Exhibit 10.3

EXECUTION VERSION

AMERICAN REALTY CAPITAL PROPERTIES, INC.

405 Park Avenue, 15th Floor

New York, New York 10022

Kirk McAllaster

c/o Cole Real Estate Investments, Inc.

2325 E. Camelback Road

Suite 1100

Phoenix, AZ 85016

October 22, 2013

 

Re: Agreement and Plan of Merger between American Realty Capital Properties,
Inc. and Cole Real Estate Investments, Inc.

Reference is made to (i) that certain Agreement and Plan of Merger, dated as of
the date hereof (the “ARCP Merger Agreement”), by and among American Realty
Capital Properties, Inc., a Maryland corporation (“Parent”), Clark Acquisition,
LLC, a Delaware limited liability company and wholly owned subsidiary of Parent
(“Merger Sub”), and Cole Real Estate Investments, Inc. (formerly known as Cole
Credit Property Trust III, Inc.), a Maryland corporation (the “Company”),
pursuant to which, among other things, the Company will merge with and into
Merger Sub (the “ARCP Transaction”), and (ii) that certain Agreement and Plan of
Merger, dated as of March 5, 2013 (the “Cole Holdings Merger Agreement”), by and
among the Company, CREInvestments, LLC (“Cole Merger Sub”), a Maryland limited
liability company and wholly owned subsidiary of the Company, Cole Holdings
Corporation, an Arizona corporation (“Cole Holdings”) wholly owned by
Christopher H. Cole (together with his assignees, “Cole”), and Cole, pursuant to
which, among other things, Cole Holdings merged with and into Cole Merger Sub
(the “Cole Holdings Transaction”). Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Cole Holdings Merger
Agreement, unless otherwise indicated. Kirk McAllaster (“McAllaster”) is one of
the “Bonus Executives,” as defined in the Cole Holdings Merger Agreement and is
entitled to certain Bonus Entitlements (as defined on Schedule 1.4 to the Cole
Holdings Merger Agreement) in respect of the Incentive Consideration and
Contingent Consideration payable under the Cole Holdings Merger Agreement.

In connection with Parent’s entry into the ARCP Merger Agreement, Parent and
McAllaster have agreed to certain arrangements relating to, among other things,
the payment in full of all amounts to which McAllaster is entitled pursuant to
the Bonus Entitlements under Cole Holdings Merger Agreement. Accordingly, in
consideration of the foregoing and the mutual representations, warranties and
covenants herein contained, and intending to be legally bound hereby, Parent and
McAllaster each hereby agree as follows:

1. Amounts Payable to McAllaster Under the Cole Holdings Merger Agreement.
McAllaster hereby acknowledges and confirms that (i) the maximum aggregate
amount of the Aggregate Merger Consideration potentially payable to McAllaster
under the Cole Holdings

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Merger Agreement to which he remains entitled as of the date hereof is
$5,223,160, which amount consists of McAllaster’s Bonus Entitlement in respect
of the Incentive Consideration and the Contingent Consideration and (ii) he has
received in full any Bonus Entitlement in respect of the Closing Consideration
and Listing Consideration, although a substantial portion of the consideration
paid in respect of these items (as indicated in Section 6 below) is being held
in escrow pursuant to the terms of the Escrow Agreement and McAllaster expressly
reserves all rights to recover such consideration as and when the same is due
for release to McAllaster, subject to the terms and conditions of the Cole
Holdings Merger Agreement and the Escrow Agreement.

