CONTRIBUTION AGREEMENT

 

 

This CONTRIBUTION AGREEMENT (this “Agreement”) is entered into as of August 30,
2012 by and among American Realty Capital Operating Partnership, L.P., a
Delaware limited partnership (the “Partnership”), American Realty Capital Trust,
Inc., a Maryland corporation and general partner of the Partnership (the
“General Partner”) and ARC Real Estate Partners, LLC, a Delaware limited
liability company (the “Contributor”).

 

WHEREAS, the Contributor wishes to contribute to the Partnership and the
Partnership wishes to accept from the Contributor, a contribution of cash to the
capital of the Partnership pursuant to the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of March 1, 2012 (the
“Partnership Agreement”), as amended by the First Amendment to the Partnership
Agreement, dated as of the date hereof, and on the terms provided herein.

 

WHEREAS, the Contributor wishes to become a limited partner in the Partnership
and the General Partner wishes to admit the Contributor as a limited partner in
the Partnership.

 

WHEREAS, the Contributor wishes to provide a deficit restoration obligation (a
“DRO”) with respect to its capital account in the Partnership, and wishes to
guaranty a portion of the indebtedness of the Partnership, and the Partnership
wishes to provide debt for the Contributor to guaranty and to allow the
Contributor to provide a DRO.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants,
promises and representations set forth in this Agreement, and for other good and
valuable consideration, the parties hereto agree as follows:

 

Section 1.1.           Definitions. Capitalized terms used herein that are not
otherwise defined herein shall have the meaning ascribed to them in the
Partnership Agreement.

 

Section 1.2.           Contribution. Effective as of the date hereof, the
Contributor shall contribute, assign, transfer and deliver to the Partnership,
and Partnership shall accept, receive and acquire from the Contributor, on the
terms and conditions, and subject to the exceptions, set forth in this
Agreement, $750,000 (the “Contribution”).

 

Section 1.3.           Consideration. In consideration of the Contribution, the
Partnership shall issue to the Contributor 65,789 OP Units of the Partnership
pursuant to Section 4.02 of the Partnership Agreement. Such OP Units shall have
all the same rights, powers, preferences and duties as OP Units under the
Partnership Agreement, including, but not limited to, the right to convert such
OP Units into shares of the General Partner or cash at the election of the
General Partner.

 

Section 1.4.           Admission of Additional Limited Partner. The General
Partner hereby consents to the admission of the Contributor to the Partnership
as an additional Limited Partner upon the terms and conditions contained in the
Partnership Agreement and the Contributor agrees to hereby execute the
counterpart to the Partnership Agreement included as Exhibit I.

 

 

 

 

Section 1.5.           Guaranty Opportunity; DRO.

 

(a)           The Partnership agrees that it shall permit the Contributor the
opportunity to provide one or more “bottom dollar” guaranties (each, a
“Guaranty”) of a portion or portions of the indebtedness of the Partnership or
its affiliates equal to up to one hundred and three (103%) percent of the
principal amount of the Subordinated Incentive Listing Note, pursuant to the
terms of one or more “Guaranty of Collectibility” (in substantially the form
attached hereto as Exhibit II), during the period beginning on the date hereof
and ending on the earlier of (x) the tenth (10th) anniversary of the date
hereof, (y) the termination of a Guaranty in accordance with the terms of the
applicable Guaranty of Collectibility, and (z) the date on which the Contributor
disposes, directly or indirectly, of its entire interest in the Partnership in a
taxable transaction. The Guaranty provided by the Contributor shall not be
subordinated (i.e., have relatively higher economic risk) to any other
guarantees of the same portion of indebtedness covered by such holder’s
Guaranty.

 

(b)          The Contributor acknowledges that (i) the Partnership makes no
representations, warranties or covenants regarding its current or expected
financial condition, or the terms of any guaranteed loan, nor shall the
Partnership have any obligation to keep the Contributor informed of any changes
in any of the foregoing, or of any changes in the characteristics of any
guaranteed loan occurring after the date the Guaranty is delivered, and the
Contributor fully assumes the risk of providing such Guaranty and keeping itself
informed of any such changes, or other developments and occurrences which might
impact the risk to such holder of providing or maintaining any such Guaranty,
(ii) the ability to execute a Guaranty shall cease in accordance with the terms
of this Agreement, (iii) the Contributor shall have reviewed with its financial
and legal advisors the potential consequences and liabilities that may be
associated with any guaranty provided pursuant to this Agreement, (iv) neither
the Partnership not its advisors have prepared to undertake a legal review (and
make or representation or warranties) as to the effectiveness of any Guaranty
for federal income tax purposes, or any legal implications (e.g., order of
payment, priority) that such Guaranty or any obligations of the Contributor and
rights of the creditor thereunder may involve under federal and state law, and
(v) the Partnership may, at any time, refinance or repay any indebtedness
guaranteed by a Guaranty by providing notice of such event to the Contributor at
least thirty (30) days prior to such refinancing or repayment, an in such case,
the Partnership shall, upon request, permit the Contributor the opportunity to
execute a Guaranty with respect to substitute indebtedness on the terms
otherwise provided in this Section 1.5. The foregoing provisions of this Section
1.5(b) shall in no way limit the obligations of the Partnership under Section
1.5(a).

