ADVISORY AGREEMENT

BY AND AMONG

ARC REALTY FINANCE TRUST, INC.,

ARC REALTY FINANCE OPERATING PARTNERSHIP, L.P.,

AND

ARC REALTY FINANCE ADVISORS, LLC

Dated as of February 12, 2013

  

TABLE OF CONTENTS

 

    Page       1.  DEFINITIONS   1       2.  APPOINTMENT   6       3.  DUTIES OF
THE ADVISOR   6       4.  AUTHORITY OF ADVISOR   8       5.  FIDUCIARY
RELATIONSHIP   8       6.  NO PARTNERSHIP OR JOINT VENTURE   8       7.  BANK
ACCOUNTS   9       8.  RECORDS; ACCESS   9       9.  LIMITATIONS ON ACTIVITIES  
9       10.  FEES   9       11.  EXPENSES   11       12.  OTHER SERVICES   12  
    13.  REIMBURSEMENT TO THE ADVISOR   12       14.  OTHER ACTIVITIES OF THE
ADVISOR   12       15.  THE AMERICAN REALTY CAPITAL NAME   13       16.  TERM OF
AGREEMENT   13       17.  TERMINATION BY THE PARTIES   13

  

 

 

 

18.  ASSIGNMENT TO AN AFFILIATE 13     19.  PAYMENTS TO AND DUTIES OF ADVISOR
UPON TERMINATION 13     20.  NON-SOLICITATION 14     21.  INCORPORATION OF THE
ARTICLES OF INCORPORATION AND THE OPERATING PARTNERSHIP AGREEMENT 14     22. 
INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP 14     23. 
INDEMNIFICATION BY ADVISOR 15     24.  NOTICES 15     25.  MODIFICATION 16    
26.  SEVERABILITY 16     27. GOVERNING LAW 16     28.  ENTIRE AGREEMENT 16    
29.  NO WAIVER 17     30.  PRONOUNS AND PLURALS 17     31.  HEADINGS 17     32. 
EXECUTION IN COUNTERPARTS 17

  

 

 

  

ADVISORY AGREEMENT 

 

THIS ADVISORY AGREEMENT (this “Agreement”) dated as of February 12, 2013, is
entered into among ARC Realty Finance Trust, Inc., a Maryland corporation (the
“Company”), ARC Realty Finance Operating Partnership, L.P., a Delaware limited
partnership (the “Operating Partnership”), and ARC Realty Finance Advisors, LLC,
a Delaware limited liability company.

 

WITNESSETH

 

WHEREAS, the Company is a Maryland corporation organized in accordance with
Maryland General Corporation Law and intends to qualify as a REIT;

 

WHEREAS, the Company is the general partner of the Operating Partnership;

 

WHEREAS, the Company and the Operating Partnership desire to avail themselves of
the experience, sources of information, advice, assistance and certain
facilities of the Advisor and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of, and subject to the
supervision of the Board of Directors, all as provided herein; and

 

WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Board of Directors, on the terms and subject to the
conditions hereinafter set forth;

 

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

 

1.         DEFINITIONS.          As used in this Agreement, the following terms
have the definitions set forth below:

 

“Acquisition Expenses” means any and all expenses, exclusive of Acquisition
Fees, incurred by the Company, the Operating Partnership, the Advisor or any of
their Affiliates in connection with the selection, evaluation, acquisition,
origination, making or development of any Investments, whether or not acquired,
including, without limitation, legal fees and expenses, travel and
communications expenses, brokerage fees, costs of appraisals, nonrefundable
option payments on property not acquired, accounting fees and expenses, title
insurance premiums, the costs of performing due diligence, and miscellaneous
expenses related to selection and acquisition of Investments, whether or not
acquired.

 

“Acquisition Fee” means the fee payable to the Advisor or its Affiliates
pursuant to Section 10(a).

 

 “Advisor” means ARC Realty Finance Advisors, LLC, a Delaware limited liability
company, any successor advisor to the Company and the Operating Partnership, or
any Person to which ARC Realty Finance Advisors, LLC or any successor advisor
subcontracts substantially all its functions. Notwithstanding the foregoing, a
Person hired or retained by ARC Realty Finance Advisors, LLC to perform property
management and related services for the Company or the Operating Partnership
that is not hired or retained to perform substantially all the functions of ARC
Realty Finance Advisors, LLC with respect to the Company and the Operating
Partnership as a whole shall not be deemed to be an Advisor.

 

“Affiliate” or “Affiliated” means with respect to any Person, (i) any other
Person directly or indirectly owning, controlling or holding, with the power to
vote, ten percent (10%) or more of the outstanding voting securities of such
Person; (ii) any other Person ten percent (10%) or more of whose outstanding
voting securities are directly or indirectly owned, controlled or held, with the
power to vote, by such Person; (iii) any other Person directly or indirectly
controlling, controlled by or under common control with such Person; (iv) any
executive officer, director, trustee or general partner of such Person; and (v)
any legal entity for which such Person acts as an executive officer, director,
trustee or general partner. For purposes of this definition, the terms
“controls,” “is controlled by” or “is under common control with” shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of an entity, whether through ownership or voting
rights, by contract or otherwise.

 

 

 

 

“Annual Subordinated Performance Fee” means the fees payable to the Advisor or
its assignees pursuant to Section 10(e).

 

“Articles of Incorporation” means the charter of the Company, as amended from
time to time.

 

“Asset Management Fee” means the fees payable to the Advisor or its Affiliates
pursuant to Section 10(d).

 

“Average Invested Assets” has the meaning set forth in the Articles of
Incorporation. For an equity interest owned in a Joint Venture, the calculation
of Average Invested Assets shall take into consideration the underlying Joint
Venture’s aggregate book value for the equity interest.

 

“Board of Directors” or “Board” means the Board of Directors of the Company.

 

“Bylaws” means the bylaws of the Company, as amended and as the same are in
effect from time to time.

 

“Cause” means (i) fraud, criminal conduct, willful misconduct or illegal or
negligent breach of fiduciary duty by the Advisor, or (ii) if any of the
following events occur: (A) the Advisor shall breach any material provision of
this Agreement, and after written notice of such breach, shall not cure such
default within thirty (30) days or have begun action within thirty (30) days to
cure the default which shall be completed with reasonable diligence; (B) the
Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for
the appointment of a receiver, liquidator or trustee of the Advisor, for all or
substantially all its property by reason of the foregoing, or if a court of
competent jurisdiction approves any petition filed against the Advisor for
reorganization, and such adjudication or order shall remain in force or unstayed
for a period of thirty (30) days; or (C) the Advisor shall institute proceedings
for voluntary bankruptcy or shall file a petition seeking reorganization under
the federal bankruptcy laws, or for relief under any law for relief of debtors,
or shall consent to the appointment of a receiver for itself or for all or
substantially all its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its
debts, generally, as they become due.

