Document:

Exhibit 10.1

 

SUBSCRIPTION ESCROW AGREEMENT

THIS SUBSCRIPTION ESCROW AGREEMENT dated as of April 1, 2011 (this “ Agreement ”), is entered into among Realty Capital Securities, LLC (the “ Dealer Manager ”), American Realty Capital Trust III, Inc. (the “ Company ”) and UMB Bank, N.A., as escrow agent (the “ Escrow Agent ”).

WHEREAS, the Company intends to raise cash funds from investors (the “ Investors ”) pursuant to a public offering (the “ Offering ”) of not less than 200,000 (the “ Minimum Amount” ) nor more than 150,000,000 shares of common stock, par value $0.01 of the Company (the “ Securities ”), pursuant to the registration statement on Form S-11 of the Company (No. 333-170298) (as amended, the “ Offering Document ”) a copy of which is attached as Exhibit A hereto.

WHEREAS , the Escrow Agent is willing to accept appointment as escrow agent only for the expressed duties outlined herein.

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

1.             Proceeds to be Escrowed. On or before the first date of the Offering, the Company shall establish an escrow account with the Escrow Agent to be invested in accordance with Section 7 hereof entitled “ESCROW ACCOUNT FOR THE BENEFIT OF INVESTORS FOR COMMON STOCK OF AMERICAN REALTY CAPITAL TRUST III, INC.” (including such abbreviations as are required for the Escrow Agent’s systems) (the “ Escrow Account ”).  All funds received from subscribers of Securities (“ Investors ”, which term shall also include Pennsylvania Investors and Tennessee Investors unless the context otherwise requires) in payment for the Securities (“ Investor Funds ”) will be delivered to the Escrow Agent within one (1) business day following the day upon which such Investor Funds are received by the Company or its agents, and shall, upon receipt by the Escrow Agent, be retained in escrow by the Escrow Agent and invested as stated herein. During the term of this Agreement, the Company or its agents shall cause all checks received by and made payable to it in payment for the Securities to be endorsed in favor of the Escrow Agent and delivered to the Escrow Agent for deposit in the Escrow Account.

Proceeds received from Pennsylvania Investors shall be accounted for separately in a subaccount entitled “Escrow Account for the Benefit of Pennsylvania Investors for American Realty Capital Trust III, Inc.” (including such abbreviations as are required for the Escrow Agent’s systems) (the “ Pennsylvania Escrow Account ”), until such Pennsylvania Escrow Account has closed pursuant to Section 4 .  The Company shall, and shall cause its agents to, cooperate with the Escrow Agent in separately accounting for Investor Funds from Pennsylvania Investors in the Pennsylvania Escrow Account, and the Escrow Agent shall be entitled to rely upon information provided by the Company or its agents in this regard.

  

  

  

 

Proceeds received from Tennessee Investors shall be accounted for separately in a subaccount entitled “Escrow Account for the Benefit of Tennessee Investors for American Realty Capital Trust III, Inc.” (including such abbreviations as are required for the Escrow Agent’s systems) (the “ Tennessee Escrow Account, ” and together with the Escrow Account and the Pennsylvania Escrow Account, the “ ARCT III Escrow Accounts ”), until such Tennessee Escrow Account has closed pursuant to Section 5 .  The Company shall, and shall cause its agents to, cooperate with the Escrow Agent in separately accounting for Investor Funds from Tennessee Investors in the Tennessee Escrow Account, and the Escrow Agent shall be entitled to rely upon information provided by the Company or its agents in this regard.

 The Escrow Agent shall have no duty to make any disbursement, investment or other use of Investor Funds until and unless it has good and collected funds.  If any checks deposited in the ARCT III Escrow Accounts are returned or prove uncollectible after the funds represented thereby have been released by the Escrow Agent, then the Company shall promptly reimburse the Escrow Agent for any and all costs incurred for such, upon request, and the Escrow Agent shall deliver the returned checks to the Company.  The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder.   The Escrow Agent reserves the right to deny, suspend or terminate participation by an Investor to the extent the Escrow Agent deems it advisable or necessary to comply with applicable laws or to eliminate practices that are not consistent with the purposes of the Offering.