 

(c)           The General Partner and the Partnership agree that the Partnership
and its affiliates shall maintain an amount of indebtedness of the Partnership
or its affiliates sufficient for the Contributor to provide one or more
Guaranties in accordance with this Section 1.5 until the tenth (10th)
anniversary of the date of this Agreement; provided, that no indebtedness shall
be maintained for Guaranty if (i) all such Guaranties have been terminated
according to the terms of this Agreement or (ii) prior to the tenth (10th)
anniversary of the date of this Agreement, the Partnership and its affiliates,
under the terms of the Guaranty of Collectibility, are no longer required to
maintain an amount of indebtedness for Guaranty by the Contributor.

 

 

 

 

(d)          The General Partner and the Partnership agree that, to the extent
the Contributor provides a Guaranty pursuant to this Section 1.5, the
Partnership Agreement shall be amended to provide that if the Partnership is
liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, and if the Contributor has a deficit balance in its Capital
Account, the Contributor shall be obligated to contribute to the capital of the
Partnership the amount necessary to restore such deficit balance in its Capital
Account to zero but not in excess of the amount of such Guaranty, a “DRO”;
provided, that consistent with Section 1.704-1(b)(2)(iv)(l) of the Regulations,
a termination of the Partnership pursuant to Section 708(b)(1)(B) of the Code
shall not result in a liquidation of the Partnership.

 

Section 1.6.           Redemption by Partnership. Notwithstanding anything to
the contrary in this Agreement or the Partnership Agreement, the Partnership
shall not, and the General Partner (or a Successor Entity) shall not cause the
Partnership to redeem or cancel or cause a redemption or cancellation of the OP
Units issued pursuant to this Agreement at any time during which a Guaranty
provided by the Contributor pursuant to Section 1.5 is currently in effect and
outstanding, or the Contributor has a deficit balance in its Capital Account and
a DRO in effect, without the prior written consent of the Contributor, which
consent shall be given in the Contributor’s sole and absolute discretion;
provided, that in no event shall the OP Units issued pursuant to this Agreement
be redeemed or cancelled by the Partnership on or prior to the twenty-four (24)
month anniversary of the date hereof.

 

Section 1.7.           Termination. If the Contributor intends to dispose of its
entire interest in the Partnership in a taxable transaction, the Contributor
shall give the General Partner fifteen (15) days notice of such intention, and
the General Partner shall take such action as is necessary to ensure that the
Partnership does not cease to be treated as a partnership for federal income tax
purposes during the taxable year in which the Contributor disposes of its entire
interest in the Partnership. Furthermore, at such time as the Contributor
disposes of its entire interest in the Partnership in a taxable transaction, any
Guaranty provided by the Contributor shall terminate pursuant to the terms of
such Guaranty and any DRO provided by the Contributor in accordance with Section
1.5(c) hereof shall terminate. The Partnership shall not, and the General
Partner shall not cause the Partnership to, liquidate or terminate prior to the
tenth (10th) anniversary of the date of this Agreement.

 

Section 1.8.           Book-up Event. The General Partner and the Partnership
agree that, consistent with the definition of Gross Asset Value contained in the
Partnership Agreement, the contribution by the Contributor pursuant to the terms
of this Agreement is an event pursuant to which the Gross Asset Value of the
Partnership’s Assets should be adjusted to reflect the relative economic
interests of the Partners, and that such adjustment in Gross Asset Value of the
Partnership’s Assets shall result in a corresponding adjustment to the Capital
Accounts of the Partners including, for the avoidance of doubt, the holders of
LTIP Units.

 

Section 1.9.           Registration Rights. Any REIT Shares issuable to the
Contributor upon a conversion of its OP Units in accordance with the provisions
of the Partnership Agreement shall be issued pursuant to an effective shelf
registration statement (a “Shelf Registration Statement”), or if a Shelf
Registration Statement is not then effective, the General Partner (or Successor
Entity) shall enter into a registration rights agreement with the Contributor
(the “Registration Rights Agreement”) on terms and subject to conditions
reasonably satisfactory to the Contributor, pursuant to which the General
Partner will agree, for the benefit of the Contributor, that, among other
things, (i) it will, at the General Partner’s cost, within 90 days after the
redemption of OP Units in exchange for REIT Shares, file a Shelf Registration
Statement with the Securities and Exchange Commission with respect to resales of
the REIT Shares and will use its commercially reasonable efforts to cause such
Shelf Registration Statement to be declared effective within 180 days after such
redemption, and (ii) it will use its commercially reasonable efforts to keep
such Shelf Registration Statement continuously effective, subject to certain
exceptions specified in, and in accordance with, the Registration Rights
Agreement.

