AMERICAN REALTY CAPITAL PROPERTIES, INC.
2013 ADVISOR MULTI-YEAR OUTPERFORMANCE AGREEMENT

 

This 2013 ADVISOR MULTI-YEAR OUTPERFORMANCE AGREEMENT (this “Agreement”) made as
of February 28, 2013 (the “Grant Date”), between AMERICAN REALTY CAPITAL
PROPERTIES, INC., a Maryland corporation (the “Company”), its subsidiary ARC
Properties Operating Partnership, L.P., a Delaware limited partnership and the
entity through which the Company conducts substantially all of its operations
(the “Partnership”), and ARC Properties Advisors LLC, a Delaware limited
liability company, the Company’s manager (the “Advisor”).

 

RECITALS

 

The Advisor provides services to the Company pursuant to the Management
Agreement by and between the Company and the Advisor dated as of September 6,
2011 (the “Management Agreement”).

 

The Compensation Committee (the “Committee”) of the Board of Directors of the
Company (the “Board”) approved this Agreement to provide the Advisor with the
incentive compensation described in this Agreement (the “Award”) and thereby
provide additional incentive for the Advisor to promote the progress and success
of the business of the Company and its affiliates, including the Partnership.
This Agreement evidences the Award and is subject to the terms and conditions
set forth herein and in the Partnership Agreement (as defined herein).

 

NOW, THEREFORE, the Company, the Partnership and the Advisor agree as follows:

 

1. Administration. The Award granted under this Agreement shall be administered
by the Committee; provided that all powers of the Committee hereunder can be
exercised by the full Board if the Board so elects. The Committee shall have the
discretionary authority to make all determinations regarding the Award,
including, without limitation, the interpretation and construction of the Award
and the determination of relevant facts; provided such determinations are made
in good faith and are consistent with the purpose and intent of the Award.
Except as expressly provided herein, no such action by the Committee shall
adversely affect the rights of the Advisor to any earned and outstanding Award
LTIP Units. Subject to the terms hereof, all decisions made by the Committee
shall be final, conclusive and binding on all persons, including the Company and
the Advisor. No member of the Committee, nor any other member of the Board or
any officer or employee of the Company acting on behalf of the Committee, shall
be personally liable for any action, determination or interpretation taken or
made in good faith with respect to the Award, and all members of the Committee
and each other member of the Board and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

 

2. Definitions. As used herein:

 

“Additional Shares” means (without double-counting), as of a particular date of
determination, the sum of (A) the number of shares of Common Stock plus (B) the
REIT Shares Amount for all Partnership Units (assuming that such Partnership
Units were converted, exercised, exchanged or redeemed for OP Units as of such
date of determination at the applicable conversion, exercise, exchange or
redemption rate (or rate deemed applicable by the Committee if there is no such
stated rate) and such OP Units were then tendered to the Partnership for
redemption pursuant to Section 8.4 of the Partnership Agreement as of such date)
other than those Partnership Units held by the Company, in the case of each (A)
and (B), to the extent issued after the Effective Date and on or before such
date of determination in a capital raising transaction, in exchange for assets
or securities, or upon the acquisition of another entity; provided, that for the
avoidance of doubt, this definition of “Additional Shares” shall exclude: (i)
shares of Common Stock issued after the Effective Date upon exercise of stock
options or upon the exchange (directly or indirectly) of LTIP Units or other
Partnership Units issued to employees, non-employee directors, consultants,
advisors or other persons or entities as incentive or other compensation, (ii)
shares of Common Stock awarded after the Effective Date to employees or other
persons or entities in exchange for services provided or to be provided to the
Company or any of its affiliates, and (iii) all Initial Shares.

 

 

 

 

“Adjusted Market Cap” means (A) the Company’s Initial Market Cap minus the value
of any Buyback Shares repurchased or redeemed since the Effective Date plus the
value of any Additional Shares issued after the Effective Date (prorated to
reflect the number of days they were outstanding since the Effective Date) with
respect to the calculation of (i) the Annual Amount on the First Valuation Date,
(ii) the Interim Amount, (iii) the Final Absolute TRS Amount and (iv) the Final
Relative TRS Amount, and (B) the Company’s Adjusted Market Cap calculated
pursuant to (A) as of the prior Valuation Date minus the value of any Buyback
Shares repurchased or redeemed since the prior Valuation Date plus the value of
any Additional Shares issued after the prior Valuation Date (prorated to reflect
the number of days they were outstanding since the prior Valuation Date) with
respect to the calculation of the Annual Amount on the Second Valuation Date and
the Final Valuation Date.

 

“Annual Absolute TRS” means, as of the each Valuation Date and provided the
Company’s TRS Percentage exceeds seven percent (7%) for the period commencing on
(A) the Commencement Date with respect to the First Valuation Date and (B) the
prior Valuation Date with respect to the Second Valuation Date and the Final
Valuation Date, a dollar amount equal to four percent (4%) of the dollar amount
by which, if any, the amount of the Company’s Total Return, determined as of
such date, exceeds the Threshold Amount, determined as of such date.

 

“Annual Amount” means, as of a Valuation Date, an amount equal to up to one and
one-quarter percent (1.25%) of the Company’s Initial Market Cap based on the
level of achievement of Annual Absolute TRS and Annual Relative TRS as of such
Valuation Date for the period commencing on (A) the Commencement Date with
respect to the First Valuation Date and (B) the prior Valuation Date with
respect to the Second Valuation Date and the Final Valuation Date.

