbitrators, one selected by each party hereto and the third arbitrator selected by the parties’ two arbitrators from a list provided by JAMS. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of this Agreement. The Company shall be responsible for paying the fees and costs of the mediator and arbitrator along with other mediation or arbitration-specific fees (except, if applicable, Executive’s petitioner’s filing fees) and its own expenses and Executive shall be responsible for his/her own expenses relating to the conduct of the mediation or arbitration (including reasonable attorneys’ fees and expenses), provided, however, the Company shall reimburse Executive for his/her costs and expenses in connection with such contest or dispute in the event Executive prevails, as determined by the arbitrator.





Section 17.    Notices.

(a)      Place of Delivery . Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom or which it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided; provided , that unless and until some other address be so designated, all notices and communications by Executive to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive’s last known address, as reflected in the Company’s records

(b)      Date of Delivery . Any notice so addressed shall be deemed to be given or received (i) if delivered by hand, on the date of such delivery, (ii) if mailed by courier or by overnight mail, on the first business day following the date of such mailing, and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.

Section 18.    Section Headings.

The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof or affect the meaning or interpretation of this Agreement or of any term or provision hereof.

Section 19.    Entire Agreement.

This Agreement, together with any exhibits attached hereto, constitutes the entire understanding and agreement of the parties hereto regarding the employment of Executive. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, and agreements between the parties relating to the subject matter of this Agreement.

Section 20.    Survival of Operative Sections.

Upon any termination of Executive’s employment, the provisions of Section 2 through Section 22 of this Agreement (together with any related definitions set forth in Section 1 hereof) shall survive to the extent necessary to give effect to the provisions thereof.

Section 21.    Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual signature or by signature delivered by facsimile or by e-mail as a portable data format (.pdf) file or image file attachment.

Section 22.     Termination.

(a)      This Agreement shall terminate two (2) years after the date of any written notification from the Company to Executive terminating this Agreement; provided, however , that if a Change in Control occurs while this Agreement is still operative, any written notification to Executive terminating this Agreement (including any written notification given prior to such Change in Control), shall not be effective prior to the end of the Change in Control Termination Period; and provided, further , that this Agreement shall continue in effect following any termination of employment that is not a Nonqualifying




Termination which occurs prior to such termination with respect to all rights and obligations accruing as a result of such termination.

*    *    *
[ Signatures to appear on the following page. ]


IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 
 
 
 
 
 
EMPIRE STATE REALTY TRUST, INC.
 
 
 
 
 
By:
/s/ David A. Karp
 
 
Name:
David A. Karp
 
 
Title:
Executive Vice President, Chief Financial Officer and Treasurer
 
 
 
 
 
EXECUTIVE
 
 
 
 
 
/s/ John B. Kessler
 
Name:
John B. Kessler
 


















Exhibit A

RELEASE OF CLAIMS

In consideration of the promises set forth in that certain Change in Control Severance Agreement between John B. Kessler (hereinafter referred to as “ you ” or “ your ”) and Empire State Realty Trust, Inc., a Maryland Corporation (the “ Company ”), dated as of February 1, 2015 (the “ Change in Control




Severance Agreement ”), you agree as follows in this General Release of Claims (this “ Release ”), dated as of _______, 20__:

Section 1.     Opportunity for Review and Revocation . You have [twenty-one (21)][forty-five (45)] days to review and consider this Release. Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable for a period of seven (7) calendar days following the date of its execution, during which time you may revoke your acceptance of this Release by notifying __________________, in writing. To be effective, such revocation must be received by the Company no later than 5:00 p.m. on the seventh calendar day following its execution. Provided that this Release is executed and you do not revoke it, the eighth (8 th ) day following the date on which this Release is executed shall be its effective date (the “ Effective Date ”). In the event of your revocation of this Release pursuant to this Section 1, this Release will be null and void and of no effect, and the Company will have no obligations hereunder.

Section 2.     Release and Waiver of Claims .

(a)      As used in this Release, the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise.

(b)      For and in consideration of the Severance Benefits (as defined in the Change in Control Severance Agreement), and other good and valuable consideration, you, for and on behalf of yourself and your heirs, administrators, executors, and assigns, effective as of the Effective Date, do fully and forever release, remise, and discharge the Company, its direct and indirect parents, subsidiaries and affiliates, and their respective successors and assigns, together with their respective officers, directors, partners, stockholders, employees, and agents (collectively, the “ Group ”), from any and all claims whatsoever up to the date hereof which you had, may have had, or now have against the Group, whether known or unknown, for or by reason of any matter, cause or thing whatsoever, including any claim arising out of or attributable to your employment or the termination of your employment with the Company, whether for tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual orientation. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act (“ ADEA ”), Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, and the Equal Pay Act, each as may be amended from time to time, and all other federal, state and local laws, the common law and any other purported restriction on an employer’s right to terminate the employment of employees.

(c)      You acknowledge and agree that as of the date you execute this Release, you have no knowledge of any facts or circumstances that give rise or could give rise to any claims under any of the laws listed in the preceding paragraph.

(d)      You specifically release all claims relating to your employment and its termination under ADEA, a United States federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.

(e)      Notwithstanding any provision of this Release to the contrary, by executing this Release, you are not releasing any claims relating to: (i) your rights with respect to the Severance Benefits and any other rights under your Change in Control Severance Agreement or any other written agreement by and between you and the Company that survive the termination of your employment; (ii) any rights to




accrued, vested benefits that you have under the employee benefit and fringe benefit plans, programs and arrangements of the Group; (iii) any claims that cannot be waived by law and any claims that may arise after the date on which you sign this Release; (iv) any rights that you have as a stockholder of the Company or an equity holder of any member of the Group; or (v) any indemnification rights (including advancement and reimbursement of legal fees and expenses) you may have as a former officer or director of the Company or its subsidiaries or affiliates or coverage under directors and officers liability insurance.

Section 3.     Knowing and Voluntary Waiver . You expressly acknowledge and agree that you:

(a)      Are able to read the language, and understand the meaning and effect, of this Release;

(b)      Have no physical or mental impairment of any kind that has interfered with your ability to read and understand the meaning of this Release or its terms, and that you’re not acting under the influence of any medication, drug, or chemical of any type in entering into this Release;

(c)      Are specifically agreeing to the terms of the release contained in this Release because the Company has agreed to pay you the Severance Benefits in consideration for your agreement to accept it in full settlement of all possible claims you might have or ever have had, and because of your execution of this Release;

(d)      Acknowledge that, but for your execution of this Release, you would not be entitled to the Severance Benefits;

(e)      Understand that, by entering into this Release, you do not waive rights or claims under ADEA that may arise after the date you execute this Release;

(f)      Had or could have had [twenty-one (21)][forty-five (45)] days from the date of your termination of employment (the “ Release Expiration Date ”) in which to review and consider this Release and that if I execute this Release prior to the Release Expiration Date, you have voluntarily and knowingly waived the remainder of the review period;

(g)      Have not relied upon any representation or statement not set forth in this Release or the Change in Control Severance Agreement made by the Company or any of its representatives;

(h)      Were advised to consult with your attorney regarding the terms and effect of this Release; and

(i)      Have signed this Release knowingly and voluntarily.

Section 4.      No Suit . You represent and warrant that you have not previously filed, and to the maximum extent permitted by law agree that you will not file, a complaint, charge, or lawsuit against any member of the Group regarding any of the claims released herein. If, notwithstanding this representation and warranty, you have filed or file such a complaint, charge, or lawsuit, you agree that you shall cause such complaint, charge, or lawsuit to be dismissed with prejudice and you shall pay any and all costs required in obtaining a dismissal of such complaint, charge, or lawsuit, including without limitation the attorneys’ fees of any member of the Group against whom I have filed such a complaint, charge, or lawsuit. This paragraph shall not apply, however, to a claim of age discrimination under ADEA or to any non-waivable right to file a charge with the United States Equal Employment Opportunity Commission (the “ EEOC ”); provided , however , that if the EEOC were to pursue any claims relating to your employment with the Company, you agree that you shall not be entitled to recover any monetary damages or any other remedies or benefits as a result and that this Release and Section 2 of the Change in Control Severance Agreement will control as the exclusive remedy and full settlement of all such claims by you. You hereby agree to waive any and all claims




to re-employment with the Company or any other member of the Group and affirmatively agree not to seek further employment with the Company or any other member of the Group.

Section 5.      Successors and Assigns . The provisions hereof shall inure to the benefit of your heirs, executors, administrators, legal personal representatives and assigns and shall be binding upon your heirs, executors, administrators, legal personal representatives and assigns.

Section 6.     Severability . If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.

Section 7.     Governing Law . This Release shall be governed by and construed in accordance with Federal law and the laws of the State of New York, applicable to releases made and to be performed in that State.



IN WITNESS WHEREOF, this Release has been executed as of the date first written above.


_________________________________
John B. Kessler








    
Bank of America Model Syndicated Credit Agreement
Exhibit 10.37
62405407
Published CUSIP Number: 29210DAD8


CREDIT AGREEMENT
Dated as of January 23, 2015
Among

EMPIRE STATE REALTY OP, L.P. ,
as Borrower,

EMPIRE STATE REALTY TRUST, INC.,
        

BANK OF AMERICA, N.A. ,
as Administrative Agent, Swing Line Lender and L/C Issuer,


The Lenders Party Hereto,


GOLDMAN SACHS BANK USA ,
as Syndication Agent,


MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and
GOLDMAN SACHS BANK USA ,
as Joint Lead Arrangers and Joint Bookrunners,
and

BARCLAYS BANK PLC,
CAPITAL ONE, N.A.,
JPMORGAN CHASE BANK, N.A.
and
WELLS FARGO BANK, N.A.
as Documentation Agents




iv




TABLE OF CONTENTS

Section      Page
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS      1
1.01
Defined Terms      1
1.02
Other Interpretive Provisions      39
1.03
Accounting Terms      40
1.04
Rounding      40
1.05
Times of Day; Rates      41
1.06
Letter of Credit Amounts      41
ARTICLE II.
the COMMITMENTS and Credit Extensions      41
2.01
Revolving Credit Loans      41
2.02
Borrowings, Conversions and Continuations of Loans      41
2.03
Competitive Loans      43
2.04
Letters of Credit      46
2.05
Swing Line Loans      56
2.06
Prepayments      59
2.07
Termination or Reduction of Revolving Credit Commitments      60
2.08
Repayment of Loans      61
2.09
Interest      61
2.10
Fees      62
2.11
Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate      63
2.12
Evidence of Debt      63
2.13
Payments Generally; Administrative Agent’s Clawback      64
2.14
Sharing of Payments by Lenders      66
2.15
Extension of Maturity Date in respect of Revolving Credit Facility      66
2.16
Increase in Revolving Credit Facility      68
2.17
Cash Collateral      70
2.18
Defaulting Lenders      71
ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY      74
3.01
Taxes      74
3.02
Illegality      79
3.03
Inability to Determine Rates      79
3.04
Increased Costs; Reserves on Eurodollar Rate Loans      80
3.05
Compensation for Losses      82
3.06
Mitigation Obligations; Replacement of Lenders      82
3.07
Survival      83
ARTICLE IV.
CONDITIONS PRECEDENT      83
4.01
Conditions of Effectiveness      83
4.02
Conditions to all Credit Extensions      85
ARTICLE V.
REPRESENTATIONS AND WARRANTIES      86
5.01
Existence, Qualification and Power      86
5.02
Authorization; No Contravention      86
5.03
Governmental Authorization; Other Consents      87
5.04
Binding Effect      87
5.05
Financial Statements; No Material Adverse Effect      87
5.06
Litigation      88




5.07
No Default      88
5.08
Ownership of Property      88
5.09
Environmental Compliance      88
5.10
Insurance      89
5.11
Taxes      89
5.12
ERISA Compliance      89
5.13
Subsidiaries; Equity Interests      90
5.14
Margin Regulations; Investment Company Act      91
5.15
Disclosure      91
5.16
Compliance with Laws      91
5.17
Anti-Money Laundering Laws; Anti-Corruption Laws      91
5.18
Intellectual Property; Licenses, Etc.      92
5.19
OFAC; Designated Jurisdictions      92
5.20
Solvency      92
5.21
Casualty, Etc      92
5.22
Unencumbered Properties      92
5.23
Subsidiary Guarantors      92
ARTICLE VI.
AFFIRMATIVE COVENANTS      93
6.01
Financial Statements      93
6.02
Certificates; Other Information      95
6.03
Notices      97
6.04
Payment of Obligations      97
6.05
Preservation of Existence, Etc .      98
6.06
Maintenance of Properties      98
6.07
Maintenance of Insurance      98
6.08
Compliance with Laws      98
6.09
Books and Records      98
6.10
Inspection Rights      99
6.11
Use of Proceeds      99
6.12
Additional Unencumbered Properties; Additional Guarantors      99
6.13
Compliance with Environmental Laws      100
6.14
Sanctions; Anti-Money Laundering Laws; Anti-Corruption Laws      101
6.15
Further Assurances      101
6.16
Maintenance of REIT Status; New York Stock Exchange or NASDAQ Listing      101
ARTICLE VII.
NEGATIVE COVENANTS      101
7.01
Liens      101
7.02
Investments      101
7.03
Indebtedness      103
7.04
Minimum Property Condition      103
7.05
Fundamental Changes; Dispositions      103
7.06
Restricted Payments      105
7.07
Change in Nature of Business      105
7.08
Transactions with Affiliates      106
7.09
Burdensome Agreements      106
7.10
Use of Proceeds      107
7.11
Financial Covenants      107
7.12
Accounting Changes      108
7.13
Amendment, Waivers and Terminations of Organization Documents      108




7.14
Parent Covenants      108
7.15
Sanctions; Anti-Money Laundering Laws; Anti-Corruption Laws      108
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES      109
8.01
Events of Default      109
8.02
Remedies Upon Event of Default      111
8.03
Application of Funds      112
ARTICLE IX.
ADMINISTRATIVE AGENT      113
9.01
Appointment and Authority      113
9.02
Rights as a Lender      113
9.03
Exculpatory Provisions      113
9.04
Reliance by Administrative Agent      114
9.05
Delegation of Duties      115
9.06
Resignation of Administrative Agent      115
9.07
Non-Reliance on Administrative Agent and Other Lenders      117
9.08
No Other Duties, Etc .      117
9.09
Administrative Agent May File Proofs of Claim      117
9.10
Guaranty Matters      118
ARTICLE X.
MISCELLANEOUS      118
10.01
Amendments, Etc .      118
10.02
Notices; Effectiveness; Electronic Communication      120
10.03
No Waiver; Cumulative Remedies; Enforcement      122
10.04
Expenses; Indemnity; Damage Waiver      123
10.05
Payments Set Aside      125
10.06
Successors and Assigns      126
10.07
Treatment of Certain Information; Confidentiality      130
10.08
Right of Setoff      131
10.09
Interest Rate Limitation      132
10.10
Counterparts; Integration; Effectiveness      132
10.11
Survival of Representations and Warranties      133
10.12
Severability      133
10.13
Replacement of Lenders      133
10.14
Governing Law; Jurisdiction; Etc.      134
10.15
Waiver of Jury Trial      135
10.16
No Advisory or Fiduciary Responsibility      135
10.17
Electronic Execution of Assignments and Certain Other Documents      136
10.18
USA PATRIOT Act      136
10.19
Release of Guarantors      136
10.20
Recourse to Loan Parties      139
10.21
ENTIRE AGREEMENT      140
SIGNATURES………………………………………………………………………….S-1
SCHEDULES
1      Unencumbered Eligible Properties on the Closing Date
2.01      Commitments and Applicable Percentages
5.12(c)      Pension Plans
5.12(d)      Multiemployer Plans
5.13      Subsidiaries; Equity Interests




10.02      Administrative Agent’s Office, Certain Addresses for Notices, Taxpayer      Identification Numbers



EXHIBITS
Form of
A      Committed Loan Notice
B-1          Competitive Bid Request
B-2      Competitive Bid
C      Swing Line Loan Notice
D      Revolving Credit Note
E      Compliance Certificate
F-1      Assignment and Assumption
F-2      Administrative Questionnaire
G      Guaranty Agreement
H      Solvency Certificate
I      United States Tax Compliance Certificate
140
CREDIT AGREEMENT
This CREDIT AGREEMENT (“ Agreement ”) is entered into as of January 23, 2015, among EMPIRE STATE REALTY TRUST, INC., a Maryland corporation (the “ Parent ”) and EMPIRE STATE REALTY OP, L.P., a Delaware limited partnership (the “ Borrower ”), each lender from time to time party hereto, and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.
The Borrower has requested that the Lenders provide a revolving credit facility to the Borrower, and the Lenders are willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
. Defined Terms
. As used in this Agreement, the following terms shall have the meanings set forth below:
“ Absolute Rate ” means a fixed rate of interest expressed in multiples of 1/100th of one basis point.
“ Absolute Rate Loan ” means a Competitive Loan that bears interest at a rate determined with reference to an Absolute Rate.
“ Act ” has the meaning set forth in Section 10.18 .
“ Adjusted EBITDA ” means, as of any date of determination, an amount equal to (i) EBITDA for the Consolidated Group (excluding Observatory EBITDA) for the then most recently ended fiscal quarter of Parent multiplied by four, plus Observatory EBITDA for the then most recently ended period of four fiscal quarters of Parent, minus (ii) the aggregate Annual Capital Expenditure Adjustment for all Real Properties.




“ Adjusted Unencumbered NOI ” means, for any period for any Unencumbered Eligible Property, (i) Unencumbered NOI for such Unencumbered Eligible Property for such period, minus (ii) the Annual Capital Expenditure Adjustment for such Unencumbered Eligible Property.
“ Administrative Agent ” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
“ Administrative Agent’s Office ” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 , or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.
“ Administrative Questionnaire ” means an Administrative Questionnaire in substantially the form of Exhibit F-2 or any other form approved by the Administrative Agent.
“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“ Agreement ” means this Credit Agreement.
“ Annual Capital Expenditure Adjustment ” for any Real Property shall be an amount equal to, without duplication, the product of (i) $0.25 (in the case of office properties and the Empire State Observatory ) or $0.15 (in the case of retail properties) multiplied by (ii) the aggregate net rentable area (determined on a square feet basis) of such Real Property.
“ Anti-Corruption Laws ” means the FCPA, the UK Bribery Act 2010 and similar, applicable legislation in other jurisdictions.
“ Applicable Percentage ” means, with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Revolving Credit Facility represented by such Lender’s Revolving Credit Commitment at such time, provided , that if the commitment of each Lender to make Revolving Credit Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 , or if the Revolving Credit Commitments have expired, then the Applicable Percentage of each Lender in respect of the Revolving Credit Facility shall be determined based on the Applicable Percentage of such Lender in respect of the Revolving Credit Facility most recently in effect, giving effect to any subsequent assignments made in accordance with the terms of this Agreement. The initial Applicable Percentage of each Lender in respect of the Revolving Credit Facility is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption or New Lender Joinder Agreement pursuant to which such Lender becomes a party hereto, as applicable.
“ Applicable Rate ” means (i) at any time prior to the Investment Grade Pricing Effective Date, the Leveraged-Based Applicable Rate in effect at such time and (ii) at any time on and after the Investment Grade Pricing Effective Date, the Ratings-Based Applicable Rate in effect at such time.
“ Appropriate Lender ” means, at any time, (a) with respect to the Revolving Credit Facility, a Lender that has a Revolving Credit Commitment and/or a Revolving Credit Loan at such time, (b) with respect to the Letter of Credit Sublimit, (i) the L/C Issuer and (ii) if any Letters of Credit have been issued pursuant to Section 2.04(a) , the Lenders and (c) with respect to the Swing Line Sublimit, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.05(a) , the Lenders.
“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.




“ Arrangers ” means, collectively, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman Sachs Bank USA, in their capacities as joint lead arrangers and joint bookrunners.
“ Assignee Group ” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b) ), and accepted by the Administrative Agent, in substantially the form of Exhibit F-1 or any other form (including electronic documentation generated by use of an electronic platform) approved by the Administrative Agent.
“ Attributable Indebtedness ” means, on any date, in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
“ Audited Financial Statements ” means, collectively, (i) the audited consolidated balance sheet of the Predecessor for the period beginning on January 1, 2013 to and including October 6, 2013, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such period, including the notes thereto and (ii) the audited consolidated balance sheet of the Parent for the period beginning on October 7, 2013 to and including December 31, 2013, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such period, including the notes thereto.
“ Availability Period ” means, the period from and including the Closing Date to the earliest of (i) the Maturity Date, (ii) the date of termination of the Revolving Credit Commitments pursuant to Section 2.07 and (iii) the date of termination of the commitment of each Lender to make Revolving Credit Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02 .
“ Bank of America ” means Bank of America, N.A. and its successors.
“ Bank of America Fee Letter ” means the letter agreement regarding certain fees payable in connection with the Facilities, dated November 10, 2014, among Borrower, the Administrative Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
“ Base Rate ” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurodollar Rate for an Interest Period of one month plus 1.00%. The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.
“ Base Rate Loan ” means a Revolving Credit Loan that bears interest based on the Base Rate.
“ Borrower ” has the meaning specified in the introductory paragraph hereto.
“ Borrower Materials ” has the meaning specified in Section 6.02 .
“ Borrowing ” means a Revolving Credit Borrowing, a Swing Line Borrowing or a Competitive Borrowing, as the context may require.




“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day that is also a London Banking Day.
“ Capitalization Rate ” means (a) in the case of (i) any office property located in the New York City central business district and (ii) the Empire State Observatory, six percent (6.00%), (b) in the case of any office property (other than a New York City central business district office property or the Empire State Observatory), seven percent (7.00%) and (c) in the case of any retail property, seven and one-quarter percent (7.25%).
“ Cash Collateralize ” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuer or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“ Cash Equivalents ” means any of the following types of Investments:
(a)      readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;
(b)      time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $500,000,000, in each case with maturities of not more than one year from the date of acquisition thereof;
(c)      commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least “Prime-2” (or the then equivalent grade) by Moody’s or at least “A-2” (or the then equivalent grade) by S&P, in each case with maturities of not more than 270 days from the date of acquisition thereof;
(d)      reverse repurchase agreements with terms of not more than seven days from the date acquired, for securities of the type described in clause (a) above and entered into only with commercial banks having the qualifications described in clause (b) above; and
(e)      Investments, classified in accordance with GAAP as current assets of the Parent or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by financial institutions that have at least the second highest rating obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b), (c) and (d) of this definition.




“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“ Change in Tax Law ” means the enactment, promulgation, execution or ratification of, or any change in or amendment to any law (including the Code), treaty, regulation or rule (or in the official interpretation of any law, treaty, regulation or rule by any Governmental Authority (including a court)) relating to U.S. income taxation.
“ Change of Control ” means an event or series of events by which:
(a)      any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “ option right ”)), directly or indirectly, of 35% or more of the equity securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right);
(b)      during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Parent cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii) , any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or




(c)      (i) the Parent shall cease to be the sole general partner of the Borrower or shall cease to own, directly, 100% of the general partnership interests of the Borrower, free and clear of all Liens (other than Permitted Equity Encumbrances) or (ii) any holder of a limited partnership interest in the Borrower is provided with or obtains voting rights with respect to such limited partnership interest that are more expansive in any material respect than the voting rights afforded to limited partners of the Borrower under the Organization Documents of the Borrower in effect on the Closing Date.
“ Closing Date ” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01 .
“ Code ” means the Internal Revenue Code of 1986.
“ Committed Loan Notice ” means a notice of (a) a Revolving Credit Borrowing, (b) a conversion of Revolving Credit Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a) , which shall be substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower .
“ Competitive Bid ” means a written offer by a Lender to make one or more Competitive Loans substantially in the form of Exhibit B-2 , duly completed and signed by such Lender.
“ Competitive Bid Request ” means a written request for one or more Competitive Loans substantially in the form of Exhibit B-1 .
“ Competitive Borrowing ” means a borrowing consisting of simultaneous Competitive Loans of the same Type from each of the Lenders whose offer to make one or more Competitive Loans as part of such borrowing has been accepted under the auction bidding procedures described in Section 2.03 .
“ Competitive Loan ” has the meaning specified in Section 2.03 .
“ Competitive Loan Lender ” means, in respect of any Competitive Loan, the Lender making such Competitive Loan to the Borrower.
“ Competitive Loan Sublimit ” means, at any time, 50% of the aggregate Revolving Credit Commitments of all Lenders at such time. The Competitive Loan Sublimit is part of, and not in addition to, the Revolving Credit Facility.
“ Compliance Certificate ” means a certificate substantially in the form of Exhibit E .
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“ Consolidated Group ” means, collectively, the Loan Parties and their Consolidated Subsidiaries.
“ Consolidated Group Pro Rata Share ” means, with respect to any Unconsolidated Affiliate, the percentage interest held by the Consolidated Group, in the aggregate, in such Unconsolidated Affiliate determined by calculating the percentage of Equity Interests of such Unconsolidated Affiliate owned by the Consolidated Group.