 

“Change of Control” means a change of control of the Company of a nature that
would be required to be reported in response to the disclosure requirements of
Schedule 14A of Regulation 14A promulgated under the Exchange Act, as enacted
and in force on the date hereof, whether or not the Company is then subject to
such reporting requirements; provided, however, that, without limitation, a
Change of Control shall be deemed to have occurred if: (i) any “person” (within
the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the
date hereof) is or becomes the “beneficial owner” (as that term is defined in
Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act)
of securities of the Company representing 9.8% or more of the combined voting
power of the Company’s securities then outstanding; (ii) there occurs a merger,
consolidation or other reorganization of the Company which is not approved by
the Board of Directors; (iii) there occurs a sale, exchange, transfer or other
disposition of substantially all the assets of the Company to another Person,
which disposition is not approved by the Board of Directors; or (iv) there
occurs a contested proxy solicitation of the Stockholders that results in the
contesting party electing candidates to a majority of the Board of Directors’
positions next up for election.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.

 

“Common Stock” means the shares of the Company’s common stock, par value $0.01
per share.

 

“Competitive Real Estate Commission” means a real estate or brokerage commission
for the purchase or sale of an asset which is reasonable, customary and
competitive in light of the size, type and location of the asset.

 

 

 

 

“Contract Purchase Price” has the meaning set forth in the Articles of
Incorporation.

 

“Contract Sales Price” means the total consideration received by the Company for
the sale of an Investment.

 

“Cost of Investments” means the Contract Purchase Price of Investments acquired,
Acquisition Expenses, capital expenditures and other customarily capitalized
costs, but excludes Acquisition Fees.

 

“Dealer Manager” means Realty Capital Securities, LLC, or such other Person
selected by the Board of Directors to act as the dealer manager for the
Offering.

 

“Dealer Manager Fee” means the fee from the sale of Shares in a Primary
Offering, payable to the Dealer Manager for serving as the dealer manager of
such Primary Offering.

 

“Director” means a director of the Company.

  

“Disposition Fee” means the fees payable to the Advisor pursuant to
Section 10(c).

 

“Distributions” means any distributions of money or other property by the
Company to Stockholders, including distributions that may constitute a return of
capital for U.S. federal income tax purposes.

 

“Excess Amount” has the meaning set forth in Section 13.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, or any successor statute thereto. Reference to any provision of the
Exchange Act shall mean such provision as in effect from time to time, as the
same may be amended, and any successor provision thereto, as interpreted by any
applicable regulations as in effect from time to time.

 

“Expense Year” has the meaning set forth in Section 13.

 

“Financings” means any indebtedness or obligations in respect of borrowed money
or evidenced by bonds, notes, debentures, deeds of trust, letters of credit or
similar instruments, including mortgages and mezzanine loans.

 

“FINRA” means the Financial Industry Regulatory Authority.

 

“GAAP” means U.S. generally accepted accounting principles, consistently
applied.

 

“Good Reason” means: (i) any failure to obtain a satisfactory agreement from any
successor to the Company or the Operating Partnership to assume and agree to
perform obligations under this Agreement; or (ii) any material breach of this
Agreement of any nature whatsoever by the Company or the Operating Partnership.

 

“Gross Proceeds” means the aggregate purchase price of all Shares sold for the
account of the Company through an Offering, without deduction for Selling
Commissions, Dealer Manager Fees, volume discounts, any marketing support and
due diligence expense reimbursement or Organization and Offering Expenses. For
the purpose of computing Gross Proceeds, the purchase price of any Share for
which reduced Selling Commissions are paid to the Dealer Manager or a Soliciting
Dealer (where net proceeds to the Company are not reduced) shall be deemed to be
the full amount of the offering price per Share pursuant to the Prospectus for
such Offering without reduction.

 

“Indemnitee” has the meaning set forth in Section 22.

 

“Independent Director” has the meaning set forth in the Articles of
Incorporation.

 

 

 

 

“Independent Valuation Advisor” means a firm that is (i) engaged in the business
of conducting appraisals on real estate properties, (ii) not an affiliate of the
Advisor and (iii) engaged by the Company with the Board’s approval to appraise
the Real Properties and other Investments pursuant to the Valuation Guidelines.

 

“Investments” means any investments by the Company or the Operating Partnership,
directly or indirectly, in Real Estate Assets, Real Estate Related Loans or any
other asset.

 

“Joint Ventures” means the joint venture or partnership or other similar
arrangements (other than between the Company and the Operating Partnership) in
which the Company or the Operating Partnership or any of their subsidiaries is a
co-venturer, limited liability company member, limited partner or general
partner, which are established to acquire or hold Investments.

 

“Listing” means the listing of the Common Stock on a national securities
exchange, or the inclusion of the Common Stock for trading in the
over-the-counter-market.

 

“NAREIT FFO” means funds from operations (“FFO”) consistent with the standards
established by the White Paper on FFO approved by the Board of Governors of the
National Association of Real Estate Investment Trusts (“NAREIT”) as revised in
February 2004 and as modified by NAREIT from time to time.

 

“NASAA REIT Guidelines” means the Statement of Policy Regarding Real Estate
Investment Trusts as revised and adopted by the North American Securities
Administrators Association on May 7, 2007, as the same may be amended from time
to time.

 

“NAV” means the Company’s net asset value, calculated pursuant to the Valuation
Guidelines.

 

“NAV Pricing Date” means the date within six months of February 12, 2015, or two
years from the commencement of the Offering, that the Company begins selling
shares in its initial Offering at a price equal to per share NAV; provided that
the NAV Pricing Date may be earlier if required by FINRA, the SEC or other
applicable regulatory authority.

 

“Net Income” means, for any period, the Company’s total revenues applicable to
such period, less the total expenses applicable to such period other than
additions to reserves for depreciation, bad debts or other similar non-cash
reserves and excluding any gain from the sale of the Company’s assets.

 

“Notice” has the meaning set forth in Section 24.

 

“Offering” means any public offering and sale of Shares pursuant to an effective
registration statement filed under the Securities Act.

 

“Operating Partnership Agreement” means the Agreement of Limited Partnership of
the Operating Partnership, among the Company, the Operating Partnership and ARC
Realty Finance Special Limited Partner, LLC, as the same may be amended from
time to time.

 

“OP Units” means units of limited partnership interest in the Operating
Partnership.

  

“Organization and Offering Expenses” means all expenses (other than the Selling
Commission and the Dealer Manager Fee) to be paid by the Company in connection
with an Offering, including legal, accounting, printing, mailing and filing
fees, charges of the escrow holder, transfer agent expenses, due diligence
expense reimbursements to the Dealer Manager and the Soliciting Dealers and
amounts to reimburse the Advisor for its portion of the salaries of the
employees of its affiliates who provide services to the Advisor and other costs
in connection with administrative oversight of the Offering and marketing
process and preparing supplemental sales materials, holding educational
conferences and attending retail seminars conducted by soliciting dealers.