2. Incentive Consideration and Contingent Consideration. Pursuant to Section 2.2
of the Cole Holdings Merger Agreement, in connection with the Listing, the
Company is required to pay to McAllaster certain Bonus Entitlements in respect
of the Incentive Consideration and Contingent Consideration as set forth in
Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement,
calculated and payable in accordance with Annex A to the Cole Holdings Merger
Agreement (“Annex A”), and pursuant to Section 3.1 of the Cole Holdings Merger
Agreement, the Company is required to pay to McAllaster certain Bonus
Entitlements in respect of the Contingent Consideration as set forth in
Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement,
calculated and payable in accordance with Annex B to the Cole Holdings Merger
Agreement (“Annex B”). Notwithstanding anything contained in Annex A or Annex B,
Parent and McAllaster each hereby acknowledge and agree that in satisfaction of
the Bonus Entitlements in respect of the Incentive Consideration and Contingent
Consideration payable to McAllaster pursuant to the Merger Agreement, subject to
Section 5(c) below, Parent shall issue to McAllaster, within three (3) Business
Days following the date that the ARCP Transaction is consummated, a number of
validly issued, fully paid and non-assessable shares of common stock, par value
$0.01 per share, of Parent (“ARCP Common Stock”), which shares will be approved
for listing on the NASDAQ, subject to official notice of issuance, with an
aggregate value equal to $5,223,160, such number of shares to be calculated on
the Closing Date based on the volume weighted average closing sale price of a
share of ARCP Common Stock over the ten (10) consecutive trading days ending the
trading day immediately prior to the date that the ARCP Transaction is
consummated on the NASDAQ Stock Market, as reported in the Wall Street Journal,
rounded down to the nearest whole share; provided, however, that if the ARCP
Transaction is consummated after the end of the Incentive Consideration Test
Period and payment of the Bonus Entitlement in respect of the Incentive
Consideration by the Company to McAllaster, then the amount otherwise payable by
Parent to McAllaster pursuant to this Section 2 shall be reduced on a
dollar-for-dollar basis by the dollar amount upon which the Company determined
the number of shares of common stock of the Company, par value $0.01 per share
(“Company Common Stock”) to be paid to McAllaster as Bonus Entitlements in
respect of the Incentive Consideration pursuant to and in accordance with
Section 2.2 of the Cole Holdings Merger Agreement. McAllaster hereby
acknowledges and agrees that the issuance of the Parent Common Stock to him
pursuant to this Section 2 will be in full and complete satisfaction of the
Bonus Entitlement in respect of the Incentive Consideration (if applicable) and
Contingent Consideration otherwise payable to him pursuant to the terms of the
Cole Holdings Merger Agreement, and that upon such issuance Parent shall have no
further obligation to McAllaster in respect thereof.

 

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3. Intentionally Omitted.

4. Intentionally Omitted.

5. Registration Rights; Restrictions on Transfer.

a. Parent and McAllaster each hereby agree that (i) all shares of Parent Common
Stock issued to McAllaster pursuant to Paragraph 2 hereunder and all other
shares of Parent Common Stock received by McAllaster in connection with the
merger provided for in the ARCP Merger Agreement shall be deemed to be
Registrable Securities under (and as defined in) the Registration Rights
Agreement, dated as of April 5, 2013 (the “Registration Rights Agreement”), by
and among the Company, Cole and the other individuals listed on the signature
pages thereto, including McAllaster, (ii) all shares of ARCP Common Stock issued
in the ARCP Transaction in respect of shares of Company Common Stock that are,
as of the date hereof, or that will be, as of Closing, Registrable Securities
under the Registration Rights Agreement shall continue to be Registrable
Securities following the effective time of the ARCP Transaction pursuant to the
terms of the ARCP Merger Agreement, and (iii) following the effective time of
the ARCP Transaction, all obligations of the Company pursuant to the terms of
the Registration Rights Agreement shall be obligations of Parent.

b. Parent and McAllaster each hereby acknowledge, confirm and agree that,
following the effective time of the ARCP Transaction, all of the shares of
Company Common Stock held by McAllaster and any Affiliate of McAllaster as of
the Closing, including, without limitation, shares of Company Common Stock
deemed to be issued to holders of Company RSUs and Company PSUs and including
all shares of Company Common Stock received by McAllaster prior to the closing
of the ARCP Transaction as a Bonus Entitlement in respect of the Incentive
Consideration, if any (collectively, the “McAllaster Shares”) that are subject
to the restrictions on transfer contained in the Registration Rights Agreement
shall remain subject to the restrictions on transfer contained therein to the
same extent such restrictions would apply if the ARCP Transaction did not occur.

c. Parent and McAllaster each hereby agree that, following the effective time of
the ARCP Transaction, the Contingent Consideration Shares (as defined below)
shall be subject to the restrictions on transfer contained in the Registration
Rights Agreement; provided, however, that notwithstanding anything contained in
the Registration Rights Agreement to the contrary, the Contingent Consideration
Shares shall be subject to the restrictions on transfer contained therein
through December 31, 2017, with releases of such restrictions on a quarterly
basis on the last day of each calendar quarter, beginning on the last day of the
first full calendar quarter following the date that the ARCP Transaction is
consummated, of a number of Contingent Consideration Shares equal to the
quotient of the aggregate number of Contingent Consideration Shares issued
pursuant to Section 2 above divided by the number of full calendar quarters
between the date that

 