“ Consolidated Subsidiaries ” means, as to any Person, all Subsidiaries of such Person that are consolidated with such Person for financial reporting purposes under GAAP.
“ Contractual Obligation ” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Controlled Joint Venture ” means a Subsidiary of the Borrower (the “ Specified Subsidiary ”) that (a) is organized under the laws of the United States or a state thereof or the District of Columbia (and each Subsidiary of the Borrower that directly or indirectly owns any Equity Interests in the Specified Subsidiary is also organized under the laws of the United States or a state thereof or the District of Columbia), (ii) owns or ground leases a Property (either directly or through a Controlled Joint Venture Subsidiary), (iii) is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness, (iv) is not a Wholly Owned Subsidiary of the Borrower and (v) is controlled by the Borrower or a Guarantor (or, following the Investment Grade Release, the Borrower or a Wholly Owned Subsidiary of the Borrower that is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness). For purposes of this definition, a Subsidiary of the Borrower is “controlled” by a Person if such Person has the right to exercise exclusive control over any disposition, refinancing and operating activity of any Unencumbered Eligible Property owned or ground leased by such Subsidiary (including the making of Restricted Payments on a ratable basis to the owners thereof), without the consent of any other Person (other than (i) the Borrower or (ii) any Subsidiary of the Borrower, as long as such Subsidiary does not need the consent of any minority equity holder thereof to consent to any such disposition, refinancing or operating activity (including the making of Restricted Payments on a ratable basis to the owners thereof).
“ Controlled Joint Venture Subsidiary ” means, as to any Controlled Joint Venture, a direct Wholly-Owned Subsidiary of such Controlled Joint Venture (the “ Specified CJV Subsidiary ”) that (i) is organized under the laws of the United States or a state thereof or the District of Columbia (and each Subsidiary of such Controlled Joint Venture that directly or indirectly owns any Equity Interests in the Specified CJV Subsidiary that is also organized under the laws of the United States or a state thereof or the District of Columbia) and (ii) is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness.
“ Credit Extension ” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
“ Debt Rating ” means, as of any date of determination, the rating assigned by a Rating Agency to the Parent’s and/or Borrower’s non-credit enhanced, senior unsecured long term debt as in effect on such date.
“ Debtor Relief Laws ” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“ Default ” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.




“ Default Rate ” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate, plus (ii) the Applicable Rate for Base Rate Loans (assuming that Pricing Level V applied in the then applicable Pricing Grid), plus (iii) 2% per annum; provided , however , that with respect to a Eurodollar Rate Revolving Credit Loan, the Default Rate shall be an interest rate equal to (i) the Eurodollar Rate, plus (ii) the Applicable Rate for Eurodollar Rate Loans (assuming that Pricing Level V applied in the then applicable Pricing Grid), plus (iii) 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate for Letter of Credit Fees plus 2% per annum (assuming that Pricing Level V applied in the then applicable Pricing Grid).
“Defaulting Lender” means, subject to Section 2.18(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the L/C Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.18(b) ) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrower, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.
“ Designated Jurisdiction ” means any country or territory to the extent that such country or territory itself is the subject of any Sanction (including, as of the date of this Agreement, Cuba, Iran, North Korea, Sudan and Syria).




“ Direct Owner ” means each Subsidiary of the Borrower that directly owns, or is the ground lessee of, an interest in any Property.
“ Disposed Property ” means, as of any date of determination, any Property that was, directly or indirectly, sold or otherwise disposed of to a Person (other than another member of the Consolidated Group) during the then most recently ended period of four consecutive fiscal quarters of the Parent.
“ Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
“ Dollar ” and “ $ ” mean lawful money of the United States.
“ EBITDA ” means, with respect to the Consolidated Group for any period, the sum of (a) Net Income for such period, in each case, excluding (without duplication), (i) any nonrecurring or extraordinary gains and losses for such period, (ii) any income or gain and any loss in each case resulting from the early extinguishment of indebtedness during such period and (iii) any net income or gain or any loss resulting from a Swap Contract (including by virtue of a termination thereof) during such period, plus (b) an amount which, in the determination of Net Income for such period pursuant to clause (a) above, has been deducted for or in connection with: (i) Interest Expense ( plus , amortization of deferred financing costs, to the extent included in the determination of Interest Expense in accordance with GAAP), (ii) income taxes, (iii) depreciation and amortization, (iv) all other non-cash charges and (v) adjustments as a result of the straight lining of rents, all as determined in accordance with GAAP for such period, plus (c) the Consolidated Group Pro Rata Share of the foregoing items attributable to the Consolidated Group’s interests in Unconsolidated Affiliates.
“ Eligible Assignee ” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii) , (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii) ).
“ Eligible Ground Lease ” means a ground lease with respect to a Property that has been executed by the Borrower, a Subsidiary Guarantor (or following the Investment Grade Release, a Wholly Owned Subsidiary of the Borrower is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness), a Controlled Joint Venture or a Controlled Joint Venture Subsidiary as ground lessee and that at all times satisfies each of the following conditions: (a) such ground lease is in full force and effect, (b) such ground lease has a remaining lease term of at least 30 years at the time such Property becomes an Unencumbered Eligible Property (but in no event shall such ground lease have a remaining term of less than 25 years at any time during which such Property is included as an Unencumbered Eligible Property) (including extension and renewal options, but only to the extent such extension and renewal options are controlled exclusively by the Unencumbered Property Subsidiary that is the ground lessee thereunder), (c) such ground lease permits the Unencumbered Property Subsidiary that is the ground lessee thereunder to grant a Lien on all of its right, title and interest therein in favor of the Administrative Agent, to secure the Obligations, without the consent of any Person (other than any consent that has been obtained), (d) no Person party to such ground lease is in default of any of its obligations under such ground lease, (e) such ground lease is not encumbered by any Lien (other than Liens encumbering the ground lessor’s interest in such ground lease) and (f) such ground lease is otherwise acceptable for nonrecourse leasehold mortgage financing under customary prudent lending requirements as reasonably and mutually determined by both the Borrower and the Administrative Agent.
“ Empire State Building ” means the Empire State Building located at 338-350 Fifth Avenue, New York, New York.




“ Empire State Observatory ” means the Property consisting of the observatory at the Empire State Building.
“ Environmental Laws ” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any Hazardous Material into the environment, including those related to air emissions and discharges to waste or public systems.
“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.
“ Equity Interests ” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“ ERISA ” means the Employee Retirement Income Security Act of 1974.
“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
“ ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan or Multiemployer Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or insolvency; (d) the filing of a notice of intent to terminate a Single Employer Plan under section 4041 of ERISA or the treatment of a Multiemployer Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Single Employer Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Single Employer Pension Plan; (g) the determination that any Single Employer Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.




“ Eurodollar Bid Margin ” means the margin above or below the Eurodollar Rate to be added to or subtracted from the Eurodollar Rate, which margin shall be expressed in multiples of 1/100th of one basis point.
“ Eurodollar Margin Bid Loan ” means a Competitive Loan that bears interest at a rate based upon the Eurodollar Rate.
“ Eurodollar Rate ” means:
(a)      for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate (“ LIBOR ”) or a comparable or successor rate, which rate is approved by the Administrative Agent, as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; and
(b)      for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to LIBOR, at or about 11:00 a.m., London time determined two Business Days prior to such date for U.S. Dollar deposits with a term of one month commencing that day;
provided that to the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided , further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.
Notwithstanding anything to the contrary contained herein, at any time that the Eurodollar Rate determined in accordance with the foregoing is less than zero, such rate shall be deemed zero for purposes of this Agreement.
“ Eurodollar Rate Revolving Credit Loan ” means a Revolving Credit Loan that bears interest at a rate based on clause (a) of the definition of “Eurodollar Rate.”
“ Eurodollar Rate Loan ” means a Eurodollar Rate Revolving Credit Loan or a Eurodollar Margin Bid Loan.
“ Event of Default ” has the meaning specified in Section 8.01 .
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, (i) U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 10.13 ) or such Lender changes its Lending Office or (ii) any additional U.S. federal withholding Tax that is imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment after the date on which such Lender acquires such interest in the Loan or Commitment (other




than pursuant to an assignment request by the Borrower under Section 10.13 ) or such Lender changes its Lending Office, except (x) in the case described in subsection (ii) of this clause (b), to the extent that any such additional U.S. federal withholding Tax is imposed as a result of a Change in Tax Law occurring after the date on which such Lender acquires such interest in the Loan or Commitment or such Lender changes its Lending Office or (y) in each of the cases described in subsections (i) and (ii) of this clause (b), pursuant to Sections 3.01(b)(ii) or (d) , amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired such interest in the Loan or Commitment or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(f) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.
“ Extension Notice ” has the meaning specified in Section 2.15(a) .
“ Existing Credit Agreement ” means the Credit Agreement, dated as of October 7, 2013 (as amended by the First, Second and Third Amendments thereto and as may be further amended, supplemented or modified prior to the Closing Date), among the Borrower, Empire State Realty Trust, Inc., Bank of America, N.A. as administrative agent, swing line lender and letter of credit issuer and the lenders and other parties thereto.
“ Existing Maturity Date ” has the meaning specified in Section 2.15(a) .
“ Facility Termination Date ” means the date as of which all of the following shall have occurred: (a) all Revolving Credit Commitments have terminated, (b) all Obligations have been paid in full (other than contingent indemnification obligations for which no claim has been made), and (c) all Letters of Credit have terminated or expired (other than Letters of Credit as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made).
“ FASB ASC ” means the Accounting Standards Codification of the Financial Accounting Standards Board.
“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any published intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
“ FCPA ” means the United States Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.
“ Federal Funds Rate ” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.
“ Fee Letters ” means, collectively, the Bank of America Fee Letter and the Goldman Sachs Fee Letter.
“ Fitch ” means Fitch, Inc. and any successor thereto.




“ Fixed Charge Coverage Ratio ” means the ratio as of the last day of any fiscal quarter of the Parent of (i) Adjusted EBITDA as of the last day of such fiscal quarter to (ii) Fixed Charges for such fiscal quarter.
“ Fixed Charges ” means, for any fiscal quarter of the Parent, an amount equal to the product of (a) the sum, without duplication, of (i) Interest Expense for such fiscal quarter, (ii) scheduled payments of principal on Total Indebtedness made or required be made during such fiscal quarter (excluding any balloon payments payable on maturity of any such Total Indebtedness), (iii) the amount of dividends or distributions paid or required to be paid by any member of the Consolidated Group during such fiscal quarter in respect of its preferred Equity Interests and (iv) the Consolidated Group Pro Rata Share of the foregoing items attributable to the Consolidated Group’s interests in Unconsolidated Affiliates, multiplied by (b) four.
“ Foreign Lender ” means a Lender that is not a U.S. Person. .
“ FRB ” means the Board of Governors of the Federal Reserve System of the United States.
“ Fronting Exposure ” means, at any time there is a Lender that is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.
“ Fund ” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.
“ Funds From Operations ” means, with respect to any period and without double counting, an amount equal to the Net Income for such period, excluding gains (or losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures; provided that “Funds From Operations” shall exclude impairment charges, charges from the early extinguishment of indebtedness and other non-cash charges as evidenced by a certification of a Responsible Officer of the Parent containing calculations in reasonable detail satisfactory to the Administrative Agent. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect “Funds From Operations” on the same basis. In addition, “Funds from Operations” shall be adjusted to remove any impact of the expensing of acquisition costs pursuant to FAS 141 (revised), as issued by the Financial Accounting Standards Board in December of 2007, and effective January 1, 2009, including, without limitation, (i) the addition to Net Income of costs and expenses related to ongoing consummated acquisition transactions during such period; and (ii) the subtraction from Net Income of costs and expenses related to acquisition transactions terminated during such period.
“ GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.
“ Goldman Sachs Fee Letter ” means the letter agreement regarding certain fees payable in connection with the Facilities, dated November 10, 2014, between Borrower and Goldman Sachs Bank USA.




“ Governmental Authority ” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“ Guarantee ” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“ Guarantors ” means, collectively, (i) each Subsidiary Guarantor and (ii) at any time that the Parent has Guaranteed the Obligations in accordance with Section 6.12(e) , the Parent.
“ Guaranty Agreement ” means the Continuing Guaranty made by the Guarantors, substantially in the form of Exhibit H .
“ Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“ Increase Effective Date ” has the meaning specified in Section 2.16(b) .
“ Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a)      all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b)      all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances and similar instruments (including bank guaranties, surety bonds, comfort letters, keep-well agreements and capital maintenance agreements);
(c)      net obligations of such Person under any Swap Contract;




(d)      all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);
(e)      indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f)      capital leases and Synthetic Debt;
(g)      all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (other than the payment solely in Equity Interests of such Person), valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and
(h)      all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof: (a) the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person, (b) the amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date and (c) the amount of any capitalized lease as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“ Indemnitees ” has the meaning specified in Section 10.04(b) .
“ Indirect Owner ” means each Subsidiary of the Borrower that directly or indirectly owns an ownership interest in any Direct Owner.
“ Information ” has the meaning specified in Section 10.07 .
“ Initial Maturity Date ” means January 23, 2019.
“ Initial Public Offering ” means the 2013 issuance by the Parent of its common Equity Interests in an underwritten primary public offering.
“ Interest Expense ” means, for any period, without duplication, total interest expense of the Consolidated Group for such period determined in accordance with GAAP (including interest expense attributable to the Consolidated Group’s ownership interests in Unconsolidated Affiliates and, for the avoidance of doubt, capitalized interest).
“ Interest Payment Date ” means, (a) as to any Revolving Credit Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Revolving Credit Loan and the Maturity Date; provided , however , that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates;




and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.
“ Interest Period ” means (a) as to each Eurodollar Rate Loan other than a Eurodollar Margin Bid Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one week, or one, three or six months, thereafter (or such other period that is twelve months or less requested by the Borrower and consented to by all the Lenders), as selected by the Borrower in a Committed Loan Notice, (b) as to each Eurodollar Margin Bid Loan, the period commencing on the date such Eurodollar Margin Bid Loan is disbursed and ending on the date one month, two months, three months, four months, five months or six months thereafter, as selected by the Borrower in a Competitive Bid Request, and (c) as to each Absolute Rate Loan, a period of not less than 14 days and not more than 180 days as selected by the Borrower in a Competitive Bid Request; provided that:
(i)      any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;
(ii)      any Interest Period of one month or an integral multiple thereof that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(iii)      no Interest Period shall extend beyond the Maturity Date.
“ Investment ” means, as to any Person, any direct or indirect (a) investment by such Person, consisting of (i) the purchase or other acquisition of Equity Interests or other securities of another Person or (ii) a loan, advance, other extension of credit or capital contribution to, or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, (b) purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial part of the business of, such Person or (c) purchase, acquisition or other investment in any real property or real property-related assets (including (x) mortgage loans and other real estate-related debt investments and notes receivable, (y) investments in unimproved land holdings and Properties and (z) costs to construct real property assets under development). For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
“ Investment Grade Release ” has the meaning specified in Section 10.19(a) .
“ Investment Grade Pricing Effective Date ” means the first Business Day following the date on which (i) the Parent and/or the Borrower has obtained an Investment Grade Rating and (ii) the Parent has delivered to the Administrative Agent a certificate executed by a Responsible Officer of the Parent (x) certifying that the Investment Grade Rating has been obtained and is in effect (which certification shall also set forth the Debt Ratings received from each Ratings Agency as of such date) and (y) notifying the Administrative Agent that the Borrower has irrevocably elected to have the Ratings-Based Applicable Rate apply to the pricing of the Revolving Credit Facility.




“ Investment Grade Rating ” means receipt of two of any of the following three Debt Ratings: (i) BBB- or higher from S&P, (ii) BBB- or higher from Fitch and (iii) Baa3 or higher from Moody’s.
“ IRS ” means the United States Internal Revenue Service.
“ ISP ” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
“ Issuer Documents ” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary of the Borrower) or in favor of the L/C Issuer and relating to such Letter of Credit.
“ Joint Venture Partner ” means the Borrower or any Wholly Owned Subsidiary of the Borrower that owns a direct Equity Interest in any Controlled Joint Venture that, or that has a Controlled Joint Venture Subsidiary that, owns or ground leases, directly or indirectly, an Unencumbered Eligible Property.
“ Laws ” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
“ L/C Advance ” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.
“ L/C Borrowing ” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing.
“ L/C Credit Extension ” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
“ L/C Issuer ” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.
“ L/C Obligations ” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06 . For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“ Lender ” means, at any time, any Person that has a Revolving Credit Commitment or holds a Loan, a participation in a Letter of Credit or a participation in a Swing Line Loan at such time and, unless the context requires otherwise, includes the Swing Line Lender.
“ Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.




“ Letter of Credit ” means any standby letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder .
“ Letter of Credit Application ” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.
“ Letter of Credit Expiration Date ” means the day that is five days prior to the Maturity Date for the Revolving Credit Facility then in effect (or, if such day is not a Business Day, the next preceding Business Day).
“ Letter of Credit Fee ” has the meaning specified in Section 2.04(h) .
“ Letter of Credit Sublimit ” means an amount equal to $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.
“ Leverage-Based Applicable Rate ” means the applicable percentage per annum set forth below determined by reference to the ratio of Total Indebtedness to Total Asset Value as set forth in the most recent Compliance Certificate received by the Administrative Agent and the Lenders pursuant to Section 6.02(a) :
Pricing Level
Ratio of Total Indebtedness to Total Asset Value
Facility Fee Rate
Eurodollar Applicable Rate
Base Rate Applicable Rate
I
≤ 35%
0.200%
1.150%
0.150%
II
> 35% and ≤ 45%
0.200%
1.250%
0.250%
III
> 45% and ≤ 50%
0.250%
1.350%
0.350%
IV
> 50% and ≤ 55%
0.300%
1.450%
0.450%
V
> 55% and ≤ 60%
0.350%
1.600%
0.600%

Any increase or decrease in the Leverage-Based Applicable Rate resulting from a change in the ratio of Total Indebtedness to Total Asset Value shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) ; provided , however , that if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level V shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered.
Notwithstanding anything to the contrary contained in this definition, (i) from the Closing Date to the date on which the Administrative Agent and the Lenders receive a Compliance Certificate pursuant to Section 6.02(a) for the fiscal quarter of the Parent ending December 31, 2014, the Pricing Level shall be determined based on the ratio of Total Indebtedness to Total Asset Value as set forth in the Compliance Certificate delivered pursuant to Section 4.01(a)(xii) and (ii) the determination of the Leverage-Based Applicable Rate for any period shall be subject to the provisions of Section 2.11(b) .
“ LIBOR ” has the meaning specified in the definition of Eurodollar Rate.
“ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, Negative Pledge, 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).




“ Loan ” means an extension of credit by a Lender to, or for the benefit of, the Borrower under Article II in the form of a Revolving Credit Loan, a Competitive Loan or a Swing Line Loan.
“ Loan Documents ” means, collectively, (a) this Agreement, (b) the Revolving Credit Notes, (c) the Guaranty Agreement, (e) the Fee Letters and (f) each Issuer Document.
“ Loan Party Pro Rata Share ” means, with respect to any Controlled Joint Venture, the percentage interest held by the Borrower and the Guarantors, in the aggregate, in such Controlled Joint Venture determined by calculating the percentage of the Equity Interests of such Controlled Joint Venture owned by the Borrower and/or one or more Guarantors.
“ Loan Parties ” means, collectively, the Parent, the Borrower and the Subsidiary Guarantors.
“ London Banking Day ” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.
“ Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, properties, liabilities (actual or contingent), or financial condition of the Parent and its Subsidiaries taken as a whole; (b) a material adverse effect on the rights and remedies of the Administrative Agent or any Lender under any Loan Document, or of the ability of the Loan Parties, taken as a whole, to perform their obligations under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.
“ Maturity Date ” means (a) the later of (i) the Initial Maturity Date and (ii) if the Initial Maturity Date (or any subsequent maturity date with respect to the Revolving Credit Facility) is extended pursuant to Section 2.15 , such extended maturity date as determined pursuant to such Section; provided , however , that, in each case, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.
“ Minimum Collateral Amount ” means, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender, an amount equal to 103% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time, (ii) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.17(a)(i), (a)(ii) or (a)(iii) , an amount equal to 103% of the Outstanding Amount of all LC Obligations, and (iii) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion.
“ Minimum Occupancy Condition ” means, at any time and with respect to any Unencumbered Eligible Property (excluding for this purpose the Empire State Building), that the Occupancy Rate for such Property is not less than seventy five percent (75%).
“ Minimum Property Condition ” means, at any time, that there are at least four (4) Unencumbered Eligible Properties included in the calculation of Unencumbered Asset Value.
“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.
“ Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.




“ Multiple Employer Plan ” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“ Negative Pledge ” means a provision of any agreement (other than this Agreement) that restricts or prohibits the creation of any Lien on any assets of a Person. For the avoidance of doubt, a “no negative pledge” provision in an agreement that is not, taken as a whole, materially more restrictive than the provisions of Section 7.09 shall not constitute a “Negative Pledge” for purposes hereof.
“ Net Cash Proceeds ” means with respect to any issuance and sale by the Parent of any its Equity Interests, the excess of (i) the sum of the cash and Cash Equivalents received by the Parent in connection with such issuance and sale, less (ii) underwriting discounts and commissions, and other reasonable out-of-pocket expenses (including the reasonable fees and disbursements of counsel), incurred by the Parent in connection with such issuance, other than any such amounts paid or payable to an Affiliate of the Parent.
“ Net Income ” means, for any period, the net income (or loss) of the Consolidated Group for such period; provided , however , that Net Income shall exclude (a) extraordinary gains and extraordinary losses for such period, (b) the net income of any Subsidiary of the Parent during such period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such income is not permitted by operation of the terms of its Organization Documents or any agreement, instrument or Law applicable to such Subsidiary during such period, except that the Parent’s equity in any net loss of any such Subsidiary for such period shall be included in determining Net Income, and (c) any income (or loss) for such period of any Person if such Person is not a Subsidiary of the Parent, except that the Parent’s equity in the net income of any such Person for such period shall be included in Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Parent or a Subsidiary thereof as a dividend or other distribution (and in the case of a dividend or other distribution to a Subsidiary of the Parent, such Subsidiary is not precluded from further distributing such amount to the Parent as described in clause (b) of this proviso).
“ Net Operating Income ” means, with respect to any Property for any period, an amount equal to (a) the aggregate gross revenues of the Consolidated Group derived from the operation of such Property during such period, minus (b) the sum of all expenses and other proper charges incurred in connection with the operation of such Property during such period (including accruals for real estate taxes and insurance and any management fees paid in cash, but excluding debt service charges, income taxes, depreciation, amortization and other non-cash expenses), which expenses and accruals shall be calculated in accordance with GAAP.
“ New Lender Joinder Agreement ” has the meaning specified in Section 2.16(a) .
“ Newly-Acquired Property ” means, as of any date of determination, any Property acquired by any member of the Consolidated Group from any Person (other than a member of the Consolidated Group) during the then most recently ended four consecutive fiscal quarter period of the Parent.
“ Non-Consenting Lender ” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 10.01 and (ii) has been approved by the Required Lenders.
“ Non-Defaulting Lender ” means, at any time, each Lender that is not a Defaulting Lender at such time.