 

“Annual Relative TRS” means, as of each Valuation Date, a dollar amount equal to
four percent (4%) of any amount by which the Company’s Total Return for the
period commencing on (A) the Commencement Date with respect to the First
Valuation Date and (B) the prior Valuation Date with respect to the Second
Valuation Date and the Final Valuation Date, exceeds the Relative Threshold
Amount as of such date; provided, that the amount so earned will be subject to
reduction in accordance with a ratable sliding scale factor so that (A) if the
Company’s TRS Percentage for the applicable period is six percent (6%) or more,
there will be no reduction to Annual Relative TRS for such period; (B) Annual
Relative TRS for such period shall be reduced by fifty percent (50%) if such TRS
Percentage for the applicable period is zero percent (0%); (C) Annual Relative
TRS for such period shall be reduced based on a linear interpolation between the
foregoing reduction factors if the Company’s TRS Percentage for the applicable
period is between zero percent (0%) and six percent (6%); and (D) Annual
Relative TRS for such period shall be reduced by one hundred percent (100%) if
the TRS Percentage for the applicable period is below zero percent (0%).

 

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“Award OP Units” has the meaning set forth in Section 7 hereof.

 

“Award LTIP Units” has the meaning set forth in Section 3(a) hereof.

 

“Beneficial Owner” has the meaning set forth in Rule 13d-3 under the Exchange
Act.

 

“Buyback Shares” means (without double-counting), as of a particular date of
determination, (A) shares of Common Stock or (B) the REIT Shares Amount for
Partnership Units (assuming that such Partnership Units were converted,
exercised, exchanged or redeemed for OP Units as of such date of determination
at the applicable conversion, exercise, exchange or redemption rate (or rate
deemed applicable by the Committee if there is no such stated rate) and such OP
Units were then tendered to the Partnership for redemption pursuant to Section
8.4 of the Partnership Agreement as of such date), other than those Partnership
Units held by the Company, in the case of each (A) and (B), to the extent
repurchased by the Company after the Effective Date and on or before such date
of determination in a stock buyback transaction or in a redemption of
Partnership Units for cash pursuant to Section 8.4 of the Partnership Agreement;
provided, that for the avoidance of doubt, this definition of “Buyback Shares”
shall exclude: (i) shares of Common Stock issued after the Effective Date upon
exercise of stock options or upon the exchange (directly or indirectly) of LTIP
Units or other Partnership Units issued to employees, non-employee directors,
consultants, advisors or other persons or entities as incentive or other
compensation, and (ii) shares of Common Stock awarded after the Effective Date
to employees or other persons or entities in exchange for services provided or
to be provided to the Company or any of its affiliates.

 

“Change of Control” means and includes any of the following events:

 

(i) any Person is or becomes Beneficial Owner, directly or indirectly, of
securities of the Company representing thirty percent (30%) or more of the
combined voting power of the then outstanding securities of the Company,
excluding (A) any Person who becomes such a Beneficial Owner in connection with
a transaction described in clause (x) of subsection (ii) below and (B) any
Person who becomes such a Beneficial Owner through the issuance of such
securities with respect to purchases made directly from the Company; or

 

(ii) the consummation of a merger or consolidation of the Company with any other
Person or the issuance of voting securities of the Company in connection with a
merger or consolidation of the Company (or any direct or indirect subsidiary of
the Company) pursuant to applicable stock exchange requirements, other than
(x) a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) thirty percent (30%)
or more of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty percent (30%) or more of the combined voting power
of the then outstanding securities of the Company; or

 

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(iii) the consummation of a sale or disposition by the Company of all or
substantially all of the assets of the Company; or

 

(iv) persons who, as of the Effective Date, constitute the Board (the “Incumbent
Directors”) cease for any reason, including, without limitation, as a result of
a tender offer, proxy contest, merger or similar transaction, to constitute at
least a majority of the Board, provided that any person becoming a director of
the Company subsequent to such date shall be considered an Incumbent Director if
such person’s election was approved by or such person was nominated for election
a vote of at least a majority of the Incumbent Directors.

 

Notwithstanding the foregoing, with respect to any payment that is triggered
upon a Change in Control, a transaction shall not be deemed to be a Change in
Control unless such transaction constitutes a “change in control event” within
the meaning of Section 409A of the Code.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commencement Date” means December 11, 2012.

 

“Common Stock” means the Company’s common stock, par value $0.01 per share,
either currently existing or authorized hereafter.

 

“Common Stock Price” means, as of a particular date, the average of the Fair
Market Value of one share of Common Stock over the fifteen (15) consecutive
trading days ending on, and including, such date (or, if such date is not a
trading day, the most recent trading day immediately preceding such date);
provided, however, that if such date is the date upon which a Transactional
Change of Control occurs, the Common Stock Price as of such date shall be equal
to the fair value, as determined by the Committee, of the total consideration
paid or payable in the transaction resulting in the Transactional Change of
Control for one share of Common Stock.

 

“Continuous Service” means the Advisor’s continuous service as manager of the
Company without interruption or termination.

 

“Convertible Preferred Stock” means the series of  the Company’s preferred
stock, par value $0.01 per share, designated as Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock.

 

“Conversion Factor” has the meaning set forth in the Partnership Agreement.

 

“Effective Date” means the date of the closing of the merger contemplated under
the Merger Agreement.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” means, as of any given date, the fair market value of a
security determined by the Committee using any reasonable method and in good
faith (such determination will be made in a manner that satisfies Section 409A
of the Code and in good-faith as required by Section 422(c)(1) of the Code);
provided that (A) if such security is admitted to trading on a national
securities exchange, the fair market value of such security on any date shall be
the closing sale price reported for such security on the principal stock
exchange or, if applicable, any other national exchange on which the security is
traded or admitted to trading on such date on which a sale was reported; and
(B) if such security is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System (“NASDAQ”) or a successor
quotation system, the fair market value of such security on any such date shall
be the average of the highest bid and lowest asked prices for such security on
the system on such date on which both the bid and asked prices were reported.

 

“Final Absolute TRS Amount” means, as of the Final Valuation Date and provided
the Company’s TRS Percentage exceeds twenty-one percent (21%) for the period
commencing on the Commencement Date through the Final Valuation Date, a dollar
amount equal to four percent (4%) of the dollar amount by which, if any, the
amount of the Company’s Total Return, determined as of such date, exceeds the
Threshold Amount, determined as of such date.