2.             Investors. Investors (including Pennsylvania and Tennessee Investors) will be instructed by the Dealer Manager or any soliciting dealers to remit the purchase price in the form of checks (hereinafter “instruments of payment”) payable to the order of, or funds wired in favor of, “UMB BANK, NA, ESCROW AGENT FOR AMERICAN REALTY CAPITAL TRUST III, INC.”  Any checks made payable to a party other than the Escrow Agent shall be returned to the soliciting dealer who submitted the check.  By 12:00 p.m. (Noon) the next business day after receipt of instruments of payment from the Offering, the Company or the Dealer Manager shall furnish the Escrow Agent with a list of the Investors who have paid for the Securities showing the name, address, tax identification number, the amount of Securities subscribed for purchase, the amount paid and whether such Investors are Pennsylvania Investors or Tennessee Investors.  The information comprising the identity of Investors shall be provided to the Escrow Agent in substantially the format set forth in the “List of Investors” attached hereto as Exhibit  B .  The Escrow Agent shall be entitled to conclusively rely upon the List of Investors in determining whether Investors are Pennsylvania Investors or Tennessee Investors , and shall have no duty to independently determine or verify the same.

When Soliciting Dealer’s internal supervisory procedures are conducted at the site at which the subscription agreement and check were initially received by Soliciting Dealer from the subscriber, Soliciting Dealer shall transmit the subscription agreement and check to the Escrow Agent by the end of the next business day following receipt of the check and subscription agreement. When, pursuant to Soliciting Dealer’s internal supervisory procedures, Soliciting Dealer’s final internal supervisory procedures are conducted at a different location (the “Final Review Office”), Soliciting Dealer shall transmit the check and subscription agreement to the Final Review Office by the end of the next business day following Soliciting Dealer’s receipt of the subscription agreement and check. The Final Review Office will, by the end of the next business day following its receipt of the subscription agreement and check, forward both the subscription agreement and check to the Escrow Agent. If any subscription agreement solicited by Soliciting Dealer is rejected by the Dealer Manager or the Company, then the subscription agreement and check will be returned to the rejected subscriber within ten (10) business days from the date of rejection.

 

  

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            All Investor Funds deposited in the ARCT III Escrow Accounts shall not be subject to any liens or charges by the Company or the Escrow Agent, or judgments or creditors’ claims against the Company, until and unless released to the Company as hereinafter provided.  The Company understands and agrees that the Company shall not be entitled to any Investor Funds on deposit in the ARCT III Escrow Accounts and no such funds shall become the property of the Company, or any other entity except as released to the Company pursuant to Sections 3, 4 or 5 hereto. The Escrow Agent will not use the information provided to it by the Company for any purpose other than to fulfill its obligations as Escrow Agent.  The Company and the Escrow Agent will treat all Investor information as confidential.  The Escrow Agent shall not be required to accept any Investor Funds which are not accompanied by the information on the List of Investors.

3.             Disbursement of Funds.   Once the Escrow Agent is in receipt of good and collected Investor Funds totaling at least the Minimum Amount from Investors (excluding funds from Pennsylvania and Tennessee Investors), the Escrow Agent shall notify the Company of same in writing. Additionally, at the end of the third business day following the Termination Date (as defined in Section 6 ), the Escrow Agent shall notify the Company of the amount of the Investor Funds received.  If the Minimum Amount has been obtained on or before the Termination Date, the Escrow Agent shall promptly notify the Company and, upon receiving acknowledgement of such notice and written instructions from the Company’s President or Chief Financial Officer to disburse the Investor Funds, the Escrow Agent shall disburse to the Company, by check or wire transfer, the funds in the Escrow Account, except for amounts payable by the Company to the Escrow Agent pursuant to Exhibit D to this Agreement that remain outstanding.  The Escrow Agent agrees that funds in the Escrow Account shall not be released to the Company until and unless the Escrow Agent receives written instructions to release the funds from the Company’s President or Chief Financial Officer.