 

“Person” has the meaning set forth in the Articles of Incorporation.

 

 

“Primary Offering” means the portion of an Offering other than the Shares
offered pursuant to the Company’s distribution reinvestment plan.

 

 

 

 

“Prospectus” means a final prospectus of the Company filed pursuant to Rule
424(b) of the Securities Act, as the same may be amended or supplemented from
time to time.

 

“Real Estate Assets” means any investment by the Company or the Operating
Partnership in unimproved and improved Real Property (including fee or leasehold
interests, options and leases), directly, through one or more subsidiaries or
through a Joint Venture.

 

“Real Estate Related Loans” means any investments in mortgage loans and other
types of real estate related debt financing, including first mortgage loans,
mezzanine loans, bridge loans, convertible mortgages, wraparound mortgage loans,
construction loans, loans on leasehold interests or other loans related to
commercial real estate and participations in such loans, by the Company or the
Operating Partnership, directly, through one or more subsidiaries or through a
Joint Venture.

 

“Real Property” means (i) land, (ii) rights in land (including leasehold
interests), and (iii) any buildings, structures, improvements, furnishings,
fixtures and equipment located on or used in connection with land and rights or
interests in land.

 

“Registration Statement” means the Company’s registration statement on Form S-11
(File No. 333-186111) and the prospectus contained therein.

 

“REIT” means a corporation, trust, association or other legal entity (other than
a real estate syndication) that is engaged primarily in investing in equity
interests in real estate (including fee ownership and leasehold interests) or in
loans secured by real estate or both, as defined pursuant to Sections 856
through 860 of the Code and any successor or other provisions of the Code
relating to real estate investment trusts (including provisions as to the
attribution of ownership of beneficial interests therein) and the regulations
promulgated thereunder

 

“Sale” or “Sales” means any transaction or series of transactions whereby: (i)
the Company or the Operating Partnership directly or indirectly (except as
described in other subsections of this definition) sells, grants, transfers,
conveys or relinquishes its direct or indirect ownership of any Real Estate
Asset, Real Estate Related Loan or other Investment or portion thereof,
including the lease of any Real Estate Assets consisting of a building only, and
including any event with respect to any Real Estate Assets that gives rise to a
significant amount of insurance proceeds or condemnation awards; (ii) the
Company or the Operating Partnership directly or indirectly (except as described
in other subsections of this definition) sells, grants, transfers, conveys or
relinquishes its ownership of all or substantially all the direct or indirect
interest of the Company or the Operating Partnership in any Joint Venture in
which it is a co-venturer, member or partner; (iii) any Joint Venture directly
or indirectly (except as described in other subsections of this definition) in
which the Company or the Operating Partnership as a co-venturer, member or
partner sells, grants, transfers, conveys or relinquishes its direct or indirect
ownership of any Real Estate Assets or portion thereof, including any event with
respect to any Real Estate Assets which gives rise to insurance claims or
condemnation awards; (iv) the Company or the Operating Partnership directly or
indirectly (except as described in other subsections of this definition) sells,
grants, conveys or relinquishes its direct or indirect interest in any Real
Estate Related Loans or portion thereof (including with respect to any Real
Estate Related Loan, all payments thereunder or in satisfaction thereof other
than regularly scheduled interest payments) and any event which gives rise to a
significant amount of insurance proceeds or similar awards; or (v) the Company
or the Operating Partnership directly or indirectly (except as described in
other subsections of this definition) sells, grants, transfers, conveys or
relinquishes its direct or indirect ownership of any other asset not previously
described in this definition or any portion thereof, but not including any
transaction or series of transactions specified in clauses (i) through (v) above
in which the proceeds of such transaction or series of transactions are
reinvested by the Company in one or more assets within 180 days thereafter.

 

 “Securities Act” means the Securities Act of 1933, as amended from time to
time, or any successor statute thereto. Reference to any provision of the
Securities Act shall mean such provision as in effect from time to time, as the
same may be amended, and any successor provision thereto, as interpreted by any
applicable regulations as in effect from time to time. 

 

“Selling Commission” means the fee payable to the Dealer Manager and reallowable
to Soliciting Dealers with respect to Shares sold by them in a Primary Offering.

 

 

 

 

“Shares” means the shares of beneficial interest or of common stock of the
Company of any class or series, including Common Stock, that has the right to
elect the Directors of the Company.

 

“Soliciting Dealers” means broker-dealers that are members of FINRA, or that are
exempt from broker-dealer registration, and that, in either case, have executed
soliciting dealer or other agreements with the Dealer Manager to sell Shares.

 

“Sponsor” means American Realty Capital VIII, LLC, a Delaware limited liability
company.

 

“Stockholders” means the holders of record of the Shares as maintained on the
books and records of the Company or its transfer agent.

 

“Termination Date” means the date of termination of this Agreement.

 

“Total Operating Expenses” has the meaning set forth in the Articles of
Incorporation. The definition of “Total Operating Expenses” set forth above is
intended to encompass only those expenses which are required to be treated as
Total Operating Expenses under the NASAA REIT Guidelines. As a result, and
notwithstanding the definition set forth above, any expense of the Company which
is not part of Total Operating Expenses under the NASAA REIT Guidelines shall
not be treated as part of Total Operating Expenses for purposes hereof.

 

 “Valuation Guidelines” means the valuation guidelines adopted by the Board, as
may be amended from time to time.

 

“2%/25% Guidelines” has the meaning set forth in Section 13.

 

2.         APPOINTMENT.          The Company and the Operating Partnership
hereby appoint the Advisor to serve as their advisor to perform the services set
forth herein on the terms and subject to the conditions set forth in this
Agreement and subject to the supervision of the Board, and the Advisor hereby
accepts such appointment.

 

3.        DUTIES OF THE ADVISOR.          The Advisor will use its reasonable
best efforts to present to the Company and the Operating Partnership potential
investment opportunities and to provide a continuing and suitable investment
program consistent with the investment objectives and policies of the Company as
determined and adopted from time to time by the Board. In performance of this
undertaking, subject to the supervision of the Board and consistent with the
provisions of the Articles of Incorporation, Bylaws and the Operating
Partnership Agreement, the Advisor, directly or indirectly, will:

 

a.           serve as the Company’s and the Operating Partnership’s investment
and financial advisor and provide research and economic and statistical data in
connection with the Company’s assets and investment policies;

 

b.           provide the daily management for the Company and the Operating
Partnership and perform and supervise the various administrative functions
necessary for the day-to-day management of the operations of the Company and the
Operating Partnership;