 

“Final Relative TRS Amount” means, as of the Final Valuation Date, a dollar
amount equal to four percent (4%) of any amount by which the Company’s Total
Return for the period commencing on the Commencement Date through the Final
Valuation Date exceeds the Relative Threshold Amount as of such date; provided,
that the amount so earned will be subject to reduction in accordance with a
ratable sliding scale factor so that (A) if the Company’s TRS Percentage for the
period commencing on the Commencement Date through the Final Valuation Date is
eighteen percent (18%) or more, there will be no reduction to the Final Relative
TRS Amount; (B) the Final Relative TRS Amount shall be reduced by fifty percent
(50%) if such TRS Percentage is zero percent (0%); (C) the Final Relative TRS
Amount shall be reduced based on a linear interpolation between the foregoing
reduction factors if the Company’s TRS Percentage is between zero percent (0%)
and eighteen percent (18%); and (D) the Final Relative TRS Amount shall be
reduced by one hundred percent (100%) if such TRS Percentage is below zero
percent (0%).

 

“Final Valuation Date” means December 31, 2015.

 

“First Valuation Date” means December 31, 2013.

 

“Initial Market Cap” means (A) the 5-day trailing average closing price per
share price of the Company’s Common Stock on the Effective Date multiplied by
(B) the number of Initial Shares outstanding on the Effective Date.

 

“Initial Shares” means 164,822,029 shares of Common Stock, which includes the
sum of (A) all shares of Common Stock outstanding as of the Effective Date (
including the shares of Common Stock into which shares of Convertible Preferred
Stock are convertible, and including any vested and nonvested restricted shares
of Common Stock issued under any other incentive plan maintained by the Company
prior to the Effective Date), plus (B) any shares of Common Stock representing
the REIT Shares Amount for all Partnership Units outstanding as of the Effective
Date (assuming such Partnership Units were converted, exercised, exchange or
redeemed for OP Units as of the Effective Date at the applicable conversion,
exercise, exchange or redemption rate (or rate deemed applicable by the
Committee if there is no such stated rate) and such OP Units were then tendered
to the Partnership for redemption pursuant to Section 8.4 of the Partnership
Agreement as of such date) other than Partnership Units held by the Company;
provided, that for the avoidance of doubt, this definition of “Initial Shares”
shall exclude shares of Common Stock issuable upon exercise of stock options or
upon the exchange (directly or indirectly) of LTIP Units or other Partnership
Units issued to employees, non-employee directors, consultants, advisors or
other persons or entities as incentive or other compensation.

 

5

 

 

“Interim Amount” means, as of the Second Valuation Date, an amount equal to (A)
up to three percent (3%) of the Company’s Initial Market Cap, less (B) any
amount of the Annual Amount achieved through the Second Valuation Date (such
that the maximum level of achievement through the Second Valuation Date shall
not exceed three (3%) of the Company’s Initial Market Cap), based on the level
of achievement of: (x) as of the Second Valuation Date and provided the
Company’s TRS Percentage exceeds fourteen percent (14%) for the period
commencing on the Commencement Date, a dollar amount equal to four percent (4%)
of the dollar amount by which, if any, the amount of the Company’s Total Return,
determined as of such date, exceeds the Threshold Amount, determined as of such
date (“Interim Absolute TSR”), and (y) as of the Second Valuation Date, a dollar
amount equal to four percent (4%) of any amount by which the Company’s Total
Return for the period commencing on the Commencement Date, exceeds the Relative
Threshold Amount as of such date (“Interim Relative TRS”); provided, that the
amount so earned will be subject to reduction in accordance with a ratable
sliding scale factor so that (A) if the Company’s TRS Percentage for the
applicable period is twelve percent (12%) or more, there will be no reduction to
Interim Relative TRS for such period; (B) Interim Relative TRS for such period
shall be reduced by fifty percent (50%) if such TRS Percentage for the
applicable period is zero percent (0%); (C) Interim Relative TRS for such period
shall be reduced based on a linear interpolation between the foregoing reduction
factors if the Company’s TRS Percentage for the applicable period is between
zero percent (0%) and twelve percent (12%); and (D) Interim Relative TRS for
such period shall be reduced by one hundred percent (100%) if the TRS Percentage
for the applicable period is below zero percent (0%).

 

“LTIP Units” means LTIP Units, as such term is defined in the Partnership
Agreement.

 

“Market Cap” means (A) Initial Market Cap with respect to the calculation of (i)
the Annual Amount on the First Valuation Date, (ii) the Interim Amount, (iii)
the Final Absolute TRS Amount and (iv) the Final Relative TRS Amount, and (B)
Adjusted Market Cap calculated as of the prior Valuation Date with respect to
the calculation of the Annual Amount on the Second Valuation Date and the Final
Valuation Date.

 

“Maximum Total Outperformance Amount” means five percent (5%) of the Company’s
Initial Market Cap.

 

6

 

 

“Merger Agreement” means the Agreement and Plan of Merger, dated as of December
14, 2012, by and among the Company, the Partnership, Tiger Acquisition, LLC,
American Realty Capital Trust III, Inc. and American Realty Capital Operating
Partnership III, L.P.

 

“OP Units” has the meaning set forth in the Partnership Agreement.

 

“Partnership Agreement” means the Second Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of the Effective Date, among
the Company, as general partner, Tiger Acquisition, LLC and any limited partners
or general partner that is admitted from time to time to the Partnership and
listed on Exhibit A thereto, as amended, restated or supplemented from time to
time.

 

“Partnership Units” has the meaning set forth in the Partnership Agreement.