“ Nonrecourse Indebtedness ” means, with respect to a Person, (a) Indebtedness, or a Guarantee of Indebtedness, in respect of which recourse for payment (except for customary exceptions for fraud, misapplication of funds, environmental indemnities, voluntary bankruptcy, collusive involuntary bankruptcy and other similar customary exceptions to nonrecourse liability) is contractually limited to specific assets of such Person encumbered by a Lien securing such Indebtedness or Guarantee, (b) if such Person is a Single Asset Entity, any Indebtedness of such Person (other than Indebtedness described in the immediately following clause (c)), or (c) if such Person is a Single Asset Holding Company, any Indebtedness (“Holdco Indebtedness”) of such Single Asset Holding Company resulting from a Guarantee of, or Lien securing, Indebtedness of a Single Asset Entity that is a Subsidiary of such Single Asset Holding Company, so long as, in each case, either (i) recourse for payment of such Holdco Indebtedness (except for customary exceptions for fraud, misapplication of funds, environmental indemnities, voluntary bankruptcy, collusive involuntary bankruptcy and other similar customary exceptions to nonrecourse liability) is contractually limited to the Equity Interests held by such Single Asset Holding Company in such Single Asset Entity or (ii) such Single Asset Holding Company has no assets other than Equity Interests in such Single Asset Entity and cash and other assets of nominal value incidental to the ownership of such Single Asset Entity.
“ NPL ” means the National Priorities List under CERCLA.
“ Obligations ” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, or Letter of Credit and (b) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof pursuant to any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
“ Observatory EBITDA ” means, for any period, the portion of EBITDA of the Consolidated Group for such period that is derived from operation of the Empire State Observatory.
“ Occupancy Rate ” means, for any Property, the percentage of the net rentable area (determined on a square feet basis) of such Property leased by bona fide tenants of such Property (excluding tenants that have vacated the Property on a permanent basis and have not sublet same to a bona fide subtenant) pursuant to bona fide tenant leases (or subleases), in each case, which tenants (or subtenants) are not more than sixty days past due in the payment of all rent payments due under such leases (or subleases).
“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“ Organization Documents ” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating or limited liability company agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections




arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment or participation (other than an assignment made pursuant to Section 3.06 ).
“ Outstanding Amount ” means (i) with respect to any Loan on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Loan occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.
“ Pari Passu Obligations ” means Unsecured Indebtedness (exclusive of the Obligations) of the Borrower or any Guarantor owing to Persons that are not members of the Consolidated Group.
“ Participant ” has the meaning specified in Section 10.06(d) .
“ Participant Register ” has the meaning specified in Section 10.06(d) .
“ PBGC ” means the Pension Benefit Guaranty Corporation.
“ Pension Act ” means the Pension Protection Act of 2006.
“ Pension Funding Rules ” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.
“ Pension Plan ” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.
“ Permitted Judgment Liens ” means Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h) (solely to the extent the aggregate amount of the judgments secured by such Liens encumbering (x) Unencumbered Eligible Properties (and the income therefrom and proceeds thereof) and/or (y) the Equity Interests of any Unencumbered Property Subsidiary (and the income therefrom and proceeds thereof), does not exceed $10,000,000).
“ Permitted Equity Encumbrances ” means:
(a)      Permitted Judgment Liens;
(b)      Liens for taxes, assessments or governmental charges which are (i) immaterial to the Parent and its Subsidiaries, taken as a whole, (ii) not overdue for a period of more than thirty (30)




days or (iii) being contested in good faith and by appropriate actions or proceedings diligently conducted (which actions or proceedings have the effect of preventing the forfeiture or sale of the property of assets subject to any such Lien), if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; and
(c)      Permitted Pari Passu Encumbrances.
“ Permitted Pari Passu Encumbrances ” means encumbrances that are contained in documentation evidencing or governing Pari Passu Obligations which encumbrances are the result of (i) limitations on the ability of the Parent or any Subsidiary thereof to transfer property to the Borrower or any Guarantor which limitations are not, taken as a whole, materially more restrictive than those contained in this Agreement or (ii) any requirement that Pari Passu Obligations be secured on an “equal and ratable basis” to the extent that the Obligations are secured.
“ Permitted Property Encumbrances ” means:
(a) Permitted Judgment Liens;
(b) easements, rights-of-way, sewers, electric lines, telegraph and telephone lines, restrictions (including zoning restrictions), encroachments, protrusions and other similar encumbrances affecting real property which (i) to the extent existing with respect to an Unencumbered Eligible Property, do not materially interfere with the ordinary conduct of the business of the applicable Person or (ii) to the extent existing with respect to a Property that is not an Unencumbered Eligible Property, could not reasonably be expected to have a Material Adverse Effect;
(c) carriers’, warehouseman’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business that are not overdue for a period of more than thirty (30) days or are being contested in good faith and by appropriate actions or proceedings diligently conducted (which actions or proceedings have the effect of preventing the forfeiture or sale of the property of assets subject to any such Lien), if adequate reserves with respect thereto are maintained on the books of the applicable Person;
(d) any interest or right of a lessee of a Property under leases entered into in the ordinary course of business of the applicable lessor;
(e) Permitted Pari Passu Encumbrances; and
(f) rights of lessors under Eligible Ground Leases.
“ Permitted Self Insurance ” has the meaning specified in Section 6.07(a) .
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“ Plan ” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees.
“ Platform ” has the meaning specified in Section 6.02 .
“ Predecessor ” means the predecessor referred to in the financial statements included in the registration statement filed in connection with the Initial Public Offering. The Predecessor is not a legal entity but rather a combination of (i) controlling interests in (a) sixteen office and retail properties, (b) one development parcel, and (c) certain management companies, which are owned by certain entities that Anthony E. Malkin and Peter L. Malkin own interests in and control, and (ii) non-controlling interests in four office properties (which include two of the sixteen properties set forth in (i) above), held through entities which are presented as




uncombined entities in the Parent’s combined financial statements referenced in clause (i) of the definition of Audited Financial Statements.
“ Pricing Grid ” means (i) prior to the Investment Grade Pricing Effective Date, the pricing grid set forth in the definition of “Leverage-Based Applicable Rate” and (ii) on and after the Investment Grade Pricing Effective Date, the pricing grid set forth in the definition of “Ratings-Based Applicable Rate”.
“ Property ” means any Real Property which is owned or ground leased, directly or indirectly, by the Borrower or a Subsidiary thereof.
“ Proposed Real Estate ” means, at any time, (a) any Property, (b) any Real Estate that the Borrower or a Wholly Owned Subsidiary of the Borrower plans to acquire or lease or (c) any Real Estate owned or ground leased by a Person that the Borrower or a Wholly Owned Subsidiary of the Borrower plans to acquire, in each such case that satisfies (or, upon the acquisition or leasing thereof or upon the acquisition of the owner or lessee thereof, would satisfy) all of the Unencumbered Property Criteria, except for clause (a) and/or clause (b) of the definition thereof.
“ Proposed Unencumbered Property Subsidiary ” has the meaning specified in Section 6.12 .
“ Public Borrower Materials ” has the meaning specified in Section 6.02 .
“ Public Lender ” has the meaning specified in Section 6.02 .
“ Rating Agency ” means any of S&P, Moody’s or Fitch.
“ Ratings-Based Applicable Rate ” means the applicable percentages per annum determined, at any time, based on the range into which the Debt Ratings then fall, in accordance with the following table:
Pricing Level
Debt Rating
Facility Fee Rate
Eurodollar Applicable Rate
Base Rate Applicable Rate
I
≥ A- / A3
0.125%
0.875%
0.000%
II
BBB+ / Baa1
0.150%
0.925%
0.000%
III
BBB / Baa2
0.200%
1.050%
0.050%
IV
BBB- / Baa3
0.250%
1.250%
0.250%
V
< BBB- / Baa3
0.300%
1.550%
0.550%
If at any time the Parent and/or the Borrower has only two (2) Debt Ratings, and such Debt Ratings are split, then: (A) if the difference between such Debt Ratings is one ratings category (e.g. Baa2 by Moody’s and BBB- by S&P or Fitch), the Ratings-Based Applicable Rate shall be the rate per annum that would be applicable if the higher of the Debt Ratings were used; and (B) if the difference between such Debt Ratings is two ratings categories (e.g. Baa1 by Moody’s and BBB- by S&P), the Ratings-Based Applicable Rate shall be the rate per annum that would be applicable if the rating that is one higher than the lower of the applicable Debt Ratings were used. If at any time the Parent and/or the Borrower has three (3) Debt Ratings, and such Debt Ratings are split, then: (A) if the difference between the highest and the lowest such Debt Ratings is one ratings category (e.g. Baa2 by Moody’s and BBB- by S&P or Fitch), the Ratings-Based Applicable Rate shall be the rate per annum that would be applicable if the highest of the Debt Ratings were used; and (B) if the difference between such Debt Ratings is two ratings categories (e.g. Baa1 by Moody’s and BBB- by S&P or Fitch) or more, the Ratings-Based Applicable Rate shall be the rate per annum that would be applicable if the average of the two (2) highest Debt Ratings were used, provided that if such average is not a recognized




rating category, then the Ratings-Based Applicable Rate shall be the rate per annum that would be applicable if the second highest Debt Rating of the three were used.
Initially, the Ratings-Based Applicable Rate shall be determined based upon the Debt Ratings specified in the certificate delivered pursuant to clause (ii) of the definition of “Investment Grade Pricing Effective Date.” Thereafter, each change in the Ratings-Based Applicable Rate resulting from a publicly announced change in a Debt Rating shall be effective, in the case of an upgrade, during the period commencing on the date of delivery by the Parent to the Administrative Agent of notice thereof pursuant to Section 6.03(e) and ending on the date immediately preceding the effective date of the next such change and, in the case of a downgrade, during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change.
“ Real Property ” means, with respect to any Person, all of the right, title, and interest of such Person in and to land, improvements, and fixtures
“ Recipient ” means the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder.
“ Recourse Indebtedness ” means, with respect to any Person, Indebtedness of such Person other than Nonrecourse Indebtedness of such Person and Indebtedness under the Loan Documents.
“ Register ” has the meaning specified in Section 10.06(c) .
“ REIT ” means any Person that qualifies as a real estate investment trust under Sections 856 through 860 of the Code.
“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“ Reportable Event ” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
“ Request for Credit Extension ” means (a) with respect to a Borrowing of Revolving Credit Loans, or with respect to conversion or continuation of Revolving Credit Loans, a Committed Loan Notice, (b) with respect to a Competitive Loan, a Competitive Bid Request, (c) with respect to an L/C Credit Extension, a Letter of Credit Application and (d) with respect to a Swing Line Loan, a Swing Line Loan Notice.
“ Required Lenders ” means, as of any date of determination, Lenders holding more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition) other than the Outstanding Amount of Competitive Loans and (b) aggregate unused Revolving Credit Commitments (determined without giving effect to any Competitive Loans outstanding on such date); provided that the unused Revolving Credit Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
“ Responsible Officer ” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party, and solely for purposes of the delivery of incumbency certificates pursuant to Section 4.01 , the secretary or any assistant secretary of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer or employee of the applicable Loan Party




so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any Subsidiary thereof, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent Person thereof).
“ Revolving Credit Borrowing ” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01 .
“ Revolving Credit Commitment ” means, as to each Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01 , (b) purchase participations in L/C Obligations and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Revolving Credit Commitment” or opposite such caption in the Assignment and Assumption or New Lender Joinder Agreement pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.
“ Revolving Credit Exposure ” means, as to any Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Lender’s participation in L/C Obligations and Swing Line Loans at such time.
“ Revolving Credit Facility ” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time. On the Closing Date, the amount of the Revolving Credit Facility is $800,000,000.
“ Revolving Credit Loan ” has the meaning specified in Section 2.01 .
“ Revolving Credit Note ” means a promissory note made by the Borrower in favor of a Lender evidencing Revolving Credit Loans or Swing Line Loans, as the case may be, made by such Lender, substantially in the form of Exhibit D .
“ Sanctioned Person ” means any Person that is (i) listed on OFAC’s List of Specially Designated Nationals and Blocked Persons, (ii) otherwise the subject or target of Sanctions, to the extent U.S. persons are prohibited from engaging in transactions with such a Person, and (iii) 50 percent or greater owned or controlled by a Person described in clause (i) or (ii) above.
“ Sanction(s) ” means any sanction administered or enforced by the United States Government (including without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority, in each case, solely to the extent applicable to the Borrower or any of its Subsidiaries.




“ S&P ” means Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. and any successor thereto.
“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“ Secured Indebtedness ” means, with respect to any Person, all Indebtedness of such Person that is secured by a Lien.
“ Secured Recourse Indebtedness ” means, with respect to any Person, all Recourse Indebtedness of such Person that is secured by a Lien.
“ Securities Act ” means the Securities Act of 1933, as amended from time to time, and any successor statute, and the rules and regulations promulgated thereunder.
“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute, and the rules and regulations promulgated thereunder.
“ Self Insurance ” has the meaning specified in Section 6.07(a) .
“ Significant Subsidiary ” means, at any time, (i) each Unencumbered Property Subsidiary, (ii) each Subsidiary of the Parent (other than an Unencumbered Property Subsidiary) which represents (a) 10.0% or more of EBITDA of the Parent and its Subsidiaries, (b) 10.0% or more of consolidated total assets of the Parent and its Subsidiaries or (c) 10.0% or more of consolidated total revenues of the Parent and its Subsidiaries, in each case as determined at the end of the then most recently ended fiscal quarter of the Parent based on the financial statements of the Parent delivered to the Administrative Agent pursuant to Sections 6.01(a) or (b) for such fiscal quarter or fiscal year, as applicable, and (iii) any Subsidiary of the Parent (other than an Unencumbered Property Subsidiary) which, when aggregated with all other Subsidiaries of the Parent that are not otherwise Significant Subsidiaries, would constitute a Significant Subsidiary under clause (ii) of this definition.
“ Single Asset Entity ” means a Person (other than an individual) that (a) only owns a single Property and/or cash and other assets of nominal value incidental to such Person’s ownership of such Property; (b) is engaged only in the business of owning, developing and/or leasing such Property; and (c) receives substantially all of its gross revenues from such Property. In addition, if the assets of a Person consist solely of (i) Equity Interests in one or more other Single Asset Entities and (ii) cash and other assets of nominal value incidental to such Person’s ownership of the other Single Asset Entities, such Person shall also be deemed to be a Single Asset Entity for purposes of this Agreement (such an entity, a “Single Asset Holding Company”).
“ Single Asset Holding Company ” has the meaning given that term in the definition of Single Asset Entity.
“ Single Employer Pension Plan ” means any employee pension benefit plan (including a Multiple Employer Plan and excluding a Multiemployer Plan) that is maintained or is contributed to by the Borrower or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.
“ Solvency Certificate ” means a Solvency Certificate of the chief financial officer of the Parent substantially in the form of Exhibit H .




“ Solvent ” and “ Solvency ” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“ Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Parent. For the avoidance of doubt, the Borrower shall be deemed a Subsidiary of the Parent so long as the management of the Borrower is controlled, directly, or indirectly through one or more intermediaries, or both, by the Parent.
“ Subsidiary Guarantor ” means, (a) at all times prior to the Investment Grade Release, each Unencumbered Property Subsidiary and (b) upon and at all times following the Investment Grade Release, each Unencumbered Property Subsidiary (if any) that is a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness, only for so long as such Subsidiary remains obligated in respect of such Recourse Indebtedness; in each case under clauses (a) and (b), to the extent such Subsidiary has not been released from its obligations hereunder in accordance with Section 10.19(b) or Section 10.19(c) , as applicable, or otherwise with the consent of the Administrative Agent and Required Lenders.
“ Swap Contract ” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”), including any such obligations or liabilities under any Master Agreement.
“ Swap Termination Value ” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) , the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based




upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
“ Swing Line Borrowing ” means a borrowing of a Swing Line Loan pursuant to Section 2.05 .
“ Swing Line Lender ” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.
“ Swing Line Loan ” has the meaning specified in Section 2.05(a) .
“ Swing Line Loan Notice ” means a notice of a Swing Line Borrowing pursuant to Section 2.06(b) , which shall be substantially in the form of Exhibit B or such other form as approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approve by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.
“ Swing Line Sublimit ” means an amount equal to the lesser of (a) $50,000,000 and (b) the Revolving Credit Facility. The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Facility.
“ Syndication Agent ” means Goldman Sachs Bank USA in its capacity as syndication agent under any of the Loan Documents.
“ Synthetic Debt ” means, with respect to any Person as of any date of determination thereof, means liabilities and obligations of such Person in respect of “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act) which such Person would be required to disclose in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the report on Form 10‑Q or Form 10‑K (or their equivalents) to be filed with the SEC.
“ Synthetic Lease Obligation ” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
“ Tangible Net Worth ” means, for the Consolidated Group as of any date of determination, (a) “Equity” of the Consolidated Group, minus (b) all intangible assets (other than lease intangibles) of the Consolidated Group, plus (c) all accumulated depreciation of the Consolidated Group, in each case on a consolidated basis determined in accordance with GAAP.
“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Tax Protection Agreement ” means that certain Tax Protection Agreement, dated as of October 7, 2013 among the Parent, the Borrower, and the other parties named therein.
“ Third Party Insurance Companies ” has the meaning specified in Section 6.07(a) .
“ Threshold Amount ” means (a) with respect to Recourse Indebtedness of any Person, $50,000,000, (b) with respect to Nonrecourse Indebtedness of any Person, $150,000,000 and (c) with respect to the Swap Termination Value owed by any Person, $50,000,000.




“ Total Asset Value ” means, with respect to the Consolidated Group at any time, the sum (without duplication) of the following:
(i) an amount equal to (x) Net Operating Income derived from each Property (other than the Empire State Observatory, each Disposed Property, each Newly-Acquired Property, each unimproved land holding and each Property under development (i.e., construction-in-progress)) owned by the Consolidated Group for the then most recently ended fiscal quarter of the Parent, multiplied by four, divided by (y) the applicable Capitalization Rate for each such Property, plus
(ii) an amount equal to (x) the Net Operating Income derived by the Consolidated Group from its operation of the Empire State Observatory (to the extent the Empire State Observatory is not a Disposed Property at such time) for the then most recently ended period of four consecutive fiscal quarters of the Parent, divided by (y) the applicable Capitalization Rate, plus
(iii) the aggregate acquisition costs of all Newly-Acquired Properties at such time, plus
(iv) the aggregate book value of all unimproved land holdings, Investments in respect of costs to construct Properties ( i.e. , construction-in-progress), Properties under development, commercial mortgage loans, commercial real estate-related mezzanine loans and commercial real estate-related notes receivable, in each case owned by the Consolidated Group at such time, plus
(v) the Consolidated Group’s pro rata share of the foregoing items and components thereof attributable to interests in Unconsolidated Affiliates, plus
(vi) Unrestricted Cash at such time.
“ Total Indebtedness ” means, as at any date of determination, the sum of (i) the aggregate amount of all Indebtedness of the Consolidated Group determined on a consolidated basis and (ii) the Consolidated Group Pro Rata Share of Indebtedness of Unconsolidated Affiliates , in each case on such date.
“ Total Outstandings ” the aggregate Outstanding Amount of all Revolving Credit Loans, Competitive Loans, Swing Line Loans and L/C Obligations.
“ Total Secured Indebtedness ” means, as at any date of determination, the sum of (i) the aggregate amount of all Secured Indebtedness of the Consolidated Group determined on a consolidated basis and (ii) the Consolidated Group Pro Rata Share of Secured Indebtedness of Unconsolidated Affiliates , in each case on such date.
“ Total Unsecured Indebtedness ” means, as at any date of determination, the sum of (i) all Unsecured Indebtedness of the Consolidated Group determined on a consolidated basis and (ii) the Consolidated Group Pro Rata Share of Unsecured Indebtedness of Unconsolidated Affiliates.
“ Type ” means (a) with respect to a Revolving Credit Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan, and (b) with respect to a Competitive Loan, its character as an Absolute Rate Loan or a Eurodollar Margin Bid Loan.
“ UCP ” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce (“ ICC ”) Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).
“ Unconsolidated Affiliate ” means, at any date, any Person (x) in which the Consolidated Group, directly or indirectly, holds an Equity Interest, which investment is accounted for in the consolidated financial statements of the Consolidated Group on an equity basis of accounting and (y) whose financial results are not consolidated with the financial results of the Consolidated Group under GAAP.




“ Unencumbered Asset Value ” means, at any time, the sum of (i) the aggregate Unencumbered Property Value for all Unencumbered Eligible Properties plus (ii) the aggregate book value of Investments in respect of costs to construct Properties (i.e., construction-in-progress) and real property assets under development, (iii) the aggregate book value of commercial mortgage loans that are Wholly Owned by the Borrower or a Wholly-Owned Subsidiary thereof, plus (iv) Unrestricted Cash, in each case at such time; provided, that notwithstanding the foregoing, for purposes of determining Unencumbered Asset Value at any time (x) the portion of Unencumbered Asset Value attributable to Investments in respect of costs to construct Properties (i.e., construction-in-progress), real property assets under development and commercial mortgage loans in excess of fifteen percent (15%) of Unencumbered Asset Value at such time shall be disregarded and (y) the Unencumbered Asset Value attributable to all Unencumbered Eligible Properties that are owned, or ground leased pursuant to an Eligible Ground Lease, by a Controlled Joint Venture or Controlled Joint Venture Subsidiary, in excess of twenty percent (20%) of Unencumbered Asset Value at such time shall be disregarded.
“ Unencumbered Eligible Property ” has the meaning specified in the definition of Unencumbered Property Criteria. For the avoidance of doubt, Properties listed on Schedule 1 shall each be considered an Unencumbered Eligible Property on the Closing Date.
“ Unencumbered Interest Coverage Ratio ” means, as of the last day of each fiscal quarter of the Parent, the ratio of (i) the sum of (x) the aggregate Unencumbered NOI with respect to all Unencumbered Eligible Properties (other than for the Empire State Observatory) for such fiscal quarter plus (y) with respect to the Empire State Observatory, the aggregate Unencumbered NOI with respect to such Unencumbered Eligible Property for the most recently ended period of four fiscal quarters of the Parent divided by four, to (ii) the portion of Interest Expense for such fiscal quarter that is attributable to Unsecured Indebtedness.
“ Unencumbered NOI ” means, as of the last day of any period, the aggregate Net Operating Income for such period attributable to all Unencumbered Eligible Properties owned or ground leased pursuant to an Eligible Ground Lease during such period; provided, that in determining the Unencumbered NOI for any period attributable to an Unencumbered Eligible Property that is owned by or ground leased to a Controlled Joint Venture or a Controlled Joint Venture Subsidiary, the Net Operating Income of such Unencumbered Eligible Property shall, for such period, be deemed to be the Loan Party Pro Rata Share of such Net Operating Income.
“ Unencumbered Property Criteria ” means, in order for any Property (for the avoidance of doubt, including the Empire State Observatory, subject to the last paragraph of this definition) to be included as an Unencumbered Eligible Property it must meet and continue to satisfy each of the following criteria (each such Property that meets such criteria being referred to as an “ Unencumbered Eligible Property ”):
(a) The Property is primarily an office and/or retail property.
(b) The Property is Wholly-Owned in fee simple directly by, or is ground leased pursuant to an Eligible Ground Lease directly to a Person that is organized in a state within the United States of America or in the District of Columbia and is (i) the Borrower, (ii) a Guarantor, (iii) following the Investment Grade Release, a Wholly Owned Subsidiary of the Borrower that is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness unless it is a Guarantor, (iv) a Controlled Joint Venture or (v) a Controlled Joint Venture Subsidiary.
(c) Each Indirect Owner with respect to the Property must be a Wholly Owned Subsidiary of the Borrower that is organized in a state within the United States of America or in the District of Columbia and either (i) be a Guarantor or (ii) following the Investment Grade Release, is not a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness unless it is a Guarantor; provided, that if the Property is owned directly by a Controlled Joint Venture Subsidiary, the immediate parent of such Controlled Joint Venture Subsidiary must be a Controlled Joint Venture.




