Exhibit 10.1

 

american realty capital advisors iV, LLC
American reaLty capital trust iV special limited partner, llc
american realty capital properties iV, llc

405 Park Avenue

New York, New York 10022

 

 

American Realty Capital Trust IV, Inc.

American Realty Capital Operating Partnership IV, L.P.

American Realty Capital Properties, Inc.

ARC Properties Operating Partnership, L.P.

Thunder Acquisition LLC

405 Park Avenue

New York, New York 10022

 

July 1, 2013

 

Re:Project Thunder – Incentive and Other Payments

 

Reference is made to that certain Agreement and Plan of Merger, dated as of the
date hereof (the “Merger Agreement”), by and among American Realty Capital
Properties, Inc., a Maryland corporation (“Parent”), ARC Properties Operating
Partnership, L.P., a Delaware limited partnership and the operating partnership
of the Company (the “Parent OP”), Thunder Acquisition LLC, a Delaware limited
liability company wholly-owned by Parent (“Merger Sub”), American Realty Capital
Trust IV, Inc., a Maryland corporation (the “Company”), and American Realty
Capital Operating Partnership IV, L.P., a Delaware limited partnership and the
operating partnership of the Company (the “Company OP”), pursuant to which (x)
the Company will merge with and into Merger Sub, with Merger Sub being the
surviving entity, and (y) the Company OP will merge with and into the Parent OP,
with the Parent OP being the surviving entity (collectively, the “Transaction”).
Any term not otherwise defined herein shall have the meaning given such term in
the Merger Agreement.

 

Reference also is hereby made to: (i) that certain Amended and Restated Advisory
Agreement, dated as of November 12, 2012, by and among American Realty Capital
Advisors IV, LLC, a Delaware limited liability company (the “Advisor”), the
Company and the Company OP (the “Advisory Agreement”), (ii) that certain Amended
and Restated Agreement of Limited Partnership of the Company OP, dated as of
November 12, 2012, by and among the Company, the Advisor, American Realty
Capital Trust IV Special Limited Partner, LLC, a Delaware limited liability
company (the “Special Limited Partner”) and other limited partners party
thereto, as amended from time to time (the “Company OP Agreement”) and (iii)
that certain Property Management and Leasing Agreement, made and entered into as
of June 8, 2012, by and among the Company, the Company OP and American Realty
Capital Properties IV, LLC, a Delaware limited liability company (the “Manager”)
(the “Property Management and Leasing Agreement”).

 

 

 

 

In order to induce the parties to the Merger Agreement to enter into the Merger
Agreement, each of the Company, Parent, the Company OP, the Special Limited
Partner, the Advisor and the Manager hereby agree as follows:

 

1.Pursuant to Section 10(c) of the Advisory Agreement, the Advisor is entitled
to a Real Estate Commission (as defined in the Advisory Agreement) in connection
with the sale of any real estate assets in any transaction or series of
transactions. The Advisor hereby agrees to a reduction in the amount of the Real
Estate Commission to which the Advisor is entitled in connection with the
Transaction. The Advisor, the Company and the Company OP agree that the reduced
Real Estate Commission payable to the Advisor shall be $8.4 million.

 

2.Pursuant to Section 5.1 of the Company OP Agreement, the Special Limited
Partner is entitled to certain subordinated distributions of net sales proceeds
from the Company OP (the “SLP Interest”). Upon an Investment Liquidity Event (as
defined in the Company OP Agreement), the Special Limited Partner’s right to
receive its SLP Interest is accelerated to the time of such Investment Liquidity
Event and the amount of the SLP Interest is fixed as of the Investment Liquidity
Event (the “Investment Liquidity Amount”). The Company, the Company OP and the
Special Limited Partner hereby acknowledge and agree that the Transaction is an
Investment Liquidity Event.

 