 

“Peer Group” means each of the following companies (i) CapLease, Inc.; (ii) EPR
Properties; (iii) Getty Realty Corporation; (iv) Lexington Realty Trust; (v)
National Retail Properties, Inc.; and (vi) Realty Income Corporation; provided,
that if (A) any of the foregoing companies ceases to exist and the Committee
determines that there is no successor to such company or (B) the Committee
reasonably determines that any of the forgoing companies is no longer suitable
for the purposes of this Agreement, then the Committee in its good faith
reasonable discretion shall select a comparable company for subsequent periods,
or if the Committee in its reasonable good faith discretion so determines, for
the entire period from the Commencement Date to the Valuation Date.

 

“Peer Group Return Percentage” means, the median percentage return to
stockholders of the Peer Group (A) for the period commencing on the Commencement
Date and ending on the First Valuation Date with respect to the calculation of
Annual Relative TRS for the First Valuation Date, (B) for the period commencing
on the day after the prior Valuation Date and ending on the next Valuation Date
with respect to calculation of Annual Relative TRS for the Second Valuation Date
and the Final Valuation Date and (C) for the period commencing on the
Commencement Date and ending on the Second Valuation Date and the Final
Valuation Date with respect to calculating Interim Relative TRS and Final
Relative TRS, respectively; in each case as calculated by a consultant engaged
by the Committee and as approved by the Committee in its reasonable discretion.

 

“Person” means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization, other
entity or “group” (as defined in the Exchange Act).

 

“REIT Shares Amount” has the meaning set forth in the Partnership Agreement.

 

“Relative Threshold Amount” means an amount equal to (A) the Company’s Market
Cap multiplied by (B) the Peer Group Return Percentage.

 

“Second Valuation Date” means December 31, 2014.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

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“Subsidiary” means any corporation or other entity (other than the Company) in
which the Company has more than a 50 percent interest, either directly or
indirectly.

 

“Threshold Amount” means an amount equal to (A) with respect to Annual Absolute
TRS, seven percent (7%) of the value of the Company’s Adjusted Market Cap for
the period commencing on (x) the Commencement Date with respect to the First
Valuation Date and (y) the prior Valuation Date with respect to the Second
Valuation Date and the Final Valuation Date, (B) with respect to Interim
Absolute TRS, fourteen percent (14%) of the value of the Company’s Adjusted
Market Cap for the period commencing on the Commencement Date, and (C) with
respect to the Final Absolute TRS Amount, twenty-one percent (21%) of the value
of the Company’s Adjusted Market Cap for the period commencing on the
Commencement Date.

 

“Total Outperformance Amount” means, as of the Final Valuation Date, a dollar
amount equal to the algebraic sum of: (A) the Final Absolute TRS Amount, (B) the
Final Relative TRS Amount, (C) the Annual Amounts determined as of each
Valuation Date and (D) the Interim Amount; provided that (i) if the resulting
amount is a negative number, the Total Outperformance Amount shall be zero, and
(ii) in no event shall the Total Outperformance Amount exceed the Maximum Total
Outperformance Amount.

 

“Total Return” means (without double-counting), as of a particular date of
determination, a dollar amount equal to the sum of: (A) the Total Shares as of
such date of determination multiplied by the Common Stock Price as of such date,
(“Current Market Cap”), minus (B) (x) the Initial Market Cap with respect to the
calculation of (i) the Annual Amount on the First Valuation Date, (ii) the
Interim Amount, (iii) the Final Absolute TRS Amount and (iv) the Final Relative
TRS Amount, and (y) the Adjusted Market Cap calculated as of the prior Valuation
Date with respect to the calculation of the Annual Amount on the Second
Valuation Date and the Final Valuation Date, plus (C) an amount equal to the sum
of the total dividends and other distributions declared between the Commencement
Date and such date of determination so long as the “ex-dividend” date with
respect thereto falls prior to such date of determination (excluding dividends
and distributions paid in the form of additional shares of Common Stock or
Partnership Units), in respect of the Total Shares as of such date of
determination (it being understood, for the avoidance of doubt, that such total
dividends and distributions shall be calculated by reference to actual
securities outstanding as of each record date with respect to each applicable
dividend or distribution payment date, and not by multiplying the aggregate
amount of distributions paid on one OP Unit that was outstanding as of the
Commencement Date between the Commencement Date and such date of determination
by the number of Total Shares as of the date of determination).

 

“Total Shares” means (without double-counting), as of a particular date of
determination, the algebraic sum of: (A) the Initial Shares, plus (B) the
Additional Shares, minus (C) all Buyback Shares repurchased or redeemed between
the Effective Date and such date of determination.

 

“Total OPP Unit Equivalent” means the aggregate of the (i) sum of Annual OPP
Unit Equivalents and the Interim OPP Unit Equivalent (the “Earned Annual and
Interim OPP Unit Equivalents”) and (ii) the excess (if any) of the Final OPP
Unit Equivalent over the Earned Annual and Interim OPP Unit Equivalents.

 

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“Transactional Change of Control” means (A) a Change of Control described in
clause (a) of the definition thereof where the Person makes a tender offer for
Common Stock, (B) a Change of Control described in clause (b) of the definition
thereof where the Company is not the surviving entity, or (C) a Change of
Control described in clause (c) of the definition thereof.

 

“Transfer” has the meaning set forth in Section 7 hereof.

 

“TRS Percentage” means the Company’s Total Return divided by the Market Cap,
with the result multiplied by 100 and expressed as a percentage.

 

“Valuation Date” means the First Valuation Date, the Second Valuation Date and
the Final Valuation Date, as applicable.

 

3. Outperformance Award.

 

a. The Advisor is hereby granted an Award, consisting of 8,241,101 LTIP Units
(the “Award LTIP Units”), which will be subject to forfeiture and vesting to the
extent provided in this Section 3 and Section 4 hereof.