 

c.           investigate, select and, on behalf of the Company and the Operating
Partnership, engage and conduct business with and supervise the performance of
such Persons as the Advisor deems necessary to the proper performance of its
obligations hereunder (including consultants, accountants, correspondents,
lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection,
insurers, insurance agents, banks, builders, developers, property owners,
property managers, real estate management companies, real estate operating
companies, securities investment advisors, mortgagors, the registrar and the
transfer agent and any and all agents for any of the foregoing), including
Affiliates of the Advisor and Persons acting in any other capacity deemed by the
Advisor necessary or desirable for the performance of any of the foregoing
services (including entering into contracts in the name of the Company and the
Operating Partnership with any of the foregoing);

 

 

 

 

d.           consult with the officers and Directors of the Company and assist
the Directors in the formulation and implementation of the Company’s financial
policies, and, as necessary, furnish the Board with advice and recommendations
with respect to the making of investments consistent with the investment
objectives and policies of the Company and in connection with any borrowings
proposed to be undertaken by the Company or the Operating Partnership;

 

e.           subject to the provisions of Section 4, (i) participate in
formulating an investment strategy and asset allocation framework; (ii) locate,
analyze and select potential Investments; (iii) structure and negotiate the
terms and conditions of transactions pursuant to which acquisitions and
dispositions of Investments will be made; (iv) research, identify, review,
recommend and arrange acquisitions and dispositions of Investments to the Board
and make Investments on behalf of the Company and the Operating Partnership in
compliance with the investment objectives and policies of the Company; (v)
review and analyze each property’s operating and capital budget; (vi) arrange
for financing and refinancing and make other changes in the asset or capital
structure of, and dispose of, reinvest the proceeds from the sale of, or
otherwise deal with, Investments; (vii) enter into leases and service contracts
for Real Estate Assets and, to the extent necessary, perform all other
operational functions for the maintenance and administration of such Real Estate
Assets; (viii) actively oversee and manage Investments for purposes of meeting
the Company’s investment objectives and reviewing and analyzing financial
information for each of the Investments and the overall portfolio; (ix) select
Joint Venture partners, structure corresponding agreements and oversee and
monitor these relationships; (x) oversee, supervise and evaluate Affiliated and
non-Affiliated property managers who perform services for the Company or the
Operating Partnership; (xi) oversee Affiliated and non-Affiliated Persons with
whom the Advisor contracts to perform certain of the services required to be
performed under this Agreement; (xii) manage accounting and other record-keeping
functions for the Company and the Operating Partnership, including reviewing and
analyzing the capital and operating budgets for the Real Estate Assets and
generating an annual budget for the Company; (xiii) recommend various liquidity
events to the Board when appropriate; and (xiv) source and structure Real Estate
Related Loans;

 

f.            upon request, provide the Board with periodic reports regarding
prospective investments;

 

g.           make investments in, and dispositions of, Investments within the
discretionary limits and authority as granted by the Board;

 

h.           negotiate on behalf of the Company and the Operating Partnership
with banks or other lenders for Financings with the Company, the Operating
Partnership or any of their subsidiaries as the borrower, negotiate with
investment banking firms and broker-dealers on behalf of the Company, the
Operating Partnership or any of their subsidiaries to obtain Financing for the
Company, the Operating Partnership or any of their subsidiaries and negotiate
private sales of Shares or other securities of the Company, the Operating
Partnership or any of their subsidiaries, but in no event in such a manner so
that the Advisor shall be acting as broker-dealer or underwriter; provided,
however, that any fees and costs payable to third parties incurred by the
Advisor in connection with the foregoing shall be the responsibility of the
Company, the Operating Partnership or any of their subsidiaries;

 

i.            obtain reports (which may, but are not required to, be prepared by
the Advisor or its Affiliates), where appropriate, concerning the value of
Investments or contemplated investments of the Company and the Operating
Partnership;

 

j.            from time to time, or at any time reasonably requested by the
Board, make reports to the Board of its performance of services to the Company
and the Operating Partnership under this Agreement, including reports with
respect to potential conflicts of interest involving the Advisor or any of its
Affiliates;

   

k.           provide the Company and the Operating Partnership with all
necessary cash management services;

 

l.            deliver to, or maintain on behalf of, the Company copies of all
appraisals obtained in connection with the investments in any Real Estate Assets
as may be required to be obtained by the Board;

 

m.          effect any private placement of OP Units, tenancy-in-common or other
interests in Investments as may be approved by the Board;

 

 

 

 

n.           perform investor-relations and Stockholder communications functions
for the Company;

 

o.           maintain the Company’s accounting and other records and assist the
Company in filing all reports required to be filed by it with the Securities and
Exchange Commission, the Internal Revenue Service and other regulatory agencies;

 

p.           notify the Board of all proposed material transactions before they
are completed;

 

q.           render such services as may be reasonably determined by the Board
of Directors consistent with the terms and conditions herein;

 

r.            do all things reasonably necessary to assure its ability to render
the services described in this Agreement;

 

s.           commencing with the NAV Pricing Date, calculate the NAV on a
quarterly basis as provided in the Registration Statement, and in connection
therewith, obtain appraisals performed by the Independent Valuation Advisors;
and

 

t.            supervise one or more Independent Valuation Advisors and, if and
when necessary, recommend to the Board its replacement.

 

Notwithstanding the foregoing or anything else that may be to the contrary in
this Agreement, the Advisor may delegate any of the foregoing duties to any
Person so long as the Advisor or its Affiliate remains responsible for the
performance of the duties set forth in this Section 3.

 

4.          AUTHORITY OF ADVISOR.

 

a.           Pursuant to the terms of this Agreement (including the restrictions
included in this Section 4 and in Section 9), and subject to the continuing and
exclusive authority of the Board over the supervision of the Company, the
Company, acting on the authority of the Board of Directors, hereby delegates to
the Advisor the authority to perform the services described in Section 3.

   

b.           Notwithstanding anything herein to the contrary, all acquisitions
of Real Estate Assets will require the prior approval of the Board, any
particular Directors specified by the Board or any committee of the Board
specified by the Board, as the case may be.

 

c.           If a transaction requires approval by the Independent Directors,
the Advisor will deliver to the Independent Directors all documents and other
information reasonably required by them to evaluate properly the proposed
transaction.

 

d.          The Board may, at any time upon the giving of notice to the Advisor,
modify or revoke the authority set forth in this Section 4; provided, however,
that such modification or revocation shall be effective upon receipt by the
Advisor and shall not be applicable to investment transactions to which the
Advisor has committed the Company or the Operating Partnership prior to the date
of receipt by the Advisor of such notification.

 

5.          FIDUCIARY RELATIONSHIP.           The Advisor, as a result of its
relationship with the Company and the Operating Partnership pursuant to this
Agreement, has a fiduciary responsibility and duty to the Company, the
Stockholders and the partners in the Operating Partnership.

 

6.           NO PARTNERSHIP OR JOINT VENTURE.           The parties to this
Agreement are not partners or joint venturers with each other and nothing herein
shall be construed to make them partners or joint venturers or impose any
liability as such on either of them.