(d) The Property must be located in a state within the United States of America or in the District of Columbia.
(e) If such Property is owned directly by (or, if applicable, ground leased pursuant to an Eligible Ground Lease directly to) a Wholly Owned Subsidiary of the Borrower, then the Borrower must own, directly or indirectly, one hundred percent (100%) of the issued and outstanding Equity Interests of such Subsidiary, free and clear of any Lien (including, without limitation, any restriction contained in the organizational documents of any such Subsidiary that limits the ability to create a Lien thereon as security for indebtedness) other than Permitted Equity Encumbrances.
(f) If such Property is owned directly by (or, if applicable, ground leased pursuant to an Eligible Ground Lease directly to) a Controlled Joint Venture or Controlled Joint Venture Subsidiary, then all of the Equity Interests in such Controlled Joint Venture owned by the applicable Joint Venture Partner(s) and, if applicable, all of the Equity Interests in such Controlled Joint Venture Subsidiary owned by the applicable Controlled Joint Venture, will be free and clear of all Liens other than any Permitted Equity Encumbrances.
(g) The Property is not subject to any ground lease (other than an Eligible Ground Lease), Lien or any restriction on the ability of the Borrower, any Unencumbered Property Subsidiary, Controlled Joint Venture or Controlled Joint Venture Subsidiary with respect to such Property to transfer or encumber such property or income therefrom or proceeds thereof, other than Permitted Property Encumbrances.
(h) The Property does not have any title, environmental, structural, or other defects that would prevent the use of such Property in accordance with its intended purpose and shall not be subject to any condemnation or similar proceeding.
(i) No Unencumbered Property Subsidiary, Controlled Joint Venture or Controlled Joint Venture Subsidiary with respect to such Property shall be subject to any proceedings under any Debtor Relief Law.
(j) The Minimum Occupancy Condition is satisfied with respect to such Property; provided , that such Property may be considered an Unencumbered Eligible Property notwithstanding its failure to satisfy the Minimum Occupancy Condition, so long as the failure to satisfy the Minimum Occupancy Condition is cured and ceases to exist within forty-five (45) days following the occurrence thereof.
(k) No Unencumbered Property Subsidiary, Controlled Joint Venture or Controlled Joint Venture Subsidiary with respect to such Property shall incur or otherwise be liable for any Indebtedness other than (i) Nonrecourse Indebtedness, (ii) Indebtedness under the Facility and (iii) if such Person is a Guarantor, Recourse Indebtedness.
Notwithstanding anything to the contrary contained above or elsewhere, if at any time the Empire State Building ceases to be an Unencumbered Eligible Property for any reason, the Empire State Observatory shall also automatically cease to be an Unencumbered Eligible Property at such time.
“ Unencumbered Property Subsidiary ” means each direct and indirect Wholly Owned Subsidiary of the Borrower that is the Direct Owner or an Indirect Owner of all or a portion of an Unencumbered Eligible Property.
“ Unencumbered Property Value ” means, as of any date of determination, (a) with respect to each Unencumbered Eligible Property other than the Empire State Observatory, (i) if such Unencumbered Eligible Property has been owned or ground leased pursuant to an Eligible Ground Lease for the period of four full fiscal quarters most recently ended on or prior to such date of determination, an amount equal to (x) the Adjusted Unencumbered NOI from such Unencumbered Eligible Property for the then most recently ended fiscal quarter of the Parent, multiplied by four, divided by (y) the Capitalization Rate with respect to such Unencumbered Eligible Property and (ii) if such Unencumbered Eligible Property has not been owned or ground leased pursuant to an Eligible Ground Lease for the period of four full fiscal quarters most recently ended on or prior to such date of determination, an amount equal to the acquisition cost of such Unencumbered Eligible Property (provided that with respect to any such Unencumbered Eligible Property that is owned by or ground leased to a Controlled Joint Venture or a Controlled Joint Venture Subsidiary, only the Loan Party




Pro Rata Share of such acquisition cost shall be included in the calculation of Unencumbered Asset Value) and (b) with respect to the Empire State Observatory (for so long it is an Unencumbered Eligible Property), an amount equal to (i) the Adjusted Unencumbered NOI from such Unencumbered Eligible Property for the period of four full fiscal quarters most recently ended on or prior to such date of determination, divided by (ii) the applicable Capitalization Rate.
“ United States ” and “ U.S. ” mean the United States of America.
“ Unreimbursed Amount ” means the amount, if any, of a drawing under a Letter of Credit that is not reimbursed by the Borrower within the time frames specified in clause (x) or (y), as applicable, of the second sentence of Section 2.04(c)(i) .
“ Unrestricted Cash ” means, at any time, (a) the aggregate amount of cash and Cash Equivalents of the Borrower and its Subsidiaries at such time that are not subject to any pledge, Lien or control agreement (excluding statutory Liens in favor of any depositary bank where such cash and Cash Equivalents are maintained), minus (b) amounts included in the foregoing clause (a) that are held by a Person other than the Borrower or any of its Subsidiaries as a deposit or security for Contractual Obligations.
“ Unsecured Indebtedness ” means, with respect to any Person, all Indebtedness of such Person that is not Secured Indebtedness.
“ U.S. Person ” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“ U.S. Tax Compliance Certificate ” has the meaning specified in Section 3.01(f)(ii)(B)(III) .
“ Wholly Owned ” means, with respect to the ownership by any Person of any Property, that one hundred percent (100%) of the title to such Property is held in fee directly or indirectly by, or one hundred percent (100%) of such Property is ground leased pursuant to an Eligible Ground Lease directly or indirectly by, such Person.
“ Wholly Owned Subsidiary ” means, as to any Person, (a) any corporation 100% of whose Equity Interests (other than directors’ qualifying shares) is at the time owned by such Person and/or one or more Wholly Owned Subsidiaries of such Person and (b) any partnership, association, joint venture, limited liability company or other entity in which such Person and/or one or more Wholly Owned Subsidiaries of such Person have a 100% equity interest at such time.
“ Withholding Agent ” means any Loan Party and the Administrative Agent.
. Other Interpretive Provisions
. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “ include ,” “ includes ” and “ including ” shall be deemed to be followed by the phrase “without limitation.” The word “ will ” shall be construed to have the same meaning and effect as the word “ shall .” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such




amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “ hereto ,” “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b) In the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ;” the words “ to ” and “ until ” each mean “ to but excluding ;” and the word “ through ” means “ to and including .”
(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
. Accounting Terms
.
(a) Generally . All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.
(b) Changes in GAAP . If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Administrative Agent shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that , until so amended, (A) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (B) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Without limiting the foregoing, leases shall continue to be classified and accounted for on a basis consistent with that reflected in the Audited Financial Statements for all purposes of this Agreement, notwithstanding any change in GAAP relating thereto, unless the parties hereto shall enter into a mutually acceptable amendment addressing such changes, as provided for above.
(c) Consolidation of Variable Interest Entities . All references herein to consolidated financial statements of the Parent and its Subsidiaries or to the determination of any amount for the Parent and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Parent is required to consolidate pursuant to FASB ASC 810 as if such variable interest entity were a Subsidiary as defined herein.
. Rounding




. Any financial ratios required to be maintained by one or more Loan Parties pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
. Times of Day; Rates
. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable). The Administrative Agent does not warrant, nor accept responsibility, nor shall the Administrative Agent have any liability with respect to the administration, submission or any other matter related to the rates in the definition of “Eurodollar Rate” or with respect to any comparable or successor rate thereto or to LIBOR.
. Letter of Credit Amounts
. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
ARTICLE II. the COMMITMENTS and Credit Extensions
. Revolving Credit Loans
. Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “ Revolving Credit Loan ”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided , however , that after giving effect to any Revolving Credit Borrowing, the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Swing Line Loans, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Competitive Loans shall not exceed such Lender’s Revolving Credit Commitment. Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01 , prepay under Section 2.06 , and reborrow under this Section 2.01 . Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.
. Borrowings, Conversions and Continuations of Loans
.
(a) Each Revolving Credit Borrowing, each conversion of Revolving Credit Loans from one Type to the other, and each continuation of Eurodollar Rate Revolving Credit Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone or a Committed Loan Notice; provided that any telephonic notice must be confirmed promptly by delivery to the Administrative Agent of a Committed Loan Notice. Each such Committed Loan Notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Revolving Credit Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans; provided , however , that if the Borrower wishes to request Eurodollar Rate Revolving Credit Loans having an Interest Period other than one week, or one, three or six months, in duration as provided in the definition of “Interest Period,” the applicable notice must be received by the Administrative Agent not later than 11:00 a.m. four Business




Days prior to the requested date of such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the Appropriate Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 11:00 a.m., three Business Days before the requested date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Appropriate Lenders. Each Borrowing of, conversion to or continuation of Eurodollar Rate Revolving Credit Loans shall be in a minimum principal amount of $5,000,000. Except as provided in Sections 2.04(c) and 2.05(c) , each Borrowing of or conversion to Base Rate Loans shall be in a minimum principal amount of $500,000. Each Committed Loan Notice shall specify (i) whether the Borrower is requesting a Revolving Credit Borrowing, a conversion of, Revolving Credit Loans from one Type to the other, or a continuation of Eurodollar Rate Revolving Credit Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Revolving Credit Loans to be borrowed, converted or continued, (iv) the Type of Revolving Credit Loans to be borrowed or to which existing Revolving Credit Loans are to be converted and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Revolving Credit Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Revolving Credit Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Revolving Credit Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Revolving Credit Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a Eurodollar Rate Loan.
(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Appropriate Lender of the amount of its Applicable Percentage of the applicable Revolving Credit Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Appropriate Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(a) . In the case of a Revolving Credit Borrowing, each Appropriate Lender shall make the amount of its Revolving Credit Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01 ), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided , however , that if, on the date a Committed Loan Notice with respect to a Revolving Credit Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Revolving Credit Borrowing, first , shall be applied to the payment in full of any such L/C Borrowings, and second , shall be made available to the Borrower as provided above.
(c) Except as otherwise provided herein, a Eurodollar Rate Revolving Credit Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Revolving Credit Loan. During the existence of a Default, no Revolving Credit Loans may be requested as, converted to or continued as Eurodollar Rate Revolving Credit Loans without the consent of the Required Lenders.
(d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Revolving Credit Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify




the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.
(e) After giving effect to all Revolving Credit Borrowings, all conversions of Revolving Credit Loans from one Type to the other, and all continuations of Revolving Credit Loans as the same Type, there shall not be more than eight (8) Interest Periods in effect in respect of the Revolving Credit Facility.
. Competitive Loans
.
(a) General . Subject to the terms and conditions set forth herein, each Lender agrees that the Borrower may from time to time request the Lenders to submit offers to make loans (each such loan, a “ Competitive Loan ”) to the Borrower prior to the Maturity Date pursuant to this Section 2.03 ; provided , however , that (i) the Parent and/or the Borrower shall have received an Investment Grade Rating which is in effect at the time such request is made and at the time any such Competitive Loans are made, (ii) the Investment Grade Pricing Effective Date shall have occurred and (iii) after giving effect to any Competitive Borrowing, the aggregate Outstanding Amount of all Competitive Loans shall not exceed the Competitive Loan Sublimit. There shall not be more than three (3) different Interest Periods in effect with respect to Competitive Loans at any time.
(b) Requesting Competitive Bids . The Borrower may request the submission of Competitive Bids by delivering a Competitive Bid Request to the Administrative Agent not later than 11:00 a.m. (i) one Business Day prior to the requested date of any Competitive Borrowing that is to consist of Absolute Rate Loans or (ii) four Business Days prior to the requested date of any Competitive Borrowing that is to consist of Eurodollar Margin Bid Loans. Each Competitive Bid Request shall specify (i) the requested date of the Competitive Borrowing (which shall be a Business Day), (ii) the aggregate principal amount of Competitive Loans requested (which must be $5,000,000 or a whole multiple of $1,000,000 in excess thereof), (iii) the Type of Competitive Loans requested, and (iv) the duration of the Interest Period with respect thereto, and shall be signed by a Responsible Officer of the Borrower. No Competitive Bid Request shall contain a request for (i) more than one Type of Competitive Loan or (ii) Competitive Loans having more than three (3) different Interest Periods. Unless the Administrative Agent otherwise agrees in its sole discretion, the Borrower may not submit a Competitive Bid Request if it has submitted another Competitive Bid Request within the prior five Business Days.
(c) Submitting Competitive Bids .
(i) The Administrative Agent shall promptly notify each Lender of each Competitive Bid Request received by it from the Borrower and the contents of such Competitive Bid Request.
(ii) Each Lender may (but shall have no obligation to) submit a Competitive Bid containing an offer to make one or more Competitive Loans in response to such Competitive Bid Request. Such Competitive Bid must be delivered to the Administrative Agent not later than 10:30 a.m. (A) on the requested date of any Competitive Borrowing that is to consist of Absolute Rate Loans, and (B) three Business Days prior to the requested date of any Competitive Borrowing that is to consist of Eurodollar Margin Bid Loans; provided , however , that any Competitive Bid submitted by Bank of America in its capacity as a Lender in response to any Competitive Bid Request must be submitted to the Administrative Agent not later than 10:15 a.m. on the date on which Competitive Bids are required to be delivered by the other Lenders in response to such Competitive Bid Request. Each Competitive Bid shall specify (A) the proposed date of the Competitive Borrowing; (B) the principal amount of each Competitive Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Revolving Credit Commitment of the bidding Lender, (y) must be $5,000,000 or a whole multiple of $1,000,000 in excess thereof, and (z) may not exceed the principal amount of Competitive Loans for which




Competitive Bids were requested; (C) if the proposed Competitive Borrowing is to consist of Absolute Rate Bid Loans, the Absolute Rate offered for each such Bid Loan and the Interest Period applicable thereto; (D) if the proposed Competitive Borrowing is to consist of Eurodollar Margin Bid Loans, the Eurodollar Bid Margin with respect to each such Eurodollar Margin Bid Loan and the Interest Period applicable thereto; and (E) the identity of the bidding Lender.
(iii) Any Competitive Bid shall be disregarded if it (A) is received after the applicable time specified in clause (ii) above, (B) is not substantially in the form of a Competitive Bid as specified herein, (C) contains qualifying, conditional or similar language, (D) proposes terms other than or in addition to those set forth in the applicable Bid Request, or (E) is otherwise not responsive to such Competitive Bid Request. Any Lender may correct a Competitive Bid containing a manifest error by submitting a corrected Competitive Bid (identified as such) not later than the applicable time required for submission of Competitive Bids. Any such submission of a corrected Competitive Bid shall constitute a revocation of the Competitive Bid that contained the manifest error. The Administrative Agent may, but shall not be required to, notify any Lender of any manifest error it detects in such Lender’s Competitive Bid.
(iv) Subject only to the provisions of Sections 3.02 , 3.03 and 4.02 and clause (iii) above, each Competitive Bid shall be irrevocable.
(d) Notice to the Borrower of Competitive Bids . Not later than 11:00 a.m. (i) on the requested date of any Competitive Borrowing that is to consist of Absolute Rate Loans or (ii) three Business Days prior to the requested date of any Competitive Borrowing that is to consist of Eurodollar Margin Bid Loans, the Administrative Agent shall notify the Borrower of the identity of each Lender that has submitted a Competitive Bid that complies with Section 2.04(c) and of the terms of the offers contained in each such Competitive Bid.
(e) Acceptance of Competitive Bids . Not later than 11:30 a.m. (i) on the requested date of any Competitive Borrowing that is to consist of Absolute Rate Loans and (ii) three Business Days prior to the requested date of any Competitive Borrowing that is to consist of Eurodollar Margin Bid Loans, the Borrower shall notify the Administrative Agent of its acceptance or rejection of the Competitive Bids notified to it pursuant to Section 2.03(d) . The Borrower shall be under no obligation to accept any Competitive Bid and may choose to reject all Competitive Bids. In the case of acceptance, such notice shall specify the aggregate principal amount of Competitive Bids for each Interest Period that is accepted. The Borrower may accept any Competitive Bid in whole or in part; provided that:
(i) the aggregate principal amount of each Competitive Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request;
(ii) the principal amount of each Competitive Loan must be $5,000,000 or a whole multiple of $1,000,000 in excess thereof;
(iii) the acceptance of Competitive Bids may be made only on the basis of ascending Absolute Rates or Eurodollar Bid Margins within each Interest Period; and
(iv) the Borrower may not accept any Competitive Bid that is described in Section 2.03(c)(iii) or that otherwise fails to comply with the requirements hereof.
(f) Procedure for Identical Bids . If two or more Lenders have submitted Competitive Bids at the same Absolute Rate or Eurodollar Bid Margin, as the case may be, for the same Interest Period, and the result of accepting all of such Competitive Bids in whole (together with any other Competitive Bids at lower Absolute Rates or Eurodollar Bid Margins, as the case may be, accepted for such Interest Period in conformity with the requirements of Section 2.03(e)(iii) ) would be to cause the aggregate outstanding principal amount of the applicable Competitive Borrowing to exceed the amount specified therefor in the related Competitive Bid Request, then, unless otherwise agreed by the Borrower, the Administrative Agent and such Lenders, such Competitive Bids shall be accepted as nearly as possible in proportion to the amount offered by each




such Lender in respect of such Interest Period, with such accepted amounts being rounded to the nearest whole multiple of $1,000,000.
(g) Notice to Lenders of Acceptance or Rejection of Competitive Bids . The Administrative Agent shall promptly notify each Lender having submitted a Competitive Bid whether or not its Competitive Bid has been accepted and, if its Competitive Bid has been accepted, of the amount of the Competitive Loan or Competitive Loans to be made by it on the date of the applicable Competitive Borrowing. Any Competitive Bid or portion thereof that is not accepted by the Borrower by the applicable time specified in Section 2.03(e) shall be deemed rejected.
(h) Notice of Eurodollar Rate . If any Competitive Borrowing is to consist of Eurodollar Margin Bid Loans, the Administrative Agent shall determine the Eurodollar Rate for the relevant Interest Period, and promptly after making such determination, shall notify the Borrower and the Lenders that will be participating in such Competitive Borrowing of such Eurodollar Rate.
(i) Funding of Competitive Loans . Each Lender that has received notice pursuant to Section 2.03(g ) that all or a portion of its Competitive Bid has been accepted by the Borrower shall make the amount of its Competitive Loan(s) available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the date of the requested Competitive Borrowing. Upon satisfaction of the applicable conditions set forth in Section 4.02, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent.
(j) Notice of Range of Competitive Bids . After each Competitive Bid auction pursuant to this Section 2.03 , the Administrative Agent shall notify each Lender that submitted a Competitive Bid in such auction of the ranges of Competitive Bids submitted (without the bidder’s name) and accepted for each Competitive Loan and the aggregate amount of each Competitive Borrowing.
. Letters of Credit
.
(a) The Letter of Credit Commitment .
(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.04 , (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the Revolving Credit Facility, (y) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Swing Line Loans, plus such Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of all Competitive Loans shall not exceed such Lender’s Revolving Credit Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.




(ii) The L/C Issuer shall not issue any Letter of Credit if, subject to Section 2.04(b)(iii) , the expiry date of the requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Administrative Agent and the L/C Issuer have approved such expiry date; provided that in no event will any Letter of Credit have an expiry date that is later than the first anniversary of the Maturity Date, subject to the requirements of Section 2.04(b)(v) .
(iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing the Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon the L/C Issuer with respect to the Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;
(B) the issuance of the Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;
(C) except as otherwise agreed by the Administrative Agent and the L/C Issuer, the Letter of Credit is in an initial stated amount less than $500,000;
(D) the Letter of Credit is to be denominated in a currency other than Dollars; or
(E) any Lender is at that time a Defaulting Lender, unless the L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the L/C Issuer (in its sole discretion) with the Borrower or such Lender to eliminate the L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.18(a)(iv )) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which the L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.
(iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue the Letter of Credit in its amended form under the terms hereof.
(v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue the Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of the Letter of Credit does not accept the proposed amendment to the Letter of Credit.
(vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.
(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit .
(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent)




in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application may be sent by facsimile, by United States mail, by overnight courier, by electronic transmission using the system provided by the L/C Issuer, by personal delivery or by any other means acceptable to the L/C Issuer. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.
(ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary thereof) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Revolving Credit Percentage times the amount of such Letter of Credit.
(iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-Extension Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be




deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the first anniversary of the Maturity Date for the Revolving Credit Facility, subject to the requirements of Section 2.04(b)(v) ; provided , however , that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.04(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.
(iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
(v) If the expiry date of any Letter of Credit would occur after the Maturity Date, the Borrower hereby agrees that it will at least thirty (30) days prior to the Maturity Date (or, in the case of a Letter of Credit issued or extended on or after thirty (30) days prior to the Maturity Date, on the date of such issuance or extension, as applicable) Cash Collateralize such Letter of Credit in an amount not less than the Minimum Collateral Amount.
(c) Drawings and Reimbursements; Funding of Participations .
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof (such notification provided by the L/C Issuer to the Borrower and the Administrative Agent being referred to herein as an “ L/C Draw Notice ”). If an L/C Draw Notice with respect to a Letter of Credit is received by the Borrower (x) on or prior to 10:00 a.m. on the date of any payment by the L/C Issuer under such Letter of Credit (each such date a payment is made by the L/C Issuer under a Letter of Credit being referred to herein as an “ Honor Date ”), then, not later than 12:00 p.m. on the Honor Date, the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing or (y) after 10:00 a.m. on the Honor Date, then, not later than 11:00 a.m. on the first Business Day following the Honor Date, the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing (such date on which the Borrower, pursuant to clauses (x) and (y) of this sentence, are required to reimburse the L/C Issuer for a drawing under a Letter of Credit is referred to herein as the “ L/C Reimbursement Date ”); provided , however , that if the L/C Reimbursement Date for a drawing under a Letter of Credit is the Business Day following the Honor Date pursuant to clause (y) of this sentence, the Unreimbursed Amount shall accrue interest from and including the Honor Date until such time as the L/C Issuer is reimbursed in full therefor (whether through payment by the Borrower and/or through a Revolving Credit Loan or L/C Borrowing made in accordance with paragraph (ii) or (iii) of this Section 2.04(c) ) at a rate equal to (A) for the period from and including the Honor Date to but excluding the first Business Day to occur thereafter, the rate of interest then applicable to a Revolving Credit Loan that is a Base Rate Loan and (B) thereafter, at the Default Rate applicable to a Revolving Credit Loan that is a Base Rate Loan. Interest accruing on the Unreimbursed Amount pursuant to the proviso to the immediately preceding sentence shall be payable by the Borrower upon demand to the Administrative Agent, solely




for the account of the L/C Issuer. If the Borrower fails to reimburse the L/C Issuer for the full amount of the Unreimbursed Amount in accordance with the preceding sentence on the applicable L/C Reimbursement Date, the Administrative Agent shall promptly notify each Lender that a payment was made on the Letter of Credit, the Honor Date, the L/C Reimbursement Date (if different from the Honor Date), the amount of the Unreimbursed Amount and the amount of such Lender’s Applicable Percentage thereof. In such event, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the L/C Reimbursement Date in an amount equal to the Unreimbursed Amount, without regard to the minimum specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Facility and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii) Each Lender shall upon any notice pursuant to Section 2.04(c)(i) make funds available (and the Administrative Agent may apply Cash Collateral provided for this purpose) for the account of the L/C Issuer at the Administrative Agent’s Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.04(c)(iii) , each Lender that so makes funds available shall be deemed to have made a Revolving Credit Loan that is a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.04 .
(iv) Until each Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.04(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.
(v) Each Lender’s obligation to make Revolving Credit Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.04(c) , shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for




the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(ii) , then, without limiting the other provisions of this Agreement, the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Credit Loan included in the relevant Revolving Credit Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d) Repayment of Participations .
(i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.04(c) , if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof in the same funds as those received by the Administrative Agent.
(ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e) Obligations Absolute . The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;




(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv) waiver by the L/C Issuer of any requirement that exists for the L/C Issuer’s protection and not the protection of the Borrower or any waiver by the L/C Issuer which does not in fact materially prejudice the Borrower;
(v) honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;
(vi) any payment made by the L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under such Letter of Credit if presentation after such date is authorized by the UCC, the ISP or the UCP, as applicable;
(vii) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
(viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any of its Subsidiaries.
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.
(f) Role of L/C Issuer . Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided , however , that this assumption is not intended to, and shall not, preclude the Borrower from pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (viii) of Section 2.04(e) ; provided , however , that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed




to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. The L/C Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (“ SWIFT ”) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.
(g) Applicability of ISP and UCP; Limitation of Liability . Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued the rules of the ISP shall apply to each Letter of Credit. Notwithstanding the foregoing, the L/C Issuer shall not be responsible to the Borrower for, and the L/C Issuer’s rights and remedies against the Borrower shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.
(h) Letter of Credit Fees . The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance, subject to Section 2.18 , with its Applicable Percentage a Letter of Credit fee (the “ Letter of Credit Fee ”) for each Letter of Credit equal to the Applicable Rate then applicable to Eurodollar Rate Loans under the Revolving Credit Facility times the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06 . Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) computed on a quarterly basis in arrears. If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.
(i) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer . The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit, at the rate per annum specified in the Bank of America Fee Letter, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06 . In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer




relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.
(j) Conflict with Issuer Documents . In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.
(k) Letters of Credit Issued for Subsidiaries of Borrower . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary of the Borrower, the Borrower shall be jointly and severally obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any of its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.
. Swing Line Loans
.
(a) The Swing Line . Subject to the terms and conditions set forth herein, the Swing Line Lender, in reliance upon the agreements of the other Lenders set forth in this Section 2.05 , shall make loans (each such loan, a “ Swing Line Loan ”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Swing Line Lender’s Applicable Percentage of the Outstanding Amount of Revolving Credit Loans, L/C Obligations and Competitive Loans may exceed the amount of the Swing Line Lender’s Revolving Credit Commitment; provided , however , that (x) after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Revolving Credit Facility and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Competitive Loans shall not exceed such Lender’s Revolving Credit Commitment , (y) no Borrower shall use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan, and (z) the Swing Line Lender shall not be under any obligation to make any Swing Line Loan if it shall determine (which determination shall be conclusive and binding absent manifest error) that it has, or by such Credit Extension may have, Fronting Exposure (after giving effect to Section 2.18(a)(iv) ). Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.05 , prepay under Section 2.06 , and reborrow under this Section 2.05 . Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan.
(b) Borrowing Procedures . Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone or by a Swing Line Loan Notice; provided that any telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a Swing Line Loan Notice. Each such Swing Line Notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 and (ii) the requested borrowing date, which shall be a Business Day. Promptly after receipt by the Swing Line Lender of any Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 2:00 p.m. on the




date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.05(a) , or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds or, if requested in the Swing Line Notice delivered to the Swing Line Lender, by transfer of immediately available funds to a bank specified by the Borrower for credit to an account at such bank specified by the Borrower in such Swing Line Notice.
(c) Refinancing of Swing Line Loans .
(i) The Swing Line Lender at any time in its sole discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Loan in an amount equal to such Lender’s Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02 , without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Revolving Credit Facility then in effect and the conditions set forth in Section 4.02 . The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds (and the Administrative Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.05(c)(ii) , each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.05(c)(i) , the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.05(c)(i) shall be deemed payment in respect of such participation.
(iii) If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.05(c) by the time specified in Section 2.05(c)(i) , the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Credit Loan included in the relevant Revolving Credit Borrowing or funded participation in the relevant Swing Line Loan, as the case may be. A




certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.
(iv) Each Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.05(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.05(c) is subject to the conditions set forth in Section 4.02 . No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.
(d) Repayment of Participations .
(i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage thereof in the same funds as those received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e) Interest for Account of Swing Line Lender . The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.05 to refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender . The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
. Prepayments
.
(a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Revolving Credit Loans in whole or in part without premium or penalty; provided that (i) such notice must be in a form reasonably acceptable to the Administrative Agent and be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $3,000,000; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Revolving Credit Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Revolving Credit Loans.