 

b. As soon as practicable following each Valuation Date, but as of such
Valuation Date, the Committee will determine the applicable Annual Amount and
divide the resulting dollar amount by the Common Stock Price calculated as of
the applicable Valuation Date (appropriately adjusted to the extent that the
Conversion Factor is greater or less than 1.0); the resulting number of unit
equivalents determined for each Valuation Date referred to herein as the “Annual
OPP Unit Equivalent”.

 

c. As soon as practicable following the Second Valuation Date, but as of the
Second Valuation Date, the Committee will determine the Interim Amount and
divide the resulting dollar amount by the Common Stock Price calculated as of
the Second Valuation Date (appropriately adjusted to the extent that the
Conversion Factor is greater or less than 1.0); the resulting number of unit
equivalents determined as of the Second Valuation Date referred to herein as the
“Interim OPP Unit Equivalent”.

 

d. As soon as practicable following the Final Valuation Date, but as of the
Final Valuation Date, the Committee will:

 

(i) determine the Final Absolute TRS Amount;

 

(ii) determine the Final Relative TRS Amount;

 

(iii) determine the Total Outperformance Amount; and

 

(iv) divide the resulting dollar amounts by the Common Stock Price calculated as
of the Final Valuation Date (appropriately adjusted to the extent that the
Conversion Factor is greater or less than 1.0); the resulting number of unit
equivalents determined as of the Final Valuation Date referred to herein as the
“Final OPP Unit Equivalent.”

 

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Exhibit A hereto sets forth a hypothetical example of the calculation of the
Final Absolute TRS Amount, the Final Relative TRS Amount and the Total
Outperformance Amount, without regard to the calculation of any Annual Amount or
the Interim Amount, based on factual assumptions as of the date of this
Agreement. For the avoidance of doubt, Exhibit A is merely illustrative and will
not control the determination of the Total OPP Unit Equivalent as of the Final
Valuation Date.

 

If the Total OPP Unit Equivalent is smaller than the number of Award LTIP Units
previously issued to the Advisor, as of the Final Valuation Date, the Advisor
shall forfeit the number of Award LTIP Units equal to the difference without
payment of any consideration by the Partnership; thereafter the term Award LTIP
Units will refer only to the Award LTIP Units that were not so forfeited and
neither the Advisor nor any of its successors, members or their respective
assigns or personal representatives will have any further rights or interests in
the Award LTIP Units that were so forfeited. If the Total OPP Unit Equivalent is
greater than the number of Award LTIP Units previously issued to the Advisor:
(A) the Company shall cause the Partnership to issue to the Advisor, as of the
Final Valuation Date, a number of additional LTIP Units equal to the difference;
(B) such additional LTIP Units shall be added to the Award LTIP Units previously
issued, if any, and thereby become part of this Award; and (C) the Company and
the Partnership shall take such action as is necessary to accomplish the grant
of such additional LTIP Units; provided that such issuance will be subject to
the Advisor executing and delivering such documents, comparable to the documents
executed and delivered in connection with this Agreement, as the Company and/or
the Partnership reasonably request in order to comply with all applicable legal
requirements, including, without limitation, federal and state securities laws.
If the Total OPP Unit Equivalent is the same as the number of Award LTIP Units
previously issued to the Advisor, then there will be no change to the number of
Award LTIP Units under this Award.

 

e. If any of the Award LTIP Units have been earned based on performance as
provided in Sections 3(b), (c) and (d), subject to Section 4 hereof, the Award
LTIP Units shall become vested in the following amounts and at the following
times, provided that the Continuous Service of the Advisor must continue through
the applicable vesting date or the accelerated vesting date provided in
Section 4 hereof, as applicable:

 

(i) one-third (1/3) on December 31, 2015;

 

(ii) one-third (1/3) on December 31, 2016; and

 

(iii) one-third (1/3) on December 31, 2017.

 

f. Within thirty (30) days following each vesting date under Section 3(e), the
Advisor, in its sole discretion, shall be entitled to convert such Award LTIP
Units that vested on such date into OP Units.

 

g. Any Award LTIP Units that do not become vested pursuant to Section 3(e) or
Section 4 hereof shall, without payment of any consideration by the Partnership
automatically and without notice be forfeited and be and become null and void,
and neither the Advisor nor any of its successors, heirs, assigns, members or
their respective assigns or personal representatives will thereafter have any
further rights or interests in such forfeited Award LTIP Units.

 

10

 

 

4. Termination/ Change of Control.

 

a. In the event the Company terminates the Advisor’s Continuous Service for any
reason prior to the Final Valuation Date, the calculations provided in Sections
3(b), (c) and (d) hereof shall be performed as of the Valuation Date next
following such termination (and if such Valuation Date is not the Final
Valuation Date, on the Final Valuation Date as well) as if the termination of
Continuous Service had not occurred and the Advisor shall be fully (100%) vested
in the Total OPP Unit Equivalent as so determined. In the event the Advisor
terminates its Continuous Service prior to the Final Valuation Date, the
calculations described in the preceding sentence shall be performed as of the
Valuation Date next following such termination and the Advisor shall be fully
(100%) vested in the Total OPP Unit Equivalent as determined on such date. In
either case, within thirty (30) days of the date such calculations are
completed, the Advisor, in its sole discretion, shall be entitled to convert the
Total OPP Unit Equivalent so determined into OP Units or their equivalent in
cash.

 

b. In the event of a termination of the Advisor’s Continuous Service for any
reason after the Final Valuation Date, any then unvested Award LTIP Units shall
be fully (100%) vested and nonforfeitable hereunder. Within thirty (30) days of
the date such termination, the Advisor, in its sole discretion, shall be
entitled to convert such Award LTIP Units into OP Units or their equivalent in
cash.