 

 

 

 

7.           BANK ACCOUNTS.           The Advisor may establish and maintain one
or more bank accounts in the name of the Company or the Operating Partnership
and may collect and deposit into any such account or accounts, and disburse from
any such account or accounts, any money on behalf of the Company or the
Operating Partnership, under such terms and conditions as the Board may approve,
provided that no funds shall be commingled with the funds of the Advisor; and,
upon request, the Advisor shall render appropriate accountings of such
collections and payments to the Board and to the auditors of the Company.

  

8.           RECORDS; ACCESS.           The Advisor shall maintain appropriate
records of all its activities hereunder and make such records available for
inspection by the Directors and by counsel, auditors and authorized agents of
the Company, at any time and from time to time. The Advisor shall at all
reasonable times have access to the books and records of the Company and the
Operating Partnership.

 

9.           LIMITATIONS ON ACTIVITIES.           Notwithstanding anything
herein to the contrary, the Advisor shall refrain from taking any action which,
in its sole judgment, or in the sole judgment of the Company, made in good
faith, would (a) adversely affect the status of the Company as a REIT, unless
the Board has determined that REIT qualification is not in the best interests of
the Company and its Stockholders, (b) subject the Company to regulation under
the Investment Company Act of 1940, as amended, or (c) violate any law, rule,
regulation or statement of policy of any governmental body or agency having
jurisdiction over the Company, the Operating Partnership or the Shares, or
otherwise not be permitted by the Articles of Incorporation or Bylaws, except if
such action shall be ordered by the Board, in which case the Advisor shall
notify promptly the Board of the Advisor’s judgment of the potential impact of
such action and shall refrain from taking such action until it receives further
clarification or instructions from the Board. In such event, the Advisor shall
have no liability for acting in accordance with the specific instructions of the
Board so given.

 

10.        FEES.

 

a.           Acquisition Fee. Subject to Section 10(b), the Company shall pay an
Acquisition Fee to the Advisor or its Affiliates as compensation for services
rendered in connection with the investigation, selection, acquisition and
origination (by purchase, investment or exchange) of Investments. If the Advisor
is terminated without cause pursuant to Section 17(a), the Advisor or its
Affiliates shall be entitled to an Acquisition Fee for any Investments acquired
after the Termination Date for which a contract to acquire any such Investment
had been entered into at or prior to the Termination Date. The total Acquisition
Fee payable to the Advisor or its Affiliates shall equal one percent (1.0%) of
the Contract Purchase Price for any Investment acquired. The Contract Purchase
Price allocable for an Investment held through a Joint Venture shall equal the
product of (i) the Contract Purchase Price of the Investment and (ii) the direct
or indirect ownership percentage in the Joint Venture held directly or
indirectly by the Company or the Operating Partnership. For purposes of this
Section 10(a), “ownership percentage” shall be the percentage of capital stock,
membership interests, partnership interests or other equity interests held by
the Company or the Operating Partnership, without regard to classification of
such equity interests. The Company shall pay the Advisor or its Affiliates the
Acquisition Fee promptly upon the closing of the Investment; provided, however,
that such Acquisition Fee shall be paid to an Affiliate of the Advisor that is
registered as a FINRA member broker-dealer if applicable laws or regulations
prohibit such payment to be made to a person that is not a FINRA member
broker-dealer. In addition, if during the period ending two years after the
close of the initial Offering, the Company sells an Investment and then
reinvests in other Investments, the Company will pay to the Advisor or its
Affiliates one percent (1.0%) of the Contract Purchase Price for the other
Investments.

  

b.           Limitation on Total Acquisition Fees and Acquisition Expenses. The
total of all Acquisition Fees and Acquisition Expenses payable in connection
with any Investment or any reinvestment shall be reasonable and shall not exceed
an amount equal to four and one-half percent (4.5%) of the Contract Purchase
Price of such Investment; provided, however, that the Advisor (i) will not be
entitled to Acquisition Fees or reimbursement of Acquisition Expenses if there
are insufficient Offering proceeds or capital proceeds to pay such expenses and
(ii) such expenses not paid to the Advisor will not be accrued and paid in
subsequent periods to the extent that there are not sufficient offering or
capital proceeds to pay them; provided, further, however, that a majority of the
Directors (including a majority of the Independent Directors) not otherwise
interested in the transaction may approve fees and expenses in excess of these
limits if they determine the transaction to be commercially competitive, fair
and reasonable to the Company.

  

 

 

 

c.           Disposition Fees. In connection with a Sale of an Investment in
which the Advisor or any Affiliate of the Advisor provides a substantial amount
of services, as determined by the Independent Directors, the Company shall pay
to the Advisor or its assignees a Disposition Fee of one percent (1.0%) of the
Contract Sales Price of each Investment sold, including mortgage-backed
securities or collateralized debt obligations issued by a subsidiary of the
Company as part of a securitization transaction; provided, however, that such
Disposition Fee shall be paid to an Affiliate of the Advisor that is registered
as a FINRA member broker-dealer if applicable laws or regulations prohibit such
payment to be made to a person that is not a FINRA member broker-dealer;
provided, further, that in no event may the Disposition Fee paid to the Advisor,
its Affiliates and non-Affiliates exceed the lesser of six percent (6.0%) of the
Contract Sales Price and a Competitive Real Estate Commission. Notwithstanding
the foregoing, the Company will not pay a Disposition Fee upon the maturity,
prepayment, workout, modification or extension of a Real Estate Related Loan
unless there is a corresponding fee paid by the borrower, in which case the
Disposition Fee will be the lesser of: (i) one percent (1.0%) of the principal
amount of the Real Estate Related Loan prior to such transaction; or (ii) the
amount of the fee paid by the borrower in connection with such transaction. If
the Company takes ownership of a Real Property as a result of a workout or
foreclosure of a Real Estate Related Loan, the Company will pay a Disposition
Fee upon the sale of such Real Property.

 

d.           Asset Management Fee. The Company shall pay the Advisor or its
Affiliates as compensation for services rendered in connection with the
management of the Company’s Investments an annual Asset Management Fee equal to
three-quarters percent (0.75%) of the Cost of Investments. Commencing on the NAV
Pricing Date, the Asset Management Fee will be based on the lower of
three-quarters percent (0.75%) of the Cost of Investments (as calculated in the
preceding sentence) and three-quarters percent (0.75%) of the quarterly NAV. The
Asset Management Fee will be payable monthly in arrears, based on Investments
held by the Company during the measurement period, adjusted for appropriate
closing dates for individual Investments. The Asset Management Fee will be
reduced to the extent that NAREIT FFO, as adjusted, during the six (6) months
ending on the last day of the calendar quarter immediately preceding the date
that such Asset Management Fee is payable, is less than the Distributions
declared with respect to such six (6) month period. For purposes of this
determination, NAREIT FFO, as adjusted, is NAREIT FFO adjusted to (i) include
Acquisition Fees and Acquisition Expenses; (ii) include non-cash restricted
stock grant amortization, if any; and (iii) impairments of Investments, if any.