 If the Minimum Amount has not been obtained prior to the Termination Date, the Escrow Agent shall promptly following the Termination Date, but in no event more than thirty (30) days after the Termination Date, refund to each Investor by check, funds deposited in the Escrow Account, or shall return the instruments of payment delivered to Escrow Agent if such instruments have not been processed for collection prior to such time, directly to each Investor at the address provided on the List of Investors. Included in the remittance shall be a proportionate share of the income earned in the account allocable to each Investor’s investment in accordance with the terms and conditions specified herein, except that in the case of Investors who have not provided an executed Form W-9 or substitute Form W-9 (or the applicable substitute Form W-8 for foreign investors), the Escrow Agent shall withhold the applicable percentage of the earnings attributable to those Investors in accordance with IRS regulations. Notwithstanding the foregoing, the Escrow Agent shall not be required to remit any payments until funds represented by such payments have been collected by Escrow Agent.

  

 If the Escrow Agent receives written notice from the Company that the Company intends to reject an Investor’s subscription, the Escrow Agent shall pay to the applicable Investor(s), within a reasonable time not to exceed ten (10) business days after receiving notice of the rejection, by first class United States Mail at the address provided on the List of Investors, or at such other address as shall be furnished to the Escrow Agent by the Investor in writing, all collected sums paid by the Investor for Securities and received by the Escrow Agent, together with the interest earned on such Investor Funds (determined in accordance with the terms and conditions specified herein).

 

  

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4.             Disbursement of Proceeds for Pennsylvania Investors.   Notwithstanding the foregoing, proceeds from Pennsylvania Investors will not count towards meeting the Minimum Amount for purposes of Section 3.  Proceeds received from Pennsylvania Investors will not be released from the Pennsylvania Escrow Account until the Pennsylvania Minimum Amount is obtained.  If the Pennsylvania Minimum Amount is obtained at any time prior to the Termination Date, the Escrow Agent shall promptly notify the Company and, upon receiving acknowledgement of such notice and written instructions from the Company’s President or Chief Financial Officer, the Escrow Agent shall disburse to the Company, by check or wire transfer, the funds in the Pennsylvania Escrow Account, except for amounts payable by the Company to the Escrow Agent pursuant to Exhibit D to this Agreement that remain outstanding.  The Escrow Agent agrees that funds in the Pennsylvania Escrow Account shall not be released to the Company until and unless the Escrow Agent receives written instructions to release the funds from the Company’s President or Chief Financial Officer.

If the Pennsylvania Minimum Amount has not been obtained prior to the Termination Date, the Escrow Agent shall promptly refund to each Pennsylvania Investor by check funds deposited in the Pennsylvania Escrow Account, or shall return the instruments of payment delivered to Escrow Agent if such instruments have not been processed for collection prior to such time, directly to each Pennsylvania Investor at the address provided on the List of Investors. Included in the remittance shall be a proportionate share of the income earned in the account allocable to each Pennsylvania Investor’s investment in accordance with the terms and conditions specified herein, except that in the case of Investors who have not provided an executed Form W-9 or substitute Form W-9, the Escrow Agent shall withhold the applicable percentage of the earnings attributable to those Investors in accordance with IRS regulations. Notwithstanding the foregoing, the Escrow Agent shall not be required to remit any payments until funds represented by such payments have been collected by Escrow Agent.