The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Appropriate Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Revolving Credit Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05 .
(b) No Competitive Loan may be prepaid voluntarily without the prior consent of the applicable Competitive Loan Lender.
(c) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.
(d) If for any reason the Total Outstandings at any time exceed the Revolving Credit Facility, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess.
(e) Prepayments made pursuant to Section 2.06(d) first , shall be applied ratably to the L/C Borrowings and the Swing Line Loans (without reduction of any of the Revolving Credit Commitments), second , shall be applied ratably to the outstanding Revolving Credit Loans (without reduction of any of the Revolving Credit Commitments) and Competitive Loans and third , shall be used to Cash Collateralize the remaining L/C Obligations. Upon a drawing under any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the L/C Issuer or the Lenders, as applicable.
. Termination or Reduction of Revolving Credit Commitments
.
(a) The Borrower may, upon notice to the Administrative Agent, terminate the Revolving Credit Facility, the Letter of Credit Sublimit or the Swing Line Sublimit, or from time to time permanently reduce the Revolving Credit Facility, the Letter of Credit Sublimit or the Swing Line Sublimit; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof and (iii) the Borrower shall not terminate or reduce (A) the Revolving Credit Facility if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Revolving Credit Facility, (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit or (C) the Swing Line Sublimit if, after giving effect thereto and to any concurrent prepayments hereunder, the Outstanding Amount of Swing Line Loans would exceed the Swing Line Sublimit.
(b) The Revolving Credit Facility shall be reduced to zero automatically and permanently on the last day of the Availability Period.
(c) If after giving effect to any reduction or termination of the Revolving Credit Facility pursuant to this Section 2.07 , the Competitive Loan Sublimit, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the Revolving Credit Facility at such time, the Competitive Loan Sublimit, the Letter of Credit Sublimit or the Swing Line Sublimit, as the case may be, shall be automatically reduced by the amount of such excess.




(d) The Administrative Agent will promptly notify the Lenders of any termination or reduction of the Revolving Credit Facility pursuant to this Section 2.07 . Upon any reduction of the Revolving Credit Facility, the Revolving Credit Commitment of each Lender shall be reduced by such Lender’s Applicable Percentage of such reduction amount. All fees in respect of the Revolving Credit Facility accrued until the effective date of any termination of the Revolving Credit Facility shall be paid on the effective date of such termination.
. Repayment of Loans
.
(a) Revolving Credit Loans . The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Revolving Credit Loans outstanding on such date.
(b) Competitive Loans . The Borrower shall repay each Competitive Loan on the last day of the Interest Period in respect thereof.
(c) Swing Line Loans . The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date five Business Days after such Swing Line Loan is made and (ii) the Maturity Date.
. Interest
.
(a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Revolving Credit Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; (iii) each Competitive Loan shall bear interest on the outstanding principal amount thereof for the Interest Period therefor at a rate per annum equal to the Eurodollar Rate for such Interest Period plus (or minus) the Eurodollar Bid Margin, or at the Absolute Rate for such Interest Period, as the case may be, and (iv) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate then applicable to Base Rate Loans.
(b) While any Event of Default exists under Section 8.01(a)(i) or (f) , the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.
(c) Upon the request of the Required Lenders, while any Event of Default exists (other than as set forth in clause (b) above), the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.
(d) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.
(e) Interest on each Revolving Credit Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.
. Fees
. In addition to certain fees described in subsections (h) and (i) of Section 2.04 :
(a) Facility Fee . The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a facility fee equal to the Applicable Rate then applicable to Facility Fees times the actual daily amount of the Revolving Credit Facility (or, if the Revolving Credit Facility has terminated, on the Outstanding Amount of all Revolving Credit




Loans, Swing Line Loans, Competitive Loans and L/C Obligations), regardless of usage. The facility fee shall accrue at all times during the Availability Period (and thereafter so long as any Revolving Credit Loans, Swing Line Loans or L/C Obligations remain outstanding), including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, on the last day of the Availability Period (and, if applicable, thereafter on demand). The facility fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(b) Other Fees .
(i) The Borrower shall pay to the Arrangers and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letters. Such fees shall be fully earned when paid and shall not be refundable for any reason.
(ii) The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
. Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate
.
(a)      All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Revolving Credit Loan for the day on which the Revolving Credit Loan is made, and shall not accrue on a Revolving Credit Loan, or any portion thereof, for the day on which the Revolving Credit Loan or such portion is paid, provided that any Revolving Credit Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a) , bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
(b)      If, as a result of any restatement of or other adjustment to the financial statements of the Parent, or for any other reason, (i) the ratio of Total Indebtedness to Total Asset Value as calculated by the Borrower as of any applicable date was inaccurate and (ii) a proper calculation of Total Indebtedness to Total Asset Value would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Parent or any other Loan Party under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This paragraph shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as the case may be, under Section 2.04(c)(iii) , 2.04(h) , 2.09(b) or 2.09(c) or under Article VIII . The Borrower’s obligations under this paragraph shall survive the termination of the Facilities and the repayment of all other Obligations hereunder.
. Evidence of Debt
.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course




of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. On the Closing Date, upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Revolving Credit Note which shall evidence such Lender’s Revolving Credit Loans in addition to such accounts or records. Each Lender may attach schedules to its Revolving Credit Note and endorse thereon the date, Type (if applicable), amount and maturity of its applicable Loans and payments with respect thereto.
(b) In addition to the accounts and records referred to in subsection (a) above, each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
. Payments Generally; Administrative Agent’s Clawback
.
(a) General . All payments to be made by the Borrower shall be made free and clear of and without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(b) (i) Funding of Loans by Lenders; Presumption by Administrative Agent . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02 ) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in




accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Revolving Credit Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
(i) Payments by the Borrower; Presumptions by Administrative Agent . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Appropriate Lenders or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Appropriate Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Appropriate Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.
(c) Failure to Satisfy Conditions Precedent . If any Lender makes available to the Administrative Agent funds for any Revolving Credit Loan to be made by such Lender as provided in the foregoing provisions of this Article II , and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(d) Obligations of Lenders Several . The obligations of the Lenders hereunder to make Revolving Credit Loans, to fund participations in Letters of Credit and Swing Line Loans, and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Revolving Credit Loan, to fund any such participation, to make any such purchase or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Revolving Credit Loan, to purchase its participation, or to make its payment under Section 10.04(c) .
(e) Funding Source . Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Revolving Credit Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Revolving Credit Loan in any particular place or manner.
. Sharing of Payments by Lenders
. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Revolving Credit Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Revolving Credit Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the




Revolving Credit Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Credit Loans and other amounts owing them, provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (y) the application of Cash Collateral provided for in Section 2.17, or (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Credit Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than an assignment to the Borrower or any Affiliate thereof (as to which the provisions of this Section shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower or any Guarantor rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower or such Guarantor in the amount of such participation.
. Extension of Maturity Date in respect of Revolving Credit Facility
.
(a) Notification of Extension . The Borrower may, by written notice to the Administrative Agent (such notice, an “ Extension Notice ”) not earlier than 90 days and not later than 30 days prior to the Maturity Date then in effect (such Maturity Date then in effect being referred to herein as the “ Existing Maturity Date ”), request that the Lenders extend the Existing Maturity Date for an additional six (6) months from such Existing Maturity Date; provided , that (x) the Borrower may not submit more than two (2) Extension Notices during the term of this Agreement and (y) in no event shall the Maturity Date be extended beyond the fifth anniversary of the Closing Date. The Administrative Agent shall distribute each Extension Notice promptly to the Lenders following its receipt thereof.
(b) Conditions Precedent to Effectiveness of an Extension of the Existing Maturity Date . As conditions precedent to any extension of the Existing Maturity Date, the Borrower shall, on or prior to the Existing Maturity Date, satisfy each of the following requirements for such extension to become effective:
(i) The Administrative Agent shall have received an Extension Notice within the period required under clause (a) above;
(ii) On the date of such Extension Notice and both immediately before and immediately after giving effect to such extension of the Existing Maturity Date, no Default shall have occurred and be continuing;
(iii) The Borrower shall have paid to the Administrative Agent, for the pro rata benefit of the Lenders based on their respective Applicable Percentages as of such date, an extension fee in an amount equal to 0.075% of the Revolving Credit Facility as in effect on the date the proposed extension is to become effective (it being agreed that such Extension Fee shall be fully earned when paid and shall not be refundable for any reason);
(iv) The Administrative Agent shall have received a certificate of the Parent dated as of the date the proposed extension is to become effective signed by a Responsible Officer of the Parent (i) (x) certifying and attaching the resolutions adopted by each Loan Party approving or consenting




to such extension or (y) certifying that, as of the date the proposed extension is to become effective, the resolutions delivered to the Administrative Agent and the Lenders on the Closing Date (which resolutions include approval for an extension of the Maturity Date for a period that is not less than an additional twelve (12) months from the Initial Maturity Date) are and remain in full force and effect and have not been modified, rescinded or superseded since the date of adoption and (ii) certifying that, before and after giving effect to such extension, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the date the proposed extension is to become effective, except (x) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, (y) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such date after giving effect to such qualification and (z) for purposes of this Section 2.15 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 , and (B) no Default exists; and
(v) The Borrower and the other Loan Parties shall have delivered to the Administrative Agent such reaffirmations of their respective obligations under the Loan Documents (after giving effect to the extension), and acknowledgments and certifications that they have no claims, offsets or defenses with respect to the payment or performance of any of the Obligations, including, without limitation, reaffirmations of the Guaranty Agreement, executed by the Loan Parties party thereto.
(a) Conflicting Provisions . This Section shall supersede any provisions in Section 2.14 or 10.01 to the contrary.
. Increase in Revolving Credit Facility
.
(a) Request for Increase . Provided there exists no Default, upon written notice to the Administrative Agent, the Borrower may, at any time and from time to time, request to increase the aggregate principal amount of the Revolving Credit Facility and/or by establishing a new (or increasing an existing) pari passu term facility (on terms and conditions to be determined by the Borrower and the lenders under such new term facility and consented to by the Administrative Agent, provided that in no event may the maturity date of any term facility established pursuant hereto be earlier than the fourth anniversary of the Closing Date), such that after giving effect to such increase, the sum of (i) the Revolving Credit Facility and (ii) the aggregate amount of all commitments and outstanding loans in respect of term facilities under this Agreement shall not exceed $1,250,000,000; provided that any such request for an increase shall be in a minimum amount of $25,000,000 or such lesser amount reasonably agreed to by the Borrower and the Administrative Agent.
Each notice from the Borrower pursuant to this Section 2.16(a) shall specify (i) whether it proposes to increase the Revolving Credit Facility, increase an existing term loan facility and/or add a new term loan facility, (ii) if it proposes to add a new term loan facility, the proposed terms of the new term facility and (iii) the identity of each Lender and each Eligible Assignee that it has approached or proposes to approach to provide all or a portion of such increase (subject in each case to any requisite consents required under Section 10.06 ). At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender (if any) identified in such notice is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to such Lender). Each Lender (if any) identified in such notice shall endeavor to notify the Administrative Agent within the specified period for a response whether or not it agrees to provide all or a portion of such increase and, if so, the amount of such requested increase that it proposes to provide. Any Lender approached to provide all or a portion of such increase may elect or decline, in its sole discretion, to provide all or a portion of such increase in the applicable facility offered to it. Any Lender not responding within such time




period shall be deemed to have declined to provide any portion of the requested increase. Any Eligible Assignee providing any portion of the requested increase that is not an existing Lender shall become a Lender pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and its counsel (a “ New Lender Joinder Agreement ”). The Administrative Agent shall promptly notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder.
(b) Effective Date and Allocations . If pursuant to this Section the Revolving Credit Facility or an existing term loan facility is increased, or a new term loan facility is established, the Administrative Agent and the Borrower shall determine the effective date (the “ Increase Effective Date ”) and the final allocation of such increase or new term loan facility.
(c) Conditions to Effectiveness of Increase . As conditions precedent to each such increase, (i) the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the applicable Increase Effective Date signed by a Responsible Officer of such Loan Party (x) (1) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase or (2) certifying that, as of such Increase Effective Date, the resolutions delivered to the Administrative Agent on the Closing Date include approval to increase the maximum aggregate principal amount of all commitments and outstanding loans under this Agreement to an amount at least equal to $1,250,000,000, and (y) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, except to the extent that (1) such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, (2) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such date after giving effect to such qualification and (3) that for purposes of this Section 2.16 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 , and (B) no Default exists, (ii) the Administrative Agent shall have received (x) a New Lender Joinder Agreement for each Eligible Assignee (other than a Lender), if any, participating in such increase, which New Lender Joinder Agreement shall be duly executed by the Borrower and each such Eligible Assignee and acknowledged and consented to in writing by the Administrative Agent, and in the case of an increase in the Revolving Credit Facility, the Swing Line Lender and the L/C Issuer and (y) written confirmation from each existing Lender, if any, participating in such increase of the amount by which its Revolving Credit Commitment will be increased, and/or the amount of term loans and/or term loan commitments to be provided by it, and (iii) the Borrower shall have paid to the Arrangers the fees, if any, required to be paid pursuant to the Fee Letters in connection therewith.
(d) Settlement Procedures . On each Increase Effective Date, promptly following fulfillment of the conditions set forth in clause (c) of this Section 2.16 , the Administrative Agent shall notify the Lenders of the occurrence of the increase effected on such Increase Effective Date, the amount of the increase, the nature of the increase (i.e., an increase in the Revolving Credit Facility or an existing term loan facility of the establishment of a new term loan facility) and, in the case of an increase of the Revolving Credit Facility, the amount of the Revolving Credit Commitment and Applicable Percentage of each Lender as a result thereof. In the event that an increase in the Revolving Credit Facility results in any change to the Applicable Percentage of any Lender, then on the applicable Increase Effective Date (i) the participation interests of the Lenders in any outstanding Letters of Credit and Swing Line Loans shall be automatically reallocated among the Lenders in accordance with their respective Applicable Percentages after giving effect to such increase, (ii) any new Lender, and any existing Lender whose Revolving Credit Commitment has increased, shall pay to the Administrative Agent such amounts as are necessary to fund its new or increased Applicable Percentage of all existing Revolving Credit Loans, (iii) the Administrative Agent will use the proceeds thereof to pay to all existing Lenders whose Applicable Percentage is decreasing such amounts as are necessary so that each




Lender’s participation in existing Revolving Credit Loans will be equal to its adjusted Applicable Percentage, and (iv) if the applicable Increase Effective Date occurs on a date other than the last day of an Interest Period applicable to any outstanding Revolving Credit Loan that is a Eurodollar Rate Loan, then the Borrower shall pay any amounts required pursuant to Section 3.05 on account of the payments made pursuant to clause (iii) of this sentence.
(e) Conflicting Provisions . This Section shall supersede any provisions in Section 2.14 or 10.01 to the contrary.
. Cash Collateral
.
(a) Certain Credit Support Events . If (i) the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, (ii) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, (iii) the Borrower shall be required to provide Cash Collateral pursuant to Section 8.02(c) , or (iv) there shall exist a Defaulting Lender, the Borrower shall immediately (in the case of clause (iii) above) or within one Business Day (in all other cases) following any request by the Administrative Agent or the L/C Issuer, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv) above, after giving effect to Section 2.18(a)(iv) and any Cash Collateral provided by the Defaulting Lender).
(b) Grant of Security Interest . The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.17(c) . If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent or the L/C Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in one or more blocked, non-interest bearing deposit accounts at Bank of America. The Borrower shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.
(c) Application . Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.17 or Sections 2.04 , 2.05 , 2.06 , 2.18 or 8.02 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(d) Release . Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released within one Business Day following (i) the determination by the Administrative Agent and the L/C Issuer and/or the Swing Line Lender, as applicable, of the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 10.06(b)(vi) )) or (ii) the determination by the Administrative Agent and the L/C Issuer that there exists excess Cash Collateral; provided , however, the Person providing Cash Collateral and the L/C Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.




. Defaulting Lenders
.
(a) Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments . Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders”, and Section 10.01 .
(ii) Defaulting Lender Waterfall . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third , to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.17 ; fourth , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Revolving Credit Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Revolving Credit Loans under this Agreement and (y) Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.17 ; sixth , to the payment of any amounts owing to the Lenders, the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Revolving Credit Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Revolving Credit Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Revolving Credit Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Revolving Credit Loans of, or L/C Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Appropriate Lenders pro rata in accordance with the applicable Commitments hereunder without giving effect to Section 2.18(a)(iv) . Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to




this Section 2.18(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees .
(A) No Lender that is a Defaulting Lender shall be entitled to receive any fee payable under Section 2.10(a) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).
(B) Each Lender that is a Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.17 .
(C) With respect to any fee payable under Section 2.10(a) or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure . All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Lenders that are Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s Revolving Credit Commitment) but only to the extent that (x) the conditions set forth in Section 4.02(b) are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Credit Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(v) Cash Collateral, Repayment of Swing Line Loans . If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.17 .
(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swing Line Lender and the L/C Issuer agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Credit Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.18(a)(iv) ), whereupon such Lender will cease to be a Defaulting Lender;




provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
. Taxes
.
(a) Defined Terms . For purposes of this Section 3.01, the term “Lender” includes the L/C Issuer.
(b) Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes .
(i) Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws. If any applicable Laws (as determined in the good faith discretion of an applicable Withholding Agent) require the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (f) below.
(ii) If any Withholding Agent shall be required by any applicable Laws to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the applicable Withholding Agent shall withhold or make such deductions as are determined by the applicable Withholding Agent to be required based upon the information and documentation it has received pursuant to subsection (f) below, (B) the applicable Withholding Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01 ) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(c) Payment of Other Taxes by the Borrower . Without limiting the provisions of subsection (b) above, the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(d) Tax Indemnifications .
(i) The Borrower shall and does hereby indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error. The Borrower shall, and does hereby, indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the




Administrative Agent as required pursuant to Section 3.01(d)(ii) below. For the avoidance of doubt, (A) to the extent the Administrative Agent indefeasibly receives payment in full from the Borrower pursuant to the immediately preceding sentence for an amount that a Lender or the L/C Issuer was required to indemnify the Administrative Agent for pursuant to clause (y) or (z) of Section 3.01(d)(ii) , and subsequent thereto the Administrative Agent receives payment from such Lender or the L/C Issuer (including by way of set off pursuant to the last sentence of Section 3.01(d)(ii) ) for that same indemnity that was previously paid in full by the Borrower, the Administrative Agent will promptly turn over to the Borrower the amount so received (including by way of set off pursuant to the last sentence of Section 3.01(d)(ii) ) from such Lender or the L/C Issuer (but in any event not in excess of the amount previously paid by the Borrower to the Administrative Agent in respect of such indemnity) and (B) to the extent the Administrative Agent receives a payment from the Borrower pursuant to the immediately preceding sentence for an amount that a Lender or the L/C Issuer was required to indemnify the Administrative Agent for pursuant to clause (y) or (z) of Section 3.01(d)(ii) , such Lender or the L/C Issuer, as applicable, shall be liable to the Borrower for reimbursement of such payment.
(ii) Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (y) the Administrative Agent and the Borrower, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent and the Borrower, as applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Administrative Agent or the Borrower in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii) .
(e) Evidence of Payments . Upon request by the Borrower or the Administrative Agent, as the case may be, after any payment of Taxes by the Borrower or by the Administrative Agent to a Governmental Authority as provided in this Section 3.01 , the Borrower shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Administrative Agent, as the case may be.
(f) Status of Lenders; Tax Documentation .
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall




deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(f)(ii)(A) , (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(I) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(II) executed originals of IRS Form W-8ECI;
(III) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit L-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN; or
(IV) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit L-2 or Exhibit L-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit L-4 on behalf of each such direct and indirect partner;
(C)      any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal




withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D)      if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(iii) Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds . Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 3.01 , it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Recipient, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to the Borrower pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
(h) Survival . Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.




. Illegality
. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurodollar Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
. Inability to Determine Rates
. If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof, (a) the Administrative Agent determines that (i) Dollar deposits are not being offered to banks in the applicable offshore interbank market for such currency for the applicable amount and Interest Period of such Eurodollar Rate Loan or (ii) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan (in each case with respect to clause (a) above, “ Impacted Loans ”) or (b) the Administrative Agent or the Required Lenders determine that for any reason the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Eurodollar Rate Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended, (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent upon the instruction of the Required Lenders revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.
Notwithstanding the foregoing, if the Administrative Agent has made the determination described in clause (a) of the first sentence of this section, the Administrative Agent, in consultation with the Borrower




and the affected Lenders, may establish an alternative interest rate for the Impacted Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Administrative Agent revokes the notice delivered with respect to the Impacted Loans under clause (a) of the first sentence of this section, (2) the Administrative Agent determines, or the affected Lenders notify the Administrative Agent and the Borrower, that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Administrative Agent and the Borrower written notice thereof.
. Increased Costs; Reserves on Eurodollar Rate Loans
.
(a) Increased Costs Generally . If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e) ) or the L/C Issuer;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements . If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swing Line Loans held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or




the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.
(c) Certificates for Reimbursement . A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests . Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section 3.04 shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Reserves on Eurodollar Rate Loans . The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Revolving Credit Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Revolving Credit Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.
. Compensation for Losses
. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Revolving Credit Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Revolving Credit Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Revolving Credit Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower;
(c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13 ; or
(d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan;
including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05 , each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Revolving Credit Loan by a matching deposit or other borrowing in the London interbank eurodollar market




for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.
. Mitigation Obligations; Replacement of Lenders
.
(a) Designation of a Different Lending Office . If any Lender requests compensation under Section 3.04 , or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender, the L/C Issuer, or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01 , or if any Lender gives a notice pursuant to Section 3.02 , then at the request of the Borrower such Lender or the L/C Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Revolving Credit Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04 , as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02 , as applicable, and (ii) in each case, would not subject such Lender or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the L/C Issuer in connection with any such designation or assignment.
(b) Replacement of Lenders . If any Lender requests compensation under Section 3.04 , or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.06(a) , the Borrower may replace such Lender in accordance with Section 10.13 .
. Survival
. All of the Borrower’s obligations under this Article III shall survive termination of the Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.
ARTICLE IV. CONDITIONS PRECEDENT
. Conditions of Effectiveness
. The effectiveness of this Agreement is subject to satisfaction of the following conditions precedent:
(a) The Administrative Agent’s receipt of the following, each of which shall be original, or e-mail (in a .pdf format) or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:
(i) executed counterparts of this Agreement and the Guaranty Agreement, in such number as reasonably requested by Administrative Agent;
(ii) a Revolving Credit Note executed by the Borrower made to the order of each Lender requesting a Revolving Credit Note (which, to the extent delivered via e-mail (in a .pdf format) or telecopies, shall be followed promptly by originals);
(iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;
(iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and each Loan Party




is validly existing, in good standing and qualified to engage in business in (A) its jurisdiction of organization and (B) each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect;
(v) a favorable opinion of Fried, Frank, Harris, Shriver and Jacobson LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request;
(vi) a favorable opinion of Venable LLP, local counsel to the Loan Parties in Maryland, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request;
(vii) a certificate of a Responsible Officer of the Borrower either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by each Loan Party, and the validity against each Loan Party, of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;
(viii) a certificate signed by a Responsible Officer of the Borrower certifying that (1) no action, suit, investigation or proceeding is pending or, to the knowledge of any Loan Party, threatened in any court or before any arbitrator or Governmental Authority that (A) challenges the validity or enforceability of this Agreement, any other Loan Document or any of the transactions contemplated hereby or thereby, or otherwise purports to restrict or prohibit the performance of all or any portion of this Agreement, any other Loan Document or any of the transactions contemplated hereby or thereby or (B) could reasonably be expected to have a Material Adverse Effect and (2) since the date of the Audited Financial Statements, there has not occurred any event or condition that has had or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect;
(ix) a Solvency Certificate from the Parent certifying that, after giving effect to the transactions to occur on the Closing Date (including, without limitation, all Credit Extensions to occur on the Closing Date), the Parent and its Subsidiaries on a consolidated basis are Solvent;
(x) the financial statements referenced in Sections 5.05(a) and (b) ;
(xi) a duly completed Compliance Certificate, giving pro forma effect to the transactions to occur on the Closing Date (including, without limitation, all Credit Extensions to occur on the Closing Date); and
(xii) evidence that substantially concurrently with the Closing Date all Indebtedness under the Existing Credit Agreement (including all unpaid principal, interest, fees, expenses and other amounts owing thereunder or in connection therewith) has been repaid in full and all commitments thereunder have been terminated.
(b) The Administrative Agent and each Lender shall have received all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
(c) All fees required hereunder or under the Fee Letters to be paid on or before the Closing Date to the Administrative Agent, the Arrangers and the Lenders shall have been paid.
(d) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced (which invoice may be in summary form) prior to or on the




Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings ( provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).
Without limiting the generality of the provisions of the last paragraph of Section 9.03 , for purposes of determining compliance with the conditions specified in this Section 4.01 , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
. Conditions to all Credit Extensions
. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:
(a) The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of the proposed Credit Extension, except (i) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, (ii) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such date after giving effect to such qualification and (iii) for purposes of this Section 4.02 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 ;
(b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.
(c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.
(d) Any such proposed Credit Extension under the Revolving Credit Facility does not exceed the unused portion of the Revolving Credit Facility at such time.
Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrower and the Parent each represents and warrants to the Administrative Agent and the Lenders that:
. Existence, Qualification and Power
. Each Loan Party, and each of its Subsidiaries, (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party and consummate the transactions contemplated by the Loan Documents, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its




business requires such qualification or license; except in each case referred to in clause (a) (solely with respect to any Person that is not a Loan Party), clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
. Authorization; No Contravention
. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law, except with respect to any breach or contravention or payment referred to in clauses (b) and (c), to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.
. Governmental Authorization; Other Consents
. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or (b) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents, except for the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect.
. Binding Effect
. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by bankruptcy insolvency, reorganization, receivership, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.
. Financial Statements; No Material Adverse Effect
.
(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, (ii) fairly present the consolidated financial condition of the Parent and its Subsidiaries as of the date thereof and the consolidated results of their operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.
(b) The unaudited consolidated balance sheet of the Parent and its Subsidiaries dated September 30, 2014, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, (ii) fairly present the consolidated financial condition of the Parent and its Subsidiaries as of the date thereof and the consolidated results of their operations for the period covered thereby and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including liabilities




for taxes, material commitments and Indebtedness; subject, in the case of clauses (i) and (ii) above, to the absence of footnotes and to normal year-end audit adjustments.
(c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(d) The consolidated forecasted balance sheet, statement of income and cash flows of the Consolidated Group delivered pursuant to Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Parent’s best estimate of its future financial condition and performance; provided , such forecasts are not to be viewed as facts and that actual results during the period or periods covered by such forecasts may differ from such forecasts and that the differences may be material.
. Litigation
. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower and the Parent, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement, any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if adversely determined, could reasonably be expected to have a Material Adverse Effect.
. No Default
. Neither any Loan Party nor any Subsidiary thereof is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.
. Ownership of Property
. Each Loan Party and each of its Subsidiaries has good record and insurable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
. Environmental Compliance
.
(a) The Loan Parties and their respective Subsidiaries are not aware of any Environmental Liabilities or claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(b) No property currently or, to the knowledge of the Loan Parties, formerly owned or operated by any Loan Party or any of its Subsidiaries, is listed or, to the knowledge of the Loan Parties, formally proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or, to the knowledge of the Loan Parties, is adjacent to any such property except (i) with respect to any Unencumbered Eligible Property, as disclosed in the Environmental Reports or as could not result in a material Environmental Liability for any Loan Party or any of its Subsidiaries, or (ii) with respect to any other property, as could not reasonably be expected to have a Material Adverse Effect.
(c) Hazardous Materials have not been released, discharged or disposed of on, at, under or from (i) any Unencumbered Eligible Property except as disclosed in the Environmental Reports or in a manner, form or amount that could not reasonably be expected to result in a material Environmental Liability for any Loan Party or any Subsidiary, or (ii) any property (other than an Unencumbered Eligible Property) currently




or, to the knowledge of the Loan Parties, formerly owned or operated by any Loan Party or any of its Subsidiaries, except as could not reasonably be expected to have a Material Adverse Effect.
(d) Neither any Loan Party nor any of its Subsidiaries is undertaking, or has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at, on, under, or from any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, that could result in a material Environmental Liability for any Loan Party or any of its Subsidiaries, (i) except, with respect to any Unencumbered Eligible Property, as disclosed in the Environmental Reports or, with respect to any such investigation or assessment or remedial or response action initiated after the Closing Date, as disclosed to the Administrative Agent in writing, or (ii) except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, with respect to any other property (other than an Unencumbered Eligible Property) either currently or formerly owned or operated by any Loan Party or any of its Subsidiaries or any other property to or at which any Loan Party or any of its Subsidiaries has disposed of, transported or arranged for the transportation or disposal of any Hazardous Materials.
. Insurance
. The properties of each Loan Party and its Subsidiaries are insured with one or more Third Party Insurance Companies and/or pursuant Permitted Self Insurance, in compliance with the provisions of Section 6.07 and otherwise in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Loan Party or the applicable Subsidiary operates.
. Taxes
. Each Loan Party and each of its Subsidiaries have filed all federal, state and other material tax returns and reports required to be filed, and have paid all federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (a) which are not overdue for more than thirty (30) days or (b) which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against any Loan Party or any Subsidiary thereof that would, if made, have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement; provided , that for the sake of clarity, the Tax Protection Agreement (as in effect on the Closing Date or as modified thereafter with the prior written consent of the Administrative Agent) shall not be treated as a tax sharing agreement.
. ERISA Compliance
.
(a) Except to the extent that, either individually or in the aggregate, any failure to comply could not reasonably be expected to have a Material Adverse Effect, (i) each Plan and, to the knowledge of the Borrower and the Parent, each Multiemployer Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state laws, (ii) each Single Employer Pension Plan and, to the knowledge of the Borrower and the Parent, each Multiemployer Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service and (iii) to the best knowledge of the Borrower and the Parent, nothing has occurred that would prevent or cause the loss of such tax-qualified status.




(b) There are no pending or, to the best knowledge of the Borrower and the Parent, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) (i) Except as disclosed in Schedule 5.12(c) , no ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Single Employer Pension Plan or Multiemployer Plan; (ii) the Borrower and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Single Employer Pension Plan and Multiemployer Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) the Borrower and each ERISA Affiliate has timely made all required contributions and payments to each Multiemployer Plan; (iv) as of the most recent valuation date for any Single Employer Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and neither the Borrower nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date; (v) neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (vi) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (vii) no Single Employer Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Single Employer Pension Plan.
(d) Neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any unsatisfied obligation to contribute to, or liability under, any active or terminated Single Employer Pension Plan or Multiemployer Plan other than (A) on the Closing Date, those listed on Schedule 5.12(d) hereto and (B) thereafter, Single Employer Pension Plans or Multiemployer Plans not otherwise prohibited by this Agreement.
(e) The assets of the Borrower and each Guarantor are not “plan assets” within the meaning of 29 C.F.R. 2510.3-101 as modified by section 3(42) or ERISA.
. Subsidiaries; Equity Interests
. Schedule 5.13 (a) is a complete and accurate list of all Subsidiaries of the Parent as of the Closing Date, showing (as to each such Person) the jurisdiction of its incorporation or organization, the type of organization it is and its true and correct U.S. taxpayer ID number and (b) sets forth the Parent’s true and correct U.S. taxpayer ID number.
. Margin Regulations; Investment Company Act
.
(a) No part of the proceeds of any Credit Extension will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of Regulation T, U or X of the FRB as in effect from time to time. Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of any Loan Party only or of the Parent and its Subsidiaries on a consolidated basis) will be margin stock.
(b) None of the Parent, any Person Controlling the Parent, or any Subsidiary of the Parent is or is required to be registered as an “investment company” under the Investment Company Act of 1940.
. Disclosure




. The Borrower and the Parent have disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which they or any of their respective Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished), at the time so furnished, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower and the Parent represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
. Compliance with Laws
. Each Loan Party and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
. Anti-Money Laundering Laws; Anti-Corruption Laws
(a) . (a) Neither the Parent nor the Borrower, nor any of their respective Subsidiaries, nor, to the knowledge of the Parent or the Borrower, any Related Party thereof (i) has violated in the last five years or is currently in violation of any applicable anti-money laundering law or (ii) has engaged in the last five years or currently engages in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of offenses designated in any applicable law, regulation or other binding measure implementing the "Forty Recommendations" and "Nine Special Recommendations" published by the Organisation for Economic Cooperation and Development's Financial Action Task Force on Money Laundering.
(b) In the last five years, the Parent, the Borrower and their respective Subsidiaries have conducted their businesses in compliance in all material respects with applicable Anti-Corruption Laws and have instituted and maintained policies and procedures reasonably designed to promote and achieve compliance with such laws.
. Intellectual Property; Licenses, Etc.
Except as could not reasonably be expected to have a Material Adverse Effect, (a) the Parent and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, (b) no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Parent or any Subsidiary infringes upon any rights held by any other Person and (c) no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened.
. OFAC; Designated Jurisdictions
. None of the Loan Parties, any of their respective Subsidiaries, or, to the knowledge of the Parent, the Borrower and their respective Subsidiaries, any Related Party thereof, is (i) a Sanctioned Person, (ii) located, organized or resident in a Designated Jurisdiction or (iii) is or has been (within the previous five (5) years) engaged in any transaction with any Sanctioned Person or any Person who is located, organized or resident in any Designated Jurisdiction to the extent that such transactions would violate Sanctions. No Credit




Extension, nor the proceeds from any Credit Extension, has been used, directly or indirectly, or has otherwise been made available to fund any activity or business in any Designated Jurisdiction or to fund any activity or business with any Sanctioned Person, or in any other manner that will result in a violation by any Loan Party or Subsidiary thereof, or any Lender, the Arrangers, the Administrative Agent, the L/C Issuer or the Swing Line Lender, of Sanctions. Neither the making of the Loans hereunder nor the use of proceeds thereof will violate the Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the Act.
. Solvency
. The Parent and its Subsidiaries on a consolidated basis are Solvent.
. Casualty, Etc
. Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
. Unencumbered Properties
. Each Property included in any calculation of Unencumbered Asset Value or Unencumbered NOI satisfied, at the time of such calculation, all of the requirements contained in the definition of “Unencumbered Property Criteria.”
. Subsidiary Guarantors
. Prior to the Investment Grade Release, each Unencumbered Property Subsidiary is a Guarantor. Each Unencumbered Property Subsidiary (if any) that is a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness is a Guarantor.
ARTICLE VI. AFFIRMATIVE COVENANTS
At all times prior to the Facility Termination Date, the Parent and the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01 , 6.02 , and 6.03 ) cause each of their respective Subsidiaries to:
. Financial Statements
. Deliver to the Administrative Agent for further distribution to each Lender:
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Parent (commencing with the fiscal year ending December 31, 2014), a consolidated balance sheet of the Consolidated Group as at the end of such fiscal year, and the related consolidated statements of income or operations, changes in shareholders’ equity, and cash flows for such fiscal year, setting forth in each case, to the extent required to be included in the Parent’s filings with the SEC, in comparative form the figures as of the end of and for the previous fiscal year (which comparative shall in the form and to the extent required to be included in the Parent’s filings with the SEC), all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit; it being understood and agreed that the delivery by the Parent of its Annual Report on Form 10-K with




the SEC (satisfying the SEC’s requirements for 10-K filings) within the time period described in this clause (a) accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders satisfying the requirements of this clause (a) shall satisfy the requirements of this clause (a); and
(b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent (commencing with the fiscal quarter ended March 31, 2015), a consolidated balance sheet of the Consolidated Group as at the end of such fiscal quarter, the related consolidated statements of income or operations for such fiscal quarter and for the portion of the Parent’s fiscal year then ended, and the related consolidated statements of changes in shareholders’ equity, and cash flows for the portion of the Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year (which comparatives shall in the form and to the extent required to be included in the Parent’s filings with the SEC), all in reasonable detail, certified by the chief executive officer, chief financial officer, treasurer or controller of the Parent as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Consolidated Group in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; it being understood and agreed that the delivery by the Parent of its Quarterly Report on Form 10-Q with the SEC (satisfying the SEC’s requirements for 10-Q filings) within the time period described in this clause (b) shall satisfy the requirements of this clause (b);
(c) as soon as available, but in any event at least 45 days after the end of each fiscal year of the Parent, forecasts prepared by management of the Parent, in form reasonably satisfactory to the Administrative Agent, of consolidated balance sheets and statements of income or operations and cash flows of the Consolidated Group on a quarterly basis for such fiscal year (including the fiscal year in which the Maturity Date occurs);
(d) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ending December 31, 2014), a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, changes in shareholders’ equity, and cash flows for such fiscal year, setting forth in each case, to the extent required to be included in the Borrower’s filings with the SEC, in comparative form the figures as of the end of and for the previous fiscal year (which comparative shall be in the form and to the extent required to be included in the Borrower’s filings with the SEC), all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit; it being understood and agreed that the delivery by the Borrower of its Annual Report on Form 10-K with the SEC (satisfying the SEC’s requirements for 10-K filings) within the time period described in this clause (d) accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders satisfying the requirements of this clause (d) shall satisfy the requirements of this clause (d); and
(e) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended March 31, 2015), a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or operations for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, and the related consolidated statements of changes in shareholders’ equity, and cash flows for the portion of the Borrower’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year (which comparatives shall be in the form and to




the extent required to be included in the Borrower’s filings with the SEC), all in reasonable detail, certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Consolidated Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; it being understood and agreed that the delivery by the Borrower of its Quarterly Report on Form 10-Q with the SEC (satisfying the SEC’s requirements for 10-Q filings) within the time period described in this clause (e) shall satisfy the requirements of this clause (e).
As to any information contained in materials furnished pursuant to Section 6.02(c) , the Borrower and the Parent shall not be separately required to furnish such information under subsection (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower and the Parent to furnish the information and materials described in subsections (a) and (b) above at the times specified therein.
. Certificates; Other Information
. Deliver to the Administrative Agent for further distribution to each Lender:
(a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal year ended December 31, 2014, a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, chief accounting officer, treasurer or controller of the Parent (which delivery may, unless the Administrative Agent requests executed originals, be by electronic communication including fax or e-mail and shall be deemed to be an original authentic counterpart thereof for all purposes); each Compliance Certificate shall be accompanied by (i) copies of the statements of Net Operating Income and Unencumbered NOI attributable to each Unencumbered Eligible Property for such fiscal quarter or year, prepared on a basis consistent with the Audited Financial Statements and otherwise in form and substance reasonably satisfactory to the Administrative Agent, together with a certification by the chief executive officer, chief financial officer, chief accounting officer, treasurer or controller of the Parent that the information contained in such statement fairly presents Net Operating Income and Unencumbered NOI attributable to each Unencumbered Property for such periods and (ii) a calculation, in form and substance satisfactory to the Administrative Agent, of the Unencumbered Property Value of each Property and the Unencumbered Asset Value as of the last day of the fiscal period covered by such Compliance Certificate;
(b) promptly after any request by the Administrative Agent, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or similar governing body) (or the audit committee of the board of directors or similar governing body) of any Loan Party by independent accountants in connection with the accounts or books of any Loan Party or any of its Subsidiaries, or any audit of any of them;
(c) promptly after the same are available, (x) copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders or other equity holders of the Parent, (y) copies of each annual report, proxy, financial statement or other financial report sent to the limited partners of the Borrower, and (z) copies of all annual, regular, periodic and special reports and registration statements which any Loan Party or any Subsidiary thereof files with the SEC under Section 13 or 15(d) of the Securities Exchange Act, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(d) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02 ;




(e) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding material issues concerning financial or other operational results of any Loan Party or any Subsidiary thereof;
(f) promptly after the assertion or occurrence thereof, notice of any action or proceeding against or of any written notice of noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect; and
(g) promptly, such additional material information regarding the business, financial or corporate affairs of any Loan Party or any Subsidiary thereof, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time reasonably request.
Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Parent posts such documents, or provides a link thereto on the Parent’s website on the Internet at the website address listed on Schedule 10.02 ; or (ii) on which such documents are posted on the Parent’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Parent shall notify the Administrative Agent (by facsimile or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions ( i.e. , soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Parent with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
The Borrower and the Parent each hereby acknowledges that (a) the Administrative Agent and/or the Arrangers may, but shall not be obligated to, make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Parent or the Borrower hereunder (collectively, “ Borrower Materials ”) by posting the Borrower Materials on Debt Domain, IntraLinks, Syndtrak, ClearPar or another similar electronic system (the “ Platform ”) and (b) certain of the Lenders (each, a “ Public Lender ”) may have personnel who do not wish to receive material non-public information with respect to the Parent or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. The Parent and the Borrower each hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be either (1) those Borrower Materials that are filed with the SEC or (2) those that are not filed with the SEC but are clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof (collectively, “ Public Borrower Materials ”); (x) by filing Borrower Materials with SEC or marking Borrower Materials that are not filed with the SEC “PUBLIC,” the Parent and the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Parent or the Borrower or their respective securities for purposes of United States Federal and state securities laws ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07 ); (y) all Public Borrower Materials are permitted to be made available through a portion of the Platform designated “Public Side Information;” and (z) the Administrative Agent and the Arrangers shall be entitled to treat the Borrower Materials that are not Public Borrower Materials as being suitable only for posting on a portion of the Platform not designated “Public Side Information.”




. Notices
. Promptly notify the Administrative Agent for further distribution to each Lender:
(a) of the occurrence of any Default;
(b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of any Loan Party or any Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting Loan Party or any Subsidiary thereof, including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any ERISA Event that could reasonably be expected to have a Material Adverse Effect;
(d) of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof, including any determination by the Parent or the Borrower referred to in Section 2.11(b) ; and
(e) of any announcement by Moody’s, Fitch or S&P of any change or possible change in a Debt Rating; provided , that the provisions of this clause (e) shall not apply until such time, if any, as the Parent or the Borrower obtains an Investment Grade Rating.
Each notice pursuant to this Section 6.03 (other than Section 6.03(e) ) shall be accompanied by a statement of a Responsible Officer of the Parent setting forth details of the occurrence referred to therein and stating what action the Parent has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.
. Payment of Obligations
. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Parent, the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except in the case of the foregoing clauses (a) through (c) as could not reasonably be expected to have a Material Adverse Effect.
. Preservation of Existence, Etc .
(a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.05 and except, solely in the case of a Subsidiary that is not a Loan Party, where the failure to do so could not reasonably be expected to have a Material Adverse Effect, (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.
. Maintenance of Properties
. (a) Maintain, preserve and protect all of its properties and equipment necessary in the operation of its business in good working order; (b) make all necessary repairs thereto and renewals and replacements thereof and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities, except in each case of the foregoing clauses (a) through (c) where the failure to do so could not reasonably be expected to have a Material Adverse Effect.




. Maintenance of Insurance
(a) . Maintain with financially sound and reputable insurance companies that are not Affiliates of the Parent (“ Third Party Insurance Companies ”), insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons (which insurance shall, in any event, include terrorism coverage to the extent generally available at commercially reasonable rates); provided , that the Loan Parties and their Subsidiaries may maintain such insurance under a plan by self-insurance, or a large deductible program, or a captive insurance arrangement (in excess of the amounts reinsured with Third Party Insurance Companies) (collectively, “ Self-Insurance ”) instead of with one or more Third Party Insurance Companies if (but only if) the Administrative Agent has consented in writing to the amount, types and terms and conditions of all such Self Insurance (such written consent not to be unreasonably withheld), it being understood and agreed that all Self-Insurance existing on the Closing Date has been consented to by the Administrative Agent.
. Compliance with Laws
. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
. Books and Records
. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Parent or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Parent or such Subsidiary, as the case may be.
. Inspection Rights
. Permit representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours, upon reasonable advance notice to the Borrower; provided , however , that so long as no Event of Default then exists, such visits shall be limited to once in any calendar year.
. Use of Proceeds
. Use the proceeds of the Credit Extensions for general corporate purposes of the Borrower and its Subsidiaries (including for working capital, capital expenditures, and acquisitions, development and redevelopment of real estate properties) not in contravention of any Law or of any Loan Document.
. Additional Unencumbered Properties; Additional Guarantors
.
(a) If at any time the Borrower intends to include as an Unencumbered Eligible Property any Proposed Real Estate, prior to any such inclusion the Borrower shall notify the Administrative Agent in writing of its desire to include such Proposed Real Estate as an Unencumbered Eligible Property.
(b) The notice referred to in clause (a) above shall include (i) if such inclusion is to occur prior to the Investment Grade Release, a list of each Subsidiary that is (or upon the acquisition or leasing thereof




or upon the acquisition of the owner or lessee thereof will be) the Direct Owner or an Indirect Owner thereof and (ii) if such inclusion is to occur on or after the Investment Grade Release, a list of each Subsidiary of the Borrower (if any) that is (or upon the acquisition or leasing thereof or upon the acquisition of the owner or lessee thereof will be) the Direct Owner or an Indirect Owner thereof and will at the time such Proposed Real Estate is to be included as an Unencumbered Eligible Property be a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness (each such Subsidiary under clause (i) or (ii) (including for the avoidance of doubt any Joint Venture Partner) being referred to hereinafter as a “ Proposed Unencumbered Property Subsidiary ”);
(c) With respect to each Proposed Unencumbered Property Subsidiary, at least 10 days (or such shorter period as the Administrative Agent may agree) prior to the date the applicable Proposed Real Estate is to be included as an Unencumbered Eligible Property, the Borrower shall
(vi) provide the Administrative Agent with the U.S. taxpayer identification number for such Proposed Unencumbered Property Subsidiary, and
(vii) provide the Administrative Agent, on behalf of the Lenders, with all documentation and other information concerning each such Proposed Unencumbered Property Subsidiary that the Administrative Agent or any Lender may reasonably request in order to comply with their obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.
(d) At or prior to the time that any Proposed Real Property that has as its Direct Owner or Indirect Owner a Proposed Unencumbered Property Subsidiary is included as an Unencumbered Eligible Property, the Borrower shall cause each such Proposed Unencumbered Property Subsidiary to
(viii) execute and deliver a joinder agreement to the Guaranty Agreement in form and substance reasonably satisfactory to the Administrative Agent, and
(ix) deliver to the Administrative Agent the items referenced in Sections 4.01(a)(iii) and (iv) with respect to each such Proposed Unencumbered Property Subsidiary, and solely to the extent requested by the Administrative Agent in its reasonable discretion, deliver to the Administrative Agent a favorable opinion of counsel (which counsel shall be reasonably acceptable to the Administrative Agent), addressed to the Administrative Agent and each Lender, as to such matters concerning each such Proposed Unencumbered Property Subsidiary and the Guaranty Agreement as the Administrative Agent may reasonably request.
(e) If at any time the Parent desires to become a Guarantor, it shall execute and deliver to the Administrative Agent a joinder agreement to the Guaranty Agreement in form and substance reasonably satisfactory to the Administrative Agent; (b) deliver to the Administrative Agent the items referenced in Sections 4.01(a)(iii) and (iv) with respect to the Parent; and (c) solely to the extent requested by the Administrative Agent in its reasonable discretion, deliver to the Administrative Agent a favorable opinion of counsel (which counsel shall be reasonably acceptable to the Administrative Agent), addressed to the Administrative Agent and each Lender, as to such matters concerning the Parent and the Guaranty Agreement as the Administrative Agent may reasonably request.
(f) Notwithstanding anything to the contrary contained in this Agreement, in the event that the results of any such “know your customer” or similar investigation conducted by the Administrative Agent with respect to any Proposed Unencumbered Property Subsidiary is not reasonably satisfactory to the Administrative Agent, such Person shall not be permitted to become a Guarantor, and for the avoidance of doubt no Property owned or ground leased by such Subsidiary shall be included as an Unencumbered Eligible Property, as applicable, without the prior written consent of the Administrative Agent.
. Compliance with Environmental Laws
. Except as would not reasonably be expected to have a Material Adverse Effect, comply, and use commercially reasonable efforts to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits




necessary for its operations and properties; and conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in compliance with applicable Environmental Laws; provided , however , that neither the Parent nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.
. Sanctions; Anti-Money Laundering Laws; Anti-Corruption Laws
. Conduct its businesses (a) in compliance with applicable Anti-Corruption Laws and applicable anti-money laundering laws and maintain policies and procedures reasonably designed to promote and achieve compliance with all such laws and (b) in a manner that will not result in a violation by the Borrower or its Subsidiaries, or any individual or entity participating in the transaction, whether as Lender, Arranger, Administrative Agent, L/C Issuer, Swing Line Lender, or otherwise, of Sanctions.
. Further Assurances
. Promptly upon request by the Administrative Agent, (a) correct any material defect or manifest error that may be discovered in any Loan Document and (b) do, execute and take any and all such further acts, deeds, certificates and assurances and other instruments as the Administrative Agent may reasonably require from time to time in order to carry out more effectively the purposes of the Loan Documents.
. Maintenance of REIT Status; New York Stock Exchange or NASDAQ Listing
. The Parent will, at all times (i) continue to be organized and operated in a manner that will allow it to qualify for taxation as a REIT and (ii) remain publicly traded with securities listed on the New York Stock Exchange or the NASDAQ Stock Market.
ARTICLE VII. NEGATIVE COVENANTS
At all times prior to the Facility Termination Date, the Parent and the Borrower shall not, nor shall they permit any of their respective Subsidiaries to, directly or indirectly:
. Liens
. Create, incur, assume or suffer to exist any Lien on (i) any Unencumbered Eligible Property other than Permitted Property Encumbrances, (ii) any Equity Interest of (x) the Borrower owned by the Parent or (y) any Unencumbered Property Subsidiary, in each case other than Permitted Equity Encumbrances or (iii) any income from or proceeds of any of the foregoing; or sign, file or authorize under the Uniform Commercial Code of any jurisdiction a financing statement that includes in its collateral description any portion of any Unencumbered Eligible Property (unless such description relates to Permitted Property Encumbrance), any Equity Interest of the Borrower owned by the Parent (unless such description relates to Permitted Equity Encumbrance), any Equity Interest of any Unencumbered Property Subsidiary (unless such description relates to Permitted Equity Encumbrance) or any income from or proceeds of any of the foregoing.
. Investments
. Make any Investments, except:
(a) Investments held by the Parent and its Subsidiaries in the form of cash or Cash Equivalents;
(b) Investments by any Loan Party or Subsidiary thereof in (i) any Loan Party or any Subsidiary of a Loan Party or (ii) any Unconsolidated Affiliate so long as, after giving effect to any such Investment, (x) the aggregate amount of Investments made in reliance on this Section 7.02(b)(ii) does not exceed 10% of the Total Asset Value at such time and (y) the aggregate amount of Investments made in reliance on this