 

c. In the event of a Change in Control prior to the Final Valuation Date, (i)
the Advisor shall become fully (100%) vested in any Award LTIP Units that had
been earned but were unvested prior to the Change in Control and within thirty
(30) days of the date such Change in Control, the Advisor, in its sole
discretion, shall be entitled to convert such Earned Annual and Interim OPP
Units into OP Units or their equivalent in cash; and (ii) the calculations
provided in Sections 3(b), (c) and (d) hereof shall be performed as of the
Valuation Date next following such Change in Control (and if such Valuation Date
is not the Final Valuation Date, on the Final Valuation Date as well) and the
Advisor shall be fully (100%) vested in the Total OPP Unit Equivalent as so
determined and within thirty (30) days of the date such calculations are
completed, the Advisor, in its sole discretion, shall be entitled to convert the
number of Award LTIP Units so determined into OP Units or their equivalent in
cash.

 

d. In the event of a Change in Control after the Final Valuation Date, any then
unvested Award LTIP Units shall be fully (100%) vested and nonforfeitable
hereunder. Within thirty (30) days of the date such Change in Control, the
Advisor, in its sole discretion, shall be entitled to convert such Award LTIP
Units into OP Units or their equivalent in cash.

 

5. Rights of Advisor. The Advisor shall have no rights with respect to this
Agreement (and the Award evidenced hereby) (i) until the closing contemplated
under the Merger Agreement occurs, and (ii) unless the Advisor shall have
accepted this Agreement prior to the close of business on the Effective Date by
(a) signing and delivering to the Partnership a copy of this Agreement and (b)
unless the Advisor is already a Limited Partner (as defined in the Partnership
Agreement), signing, as a Limited Partner, and delivering to the Partnership a
counterpart signature page to the Partnership Agreement (attached hereto as
Exhibit B). Upon acceptance of this Agreement by the Advisor, the Partnership
Agreement shall be amended to reflect the issuance to the Advisor of the Award
LTIP Units so accepted. Thereupon, the Advisor shall have all the rights of a
Limited Partner of the Partnership with respect to the Award LTIP Units, as set
forth in the Partnership Agreement, subject, however, to the restrictions and
conditions specified herein. Award LTIP Units constitute and shall be treated
for all purposes as the property of the Advisor, subject to the terms of this
Agreement and the Partnership Agreement.

 

11

 

 

6. Distributions.

 

a. The Advisor shall be entitled to receive distributions with respect to the
Award LTIP Units to the extent provided for in the Partnership Agreement, as
modified hereby.

 

b. The LTIP Unit Distribution Participation Date (as defined in the Partnership
Agreement) with respect to any Award LTIP Unit shall be the date as of which
such Award LTIP Unit is earned pursuant to Sections 3(b), (c) and (d), and on
such date, the Partnership will pay the Advisor, for each Award LTIP Unit
earned, an amount in cash equal to the quotient of (i) the per unit amount of
all distributions paid with respect to each OP Unit on or after the Effective
Date and before the date on which such Award LTIP Unit is earned (other than
those with respect to which an adjustment was made pursuant to Section 8 hereof)
divided by (ii) the Conversion Factor.

 

c. All distributions paid with respect to Award LTIP Units shall be fully vested
and non-forfeitable when paid, whether or not the underlying LTIP Units have
been earned based on performance or have become vested based on the passage of
time as provided in Section 3 or Section 4 hereof.

 

7. Restrictions on Transfer. Except as otherwise permitted by the Committee in
its sole discretion, none of the Award LTIP Units granted hereunder nor any of
the OP Units of the Partnership into which such Award LTIP Units may be
converted (the “Award OP Units”) shall be sold, assigned, transferred, pledged,
hypothecated, given away or in any other manner disposed of, encumbered, whether
voluntarily or by operation of law (each such action a “Transfer”). The
transferee in any Transfers of Award LTIP Units or Award OP Units permitted by
the Committee must agree in writing with the Company and the Partnership to be
bound by all the terms and conditions of this Agreement and that subsequent
transfers shall be prohibited except those in accordance with this Section 7.
Additionally, all Transfers of Award LTIP Units or Award OP Units must be in
compliance with all applicable securities laws (including, without limitation,
the Securities Act) and the applicable terms and conditions of the Partnership
Agreement. In connection with any Transfer of Award LTIP Units or Award OP
Units, the Partnership may require the Advisor to provide an opinion of counsel,
satisfactory to the Partnership, that such Transfer is in compliance with all
federal and state securities laws (including, without limitation, the Securities
Act). Any attempted Transfer of Award LTIP Units or Award OP Units not in
accordance with the terms and conditions of this Section 7 shall be null and
void, and the Partnership shall not reflect on its records any change in record
ownership of any Award LTIP Units or Award OP Units as a result of any such
Transfer, shall otherwise refuse to recognize any such Transfer and shall not in
any way give effect to any such Transfer of any Award LTIP Units or Award OP
Units. Except as provided in this Section 7, this Agreement is personal to the
Advisor, is non-assignable and is not transferable in any manner, by operation
of law or otherwise.

 

12

 

 

8. Changes in Capital Structure. If (i) the Company shall at any time be
involved in a merger, consolidation, dissolution, liquidation, reorganization,
exchange of shares, sale of all or substantially all of the assets or stock of
the Company or other transaction similar thereto, (ii) any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, significant repurchases of stock, or other similar change in the capital
stock of the Company, (iii) any cash dividend or other distribution to holders
of share of Common Stock or OP Units shall be declared and paid other than in
the ordinary course, or (iv) any other extraordinary corporate event shall occur
that in each case in the good faith judgment of the Committee necessitates
action by way of equitable or proportionate adjustment in the terms of this
Agreement or the Award LTIP Units to avoid distortion in the value of this
Award, the Committee shall make equitable or proportionate adjustment and take
such other action as it deems necessary to maintain the Advisor’s rights
hereunder so that they are substantially proportionate to the rights existing
under this Award and the terms of the Award LTIP Units prior to such event,
including, without limitation: (A) interpretations of or modifications to any
defined term in this Agreement; (B) adjustments in any calculations provided for
in this Agreement, and (C) substitution of other awards. All adjustments made by
the Committee shall be final, binding and conclusive.