 If the Escrow Agent is not in receipt of evidence of subscriptions accepted on or before the close of business on such date that is 120 days after commencement of the Offering (the Company will notify the Escrow Agent in writing of the commencement date of the Offering) (the “ Initial Escrow Period ”), and instruments of payment dated not later than that date, for the purchase of Securities providing for total purchase proceeds from all nonaffiliated sources that equal or exceed the Pennsylvania Minimum Amount, the Escrow Agent shall promptly notify the Company. Thereafter, the Company or its agents shall send to each Pennsylvania Investor by certified mail within ten (10) calendar days after the end of the Initial Escrow Period a notification substantially in the form of Exhibit F .  If, pursuant to such notification, a Pennsylvania Investor requests the return of his or her Investor Funds within ten (10) calendar days after receipt of the notification (the “ Request Period ”), the Escrow Agent shall promptly refund directly to each Pennsylvania Investor the collected funds deposited in the Pennsylvania Escrow Account on behalf of such Pennsylvania Investor or shall return the instruments of payment delivered, but not yet processed for collection prior to such time, to the address provided on the List of Investors, upon which the Escrow Agent shall be entitled to rely, together with interest income earned as determined in accordance with the terms and conditions specified herein (which interest shall be paid within five business days after the first business day of the succeeding month). Notwithstanding the above, if the Escrow Agent has not received an executed Form W-9 or substitute Form W-9 for such Pennsylvania Investor, the Escrow Agent shall thereupon remit an amount to such Pennsylvania Investor in accordance with the provisions hereof, withholding the applicable percentage for backup withholding required by the Internal Revenue Code, as then in effect, from any interest income earned on Investor Funds (determined in accordance with the terms and conditions specified herein) attributable to such Pennsylvania Investor. However, the Escrow Agent shall not be required to remit such payments until the Escrow Agent has collected funds represented by such payments.

 

  

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              The Investor Funds of Pennsylvania Investors who do not request the return of their Investor Funds within the Request Period shall remain in the Pennsylvania Escrow Account for successive 120-day escrow periods (a “ Successive Escrow Period ”), each commencing automatically upon the termination of the prior Successive Escrow Period, and the Company and Escrow Agent shall follow the notification and payment procedure set forth above with respect to the Initial Escrow Period for each Successive Escrow Period until the occurrence of the earliest of (i) the Termination Date, (ii) the receipt and acceptance by the Company of subscriptions for the purchase of Securities with total purchase proceeds that equal or exceed the Pennsylvania Minimum Amount and the disbursement of the Pennsylvania Escrow Account on the terms specified herein, and (iii) all funds held in the Pennsylvania Escrow Account having been returned to the Pennsylvania Investors in accordance with the provisions hereof.

5.             Disbursement of Proceeds for Tennessee Investors.   Notwithstanding the foregoing, proceeds from Tennessee Investors will not count towards meeting the Minimum Amount for purposes of Section 3 .  Proceeds received from Tennessee Investors will not be released from the Tennessee Escrow Account until the Tennessee Minimum Amount is obtained.  If the Tennessee Minimum Amount is obtained at any time prior to the Termination Date, the Escrow Agent shall promptly notify the Company and, upon receiving acknowledgement of such notice and written instructions from the Company’s President or Chief Financial Officer, the Escrow Agent shall disburse to the Company, by check or wire transfer, the funds in the Tennessee Escrow Account, except for amounts payable by the Company to the Escrow Agent pursuant to Exhibit D to this Agreement that remain outstanding.  The Escrow Agent agrees that funds in the Tennessee Escrow Account shall not be released to the Company until and unless the Escrow Agent receives written instructions to release the funds from the Company’s President or Chief Financial Officer.

If the Tennessee Minimum Amount has not been obtained prior to the Termination Date, the Escrow Agent shall promptly refund to each Tennessee Investor by check funds deposited in the Tennessee Escrow Account, or shall return the instruments of payment delivered to Escrow Agent if such instruments have not been processed for collection prior to such time, directly to each Tennessee Investor at the address provided on the List of Investors. Included in the remittance shall be a proportionate share of the income earned in the account allocable to each Tennessee Investor’s investment in accordance with the terms and conditions specified herein, except that in the case of Investors who have not provided an executed Form W-9 or substitute Form W-9, the Escrow Agent shall withhold the applicable percentage of the earnings attributable to those Investors in accordance with IRS regulations. Notwithstanding the foregoing, the Escrow Agent shall not be required to remit any payments until funds represented by such payments have been collected by Escrow Agent.