 

 

 

 

Section 1.10.       Contributor Representations. The Contributor represents and
warrants to the Recipient, as of the date hereof, as follows:

 

(a)          The Contributor has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Contributor, and, assuming
the due authorization, execution and delivery by the Partnership and the General
Partner, this Agreement constitutes a valid and binding obligation of the
Contributor, enforceable against the Contributor in accordance with its terms,
except as such enforceability may be subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity.

 

Section 1.11.       Partnership Representations. The Partnership represents and
warrants to the Contributor, as of the date hereof, as follows:

 

(a)          The Partnership has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Partnership, and, assuming
the due authorization, execution and delivery by the Contributor, this Agreement
constitutes a valid and binding obligation of the Partnership, enforceable
against the Partnership in accordance with its terms, except as such
enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity.

 

Section 1.12.       Indemnity. In the event of any breach by the Partnership,
the General Partner, or their affiliates or successors, of their respective
obligations (a) to provide the Contributor with the opportunity to guaranty
indebtedness of the Partnership under Section 1.5(a) and to maintain a
sufficient amount of indebtedness to guaranty in accordance with Section 1.5(c),
(b) to amend the Partnership Agreement pursuant to Section 1.5(d) to provide for
a DRO, (c) with respect to the redemption or cancellation of OP Units issued
pursuant to this agreement pursuant to Section 1.6, or (d) with respect to the
liquidation or termination of the Partnership pursuant to Section 1.7, the
Contributor shall be entitled to a payment of damages by the Partnership,
promptly upon demand at any time following the occurrence of such breach, in
cash in an amount equal to the sum of (x) the full amount of federal, state and
local income taxes that would be payable by the Contributor (or its members) as
a result of such breach plus (y) the amount of such taxes that would be payable
by the Contributor (or its members) on any payments made pursuant to clause (x),
assuming for the purpose of determining the amount of taxes payable by the
Contributor (or its members) that the Contributor (or its members) is liable for
income taxes at the highest combined federal, state and local income tax rate
applicable to an individual resident of New York City.

 

 

 

 

Section 1.13.       Governing Law. This Agreement shall be construed under and
governed by the laws of the State of New York without regard for conflict of law
principles that would result in the application of the laws of any other
jurisdiction.

 

Section 1.14.       Entire Agreement. This Agreement and any other writing
signed by the parties that specifically references this Agreement constitute the
entire agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
hereof and thereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder. In the event of
a conflict between the terms and conditions of this Agreement and a Guaranty of
Collectibility executed by the Contributor, the terms and conditions of the
Guaranty of Collectibility shall control for all purposes.

 

Section 1.15.       Counterparts. This Agreement may be executed in counterparts
by the parties hereto. Each such counterpart shall be, and shall be deemed to
be, an original instrument, but all such counterparts taken together shall
constitute one and the same Agreement.

 

Section 1.16.       Headings. The section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.

 

Section 1.17.       Amendments. This Agreement may not be amended or modified
except in writing duly and validly executed by each party hereto.

 

Section 1.18.       Assignment; Binding Effect. No party may assign this
Agreement or any right or interest, or delegate any of its duties or
obligations, hereunder without the prior written consent of the other parties
hereto. This Agreement is binding upon, and shall inure to the benefit of and is
enforceable by, the parties hereto and their respective successors, permitted
assigns and personal representatives.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date set forth above by their duly authorized representatives.

 

  AMERICAN REALTY CAPITAL TRUST, INC.            By:  /s/ William M. Kahane    
  Name: William M. Kahane        Title: President and Chief Executive Officer   

 

 

  AMERICAN REALTY CAPITAL OPERATING PARTNERSHIP, L.P.         By: American
Realty Capital Trust, Inc., its General Partner            By:  /s/ William M.
Kahane         Name: William M. Kahane          Title: President and Chief
Executive Officer   

 

 

  ARC REAL ESTATE PARTNERS, LLC           By:  /s/ Nicholas S. Schorsch      
Name: Nicholas S. Schorsch        Title: Manager              By:  /s/ William
M. Kahane        Name: William M. Kahane         Title: Manager           

 

 

 

 

[Signature Page for Contribution Agreement]

 

 

 

 

IN WITNESS WHEREOF, the undersigned has affixed its signature to this Amended
and Restated Agreement of Limited Partnership, as of the 30th day of August,
2012.

 

  ADDITIONAL LIMITED PARTNER:           ARC Real Estate Partners, LLC           
By:  /s/ Nicholas S. Schorsch       Name: Nicholas S. Schorsch        Title:
Manager              By:  /s/ William M. Kahane        Name: William M. Kahane  
      Title: Manager