 

9. Miscellaneous.

 

a. Amendments. This Agreement may be amended or modified only with the consent
of the Company and the Partnership acting through the Committee; provided that
any such amendment or modification that adversely affects the rights of the
Advisor hereunder must be consented to by the Advisor to be effective as against
it. Notwithstanding the foregoing, this Agreement may be amended in writing
signed only by the Company and the Partnership to correct any errors or
ambiguities in this Agreement and/or to make such changes that do not adversely
affect the Advisor’s rights hereunder.

 

b. Legend. The records of the Partnership evidencing the Award LTIP Units shall
bear an appropriate legend, as determined by the Partnership in its sole
discretion, to the effect that such Award LTIP Units are subject to restrictions
as set forth herein and in the Partnership Agreement.

 

c. Compliance With Law. The Partnership and the Advisor will make reasonable
efforts to comply with all applicable securities laws. In addition,
notwithstanding any provision of this Agreement to the contrary, no Award LTIP
Units will become vested or be paid at a time that such vesting or payment would
result in a violation of any such law.

 

13

 

 

d. Advisor Representations; Registration.

 

(i) The Advisor hereby represents and warrants that (A) it understands that it
is responsible for consulting its own tax advisor with respect to the
application of the U.S. federal income tax laws, and the tax laws of any state,
local or other taxing jurisdiction to which the Advisor is or by reason of this
Award may become subject, to its particular situation; (B) the Advisor has not
received or relied upon business or tax advice from the Company, the Partnership
or any of their respective Affiliates (as defined in the Partnership Agreement),
employees, agents, consultants or advisors, in their capacity as such; (C) the
Advisor provides services to the Partnership on a regular basis and in such
capacity has access to such information, and has such experience of and
involvement in the business and operations of the Partnership, as the Advisor
believes to be necessary and appropriate to make an informed decision to accept
this Award; (D) Award LTIP Units are subject to substantial risks; (E) the
Advisor has been furnished with, and has reviewed and understands, information
relating to this Award; (F) the Advisor has been afforded the opportunity to
obtain such additional information as it deemed necessary before accepting this
Award; and (G) the Advisor has had an opportunity to ask questions of
representatives of the Partnership and the Company, or persons acting on their
behalf, concerning this Award.

 

(ii) The Advisor hereby acknowledges that: (A) there is no public market for
Award LTIP Units or Award OP Units and neither the Partnership nor the Company
has any obligation or intention to create such a market; (B) sales of Award LTIP
Units and Award OP Units are subject to restrictions under the Securities Act
and applicable state securities laws; and (C) because of the restrictions on
transfer or assignment of Award LTIP Units and Award OP Units set forth in the
Partnership Agreement and in this Agreement, the Advisor may have to bear the
economic risk of its ownership of the Award LTIP Units covered by this Award for
an indefinite period of time.

 

e. Section 83(b) Election. In connection with each separate issuance of LTIP
Units under this Award pursuant to Section 3 hereof, the Advisor may elect to
include in gross income in the year of transfer the applicable Award LTIP Units
pursuant to Section 83(b) of the Code substantially in the form attached hereto
as Exhibit C and to supply the necessary information in accordance with the
regulations promulgated thereunder. The Advisor agrees to file such election (or
to permit the Partnership to file such election on the Advisor’s behalf) within
thirty (30) days after the Grant Date with the IRS Service Center where the
Advisor files its personal income tax returns, provide a copy of such election
to the Partnership, and to file a copy of such election with the Advisor’s U.S.
federal income tax return for the taxable year in which the LTIP Units are
awarded to the Advisor. So long as the Advisor holds any Award LTIP Units, the
Advisor shall disclose to the Partnership in writing such information as may be
reasonably requested with respect to ownership of LTIP Units as the Partnership
may deem reasonably necessary to ascertain and to establish compliance with
provisions of the Code applicable to the Partnership or to comply with
requirements of any other appropriate taxing authority.

 

f. Severability. If, for any reason, any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of this Agreement
not so held invalid, and each such other provision shall to the full extent
consistent with law continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in no way affect
the rest of such provision not held so invalid, and the rest of such provision,
together with all other provisions of this Agreement, shall to the full extent
consistent with law continue in full force and effect.

14

 

 

g. Governing Law. This Agreement is made under, and will be construed in
accordance with, the laws of State of Delaware, without giving effect to the
principles of conflict of laws of such state.

 

h. No Obligation to Continue Service as a Consultant or Advisor. Neither the
Company nor any affiliate is obligated by or as a result of this Agreement to
continue to have the Advisor as a consultant, advisor or other service provider
and this Agreement shall not interfere in any way with the right of the Company
or any affiliate to terminate the Advisor’s service relationship at any time.

 

i. Notices. Any notice to be given to the Company shall be addressed to the
Secretary of the Company at 405 Park Avenue, New York, New York, 10022, and any
notice to be given the Advisor shall be addressed to the Advisor at the
Advisor’s address as it appears on the records of the Company, or at such other
address as the Company or the Advisor may hereafter designate in writing to the
other.

 

j. Withholding and Taxes. The Advisor shall be solely responsible for all
federal, state, local or foreign taxes or any taxes under the Federal Insurance
Contributions Act with respect to this Award. Notwithstanding the foregoing, if
at any time the Company or Partnership are required to withhold any such taxes,
the Advisor shall make arrangements satisfactory to the Committee regarding the
payment of any United States federal, state or local or foreign taxes required
by law to be withheld with respect to such amount; provided, however, that if
any Award LTIP Units or Award OP Units are withheld (or returned), the number of
Award LTIP Units or Award OP Units so withheld (or returned) shall be limited to
the number which have a fair market value on the date of withholding equal to
the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal, state, local and foreign income tax and payroll
tax purposes that are applicable to such supplemental taxable income. The
obligations of the Company under this Agreement will be conditional on such
payment or arrangements, and the Company and its affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Advisor.