3.Pursuant to Section 8.7(b) of the Company OP Agreement, if the Special Limited
Partner is entitled to the Investment Liquidity Amount, the Special Limited
Partner has the right to contribute its SLP Interest to the Company OP in
exchange for a number of Company OP Units equal to the quotient of (a) the
Investment Liquidity Amount divided by (b) the product of (i) the fair market
value of one share of Company Common Stock on the date of the Investment
Liquidity Event multiplied by (ii) the Exchange Factor (as defined in the
Company OP Agreement). The Special Limited Partner hereby elects to contribute
its SLP Interest to the Company OP in exchange for Company OP Units and the
Company, the Company OP and the Special Limited Partner hereby acknowledge and
agree that such contribution and exchange shall be made pursuant to customary
contribution or assignment documentation and shall be effective immediately
prior to the consummation of the Transaction. Upon the consummation of the
Transaction, each Company OP Unit will automatically be converted into a number
of validly issued Parent OP Units equal to the Exchange Ratio. Furthermore, the
Special Limited Partner may desire to exchange or convert all or a portion of
the Parent OP Units to be received as a result of the Transaction for Parent
Common Stock, or, at the election of Parent, cash, and the Special Limited
Partner, Parent, Parent OP, the Company and the Company OP will agree in good
faith to any such exchange or conversion into Parent Common Stock or cash at
least 5 days prior to the Closing Date; provided, that if the Special Limited
Partner does not exchange or convert the Parent OP Units to be received as a
result of the Transaction in connection with the Closing, the Special Limited
Partner shall have the option to cause Parent to acquire such Parent OP Units
for cash at any time during the 24 month period commencing on the date
immediately after the date that is the two-year anniversary of the date on which
the Special Limited Partner was issued its original interest in the Company OP
for an amount equal to the Cash Amount (as defined in the limited partnership
agreement of the Parent OP) per Parent OP Unit.

 

 

 

 

4.Pursuant to Section 10(i) of the Advisory Agreement and Section 16.1 of the
Company OP Agreement, the Advisor is entitled to receive Class B Units (as
defined in the Company OP Agreement) in the Company OP within 30 days of the end
of each quarter, commencing with the calendar quarter beginning July 1, 2012.
The Class B Units are issued pursuant to the terms of the Company OP Agreement
quarterly in arrears, subject to the approval of the Company’s board of
directors. As of the date hereof, 121,769 Class B Units have been issued or
approved for issuance to the Advisor. Furthermore, it is expected that
additional Class B Units will be issued to the Advisor in connection with its
asset management services through and including the Closing Date. Any Class B
Units earned and issuable for the period from the date hereof up to an including
the Closing Date shall be issued immediately prior to the Closing and shall be
subject to the terms of this letter agreement. When issued, the Class B Units
are subject to forfeiture until both an economic hurdle and a performance hurdle
have been met in accordance with Section 16.2(a) of the Company OP Agreement. It
is expected that the economic hurdle will be met prior to the Closing Date. The
performance hurdle will be met if the Advisor continues to be the Advisor at the
Closing of the Transaction. Accordingly, the Company, the Company OP and the
Advisor hereby acknowledge and agree that, provided the economic hurdle is met
prior to the Closing Date and the Advisor continues to be the advisor under the
Advisory Agreement as contemplated in paragraph 7 hereof, both the economic
hurdle and the performance hurdle will be met upon the consummation of the
Transaction, and at such time no Class B Units held by the Advisor will continue
to be subject to forfeiture.

 

5.Pursuant to Section 16.4 of the Company OP Agreement, the Class B Units are
convertible automatically into Company OP Units at such time as the Advisor’s
capital account with respect to a Class B Unit is equal to the average capital
account balance attributable to an outstanding Company OP Unit (as determined on
a unit-by-unit basis). Pursuant to subparagraph 1(c)(ii) of Exhibit B of the
Company OP Agreement, the Advisor is entitled to special allocations of
unrealized appreciation in the value of, and net property gain from the sale of,
the Company OP’s assets. Furthermore, pursuant to Section 16.4(b) of the Company
OP Agreement, the Advisor has the right up to twice per year to cause the
Company OP to adjust the book value of its assets to fair market value, a
“book-up”, by making a capital contribution of more than a de minimis amount to
the Company OP in exchange for Company OP Units. The Advisor hereby elects to
make such a capital contribution to the Company OP in exchange for Company OP
Units prior to the consummation of the Transaction, if necessary to be
effective, in order to cause such an adjustment and allow it to convert the
maximum number of Class B Units to Company OP Units in connection with the
consummation of the Transaction, and the Company and the Company OP hereby
acknowledge and agree to allow the Advisor to make such capital contributions in
order to effectuate a book-up prior to the Closing Date. The amount of the
capital contribution, if any, and the number of Company OP Units issuable will
be agreed to in good faith by the Company, the Company OP and the Advisor. Upon
the consummation of the Transaction, each Company OP Unit will automatically be
converted into a number of validly issued Parent OP Units equal to the Exchange
Ratio. The Advisor agrees that these Parent OP Units are subject to a minimum
two-year holding period prior to being exchangeable into Parent Common Stock
which holding period includes the period during which the Advisor held the
relevant Class B Units.

 

 

 

 

6.The Company, the Company OP and the Advisor hereby acknowledge and agree that
there may be a number of unconverted Class B Units on the Closing Date and that,
in accordance with Section 3.1 of the Merger Agreement, each unconverted Class B
Unit will be converted automatically into a number of Parent Class B Units equal
to the Exchange Ratio.