  

e.           Annual Subordinated Performance Fee. The Company may pay an Annual
Subordinated Performance Fee to the Advisor calculated on the basis of the total
return to Stockholders for any year in which the Company’s total return on
Stockholders’ capital contributions exceeds six percent (6%) per annum. With
respect to such year, the Advisor will be paid fifteen percent (15%) of the
excess total return, not to exceed ten percent (10%) of the aggregate total
return for such year. This fee will only be payable upon the Sale of
Investments, Distributions or other event which results in the Company’s total
return on Stockholders’ capital contributions exceeding six percent (6%) per
annum. This fee will be calculated annually and will be payable monthly over 12
months following the year for which the fee is being paid.

 

f.            Payment of Fees. In connection with the Acquisition Fee,
Disposition Fee and Annual Subordinated Performance Fee, the Company shall pay
such fees to the Advisor or its Affiliates in cash or in Shares, or a
combination of both, the form of payment to be determined in the sole discretion
of the Advisor. The Asset Management Fee shall be payable, at the discretion of
the Board of Directors, in cash, Shares or grants of restricted Shares, or any
combination thereof. For the purposes of the payment of any fees in Shares,
prior to the NAV Pricing Date, each Share shall be valued at the per share
Offering price of the Shares in such Offering minus the maximum Selling
Commissions and Dealer Manager Fee allowed in the initial Offering. Commencing
with the NAV Pricing Date, each Share shall be valued using per share NAV;
provided, however, that in the case of Asset Management Fees payable in grants
of restricted shares, each Share shall be valued in a manner consistent with the
provisions of the equity incentive plan of the Company.

  

g.           Exclusion of Certain Transactions.

 

i.            If the Company or the Operating Partnership shall propose to enter
into any transaction in which the Advisor, any Affiliate of the Advisor or any
of the Advisor’s directors or officers has a direct or indirect interest, then
such transaction shall be approved by a majority of the Board not otherwise
interested in such transaction, including a majority of the Independent
Directors.

 

 

 

 

ii.         If the Board elects to internalize any management services provided
by the Advisor, neither the Company nor the Operating Partnership shall pay any
compensation or other remuneration to the Advisor or its Affiliates in
connection with such internalization of management services.

 

11.         EXPENSES.

 

a.           In addition to the compensation paid to the Advisor pursuant to
Section 11, the Company or the Operating Partnership shall pay directly or
reimburse the Advisor for all the expenses paid or actually incurred by the
Advisor or its Affiliates in connection with the services it provides to the
Company and the Operating Partnership pursuant to this Agreement, including, the
following:

  

i.            Organization and Offering Expenses, including third-party due
diligence fees related to the Primary Offering, as set forth in detailed and
itemized invoices; provided, however, that the Company shall not reimburse the
Advisor to the extent such reimbursement would cause the total amount of
Organization and Offering Expenses paid by the Company and the Operating
Partnership to exceed one and three-quarters percent (1.75%) of the Gross
Proceeds raised in all Primary Offerings;

 

ii.          Acquisition Expenses, subject to the limitations set forth in
Section 10(b);

 

iii.         the actual cost of goods and services used by the Company and
obtained from Persons not Affiliated with the Advisor;

 

iv.         interest and other costs for Financings, including discounts, points
and other similar fees; taxes and assessments on income of the Company or
Investments;

 

v.          costs associated with insurance required in connection with the
business of the Company or by the Board;

 

vi.         expenses of managing and operating Investments owned by the Company,
whether payable to an Affiliate of the Company or a non-affiliated Person;

  

vii.        all expenses in connection with payments to the Directors for
attending meetings of the Board and Stockholders;

 

viii.       expenses associated with a Listing, if applicable, or with the
issuance and distribution of Shares, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, listing and registration
fees;

 

ix.         expenses connected with payments of Distributions;

 

x.          expenses of organizing, revising, amending, converting, modifying or
terminating the Company, the Operating Partnership or any subsidiary thereof or
the Articles of Incorporation, Bylaws or governing documents of the Operating
Partnership or any subsidiary of the Company or the Operating Partnership;

 

xi.          expenses of maintaining communications with Stockholders, including
the cost of preparation, printing, and mailing annual reports and other
Stockholder reports, proxy statements and other reports required by governmental
entities;

 

xii.         administrative service expenses, including all costs and expenses
incurred by Advisor or its Affiliates in fulfilling its duties hereunder,
including reasonable salaries and wages, benefits and overhead of all employees
directly involved in the performance of such services; provided, however, that
no reimbursement shall be made for costs of such employees of the Advisor or its
Affiliates to the extent that such employees perform services for which the
Advisor receives an Acquisition Fee or a Disposition Fee; and

 

xiii.         audit, accounting and legal fees.

 

 

 

   

b.           Commencing six (6) months after the initial release of Offering
proceeds from escrow in the Company’s initial Offering, expenses incurred by the
Advisor on behalf of the Company and the Operating Partnership or in connection
with the services provided by the Advisor hereunder and payable pursuant to this
Section 11 shall be reimbursed, no less than monthly, to the Advisor.

 

12.         OTHER SERVICES.           Should the Board request that the Advisor
or any director, officer or employee thereof render services for the Company and
the Operating Partnership other than set forth in Section 3 , such services
shall be separately compensated at such customary rates and in such customary
amounts as are agreed upon by the Advisor and the Board, including a majority of
the Independent Directors, subject to the limitations contained in the Articles
of Incorporation, and shall not be deemed to be services pursuant to the terms
of this Agreement.

  

13.         REIMBURSEMENT TO THE ADVISOR.           The Company shall not
reimburse the Advisor at the end of any fiscal quarter in which Total Operating
Expenses incurred by the Advisor for the four (4) consecutive fiscal quarters
then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of two
percent (2%) of Average Invested Assets or twenty-five percent (25%) of Net
Income (the “2%/25% Guidelines”) for such Expense Year. Any Excess Amount paid
to the Advisor during a fiscal quarter shall be repaid to the Company or, at the
option of the Company, subtracted from the Total Operating Expenses reimbursed
during the subsequent fiscal quarter. If there is an Excess Amount in any
Expense Year and the Independent Directors determine that such excess was
justified based on unusual and nonrecurring factors which they deem sufficient,
then the Excess Amount may be carried over and included in Total Operating
Expenses in subsequent Expense Years and reimbursed to the Advisor in one or
more of such years, provided that there shall be sent to the Stockholders a
written disclosure of such fact within sixty (60) days of the end of the fiscal
quarter, together with an explanation of the factors the Independent Directors
considered in determining that such excess expenses were justified. Such
determination shall be reflected in the minutes of the meetings of the Board.
All figures used in the foregoing computation shall be determined in accordance
with GAAP applied on a consistent basis.