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the ARCP Transaction is consummated and December 31, 2017. In the event
McAllaster attempts to Transfer all or any portion of the Contingent
Consideration Shares in violation of this Section 5(c), such Transfer shall be
null and void ab initio, and Parent shall instruct its transfer agent and other
third parties not to record or recognize any such purported transaction. Parent
may impose stop-transfer instructions with respect to the Contingent
Consideration Shares to the extent reasonably required to ensure compliance with
the provisions of this Section 5(c). For purposes of this letter, “Contingent
Consideration Shares” means: (i) if the ARCP Transaction is consummated after
the end of the Incentive Consideration Test Period and payment of the Bonus
Entitlement in respect of the Incentive Consideration by the Company to
McAllaster, all of the shares of Parent Common Stock actually issued to
McAllaster pursuant to Section 2 above; (ii) if the ARCP Transaction is
consummated before the end of the Incentive Consideration Test Period, a number
of shares equal to (x) all of the shares of Parent Common Stock actually issued
to McAllaster pursuant to Section 2 above minus (y) the number of shares of
Parent Company Stock that would have been issued in the ARCP Transaction upon
conversion of the number of shares Company Common Stock that would have been
issued to McAllaster as the Bonus Entitlement in respect of the Incentive
Consideration if the Incentive Consideration Test Period had been the thirty
(30) trading day period ended on the business day immediately prior closing of
the ARCP Transaction; and (iii) if the ARCP Transaction is consummated after the
end of the Incentive Consideration Test Period but before the issuance of the
Bonus Entitlement in respect of the Incentive Consideration by the Company to
McAllaster, a number of shares equal to (x) all of the shares of Parent Common
Stock actually issued to McAllaster pursuant to Section 2 above minus (y) the
number of shares of Parent Common Stock that would have been issued in the ARCP
Transaction upon conversion of the number of shares of Company Common Stock that
would have been issued to McAllaster as the Bonus Entitlement in respect of the
Incentive Consideration if such issuance had been made prior to consummation of
the ARCP Transaction.

6. Escrow Agreement. Based on the latest annex to the Indemnification Escrow
Agreement, dated as of April 5, 2013 (the “Escrow Agreement”), by and among
Cole, the Company, the Bonus Executives and U.S. Bank National Association, as
escrow agent (the “Escrow Agent”), a total of 4,284,489 shares of Company Common
Stock (the “Escrow Share Deposit”) are currently on deposit with the Escrow
Agent under the Escrow Agreement. In furtherance of the foregoing, McAllaster
acknowledges and agrees that, as of and following the effective time of the ARCP
Transaction, the Escrow Share Deposit shall remain on deposit with the Escrow
Agent in accordance with and subject to the terms of the Escrow Agreement.
Notwithstanding anything contained in the Escrow Agreement or the Cole Holdings
Merger Agreement, Parent and McAllaster each hereby acknowledge and agree that
as of the effective time of the ARCP Transaction, (i) each share of Company
Common Stock that forms a part of the Escrow Share Deposit shall automatically,
without any action by or on behalf of McAllaster or Parent, be converted into
the right to receive such number of shares of ARCP Common Stock equal to the
Exchange Ratio (as defined in the ARCP Merger Agreement) pursuant to the terms
of the ARCP Merger Agreement, (ii) all references in the Escrow Agreement to
“Company Common Stock” (including, but not limited to, Section 3 of the Escrow
Agreement governing the

 

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release of the Escrow Share Deposit) will be deemed to be references to ARCP
Common Stock, and any reference to a number of shares of “Company Common Stock”
shall be a number of shares of ARCP Common Stock adjusted to reflect the
Exchange Ratio, (iii) the references in Section 1.6(b) and in Section 11.2(b) of
the Cole Holdings Merger Agreement to “the volume-weighted average of the sale
prices per share of Parent Common Stock as reported on the NYSE composite
transactions reporting system” will be deemed to refer to “the volume-weighted
average of the sale prices per share of ARCP Common Stock as reported on the
NASDAQ composite transactions reporting system,” (iv) to the extent that
McAllaster makes a Cash Election with respect to any shares of Company Common
Stock that form a part of the Escrow Share Deposit, any and all amounts payable
in respect of such shares shall remain on deposit with the Escrow Agent under
the Escrow Agreement in accordance with the terms of the Escrow Agreement;
provided that any releases under the Escrow Agreement to McAllaster will be
satisfied first with such cash amounts held in the escrow and attributable to
McAllaster and thereafter in shares, and (v) all dividends or other income
earned in respect of the Escrow Share Deposit or otherwise under the Escrow
Agreement (including dividends on the Parent Common Stock to be substituted for
the Company Common Stock now held in the escrow) shall be paid to McAllaster in
accordance with Section 2(c) of the Escrow Agreement, assuming the conversion of
the shares of Company Common Stock that form the Escrow Share Deposit into
shares of ARCP Common Stock in accordance with the terms of the ARCP Merger
Agreement.