 

6.             Term of Escrow. The “ Termination Date ” shall be the earliest of:  (i) the close of business on March 31, 2012, the one year anniversary of the date the Offering Document was declared effective by the Securities and Exchange Commission; (ii) all funds held in the ARCT III Escrow Accounts are distributed to the Company or to Investors pursuant to Section 3 , for Pennsylvania Investors, Section 4 and for Tennessee Investors, Section 5 and the Company has informed the Escrow Agent in writing to close each of the ARCT III Escrow Accounts; (iii) the date the Escrow Agent receives written notice from the Company that it is abandoning the sale of the Securities; and (iv) the date the Escrow Agent receives notice from the Securities and Exchange Commission or any other federal or state regulatory authority that a stop or similar order has been issued with respect to the Offering Document and has remained in effect for at least twenty (20) days.  After the Termination Date the Company and its agents shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective Investors.

 

  

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7.             Duty and Liability of the Escrow Agent. The sole duty of the Escrow Agent shall be to receive Investor Funds and hold them subject to release, in accordance herewith, and the Escrow Agent shall be under no duty to determine whether the Company or the Dealer Manager is complying with requirements of this Agreement, the Offering or applicable securities or other laws in tendering the Investor Funds to the Escrow Agent. No other agreement entered into between the parties, or any of them, shall be considered as adopted or binding, in whole or in part, upon the Escrow Agent notwithstanding that any such other agreement may be referred to herein or deposited with the Escrow Agent or the Escrow Agent may have knowledge thereof, including specifically but without limitation any Offering Documents (including the subscription agreement and exhibits thereto), and the Escrow Agent’s rights and responsibilities shall be governed solely by this Agreement.  The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of any Offering Document (including the subscription agreement and exhibits thereto) or other agreement between the Company and any other party.  The Escrow Agent may conclusively rely upon and shall be protected in acting upon any statement, certificate, notice, request, consent, order or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall have no duty or liability to verify any such statement, certificate, notice, request, consent, order or other document, and its sole responsibility shall be to act only as expressly set forth in this Agreement. Concurrent with the execution of this Agreement, the Company and the Dealer Manager shall deliver to the Escrow Agent an authorized signers form in the forms of Exhibit C and Exhibit C-1 to this Agreement.  The Escrow Agent shall be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement unless first indemnified to its satisfaction.  The Escrow Agent may consult counsel of its own choice with respect to any question arising under this Agreement and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon advice of such counsel.  The Escrow Agent shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Escrow Agent’s gross negligence or willful misconduct was the primary cause of loss. The Escrow Agent is acting solely as escrow agent hereunder and owes no duties, covenants or obligations, fiduciary or otherwise, to any other person by reason of this Agreement, except as otherwise stated herein, and no implied duties, covenants or obligations, fiduciary or otherwise, shall be read into this Agreement against the Escrow Agent.  If any disagreement between any of the parties to this Agreement, or between any of them and any other person, including any Investor, resulting in adverse claims or demands being made in connection with the matters covered by this Agreement, or if the Escrow Agent is in doubt as to what action it should take hereunder, the Escrow Agent may, at its option, refuse to comply with any claims or demands on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists, and in any such event, the Escrow Agent shall not be or become liable in any way or to any person for its failure or refusal to act, and the Escrow Agent shall be entitled to continue so to refrain from acting until (i) the rights of all interested parties shall have been fully and finally adjudicated by a court of competent jurisdiction, or (ii) all differences shall have been adjudged and all doubt resolved by agreement among all of the interested persons, and the Escrow Agent shall have been notified thereof in writing signed by all such persons. Notwithstanding the foregoing, the Escrow Agent may in its discretion obey the order, judgment, decree or levy of any court, whether with or without jurisdiction and the Escrow Agent is hereby authorized in its sole discretion to comply with and obey any such orders, judgments, decrees or levies.  If any controversy should arise with respect to this Agreement the Escrow Agent shall have the right, at its option, to institute an interpleader action in any court of competent jurisdiction to determine the rights of the parties.  IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION.  The parties agree that the Escrow Agent has no role in the preparation of the Offering Documents (including the subscription agreement and exhibits thereto) and makes no representations or warranties with respect to the information contained therein or omitted therefrom.  The Escrow Agent shall have no obligation, duty or liability with respect to compliance with any federal or state securities, disclosure or tax laws concerning the Offering Documents (including the subscription agreement and exhibits thereto) or the issuance, offering or sale of the Securities.  The Escrow Agent shall have no duty or obligation to monitor the application and use of the Investor Funds once transferred to the Company, that being the sole obligation and responsibility of the Company.