 

14.         OTHER ACTIVITIES OF THE ADVISOR.           Except as set forth in
this Section 14, nothing herein contained shall prevent the Advisor or any of
its Affiliates from engaging in or earning fees from other activities, including
the rendering of advice to other Persons (including other REITs) and the
management of other programs advised, sponsored or organized by the Sponsor or
its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, member, partner, employee or stockholder of the Advisor or
any of its Affiliates to engage in or earn fees from any other business or to
render services of any kind to any other Person and earn fees for rendering such
services; provided, however, that the Advisor must devote sufficient resources
to the Company’s business to discharge its obligations to the Company under this
Agreement. The Advisor may, with respect to any investment in which the Company
is a participant, also render advice and service to each and every other
participant therein, and earn fees for rendering such advice and service.
Specifically, it is contemplated that the Company may enter into Joint Ventures
or other similar co-investment arrangements with certain Persons, and pursuant
to the agreements governing such Joint Ventures or arrangements, the Advisor may
be engaged to provide advice and service to such Persons, in which case the
Advisor will earn fees for rendering such advice and service.

  

The Advisor shall report to the Board the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor’s obligations to the
Company and its obligations to or its interest in any other Person. If the
Advisor, Director or Affiliates thereof have sponsored other investment programs
with similar investment objectives which have investment funds available at the
same time as the Company, the Advisor shall inform the Board of the method to be
applied by the Advisor in allocating investment opportunities among the Company
and competing investment entities and shall provide regular updates to the Board
of the investment opportunities provided by the Advisor to competing programs in
order for the Board (including the Independent Directors) to fulfill its duty to
ensure that the Advisor and its Affiliates use their reasonable best efforts to
apply such method fairly to the Company.

  

 

 

 

15.         THE AMERICAN REALTY CAPITAL NAME.           The Advisor and its
Affiliates have or may have a proprietary interest in the names “American Realty
Capital,” “ARC” and “AR Capital.” The Advisor hereby grants to the Company, to
the extent of any proprietary interest the Advisor may have in any of the names
“American Realty Capital,” “ARC” and “AR Capital,” a non-transferable,
non-assignable, non-exclusive, royalty-free right and license to use the names
“American Realty Capital,” “ARC” and “AR Capital” during the term of this
Agreement. The Company agrees that the Advisor and its Affiliates will have the
right to approve of any use by the Company of the names “American Realty
Capital,” “ARC” and “AR Capital,” such approval not to be unreasonably withheld
or delayed. Accordingly, and in recognition of this right, if at any time the
Company ceases to retain the Advisor or one of its Affiliates to perform
advisory services for the Company, the Company will, promptly after receipt of
written request from the Advisor, cease to conduct business under or use the
names “American Realty Capital,” “ARC” and “AR Capital” or any derivative
thereof and the Company shall change its name and the names of any of its
subsidiaries to a name that does not contain the names “American Realty
Capital,” “ARC” and “AR Capital” or any other word or words that might, in the
reasonable discretion of the Advisor, be susceptible of indication of some form
of relationship between the Company and the Advisor or any its Affiliates. At
such time, the Company will also make any changes to any trademarks,
servicemarks or other marks necessary to remove any references to the words
“American Realty Capital,” “ARC” and “AR Capital.” Consistent with the
foregoing, it is specifically recognized that the Advisor or one or more of its
Affiliates has in the past and may in the future organize, sponsor or otherwise
permit to exist other investment vehicles (including vehicles for investment in
real estate) and financial and service organizations having any of the names
“American Realty Capital,” “ARC” and “AR Capital” as a part of their name, all
without the need for any consent (and without the right to object thereto) by
the Company. Neither the Advisor nor any of its Affiliates makes any
representation or warranty, express or implied, with respect to the names
“American Realty Capital,” “ARC” and “AR Capital” licensed hereunder or the use
thereof (including without limitation as to whether the use of the names
“American Realty Capital,” “ARC” and “AR Capital” will be free from infringement
of the intellectual property rights of third parties. Notwithstanding the
preceding, the Advisor represents and warrants that it is not aware of any
pending claims or litigation or of any claims threatened in writing regarding
the use or ownership of the names “American Realty Capital,” “ARC” and “AR
Capital.”

 

16.         TERM OF AGREEMENT.           This Agreement shall continue in force
for a period of one (1)-year from the date hereof. Thereafter, the term may be
renewed for an unlimited number of successive one-(1) year terms upon mutual
consent of the parties.

 

17.         TERMINATION BY THE PARTIES. This Agreement may be terminated upon
sixty (60) days’ written notice (a) by the Independent Directors or the Advisor,
without Cause and without penalty, (b) by the Advisor for Good Reason, or (c) by
the Advisor upon a Change of Control. The provisions of Sections 15 and 19
through 32 (inclusive) of this Agreement shall survive any expiration or earlier
termination of this Agreement.

 

18.         ASSIGNMENT TO AN AFFILIATE.           This Agreement may be assigned
by the Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement to any Person
without obtaining the approval of the Directors. This Agreement shall not be
assigned by the Company or the Operating Partnership without the consent of the
Advisor, except in the case of an assignment by the Company or the Operating
Partnership to a Person which is a successor to all the assets, rights and
obligations of the Company or the Operating Partnership, in which case such
successor Person shall be bound hereunder and by the terms of said assignment in
the same manner as the Company or the Operating Partnership, as applicable, is
bound by this Agreement.

  

19.         PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

 

a.           Amounts Owed. After the Termination Date, the Advisor shall be
entitled to receive from the Company or the Operating Partnership within thirty
(30) days after the effective date of such termination all amounts then accrued
and owing to the Advisor, including all its interest in the Company’s and the
Operating Partnership’s income, losses, distributions and capital by payment of
an amount equal to the then-present fair market value of the Advisor’s interest
(as provided by the Operating Partnership Agreement), subject to the 2%/25%
Guidelines to the extent applicable.

  

 

 

  

b.           Advisor’s Duties. The Advisor shall promptly upon termination of
this Agreement:

 

i.            pay over to the Company and the Operating Partnership all money
collected and held for the account of the Company and the Operating Partnership
pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;

 

ii.         deliver to the Board a full accounting, including a statement
showing all payments collected by it and a statement of all money held by it,
covering the period following the date of the last accounting furnished to the
Board;

 

iii.         deliver to the Board all assets, including all Investments, and
documents of the Company and the Operating Partnership then in the custody of
the Advisor; and

 

iv.         cooperate with the Company and the Operating Partnership to provide
an orderly management transition.

 

20.         NON-SOLICITATION. The Company agrees not to solicit any current
and/or future employees of Advisor for employment or in any consulting or
similar capacity during the term of the this Agreement and for two (2) years
following the termination of this Agreement without the consent of the Advisor.