Section 7.02(b)(ii) , when taken together with the aggregate amount of Investments made in reliance on Sections 7.02(c) , (d) and (e) , do not exceed 25% of the Total Asset Value at such time;
(c) Investments in unimproved land holdings so long as, after giving effect to any such Investment, (i) the aggregate amount of Investments made in reliance on this Section 7.02(c) does not exceed 5% of the Total Asset Value at such time and (ii) the aggregate amount of Investments made in reliance on this Section 7.02(c) , when taken together with the aggregate amount of Investments made in reliance on Sections 7.02(b)(ii) , (d) and (e) , does not exceed 25% of the Total Asset Value at such time;
(d) Investments (whether originated or acquired by the Parent or a Subsidiary thereof) consisting of commercial mortgage loans, commercial real estate-related mezzanine loans and commercial real estate-related notes receivable so long as, after giving effect to any such Investment, (i) the aggregate amount of Investments made in reliance on this Section 7.02(d) does not exceed 10% of the Total Asset Value at such time and (ii) the aggregate amount of Investments made in reliance on this Section 7.02(d) , when taken together with the aggregate amount of Investments made in reliance on Sections 7.02(b)(ii) , (c) and (e) , does not exceed 25% of the Total Asset Value at such time;
(e) Investments in respect of (x) costs to construct Real Property ( i.e. , construction in progress) and (y) Real Property under development, in each case so long as after giving effect to any such Investment, (i) the aggregate amount of Investments made in reliance on this Section 7.02(e) (including as outstanding Investments for purposes of such calculation Borrower’s reasonable projection of (x) costs to complete construction of Real Properties that are then under construction and (y) costs to complete development of Real Properties) does not exceed 20% of the Total Asset Value at such time and (ii) the aggregate amount of Investments made in reliance on this Section 7.02(e) , when taken together with the aggregate amount of Investments made in reliance on Sections 7.02(b)(ii) , (c) and (d) , does not exceed 25% of the Total Asset Value at such time;
(f) Investments through any interest, whether fee, leasehold, operating or management contract or otherwise, in Real Property (including any ancillary facilities, such as an observatory attached to or part of any such Real Property) owned, held, leased or managed by the Borrower or a Subsidiary thereof, and other Investments incidental thereto not constituting (i) an Investment in an unimproved land holding, (ii) a commercial mortgage loan, commercial real estate-related mezzanine loan or commercial real estate-related note receivable, (iii) an Investment in an Unconsolidated Affiliate or (iv) an Investment in respect of costs to construct or develop a Real Property;
(g) equity Investments owned as of the Closing Date in Subsidiaries;
(h) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
(i) the purchase or other acquisition of all or a portion of the Equity Interests of any Person that (x) owns, leases (whether pursuant to a master lease, ground lease or otherwise) or manages a Real Property or an observatory or (y) owns a commercial mortgage loan, commercial real estate-related mezzanine loan or commercial real estate-related note receivable; provided that (A) after giving effect to such purchase or other acquisition of such Equity Interests, such Person is not an Unconsolidated Affiliate, (B) if such Person owns an Investment of the type referred to in subclause (y) of this clause (i), the provisions of clause (d) of this Section 7.02 are satisfied (assuming that such Investment held by such Person, and not the Equity Interests of such Person, is being acquired), (C) if such Person owns an unimproved land holding, the provisions of clause (c) of this Section 7.02 are satisfied (assuming that the unimproved land holding held by such Person, and not the Equity Interests of such Person, is being acquired) and (D) if such Person owns a Real Property under construction or development, the provisions of clause (e) of this Section 7.02 are satisfied (assuming that the Real Property under construction or development held by such Person, and not the Equity Interests of such Person, is being acquired);
(j) Investments in Swap Contracts permitted under Section 7.03 entered into in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments,




investments, assets or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view”;
provided , that notwithstanding the foregoing, in no event shall (i) the Parent or any of its Subsidiaries make an Investment in reliance on any of clauses (b)(ii), (c), (d) and (e) of this Section 7.02 if, immediately before or immediately after giving effect thereto, an Event of Default has occurred and is continuing or would result therefrom and (ii) the Parent be permitted to make any Investment at any time that it is not a Guarantor, except as permitted under Section 7.14 .
. Indebtedness
. Create, incur, assume or suffer to exist any Indebtedness (other than Indebtedness exclusively among members of the Consolidated Group) unless (a) no Event of Default has occurred and is continuing immediately before and after the incurrence of such Indebtedness and (b) immediately after giving effect to the incurrence of such Indebtedness, the Parent and its Subsidiaries shall be in compliance, on a pro forma basis, with the provisions of Section 7.11 ;
provided , that notwithstanding the foregoing, in no event shall the Parent or any Unencumbered Property Subsidiary be a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness unless it is a Guarantor.
. Minimum Property Condition
. Suffer or permit a failure to comply with the Minimum Property Condition at all times.
. Fundamental Changes; Dispositions
. Merge, dissolve, liquidate, consolidate with or into another Person, make any Disposition or, in the case of any Subsidiary of the Parent, issue, sell or otherwise Dispose of any of such Subsidiary’s Equity Interests to any Person, except:
(a) any Subsidiary of the Borrower may merge or consolidate with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person and or (ii) any one or more other Subsidiaries of the Borrower, provided that if any Subsidiary Guarantor is merging with another Subsidiary of the Borrower that is not a Subsidiary Guarantor, such Subsidiary Guarantor shall be the continuing or surviving Person (unless such Subsidiary Guarantor ceases to be a Subsidiary Guarantor as the result of such merger or consolidation);
(b) any Subsidiary of the Borrower may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or another Subsidiary of the Borrower; provided that if the transferor in such a transaction is a Subsidiary Guarantor that will remain a Subsidiary Guarantor after giving effect to such Disposition, then the transferee must be the Borrower or a Subsidiary Guarantor;
(c) Dispositions of obsolete or worn out equipment, whether now owned or hereafter acquired, in the ordinary course of business;
(d) Dispositions of property by any Subsidiary of the Borrower to the Borrower or another Subsidiary of the Borrower; provided that if the transferor is a Subsidiary Guarantor, then the transferee must be the Borrower or a Subsidiary Guarantor;
(e) Investments permitted by Section 7.02 ; and
(f) mergers, dissolutions, liquidations, consolidations or Dispositions not otherwise permitted above; provided that:
(i) no Event of Default has occurred and is continuing immediately before and after such transaction;
(ii) immediately upon giving effect thereto, the Parent and its Subsidiaries shall be in compliance, on a pro forma basis, with the provisions of Section 7.11 ; and




(iii) in the event of any Disposition of an Unencumbered Eligible Property for which a Direct Owner or an Indirect Owner is a Guarantor or a Disposition of any such Direct Owner or Indirect Owner: (A) the representations and warranties contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, are true and correct in all material respects on and as of the date thereof and immediately after giving effect thereto, except (1) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, (2) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such applicable date (including such earlier date set forth in the foregoing clause (1)) after giving effect to such qualification and (3) for purposes of this Section 7.05 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 and (B) the provisions of Section 10.19(b) or (c) , as applicable, shall be satisfied.
Notwithstanding anything to the contrary contained herein, in no event shall the Parent or the Borrower be permitted to (i) merge, dissolve or liquidate or consolidate with or into any other Person unless after giving effect thereto the Parent or the Borrower, as applicable, is the sole surviving Person of such transaction and no Change of Control results therefrom or (ii) engage in any transaction pursuant to which it is reorganized or reincorporated in any jurisdiction other than a State of the United States of America or the District of Columbia.
. Restricted Payments
. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that the following shall be permitted:
(a) each Subsidiary of the Borrower may make Restricted Payments pro rata to the holders of its Equity Interests;
(b) the Parent and each Subsidiary thereof may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person or its direct or indirect parent;
(c) (i) the Parent and each Subsidiary thereof may purchase, redeem or otherwise acquire Equity Interests or warrants or options to obtain such Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its or its direct or indirect parent’s common stock or other common Equity Interests and (ii) the Parent and/or the Borrower may purchase, redeem or otherwise acquire limited partnership interests of the Borrower held by a limited partner thereof in exchange for Equity Interests of the Parent and/or the Borrower so long as, after giving effect to any such purchase, redemption or other acquisition, a Change of Control does not occur;
(d) the Borrower shall be permitted to declare and make Restricted Payments on or in respect of its Equity Interests, in an aggregate amount for any fiscal year of the Parent equal to the greater of (i) 95% of Funds From Operations for such fiscal year and (ii) such amount that will result in the Parent receiving the necessary amount of funds required to be distributed to its equity holders in order for the Parent to (x) maintain its status as a REIT for federal and state income tax purposes and (y) avoid the payment of federal or state income or excise tax; provided , however , (1) if an Event of Default under Section 8.01(a) shall have occurred and be continuing or would result therefrom, the Borrower shall only be permitted to declare and pay pro rata dividends on its Equity Interests or make pro rata distributions with respect thereto in an amount that will result in the Parent receiving the minimum amount of funds required to be distributed to its equity holders in order for the Parent to maintain its status as a REIT for federal and state income tax purposes and (2) no Restricted Payments shall be permitted under this clause (d) following an acceleration of the Obligations pursuant to Section 8.02 or following the occurrence of an Event of Default under Section 8.01(f) or (g) ;




(e) the Parent shall be permitted to make Restricted Payments with any amounts received by it from the Borrower pursuant to Section 7.06(d) ; and
(f) the Parent and the Borrower shall be permitted to make Restricted Payments pursuant to the Tax Protection Agreement (as in effect on the Closing Date or as modified thereafter with the prior written consent of the Administrative Agent).
. Change in Nature of Business
. Engage in any material line of business other than acquiring and developing income producing real properties and investments related thereto (including the operation of the Empire State Observatory or other observatory properties) or any business reasonably related or ancillary thereto or representing a reasonable extension thereof.
. Transactions with Affiliates
. Enter into any transaction of any kind with any Affiliate of the Parent, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Parent or a Subsidiary thereof as would be obtainable by the Parent or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate; provided that the foregoing restriction shall not apply to (i) transactions between or among the Borrower and its Subsidiaries at any time that the Parent is not a Guarantor, and transactions between or among the Parent and its Subsidiaries at any time that the Parent is a Guarantor, (ii) fees and compensation (whether in the form of cash, equity or otherwise) paid or provided to, and any indemnity provided on behalf of, officers, directors or employees of the Parent or any Subsidiary thereof as determined in good faith by the board of directors of the Parent and in the ordinary course of business, (iii) payments contemplated by the Tax Protection Agreement, (iv) Restricted Payments not prohibited hereunder and (v) transactions and arrangements existing on the Closing Date and disclosed in the reports filed by the Parent with the SEC under the Securities Act or the Securities Exchange Act prior to the Closing Date.
. Burdensome Agreements
. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of (i) any Subsidiary to make Restricted Payments to the Parent, the Borrower or any Guarantor (or, following the Investment Grade Release, any Wholly Owned Subsidiary of the Borrower that is a Direct Owner or Indirect Owner of an Unencumbered Eligible Property) or to otherwise transfer any Unencumbered Eligible Property, or any income therefrom or proceeds thereof, to the Parent, the Borrower or any Subsidiary, (ii) the Parent or any Subsidiary of the Borrower that is an Unencumbered Property Subsidiary to Guarantee any Obligations or (iii) the Parent, any Subsidiary of the Borrower that is an Unencumbered Property Subsidiary, any Controlled Joint Venture or any Controlled Venture Subsidiary to create, incur, assume or suffer to exist Liens on any Unencumbered Eligible Property, any Equity Interest of the Borrower owned by the Parent, any Equity Interest of any Unencumbered Property Subsidiary, any Equity Interest of any Controlled Joint Venture owned by a Joint Venture Partner, any Equity Interest of any Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property, or any income from or proceeds of any of the foregoing; provided , however , that clause (i) above shall not prohibit customary limitations on Restricted Payments or Negative Pledges (A) provided in favor of any holder of Secured Indebtedness of a Subsidiary so long as (1) such Subsidiary is not an Unencumbered Property Subsidiary, a Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property or a Controlled Joint Venture that owns a Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property and (2) such Secured Indebtedness is permitted under Sections 7.03 and 7.11 , (B) contained in (1) any agreement in connection with a Disposition permitted by Section 7.05 ( provided that such limitation shall only be effective against the assets or property that are the subject of such Disposition) or (2) the constituent documents of, or joint venture agreements or other similar agreements entered into in the ordinary course of business that are applicable solely to, a non-Wholly Owned Subsidiary that is not a Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property or a Controlled Joint Venture that owns a Controlled Joint




Venture Subsidiary that owns an Unencumbered Eligible Property, (C) arising by virtue of restrictions on cash or other deposits or net worth imposed by customers, suppliers or landlords or required by insurance, surety or bonding companies, in each case, under contracts entered into in the ordinary course of business so long as such restrictions do not apply to any Subsidiary that is an Unencumbered Property Subsidiary, a Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property or a Controlled Joint Venture that owns a Controlled Joint Venture Subsidiary that owns an Unencumbered Eligible Property and (D) that constitute Permitted Pari Passu Encumbrances.
. Use of Proceeds
. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose or (b) for any purpose that would breach any applicable anti-money laundering law or Anti-Corruption Law.
. Financial Covenants
.
(a) Maximum Leverage Ratio . Permit Total Indebtedness as of the last day of each fiscal quarter of the Parent to exceed 60% of the Total Asset Value on such day.
(b) Maximum Secured Leverage Ratio . Permit Total Secured Indebtedness as of the last day of each fiscal quarter of the Parent to exceed 40% of the Total Asset Value on such day.
(c) Minimum Tangible Net Worth . Permit Tangible Net Worth at any time to be less than the sum of (i) $745,356,000 and (ii) 75% of the Net Cash Proceeds received by the Parent after September 30, 2014 from issuances and sales of Equity Interests of the Parent (other than Net Cash Proceeds received within ninety (90) days after the redemption, retirement or repurchase of ownership or Equity Interests in the Parent up to the amount paid by the Parent in connection with such redemption, retirement or repurchase, where, for the avoidance of doubt, the net effect is that the Parent shall not have increased its net worth as a result of any such proceeds).
(d) Minimum Fixed Charge Coverage Ratio . Permit the Fixed Charge Coverage Ratio as of the last day of any fiscal quarter of the Parent to be less than 1.50 to 1.00.
(e) Minimum Unencumbered Interest Coverage Ratio . Permit the Unencumbered Interest Coverage Ratio as of the last day of any fiscal quarter of the Parent to be less than 1.75 to 1.00.
(f) Maximum Unsecured Leverage Ratio . Permit Total Unsecured Indebtedness as of the last day of each fiscal quarter of the Parent to exceed 60% of the Unencumbered Asset Value on such day.
(g) Maximum Secured Recourse Indebtedness . Permit the aggregate outstanding principal amount of Secured Recourse Indebtedness of the Loan Parties and their Subsidiaries owing to Persons that are not members of the Consolidated Group at any time to exceed 10% of Total Asset Value at such time; provided , that at any time that the Parent and/or the Borrower has Debt Ratings from at least two of Moody’s, S&P and Fitch, and such Debt Ratings are Baa3 or better (in the case of a rating by Moody’s) or BBB- or better (in the case of a rating by S&P or Fitch), the covenant contained in this Section 7.11(g) shall not apply.
. Accounting Changes
. Make any change in (a) accounting policies or reporting practices, except as required or permitted by GAAP, or (b) fiscal year.
. Amendment, Waivers and Terminations of Organization Documents
. Directly or indirectly, consent to, approve, authorize or otherwise suffer or permit any amendment, change, cancellation, termination or waiver in any respect of the terms of any Organization Document of any Loan Party or any Subsidiary thereof, other than amendments, changes and modifications that are not adverse in




any material respect to the Parent, any of the other Loan Parties, any Subsidiary thereof, the Administrative Agent or the Lenders.
. Parent Covenants
. Notwithstanding anything to the contrary contained in any Loan Document, at any time that the Parent is not a Guarantor the Parent shall not directly or indirectly enter into or conduct any business other than in connection with the ownership, acquisition and disposition of interests in the Borrower and, if applicable, direct interests in the Borrower, and the management of the business of the Borrower, and such activities as are incidental thereto, all of which shall be solely in furtherance of the business of the Borrower. The Parent shall not own any assets other than (i) interests, rights, options, warrants or convertible or exchangeable securities of the Borrower, (ii) assets that have been distributed to the Parent by its Subsidiaries in accordance with Section 7.06 that are held for ten (10) Business Days or less pending further distribution to equity holders of the Parent, (iii) assets received by the Parent from third parties (including the Net Cash Proceeds from any issuance and sale by the Parent of any its Equity Interests), that are held for ten (10) Business Days or less pending contribution of same to the Borrower, (iv) such bank accounts or similar instruments as it deems necessary to carry out its responsibilities under the Organization Documents of the Borrower and (v) other tangible and intangible assets that, taken as a whole, are de minimis in relation to the net assets of the Borrower and its Subsidiaries, but which shall in no event include any Equity Interests other than those permitted in clauses (i) and (iii) of this sentence. Nothing in this Section 7.14 shall prevent the Parent from (i) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (ii) the performance of its obligations with respect to the Loan Documents, (iii) any public offering of its common stock or any other issuance or sale of its Equity Interests, (iv) the payment of dividends, (v) making contributions to the capital of the Borrower, (vi) participating in tax, accounting and other administrative matters as a member of the consolidated group of the Parent and the Borrower, (vii) providing indemnification to officers, managers and directors, (viii) any activities incidental to compliance with the provisions of the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, any rules and regulations promulgated thereunder, and the rules of national securities exchanges, in each case, as applicable to companies with listed equity or debt securities, as well as activities incidental to investor relations, shareholder meetings and reports to shareholders or debt holders and (ix) any activities incidental to the foregoing.
. Sanctions; Anti-Money Laundering Laws; Anti-Corruption Laws
. .
(a) Engage in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated in any applicable law, regulation or other binding measure by the Organisation for Economic Cooperation and Development’s Financial Action Task Force on Money Laundering or violate these laws or any other applicable anti-money laundering law.
(b) Use the proceeds of any Credit Extension for any purpose which would violate Anti-Corruption Laws, the Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto.
(c) Use the proceeds of any Credit Extension, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other individual or entity, to fund any activities of or business with any Sanctioned Person or in any Designated Jurisdiction, or in any other manner that will result in a violation by the Borrower or its Subsidiaries, or any entity participating in the transaction, whether as Lender, Arranger, Administrative Agent, L/C Issuer, Swing Line Lender, or otherwise, of Sanctions.
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES
. Events of Default




. Any of the following shall constitute an Event of Default:
(a) Non-Payment . The Borrower or any other Loan Party fails to (i) pay when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation or deposit any funds as Cash Collateral in respect of L/C Obligations, or (ii) pay within three (3) Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) pay within five (5) Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or
(b) Specific Covenants . The Borrower or the Parent fails to perform or observe any term, covenant or agreement contained in any of Section 2.04(b)(v) , 6.02(e) , 6.03 (other than 6.03(d) and (e) ), 6.05 (with respect to the Parent, the Borrower and each Unencumbered Eligible Subsidiary), 6.07 , or Article VII , or any Guarantor fails to perform or observe any term, covenant or agreement contained in the Guaranty Agreement; or
(c) Other Defaults . Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the earlier of (x) the date upon which a Responsible Officer of the Borrower or the Parent obtains knowledge of such failure or (y) the date upon which the Borrower or the Parent has received written notice of such failure from the Administrative Agent; or
(d) Representations and Warranties . Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
(e) Cross-Default . (i) Any Loan Party or any Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Recourse Indebtedness or Guarantee of Recourse Indebtedness (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee, or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) any Loan Party or any Subsidiary thereof fails to observe or perform any agreement or condition relating to any Nonrecourse Indebtedness or Guarantee of Nonrecourse Indebtedness having an aggregate principal amount of more than the Threshold Amount, or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded or (iii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Loan Party or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which any Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Subsidiary as a result thereof is greater than the Threshold Amount; or
(f) Insolvency Proceedings, Etc. The Parent, the Borrower or any Significant Subsidiary of the Parent institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an




assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment . (i) The Parent, the Borrower or any Significant Subsidiary of the Parent becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 60 days after its issue or levy; or
(h) Judgments . There is entered against the Parent, the Borrower or any Significant Subsidiary of the Parent (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $50,000,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 60 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(i) ERISA . (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the $50,000,000, (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the $50,000,000, or (iii) the assets of a Loan Party are deemed to be plan assets within the meaning of 29 C.F.R. as modified in operation by section 3(42) of ERISA; or
(j) Invalidity of Loan Documents . Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or
(k) Change of Control . There occurs any Change of Control; or
(l) REIT Status. The Parent shall, for any reason, fail to maintain its status as a REIT, after taking into account any cure provisions set forth in the Code that are complied with by the Parent.
. Remedies Upon Event of Default
. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:
(a) declare the commitment of each Lender to make Credit Extensions and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;




(c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto); and
(d) exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents;
provided , however , that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Parent, the Borrower or any Unencumbered Eligible Subsidiary under the Bankruptcy Code of the United States, the obligation of each Lender to make Credit Extensions and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Revolving Credit Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
. Application of Funds
. After the exercise of remedies provided for in Section 8.02 (or after the Revolving Credit Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02 ), or if at any time insufficient funds are received by and available to the Administrative Agent to pay fully all Obligations then due hereunder, any amounts received on account of the Obligations shall, subject to the provisions of Sections 2.17 and 2.18 , be applied by the Administrative Agent in the following order:
First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III ) payable to the Administrative Agent in its capacity as such;
Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer and amounts payable under Article III ), ratably among them in proportion to the respective amounts described in this clause Second payable to them;
Third , to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;
Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourth held by them;
Fifth , to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit to the extent not otherwise Cash Collateralized by the Borrower pursuant to Sections 2.04 and 2.17 ; and
Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.
Subject to Sections 2.04(c) and 2.17 , amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.