 

  

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8.             Escrow Agent’s Fee. The Escrow Agent shall be entitled to compensation for its services as stated in the fee schedule attached hereto as Exhibit D , which compensation shall be paid by the Company. The fee agreed upon for the services rendered hereunder is intended as full compensation for the Escrow Agent’s services as contemplated by this Agreement; provided, however, that if the conditions for the disbursement of funds under this Agreement are not fulfilled, or the Escrow Agent renders any material service not contemplated in this Agreement, or there is any assignment of interest in the subject matter of this Agreement, or any material modification hereof, or if any material controversy arises hereunder, or the Escrow Agent is made a party to any litigation pertaining to this Agreement, or the subject matter hereof, then the Escrow Agent shall be reasonably compensated for such extraordinary services and reimbursed for all costs and expenses, including reasonable attorney’s fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable from the Company.  The Company’s obligations under this Section 8 shall survive the resignation or removal of the Escrow Agent and the assignment or termination of this Agreement.

9.             Investment of Investor Funds. The Investor Funds shall be deposited in the ARCT III Escrow Accounts in accordance with Section 3 , for Pennsylvania Investors, Section 4 and Tennessee Investors, Section 5.  The Escrow Agent is hereby directed to invest all funds received under this Agreement, including principal and interest in, the UMB Bank Money Market Deposit Account, as directed in writing in the form of Exhibit E to this Agreement.  The Escrow Agent shall invest the Investor Funds in alternative investments in accordance with written instructions as may from time to time be provided to the Escrow Agent and signed by the Company.  In the absence of written investment instructions from the Company to the contrary, the Escrow Agent is hereby directed to invest the Investor Funds in the UMB Bank Money Market Deposit Account.  Notwithstanding the foregoing, Investor Funds shall not be invested in anything other than “Short Term Investments” in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended.  The following are not permissible investments:  (a) money market mutual funds; (b) corporate debt or equity securities; (c) repurchase agreements; (d) banker’s acceptance; (e) commercial paper; and (f) municipal securities.  Any interest received by the Escrow Agent with respect to the Investor Funds, including reinvested interest shall become part of the Investor Funds, and shall be disbursed pursuant to Section 3 , for Pennsylvania Investors, Section 4 and Tennessee Investors, Section 5.

 

The Escrow Agent shall be entitled to sell or redeem any such investments as necessary to make any payments or distributions required under this Agreement.  The Escrow Agent shall have no responsibility or liability for any loss which may result from any investment made pursuant to this Agreement, or for any loss resulting from the sale of such investment.  The parties acknowledge that the Escrow Agent is not providing investment supervision, recommendations, or advice.

The Company on the date of this Agreement shall provide the Escrow Agent with a certified tax identification number by furnishing appropriate IRS form W-9 or W-8 (or substitute Form W-9 or W-8) and other forms and documents that the Escrow Agent may reasonably request, including without limitation a tax form for each Investor.  The Company understands that if such tax reporting documentation is not so certified to the Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code of 1986, as amended, to withhold a portion of any interest or other income earned on the Investor Funds pursuant to this Agreement.  For tax reporting purposes, all interest and other income from investment of the Investor Funds shall, as of the end of each calendar year and to the extent required by the Internal Revenue Service, be reported as having been earned by the party to whom such interest or other income is distributed, in the year in which it is distributed.

  

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The Company agrees to indemnify and hold the Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses that may be assessed against the Escrow Agent on or with respect to any payment or other activities under this Agreement unless any such tax, addition for late payment, interest, penalties and other expenses shall be determined by a court of competent jurisdiction to have been caused by the Escrow Agent’s gross negligence or willful misconduct.  The terms of this Section shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.