7. Intentionally Omitted.

8. Intentionally Omitted.

9. Intentionally Omitted.

10. Intentionally Omitted.

11. Intentionally Omitted.

12. Further Assurances. From time to time after the date hereof as and when
requested by McAllaster or Parent and at such party’s expense, each of
McAllaster and Parent agree to execute such further assignments, assumptions,
notifications and other documents as may be reasonably requested for the purpose
of giving effect to, or evidencing or giving notice of, the transactions
contemplated by this letter.

13. Notices. Any notice, request, claim, demand and other communications
hereunder shall be sufficient if in writing and sent (a) if personally delivered
to an authorized representative of the recipient, when actually delivered to
such authorized representative, (b) if sent by facsimile transmission (providing
confirmation of transmission) or e-mail of a pdf attachment (provided that any
notice received by facsimile transmission or otherwise at the addressee’s
location on any Business Day after 5:00 p.m. (in the time zone of the recipient)
or any day other than a Business Day shall be deemed to have been received at
9:00 a.m. on the next Business Day) or (c) if sent by reliable overnight
delivery service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 13):

 

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  a. If to McAllaster, to:

Kirk McAllaster

2325 East Camelback Road, Suite 1100

Phoenix, Arizona 85016

Facsimile: (480) 449-7023

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

Century Park East, 21st Floor

Los Angeles, California 90067

Attention: Alison S. Ressler, Esq.

Facsimile: (310) 712-8800

Phone: (310) 712-6630

 

  b. If to Parent, to:

American Realty Capital Partners, Inc.

405 Park Avenue, 15th Floor

New York, New York 10022

Fax: (212) 415-6507; and (646) 861-7743

Phone: (212) 415-6501

  Attention: Nicholas S. Schorsch and James A. Tanaka

  Email: nschorsch@arlcap.com; and jtanaka@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Phone: (212) 969-3000

Fax: (212) 969-2900

  Attention: Peter M. Fass, Esq., Steven L. Lichtenfeld, Esq., and Daniel I.
Ganitsky, Esq.

  Email: PFass@proskauer.com; SLichtenfeld@proskauer.com; and
DGanitsky@proskauer.com

14. Specific Performance. The parties hereto agree that irreparable damage, for
which monetary damages (even if available) would not be an adequate remedy,
would occur in the event that the parties hereto do not perform the provisions
of this letter in accordance with its specified terms or otherwise breach such
provisions. Accordingly, the parties acknowledge and

 

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agree that the parties shall be entitled to an injunction, specific performance
and other equitable relief to prevent breaches of this letter and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which they are entitled at law or in equity. Each of the parties agrees that it
will not oppose the granting of an injunction, specific performance and other
equitable relief on the basis that the other party has an adequate remedy at law
or that any award of specific performance is not an appropriate remedy for any
reason at law or in equity. Any party seeking an injunction or injunctions to
prevent breaches of this letter and to enforce specifically the terms and
provisions of this letter shall not be required to provide any bond or other
security in connection with any such order or injunction.

15. Miscellaneous. This letter may be amended, modified or supplemented only by
a written instrument executed by each of the parties hereto. The provisions of
this letter are the result of negotiations between the parties; accordingly,
this letter shall not be construed in favor of or against any party by reason of
the extent to which the party or any of his or its professional advisors
participated in its preparation. This letter may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same letter agreement. Delivery of an
executed counterpart of a signature page to this letter by facsimile
transmission or by e-mail of a pdf attachment shall be effective as delivery of
a manually executed counterpart of this letter. This letter shall be governed by
and interpreted and enforced in accordance with the laws of the State of
Maryland (without reference to the choice of law provisions).

[Signature Page Follows]

 

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  Very truly yours,     AMERICAN REALTY CAPITAL PROPERTIES, INC.     By:  

/s/ Edward M. Weil, Jr.

    Name:   Edward M. Weil, Jr.     Title:   President

[Signature Page to McCallaster Side Letter]

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ACKNOWLEDGED AND AGREED TO AS OF THE DATE FIRST SET FORTH ABOVE BY:

/s/ D. KIRK MCALLASTER, JR.

D. KIRK MCALLASTER, JR.

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ACKNOWLEDGED AND AGREED TO AS OF THE DATE FIRST SET FORTH ABOVE BY: COLE REAL
ESTATE INVESTMENTS, INC. By:  

/s/ Stephan Keller

Name:   Stephan Keller Title:  

Executive Vice President and

Chief Financial Officer