 

7.In order to facilitate the smooth transition of advisory services following
the consummation of the Transaction, Parent, the Parent OP, Merger Sub, the
Company, the Company OP, and the Advisor agree that the Advisory Agreement will
be extended for a 60 day period following the Closing Date pursuant to the terms
substantially in the form Amendment and Acknowledgement of Termination of Second
Amended and Restated Advisory Agreement attached hereto as Exhibit A.

 

8.In order to facilitate the smooth transition of property management services
following the consummation of the Transaction, Parent, the Parent OP, Merger
Sub, the Company, the Company OP and the Manager agree that the Property
Management and Leasing Agreement will be extended for a 60 day period following
the Closing Date pursuant to the terms substantially in the form Amendment and
Acknowledgement of Termination of Property Management and Leasing Agreement
attached hereto as Exhibit B.

 

The parties hereto agree that this letter agreement satisfies any notice
requirements with respect to (a) the contribution of the SLP Interest to the
Company OP in exchange for Company OP Units and (b) the election to cause a
book-up event.

 

Each of the Company, Parent, the Company OP, the Special Limited Partner, the
Advisor and the Manager, as applicable, represent and warrant that (a) each has
the necessary power and authority to enter into this letter agreement and to
carry out its obligations hereunder and (b) no consents, approvals,
authorizations or other actions are required for the Company, Parent, the
Company OP, the Special Limited Partner, the Advisor or the Manager to execute,
deliver and perform their respective obligations under this letter agreement.

 

This letter agreement may be amended, modified or supplemented only by a written
instrument executed by each of the parties hereto. This letter agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original and together with this letter agreement shall be deemed to be one and
the same instrument. This letter agreement shall terminate concurrently with any
termination of the Merger Agreement without a Closing. This letter agreement
shall be governed by and interpreted and enforced in accordance with the laws of
the State of New York (without reference to the choice of law provisions).

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed and delivered this side letter as
of the date first written above.

      AMERICAN REALTY CAPITAL TRUST IV, INC.       By: /s/ Edward M. Weil, Jr.  
Name: Edward M. Weil, Jr.   Title:   President and Chief Operating Officer    

 

 

 

  

      AMERICAN REALTY CAPITAL OPERATING PARTNERSHIP IV, L.P.       By:  AMERICAN
REALTY CAPITAL TRUST IV, INC.,           Its general partner       By: /s/
Edward M. Weil, Jr.   Name: Edward M. Weil, Jr.   Title:   President and Chief
Operating Officer    

 

 

 

 

      AMERICAN REALTY CAPITAL ADVISORS IV, LLC      

By: AMERICAN REALTY CAPITAL TRUST IV

       SPECIAL LIMITED PARTNER, LLC,

          Its Member       By: AR CAPITAL, LLC,           Its managing member  
    By: /s/ Edward M. Weil, Jr.   Name: Edward M. Weil. Jr.   Title:  Authorized
Signatory    

 

 

 

 

      AMERICAN REALTY CAPITAL TRUST IV SPECIAL LIMITED PARTNER, LLC       By: AR
CAPITAL, LLC,           Its managing member       By: /s/ Edward M. Weil, Jr.  
Name: Edward M. Weil, Jr.   Title:  Authorized Signatory

 

 

 

 

      AMERICAN REALTY CAPITAL PROPERTIES IV, LLC      

By: AMERICAN REALTY CAPITAL TRUST IV

       SPECIAL LIMITED PARTNER, LLC,

          Its member       By: AR CAPITAL, LLC,           Its managing member  
    By: /s/ Edward M. Weil, Jr.   Name: Edward M. Weil, Jr.   Title:  Authorized
Signatory    

 

 

 

 

      AMERICAN REALTY CAPITAL PROPERTIES , INC.       By: /s/ Nicholas S.
Schorsch   Name: Nicholas S. Schorsch   Title:   Chairman and Chief Executive
Officer    

 

 

 

 

      ARC PROPERTIES OPERATING PARTNERSHIP, L.P.       By:  AMERICAN REALTY
CAPITAL PROPERTIES, INC.,           Its general partner       By: /s/ Nicholas
S. Schorsch   Name: Nicholas S. Schorsch   Title:   Chairman and Chief Executive
Officer    

 

 

 

 

      THUNDER ACQUISITION LLC       By:  AMERICAN REALTY CAPITAL PROPERTIES,
INC.,           Its sole member       By: /s/ Nicholas S. Schorsch   Name:
Nicholas S. Schorsch   Title:   Chairman and Chief Executive Officer    

 

 

 

 

 

EXHIBIT A

 

 

 

 

EXHIBIT B