10.             Notices.   All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, (b) on the day of transmission if sent by facsimile/email transmission bearing an authorized signature to the facsimile number/email address given below, and written confirmation of receipt is obtained promptly after completion of transmission, (c) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the United States Postal Service, or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, return receipt requested, to the party as follows:

If to the Company:

405 Park Avenue

New York, New York 10022

Fax: (212) 421-5799

Attention:  Edward M. Weil, Jr., Executive Vice President and Secretary

Attention:  Brian S. Block, Executive Vice President and Chief Financial Officer

with a copy to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Fax: (212) 969-2900

Attention: Peter M. Fass, Esq.

Attention:  Steven Fishman, Esq.

 

If to the Dealer Manager:

Realty Capital Securities, LLC

Three Copley Place

Suite 3300

Boston, MA 02116

Attention:  Louisa Quarto, President

with a copy to:

  

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Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Fax: (212) 969-2900

Attention: Peter M. Fass, Esq.

and:

American Realty Capital Trust III, Inc.

405 Park Avenue

New York, New York 10022

Fax: (212) 421-5799

Attention:  Edward M. Weil, Jr., Executive Vice President and Secretary

Attention:  Brian S. Block, Executive Vice President and Chief Financial Officer

If to Escrow Agent:

UMB Bank, N.A.

1010 Grand Blvd., 4th Floor

Mail Stop: 1020409

Kansas City, Missouri 64106

Attention: Lara Stevens,

Corporate Trust

Telephone: (816) 860-3017

Facsimile: (816) 860-3029

Any party may change its address for purposes of this Section by giving the other party written notice of the new address in the manner set forth above.

11.             Indemnification of Escrow Agent. The Company and the Dealer Manager hereby jointly and severally indemnify, defend and hold harmless the Escrow Agent from and against, any and all loss, liability, cost, damage and expense, including, without limitation, reasonable counsel fees and expenses, which the Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought against the Escrow Agent arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates unless such loss, liability, cost, damage or expense is finally determined by a court of competent jurisdiction to have been primarily caused by the willful misconduct of the Escrow Agent.  The terms of this Section shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.

12.             Successors and Assigns. Except as otherwise provided in this Agreement, no party hereto shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto.  Any corporation or association into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor Escrow Agent under this Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance any further act.

  

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13.             Governing Law; Jurisdiction. This Agreement shall be construed, performed, and enforced in accordance with, and governed by, the internal laws of the State of New York, without giving effect to the principles of conflicts of laws thereof.

14.             Severability. If any part of this Agreement is declared by any court or other judicial or administrative body to be null, void, or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Agreement shall remain in full force and effect.

 

15.             Amendments; Waivers. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties, or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as further or continuing waiver of any such condition, or of the breach of any other provision, term, covenant, representation, or warranty of this Agreement.  The Company and the Dealer Manager agree that any requested waiver, modification or amendment of this Agreement shall be consistent with the terms of the Offering.

16.             Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the escrow contemplated hereby and supersedes and replaces all prior and contemporaneous agreements and understandings, oral or written, with regard to such escrow.

17.             Section Headings. The section headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

18.             Counterparts. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument.

19.             Resignation. The Escrow Agent may resign upon 30 days’ advance written notice to the parties hereto. If a successor escrow agent is not appointed by the Company within the 30-day period following such notice, the Escrow Agent may petition any court of competent jurisdiction to name a successor escrow agent, or may interplead the Investor Funds with such court, whereupon the Escrow Agent’s duties hereunder shall terminate.

20.             References to Escrow Agent.   Other than the Offering Document (including the subscription agreement and exhibits thereto) and any amendments thereof or supplements thereto, no printed or other matter in any language (including, without limitation, notices, reports and promotional material) which mentions the Escrow Agent’s name or the rights, powers, or duties of the Escrow Agent shall be issued by the Company or the Dealer Manager, or on the Company’s or the Dealer Manager’s behalf, unless the Escrow Agent shall first have given its specific written consent thereto.  Notwithstanding the foregoing, any amendment or supplement to the Offering Document (including the subscription agreement and exhibits thereto) that revises, alters, modifies, changes or adds to the description of the Escrow Agent or its rights, powers or duties hereunder shall not be issued by the Company or the Dealer Manager, or on the Company’s or Dealer Manager’s behalf, unless the Escrow Agent has first given specific written consent thereto.