 

21.         INCORPORATION OF THE ARTICLES OF INCORPORATION AND THE OPERATING
PARTNERSHIP AGREEMENT.           To the extent that the Articles of
Incorporation or the Operating Partnership Agreement impose obligations or
restrictions on the Advisor or grant the Advisor certain rights which are not
set forth in this Agreement, the Advisor shall abide by such obligations or
restrictions and such rights shall inure to the benefit of the Advisor with the
same force and effect as if they were set forth herein.

 

22.         INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP.

 

a.           The Company and the Operating Partnership shall indemnify and hold
harmless the Advisor and its Affiliates, as well as their respective officers,
directors, equity holders, members, partners, stockholders, other equity holders
and employees (collectively, the “Indemnitees ,” and each, an “Indemnitee”),
from all liability, claims, damages or losses arising in the performance of
their duties hereunder, and related expenses, including reasonable attorneys’
fees, to the extent such liability, claims, damages or losses and related
expenses are not fully reimbursed by insurance, and to the extent that such
indemnification would not be inconsistent with the laws of the State of New
York, the Articles of Incorporation or the provisions of Section II.G of the
NASAA REIT Guidelines. Notwithstanding the foregoing, the Company and the
Operating Partnership shall not provide for indemnification of an Indemnitee for
any loss or liability suffered by such Indemnitee, nor shall they provide that
an Indemnitee be held harmless for any loss or liability suffered by the Company
and the Operating Partnership, unless all the following conditions are met:

  

i.           the Indemnitee has determined, in good faith, that the course of
conduct that caused the loss or liability was in the best interest of the
Company and the Operating Partnership;

 

ii.          the Indemnitee was acting on behalf of, or performing services for,
the Company or the Operating Partnership;

 

iii.         such liability or loss was not the result of negligence or
misconduct by the Indemnitee; and

 

iv.         such indemnification or agreement to hold harmless is recoverable
only out of the Company’s net assets and not from the Stockholders.

 

b.           Notwithstanding the foregoing, an Indemnitee shall not be
indemnified by the Company and the Operating Partnership for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws by such Indemnitee unless one or more of the following
conditions are met:

 

 

 

  

i.          there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the Indemnitee;

 

ii.         such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the Indemnitee; or

 

iii.        a court of competent jurisdiction approves a settlement of the
claims against the Indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority of a jurisdiction in which securities of the Company or the Operating
Partnership were offered or sold as to indemnification for violation of
securities laws.

 

c.           In addition, the advancement of the Company’s or the Operating
Partnership’s funds to an Indemnitee for legal expenses and other costs incurred
as a result of any legal action for which indemnification is being sought is
permissible only if all the following conditions are satisfied:

  

i.          the legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company or the Operating
Partnership;

  

ii.         the legal action is initiated by a third party who is not a
Stockholder or the legal action is initiated by a Stockholder acting in such
Stockholder’s capacity as such and a court of competent jurisdiction
specifically approves such advancement;

 

iii.        the Indemnitee provides the Company or the Operating Partnership
with a written affirmation of his or her good faith belief that he or she has
met the standard of conduct necessary for indemnification; and

 

iv.        the Indemnitee undertakes to repay the advanced funds to the Company
or the Operating Partnership, together with the applicable legal rate of
interest thereon, in cases in which such Indemnitee is found not to be entitled
to indemnification.

 

23.         INDEMNIFICATION BY ADVISOR.           The Advisor shall indemnify
and hold harmless the Company and the Operating Partnership from contract or
other liability, claims, damages, taxes or losses and related expenses,
including reasonable attorneys’ fees, to the extent that such liability, claims,
damages, taxes or losses and related expenses are not fully reimbursed by
insurance and are incurred by reason of the Advisor’s bad faith, fraud, willful
misfeasance, intentional misconduct, gross negligence or reckless disregard of
its duties; provided, however, that the Advisor shall not be held responsible
for any action of the Board in following or declining to follow any advice or
recommendation given by the Advisor.

 

24.         NOTICES.           Any notice, report or other communication (each a
“Notice”) required or permitted to be given hereunder shall be in writing unless
some other method of giving such Notice is required by the Articles of
Incorporation or the Bylaws, and shall be given by being delivered by hand, by
courier or overnight carrier or by registered or certified mail to the addresses
set forth below:

 

To the Company: ARC Realty Finance Trust, Inc.   405 Park Avenue   New York, New
York 10022   Attention: Peter M. Budko, President and Secretary       with a
copy to:   Alston & Bird LLP   1201 West Peachtree Street   Atlanta, Georgia
30309   Attention: Rosemarie A. Thurston

 

 

 

 

  and       Company Lead Director   Leslie D. Michelson   c/o 405 Park Avenue  
New York, New York 10022

  

 To the Operating Partnership: ARC Realty Finance Operating Partnership, L.P.  
405 Park Avenue   New York, New York 10022   Attention:  Peter M. Budko,
President and Secretary       with a copy to:       Alston & Bird LLP   1201
West Peachtree Street   Atlanta, Georgia 30309   Attention:  Rosemarie A.
Thurston     To the Advisor: ARC Realty Finance Advisors, LLC   405 Park Avenue
  New York, New York 10022   Attention:  Peter M. Budko, President and Secretary
      with a copy to:       Alston & Bird LLP   1201 West Peachtree Street  
Atlanta, Georgia 30309   Attention:  Rosemarie A. Thurston

 

Any party may at any time give Notice in writing to the other parties of a
change in its address for the purposes of this Section 24.

 

25.         MODIFICATION.           This Agreement shall not be amended,
supplemented, terminated or discharged, in whole or in part, except by an
instrument in writing signed by the parties hereto, or their respective
successors or assignees.

 

26.         SEVERABILITY.           The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

 

27.         GOVERNING LAW.           The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect, without regard to the principles of conflicts of laws
thereof.

  

28.         ENTIRE AGREEMENT.           This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof.

 

 

 

 

29.         NO WAIVER.           Neither the failure nor any delay on the part
of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

 

30.        PRONOUNS AND PLURALS.           Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.

 

31.         HEADINGS.           The titles of sections and subsections contained
in this Agreement are for convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction or interpretation hereof.

 

32.        EXECUTION IN COUNTERPARTS.           This Agreement may be executed
(including by facsimile transmission) with counterpart signature pages or in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

  ARC REALTY FINANCE TRUST, INC.         By:  /s/ Peter M. Budko     Name: Peter
M. Budko     Title:   President and Secretary         ARC REALTY FINANCE
OPERATING
PARTNERSHIP, L.P.         By: ARC Realty Finance Trust, Inc.     its General
Partner         By:  /s/ Peter M. Budko     Name: Peter M. Budko    
Title:   President and Secretary         ARC REALTY FINANCE ADVISORS, LLC      
  By: ARC Realty Finance Special Limited Partnership, LLC     its Member        
By: AR Capital, LLC     its Managing Member         By:  /s/ Nicholas S.
Schorsch     Name: Nicholas S. Schorsch     Title:   Authorized Signatory