 

k. Excise Tax. In the event that the Advisor becomes entitled to any amounts
under this Agreement that will be subject to the tax imposed by Section 4999 of
the Code, the provisions of Section 8 of the Company’s Equity Plan will apply to
such amounts.

 

l. Headings. The headings of paragraphs hereof are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

 

m. Counterparts. This Agreement may be executed in multiple counterparts with
the same effect as if each of the signing parties had signed the same document.
All counterparts shall be construed together and constitute the same instrument.

 

15

 

 

n. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and any successors to the Company and the
Partnership, on the one hand, and any successors to the Advisor, on the other
hand, by will or the laws of descent and distribution, but this Agreement shall
not otherwise be assignable or otherwise subject to hypothecation by the
Advisor.

 

o. Section 409A. This Agreement shall be construed, administered and interpreted
in accordance with a good faith interpretation of Section 409A of the Code. Any
provision of this Agreement that is inconsistent with Section 409A of the Code,
or that may result in penalties under Section 409A of the Code, shall be
amended, with the reasonable cooperation of the Advisor and the Company and the
Partnership, to the extent necessary to exempt it from, or bring it into
compliance with, Section 409A of the Code. Any payment to Advisor made pursuant
to Section 9(k) will be made in a manner intended to comply with Regulation
Section 1.409A-3(i)(1)(v).

 

 

 

 

 

[Signature page follows]

 

 

16

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as
of the 28th day of February, 2013.

 

  AMERICAN REALTY CAPITAL PROPERTIES, INC.       By: /s/ Nicholas S. Schorsch  
  Name: Nicholas S. Schorsch     Title: 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: Chief Executive Officer              
ARC PROPERTIES ADVISORS LLC         By AR Capital, LLC, its sole member        
By: /s/ Edward M. Weil, Jr.     Name: Edward M. Weil, Jr.     Title: Authorized
Signatory

 

[Signature Page to Outperformance Award Agreement]

 

 

 

 

EXHIBIT A

 

 

 

 

 

 

 

 

 

Exhibit A - 1

 

 

 

 

EXHIBIT B

 

FORM OF LIMITED PARTNER SIGNATURE PAGE

 

ARC Properties Advisors LLC (the “Advisor”), desiring to become one of the
within named Limited Partners of ARC Properties Operating Partnership, L.P.,
hereby accepts all of the terms and conditions of (including, without
limitation, the provisions of the Section 8.02 titled “Power of Attorney”), and
becomes a party to, the Second Amended and Restated Agreement of Limited
Partnership, dated as of February 28, 2013 of ARC Properties Operating
Partnership, L.P. as amended through the date hereof (the “Partnership
Agreement”). The Advisor agrees that this signature page may be attached to any
counterpart of the Partnership Agreement.

 

    ARC Properties Advisors LLC                 Name:
Title:
Date: [•], 201[•]           Address of Limited Partner:                  

 

 

 

Exhibit B - 1

 

 

 

EXHIBIT C

 

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF
PROPERTY PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of the
Internal Revenue Code with respect to the property described below and supplies
the following information in accordance with the regulations promulgated
thereunder:

 

1.The name, address and taxpayer identification number of the undersigned are:

Name: ARC Properties Advisors LLC (the “Taxpayer”)

Address: ______________________________________________________

Social Security No./Taxpayer Identification No.: ___-__-____

 

2.Description of property with respect to which the election is being made:
______ LTIP Units in ARC Properties Operating Partnership, L.P. (the
“Partnership”).

 

3.The date on which the LTIP Units were transferred is February 28, 2013. The
taxable year to which this election relates is calendar year 2013.

 

4.Nature of restrictions to which the LTIP Units are subject:

 

(a)With limited exceptions, until the LTIP Units vest, the Taxpayer may not
transfer in any manner any portion of the LTIP Units without the consent of the
Partnership.

 

(b)The Taxpayer’s LTIP Units vest in accordance with the vesting provisions
described in the Schedule attached hereto. Unvested LTIP Units are forfeited in
accordance with the vesting provisions described in the Schedule attached
hereto.

 

5.The fair market value at time of transfer (determined without regard to any
restrictions other than restrictions which by their terms will never lapse) of
the LTIP Units with respect to which this election is being made was $[•] per
LTIP Unit.

 

6.The amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit.

 

7.A copy of this statement has been furnished to the Partnership and American
Realty Capital Properties, Inc.

 

Dated:     Name:                            

 

Exhibit C - 1

 

 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of LTIP Units

 

The LTIP Units are subject to time-based and performance-based vesting with the
final vesting percentage equaling the product of the time-based vesting
percentage and the performance-based vesting percentage. Performance-based
vesting will be from 0% to 100% based (i) 50% on American Realty Capital
Properties, Inc.’s (the “Company’s”) per-share total return to shareholders and
(ii) 50% on total return against the total percentage return to stock holders of
a specified peer group, in each case for the period from December 11, 2012 to
December 31, 2015 (or earlier in certain circumstances). Under the time-based
vesting hurdles, one-third (1/3) of the LTIP Units will vest on December 31,
2015, one-third (1/3) of the LTIP Units will vest on December 31, 2016, and the
remaining one-third (1/3) of the LTIP Units will vest on December 31, 2017,
provided that the Taxpayer continues its service relationship with the Company
and the Partnership through such dates, subject to acceleration in the event of
certain extraordinary transactions or termination of the Taxpayer’s service
relationship with the Company under specified circumstances. Unvested LTIP Units
are subject to forfeiture in the event of failure to vest based on the
determination of the performance-based percentage or the passage of time.

 

 

Schedule A - 1