ARTICLE IX. ADMINISTRATIVE AGENT
. Appointment and Authority
. Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
. Rights as a Lender
. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Parent or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
. Exculpatory Provisions
. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(a)      shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)      shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(c)      shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be




necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall not be deemed to have knowledge of any Default (other than a Default resulting from the failure to make any payment of or interest on any Loan or any L/C Obligation), unless and until notice describing such Default is given in writing to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
. Reliance by Administrative Agent
. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Credit Extension, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Credit Extension or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
. Delegation of Duties
. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub‑agents appointed by the Administrative Agent. The Administrative Agent and any such sub‑agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub‑agent and to the Related Parties of the Administrative Agent and any such sub‑agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
. Resignation of Administrative Agent
.
(a) The Administrative Agent may resign as the Administrative Agent upon thirty (30) days’ notice to the Lenders, the L/C Issuer and the Borrower. Upon receipt of any such notice of




resignation, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed and shall be deemed given if the Borrower fails to respond within ten (10) Business Days). If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 45 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders and the Borrower) (the “ Resignation Effective Date ”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, with the consent of the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed and shall be deemed given if the Borrower fails to respond within ten (10) Business Days), appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “ Removal Effective Date ”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.
(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.01(h) and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub‑agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
(d)      Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. If Bank of America resigns as an L/C Issuer , it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk




participations in Unreimbursed Amounts pursuant to Section 2.04(c). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.05(c). Upon the appointment by the Borrower of a successor L/C Issuer or Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender), (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.
. Non-Reliance on Administrative Agent and Other Lenders
. Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
. No Other Duties, Etc .
Anything herein to the contrary notwithstanding, none of the Arrangers or the Syndication Agent or the Documentation Agents listed on the cover page hereof, in each case in their capacities as such, shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents.
. Administrative Agent May File Proofs of Claim
. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
( a )      to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.04(h) and (i) , 2.09 , 2.11(b) and 10.04 ) allowed in such judicial proceeding; and
(b)      to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such




payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 , 2.11(b) and 10.04 .
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer or in any such proceeding.
. Guaranty Matters
. Without limiting the provisions of Section 9.09 , each Lender and each L/C Issuer irrevocably authorize the Administrative Agent, at its option and in its discretion to release any Guarantor from its obligations under the Guaranty Agreement if required or permitted pursuant to the terms hereof. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty Agreement pursuant to this Section 9.10 .
ARTICLE X. MISCELLANEOUS
. Amendments, Etc .
No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided , however , that no such amendment, waiver or consent shall:
(a) in the case of the initial Credit Extension, waive any condition set forth in Section 4.01 , without the written consent of each Lender;
(b) extend (except as provided in Section 2.15 ) or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02 ) without the written consent of such Lender;
(c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under such other Loan Document without the written consent of each Lender entitled to such payment;
(d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01 ) any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender entitled to such amount; provided , however , that only the consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;
(e) change (i) any provision of Section 2.14 , Section 8.03 or any of the other terms or provisions in any Loan Document requiring pro rata payments, distributions, commitment reductions or sharing of payments without the consent of each Lender directly and adversely affected thereby in each case without the consent of each Lender directly and adversely affected thereby or (ii) the order of application of any reduction in Revolving Credit Commitments or any prepayment of Loans from the application thereof set forth in the applicable provisions of Sections 2.06 or 2.07 in any manner that materially and adversely affects the Lenders without the written consent of each Lender;




(f) change (i) any provision of this Section 10.01 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Lender directly and adversely affected thereby; or
(g) release the Parent or the Borrower from their respective obligations under this Agreement or any other Loan Document, or release all or substantially all of the value of the Guaranty Agreement, in each case without the written consent of each Lender, except as expressly provided in the Loan Documents;
and, provided further , that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) each Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.
Notwithstanding any provision herein to the contrary,
(i) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) any Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender, (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender and (z) the outstanding principal balance of any Loan held by any Defaulting Lender may not be reduced without the consent of such Lender; and
(ii) the Administrative Agent and the Borrower may, with the consent of the other (but without the consent of any Lender or other Loan Party), amend, modify or supplement this Agreement and any other Loan Document
(A) to cure any ambiguity, omission, typographical error, mistake, defect or inconsistency if such amendment, modification or supplement does not adversely affect the rights of the Administrative Agent or any Lender,
(B) to add a “Guarantor” pursuant to in accordance with the applicable provisions of this Agreement and the other Loan Documents, or
(C) (i) to add one or more additional revolving credit or term loan facilities to this Agreement, in each case as contemplated by, and subject to the limitations, of Section 2.16 , and to permit the extensions of credit and all related obligations and liabilities arising in connection therewith from time to time outstanding to share ratably (or on a basis subordinated to the existing facilities hereunder) in the benefits of this Agreement and the other Loan Documents with the obligations and liabilities from time to time outstanding in respect of the existing facilities hereunder, (ii) to permit the Lenders providing such additional facilities to participate in any required vote or action required to be approved by the Required Lenders or by any other number, percentage or class of Lenders hereunder, and (iii) if an additional facility shall take the form of a term loan facility or a revolving credit facility on terms that are not identical to the terms of the then existing facilities hereunder, to include such terms




as are then customary for the type of facility being added; provided that the final maturity date of any such facility shall not be earlier than the Maturity Date.
. Notices; Effectiveness; Electronic Communication
.
(a) Notices Generally . Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrower or any other Loan Party, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 ; and
(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Borrower).
Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b) .
(b) Electronic Communications . Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail, FpML messaging, and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent, the Swing Line Lender, the L/C Issuer or the Borrower may each, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice, e-mail or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
(c) The Platform . THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR




COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan Party’s or the Administrative Agent’s transmission of Borrower Materials or notices through the Platform, any other electronic platform or electronic messaging service, or through the Internet.
(d) Change of Address, Etc . Each of the Parent, the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.
(e) Reliance by Administrative Agent, L/C Issuer and Lenders . The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic notices, Committed Loan Notices, Letter of Credit Applications, Competitive Bid Requests and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
. No Waiver; Cumulative Remedies; Enforcement
. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan




Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided , however , that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.14 ), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided , further , that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b) , (c) and (d) of the preceding proviso and subject to Section 2.14 , any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
. Expenses; Indemnity; Damage Waiver
.
(a) Costs and Expenses . The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Syndication Agent, any Arranger and their respective Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, the Syndication Agent and the Arrangers, which shall be limited to one special counsel to all such parties and, where appropriate, one local counsel in each applicable jurisdiction), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer, which shall be limited to one special counsel to all such parties and, where appropriate, one local counsel in each applicable jurisdiction, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) Indemnification by the Borrower . The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, the Arrangers and each Related Party of any of the foregoing Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee, which shall be limited to one special counsel to all such parties, where appropriate, one local counsel in each applicable jurisdiction and one additional counsel for each Indemnitee for whom such joint representation results in the conflict of interest), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any of same asserted by the Borrower or any other Loan Party, but excluding any of same asserted by Related Parties of such Indemnitee) arising out of, in connection with, or as a result of (i) the




execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01 ), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Parent or any of its Subsidiaries, or any Environmental Liability related in any way to the Parent or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto , IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE ; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or its Affiliates, (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee or its Affiliate for breach in bad faith of such Indemnitee’s or its Affiliates obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (z) resulting from any dispute solely among Indemnitees other than (A) any claims against the Administrative Agent (and any sub-agent thereof) or any Arranger in their respective capacities, as or in fulfilling their respective roles, as an administrative agent or arranger in respect of this Agreement and the transactions contemplated hereby and (B) any claims arising out of any act or omission on the part of any of the Borrower or its Affiliates. Without limiting the provisions of Section 3.01(d) , this Section 10.4(b) shall not apply with respect to Taxes (including, without limitation, Taxes covered by Section 3.01 ) other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c) Reimbursement by Lenders . To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Syndication Agent, the L/C Issuer, the Swing Line Lender, any Arranger or any Related Party of any of the foregoing (and without limiting the obligation of the Borrower to do so), each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Syndication Agent, the L/C Issuer, the Swing Line Lender, such Arranger or such Related Party, as the case may be, such Lender’s Applicable Percentage of such unpaid amount (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought); provided , that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Syndication Agent, the L/C Issuer, the Swing Line Lender or any Arranger in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the Syndication Agent, the L/C Issuer, the Swing Line Lender or any Arranger in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.13(d) .
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the parties hereto shall not assert, and each party hereto hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnitee or any Loan Party or any of its Affiliates, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of




Credit or the use of the proceeds thereof; provided , that nothing herein shall limit the Borrower’s obligations under Sections 10.04(a) and (b) . No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(e) Payments . All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.
(f) Survival . The agreements in this Section shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Loan Documents and the Revolving Credit Facility and the repayment, satisfaction or discharge of all the other Obligations.
. Payments Set Aside
. To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
. Successors and Assigns
.
(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving




Credit Commitment and Loans (including for purposes of this subsection (b) , participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts .
(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Revolving Credit Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed); provided , however , that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.
(ii) Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Revolving Credit Commitment assigned, except that this clause (ii) shall not apply to rights in respect of Competitive Loans or the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;
(iii) Required Consents . No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or (except in the case of an assignment of all or any portion of any Lender’s Revolving Credit Commitment) an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof;
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and
(C) the consent of the L/C Issuer and the Swing Line Lender shall be required for any assignment in respect of the Revolving Credit Facility if such assignment is to a Person that is not a Lender.
(iv) Assignment and Assumption . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.




(v) No Assignment to Certain Persons . No such assignment shall be made (A) to the Borrower or any Affiliate or Subsidiary of the Borrower, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B) , or (C) to a natural Person.
(vi) Certain Additional Payments . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Revolving Credit Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the L/C Issuer or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Revolving Credit Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01 , 3.04 , 3.05 , and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided , that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c) Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments of, and principal amounts (and stated interest) of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.




(d) Participations . Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person, a Defaulting Lender or the Borrower or any Affiliates or Subsidiaries of the Borrower) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and/or Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.04(c) without regard to the existence of any participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01 , 3.04 and 3.05 (subject to the requirements and limitations therein, including the requirements under Section 3.01(f) ) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section (it being understood that the documentation required under Section 3.01(f) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 3.06 and 10.13 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.04 , with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 3.06 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.14 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e) Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Revolving Credit Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any other central bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.




(f) Resignation as L/C Issuer or Swing Line Lender after Assignment . Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Revolving Credit Commitments and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrower, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided , however , that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.04(c) ). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.05(c) . Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.
. Treatment of Certain Information; Confidentiality
. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or any Eligible Assignee invited to be a Lender pursuant to Section 2.16 or Section 10.01 or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to any Loan Party and its obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating the Parent or any of its Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than a Loan Party. For purposes of this Section, “ Information ” means all information received from the Parent or any Subsidiary thereof relating to the Parent or any Subsidiary thereof or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Parent or any Subsidiary thereof, provided that, in the case of information received from the Parent or any Subsidiary thereof after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person




required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Parent or a Subsidiary thereof, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.
. Right of Setoff
. If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the L/C Issuer different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.18 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
. Interest Rate Limitation
. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “ Maximum Rate ”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
. Counterparts; Integration; Effectiveness
. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single




contract. Without limitation of Section 10.21 , this Agreement, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent or the L/C Issuer, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01 , this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.
. Survival of Representations and Warranties
. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect until the Facility Termination Date.
. Severability
. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.12 , if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
. Replacement of Lenders
. If the Borrower is entitled to replace a Lender pursuant to the provisions of Section 3.06 , or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06 ), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 10.06(b) ;
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05 ) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);




(c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01 , such assignment will result in a reduction in such compensation or payments thereafter or the Borrower (or in the reasonable, good faith opinion of the Borrower will in the future result in a reduction in compensation or payments that they are required to pay pursuant to Section 3.01 );
(d) such assignment does not conflict with applicable Laws; and
(e) in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
. Governing Law; Jurisdiction; Etc.
(a)
(b) GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER JURISDICTION.
(c) SUBMISSION TO JURISDICTION . EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY ADMINISTRATIVE AGENT, ANY LENDER OR ANY L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(d) WAIVER OF VENUE . EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(e) SERVICE OF PROCESS . EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02 . NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.




. Waiver of Jury Trial
. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
. No Advisory or Fiduciary Responsibility
. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Parent and the Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Arrangers, and the extensions of credit made by the Lenders, the L/C Issuer and the Swing Line Lender pursuant to this Agreement, are arm’s-length commercial transactions between the Parent and its Affiliates, on the one hand, and the Administrative Agent and the Arrangers, on the other hand, (B) each of the Parent and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Parent and the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, the Arrangers, the Lenders, the L/C Issuer and the Swing Line Lender each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Parent or any of its Affiliates, or any other Person and (B) neither the Administrative Agent, the Arrangers, the Lenders, the L/C Issuer or the Swing Line Lender has any obligation to the Parent or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the Arrangers, the Lenders, the L/C Issuer and the Swing Line Lender and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Parent and its Affiliates, and neither the Administrative Agent, the Arrangers, the Lenders, the L/C Issuer, the Swing Line Lender nor their respective Affiliates have any obligation to disclose any of such interests to the Parent or any of its Affiliates. To the fullest extent permitted by law, each of the Parent and the Borrower hereby waives and releases any claims that it may have against the Administrative Agent, the Arrangers, the Lenders, the L/C Issuer, the Swing Line Lender and their respective Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
. Electronic Execution of Assignments and Certain Other Documents
. The words “execute,” “execution,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation Assignment and Assumptions, amendments or other modifications, Committed Loan Notices, Swingline Loan Notices, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including




the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it.
. USA PATRIOT Act
. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Act ”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.
. Release of Guarantors
.
(a) Investment Grade Release . If at any time the Borrower or the Parent obtains an Investment Grade Rating, the Administrative Agent shall (at the sole cost of the Borrower and pursuant to documentation reasonably satisfactory to the Administrative Agent) promptly release all of the Unencumbered Property Subsidiaries (other than any Unencumbered Property Subsidiary that is (i) a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness) from their obligations under the Guaranty Agreement (the “ Investment Grade Release ”), subject to satisfaction of the following conditions:
(i) The Borrower shall have delivered to the Administrative Agent, on or prior to the date that is ten (10) Business Days (or such shorter period of time as agreed to by the Administrative Agent) before the date on which the Investment Grade Release is to be effected, a certificate executed by a Responsible Officer of the Parent,
(A) certifying that the Parent or the Borrower has obtained an Investment Grade Rating, and
(B) notifying the Administrative Agent and the Lenders that it is requesting the Investment Grade Release; and
(C) certifying that no Subsidiary Guarantor to be released is a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness; and
(ii) The Borrower shall have submitted to the Administrative Agent and the Lenders, within one (1) Business Day prior to the date on which the Investment Grade Release is to be effected, a certificate executed by a Responsible Officer of the Parent certifying to the Administrative Agent and the Lenders that, immediately before and immediately after giving effect to the Investment Grade Release,
(A) no Default has occurred and is continuing or would result therefrom (including as a result of the failure to satisfy the Minimum Property Condition), and
(B) the representations and warranties contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, are true and correct in all material respects on and as of the date of such release and immediately after giving effect to such release, except (1) to the extent that such representations and warranties specifically refer to an earlier date, in which case




they shall be true and correct in all material respects as of such earlier date, (2) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such applicable date (including such earlier date set forth in the foregoing clause (1)) after giving effect to such qualification and (3) for purposes of this Section 10.19(a) , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 .
(b) Release upon Disposition of Equity Interests . In the event that all of the capital stock or other Equity Interests of any Subsidiary Guarantor is sold or otherwise disposed of in a transaction permitted by Section 7.05 or if a Subsidiary Guarantor ceases to be an Unencumbered Property Subsidiary, then, at the request of the Borrower, such Subsidiary Guarantor shall be released from its obligations under the Guaranty Agreement, subject to satisfaction of the following conditions:
(i) the Borrower shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the date of the proposed release (or such shorter period of time as agreed to by the Administrative Agent in writing), a written request for such release (a “ Guarantor Release Notice ”) which shall identify the Subsidiary Guarantor to which it applies and the proposed date of the release,
(ii) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the effective date of such release and, both before and after giving effect to such release, except (A) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, (B) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such applicable date (including such earlier date set forth in the foregoing clause (A)) after giving effect to such qualification and (C) for purposes of this Section 10.19(b) , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 ,
(iii) immediately after giving effect to such release the Parent and its Subsidiaries shall be in compliance, on a pro forma basis, with the provisions of Section 7.11 ,
(iv) no Default shall have occurred and be continuing or would result under any other provision of this Agreement after giving effect to such release (including as a result of the failure to satisfy the Minimum Property Condition), and
(v) the Borrower shall have delivered to the Administrative Agent a certificate executed by a Responsible Officer of the Parent certifying that the conditions in clauses (ii) through (iv) above have been satisfied.
The Administrative Agent will (at the sole cost of the Borrower) following receipt of such Guarantor Release Notice and certificate, and each of the Lenders and the L/C Issuers irrevocably authorizes the Administrative Agent to, execute and deliver such documents as the Borrower or such Subsidiary Guarantor may reasonably request to evidence the release of such Subsidiary Guarantor from its obligations under the Guaranty Agreement, which documents shall be reasonably satisfactory to the Administrative Agent.
(c) Release following the Investment Grade Release . At any time following the Investment Grade Release, at the request of the Borrower the Administrative Agent may release a Subsidiary Guarantor from its obligations under the Guaranty Agreement, subject to satisfaction of the following conditions:
(i) the Borrower shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the date of the proposed release (or such shorter period of time as agreed to by the Administrative Agent in writing), a Guarantor Release Notice (which notice shall specify, inter alia,




that upon such release the Subsidiary Guarantor to which such notice relates either (A) will not be the Direct Owner or an Indirect Owner of any Unencumbered Eligible Property or (B) will not be will not be a borrower or guarantor of, or otherwise obligated in respect of, any Recourse Indebtedness),
(ii) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the effective date of such release and, both before and after giving effect to such release, except (A) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, (B) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such applicable date (including such earlier date set forth in the foregoing clause (A)) after giving effect to such qualification and (C) for purposes of this Section 10.19(c) , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b) , respectively, of Section 6.01 ,
(iii) immediately after giving effect to such release, the Parent and its Subsidiaries shall be in compliance, on a pro forma basis, with the provisions of Section 7.11 ,
(iv) no Default shall have occurred and be continuing (unless such Default relates solely to an Unencumbered Eligible Property of which such Subsidiary Guarantor is the Direct Owner or an Indirect Owner and such Unencumbered Eligible Property will not be included for purposes of determining Unencumbered Asset Value after giving effect to such release) or would result under any other provision of this Agreement after giving effect to such release (including as a result of the failure to satisfy the Minimum Property Condition), and
(v) the Borrower shall have delivered to the Administrative Agent an Officer’s Certificate certifying that the conditions in clauses (ii) through (iv) above have been satisfied.
The Administrative Agent will (at the sole cost of the Borrower) following receipt of such Guarantor Release Notice and Officer’s Certificate, and each of the Lenders and the L/C Issuers irrevocably authorizes the Administrative Agent to, execute and deliver such documents as the Borrower or such Subsidiary Guarantor may reasonably request to evidence the release of such Subsidiary Guarantor from its obligations under the Guaranty Agreement, which documents shall be reasonably satisfactory to the Administrative Agent.
(d) The Administrative Agent shall promptly notify the Lenders of any such release hereunder, and this Agreement and each other Loan Document shall be deemed amended to delete the name of any Subsidiary Guarantor released pursuant to this Section 10.19 .
. Recourse to Loan Parties
. Neither the Parent (whether in its capacity as a general partner of the Borrower or otherwise), so long as the Parent is not a Guarantor, nor any of its Affiliates or its Affiliates’ past, present or future shareholders, partners, members, officers, employees, servants, executives, directors, agents or representatives, in each case other than the Borrower and Guarantors (each such Person that is not the Borrower or a Guarantor, an “Exculpated Party”) shall be liable for payment of any Obligations due hereunder or under any other Loan Document. The sole recourse of the Lenders and the Administrative Agent for satisfaction of the Obligations due hereunder or under any other Loan Document shall be against the Borrower, the Guarantors and their respective assets and not against any assets or property of any Exculpated Party. In the event that an Event of Default occurs, no action shall be brought against any Exculpated Party by virtue of its direct or indirect ownership interest in the Borrower, the Guarantors or their respective assets.
. ENTIRE AGREEMENT




. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

    
[Signature Page to Credit Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
BORROWER:
EMPIRE STATE REALTY OP, L.P.

By: /s/ David A. Karp     
Name: David A. Karp     
Title: Executive Vice President, Chief Financial Officer and Treasurer



LOAN PARTY:

EMPIRE STATE REALTY TRUST, INC.

By: /s/ David A. Karp     
Name: David A. Karp
Title: Executive Vice President, Chief Financial Officer and Treasurer







    
[Signature Page to ESRT Revolving Credit Agreement]





bank of america, n.a., as
Administrative Agent
By: /s/ Ann E. Kenzie     
Name: Ann E. Kenzie
Title: Senior Vice President

bank of america, n.a., as a Lender, L/C Issuer and Swing Line Lender
By: /s/ Ann E. Kenzie     
Name: Ann E. Kenzie
Title: Senior Vice President
GOLDMAN SACHS BANK USA, as a Lender
By: /s/ Rebecca Kratz     
Name: Rebecca Kratz
Title: Authorized Signatory
BARCLAYS BANK PLC., as a Lender

By: /s/ Christine Aharonian     
Name: Christine Aharonian
Title: Vice President

CAPITAL ONE NATIONAL ASSOCIATION, as a Lender

By: /s/ Frederick H. Denecke     
Name: Frederick H. Denecke
Title: Senior Vice President
JPMORGAN CHASE BANK, N.A., as a Lender

By: /s/ Rita Lai     
Name: Rita Lai
Title: Authorized Signer
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender

By: /s/ Sean Armah     
Name: Sean Armah
Title: Vice President




HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender

By: /s/ Robert D. Gominiak     
Name: Robert D. Gominiak
Title: Vice President
KEYBANK NATIONAL ASSOCIATION, as a Lender

By: /s/ Jason R. Weaver     
Name: Jason R. Weaver
Title: SVP
PNC BANK, NATIONAL ASSOCIATION, as a Lender

By: /s/ Denise Smyth     
Name: Denise Smyth
Title: Senior Vice President
RNS CITIZENS, N.A., as a Lender

By: /s/ Samuel A. Bluso     
Name: Samuel A. Bluso
Title: Senior Vice President
BRANCH BANKING AND TRUST COMPANY, as a Lender

By: /s/ Mark Edwards     
Name: Mark Edwards
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION, as a Lender

By: /s/ David Heller     
Name: David Heller
Title: Senior Vice President





Exhibit 21.1
LIST OF SUBSIDIARIES OF EMPIRE STATE REALTY TRUST, INC.
The following list sets forth Empire State Realty Trust, Inc.’s subsidiaries:

Empire State Realty OP, L.P.
ESRT 10 BK St., L.L.C.
ESRT 10 Union Square, L.L.C.
ESRT 103-107 Main St., L.L.C.
ESRT 112 West 34th Street GP, L.L.C.
ESRT 112 West 34th Street, L.P.
ESRT 1333 Broadway, L.L.C.
ESRT 1350 Broadway, L.L.C.
ESRT 1359 Broadway, L.L.C.
ESRT 1400 Broadway GP, L.L.C.
ESRT 1400 Broadway, L.P.
ESRT 1542 Third Avenue, L.L.C.
ESRT 250 West 57th St., L.L.C.
ESRT 500 Mamaroneck Avenue, L.L.C.
ESRT 501 Seventh Avenue, L.L.C.
ESRT 69-97 Main St., L.L.C.
ESRT Captive Insurance Company, L.L.C.
ESRT Cleaning TRS, L.L.C.
ESRT Construction TRS, L.L.C.
ESRT Construction, L.L.C.
ESRT Dining and Fitness TRS, L.L.C.
ESRT East West Manhattan Retail, L.L.C.
ESRT Empire State Building G-Parent, L.L.C.
ESRT Empire State Building Parent, L.L.C.
ESRT Empire State Building, L.L.C.
ESRT ESB Fitness TRS, L.L.C.
ESRT ESB Restaurant TRS, L.L.C.
ESRT First Stamford Place Investor, L.L.C.
ESRT First Stamford Place SPE, L.L.C.
ESRT Holdings TRS, L.L.C.
ESRT Management TRS, L.L.C.
ESRT Management, L.L.C.
ESRT MerrittView, L.L.C.
ESRT Metro Center, L.L.C.
ESRT Metro Tower, L.L.C.
ESRT MH Holdings, L.L.C.
ESRT Observatory TRS, L.L.C.
ESRT One Grand Central Place G-Parent, L.L.C.
ESRT One Grand Central Place Parent, L.L.C.
ESRT One Grand Central Place, L.L.C.
ESRT Springing Member One, L.L.C.
ESRT Springing Member Two, L.L.C.
Malkin Properties of New York, L.L.C.


Malkin Properties, L.L.C.



Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form S-8 No. 333-191588) pertaining to the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2013 Equity Incentive Plan and
(2)
Registration Statement (Form S-3 No. 333-199199) of Empire State Realty Trust, Inc. and Empire State Realty OP, L.P.
of our reports, dated February 27, 2015, with respect to the consolidated financial statements and schedules of Empire State Realty Trust, Inc. and the effectiveness of internal control over financial reporting of Empire State Realty Trust, Inc. included in this Annual Report (Form 10-K) of Empire State Realty Trust, Inc. for the year ended December 31, 2014.

/s/ Ernst & Young LLP
New York, New York
February 27, 2015



EXHIBIT 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Anthony E. Malkin, certify that:
1.    I have reviewed this Annual Report on Form 10-K of Empire State Realty Trust, Inc.;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant’s other certifying officer(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)) [ language omitted in accordance with SEC release Nos. 33-8760 and 34-54942 ] 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.    [ Language omitted in accordance with SEC release Nos. 33-8760 and 34-54942 ];
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 trustees (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.
Dated: February 27, 2015
EMPIRE STATE REALTY TRUST, INC.
By: /s/ Anthony E. Malkin  
Chief Executive Officer





EXHIBIT 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David A. Karp, certify that:
1.    I have reviewed this Annual Report on Form 10-K of Empire State Realty Trust, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(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)) [ language omitted in accordance with SEC release Nos. 33-8760 and 34-54942 ] 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.
[ Language omitted in accordance with SEC release Nos. 33-8760 and 34-54942 ];
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 trustees (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.
Dated: February 27, 2015
EMPIRE STATE REALTY TRUST, INC.
By: /s/ David A. Karp  
Executive Vice President, Chief Financial Officer and Treasurer





EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer of Empire State Realty Trust, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K for the year ended December 31, 2014 (the "Form 10-K"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2015
EMPIRE STATE REALTY TRUST, INC.
By: /s/ Anthony E. Malkin  
Chief Executive Officer
Pursuant to the Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Executive Vice President, Chief Financial Officer and Treasurer of Empire State Realty Trust, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K for the year ended December 31, 2014 (the "Form 10-K"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2015
EMPIRE STATE REALTY TRUST, INC.
By: /s/ David A. Karp  
Executive Vice President, Chief Financial Officer and Treasurer
Pursuant to the Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.