 

  

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21.           Patriot Act Compliance; OFAC Search Duties.  The Company shall provide to Escrow Agent upon the execution of this Agreement any documentation requested and any information reasonably requested by the Escrow Agent to comply with the USA Patriot Act of 2001, as amended from time to time.  The Escrow Agent, or its agent, shall complete an OFAC search, in compliance with its policy and procedures, of each subscription check and shall inform the Company if a subscription check fails the OFAC search.

[Signature page follows]

 

  

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IN WITNESS WHEREOF , the parties hereto have caused this Escrow Agreement to be executed the date and year first set forth above.

AMERICAN REALTY CAPITAL TRUST III, INC.

 

	
By:

	
 /s/ Nicholas S. Schorsch

	  
	  	
Name: 

	
Nicholas S. Schorsch

	  
	  	
Title:

	
Chief Executive Officer

	  

 

REALTY CAPITAL SECURITIES, LLC

 

	
By:

	
 /s/ Louisa Quarto

	  
	  	
Name: 

	
Louisa Quarto

	  
	  	
Title:

	
President

	  

 

UMB BANK, N.A., as Escrow Agent

 

	
By:

	
 /s/ Douglas Hare

	  
	  	
Name: 

	
 Douglas Hare

	  
	  	
Title:

	
 Vice President

	  

 

  

12

  

 

Exhibit A

Copy of Offering Document

 

  

13

  

Exhibit B

List of Investors

Pursuant to the Escrow Agreement dated as of April 1, 2011, among Realty Capital Securities, LLC, American Realty Capital Trust III, Inc. (the “Company ”), and UMB BANK, N.A. (the “ Escrow Agent ”), the Company hereby certifies that the following Investors have paid money for the purchase of shares of the Company’s common stock, par value $0.01 (“Securities”), and the money has been deposited with the Escrow Agent:

 

	
1.

	
Name of Investor

 Address

 Tax Identification Number

 Amount of Securities subscribed for

 Amount of money paid and deposited with Escrow Agent

 Is Investor a resident of Pennsylvania (Yes or No)?

 Is Investor a resident of T Tennessee (Yes or No)?

 

	
2.

	
Name of Investor

 Address

 Tax Identification Number

 Amount of Securities subscribed for

 Amount of money paid and deposited with Escrow Agent

 Is Investor a resident of Pennsylvania (Yes or No)?

 Is Investor a resident of Tennessee (Yes or No)?

Dated: _____________________________

REALTY CAPITAL SECURITIES, LLC

 

	
By:

	  	  
	  	
Name: 

	
Louisa Quarto

	  
	  	
Title:

	
President

	  

 

  

14

  

 

Exhibit C

CERTIFICATE AS TO AUTHORIZED SIGNATURES

Account Name:

Account Number:

The specimen signatures shown below are the specimen signatures of the individuals who have been designated as Authorized Representatives of American Realty Capital Trust III, Inc. and are authorized to initiate and approve transactions of all types for the above-mentioned account on behalf of American Realty Capital Trust III, Inc.

	
Name/Title

	
Specimen Signature

	
Nicholas S. Schorsch

	
/s/ Nicholas S. Schorsch 

	
Chief Executive Officer

	
Signature

	  	  
	
William M. Kahane

	
/s/ William M. Kahane

	
President and Treasurer

	
Signature

	  	  
	
Brian Block

	
/s/ Brian Block

	
Executive Vice President and Chief Financial Officer

	
Signature

	  	  
	
Edward M. Weil, Jr.

	
/s/ Edward M. Weil, Jr.

	
Executive Vice President and Secretary

	
Signature

	  	  

 

  

15

  

 

Exhibit C-1

CERTIFICATE AS TO AUTHORIZED SIGNATURES

Account Name:

Account Number:

The specimen signatures shown below are the specimen signatures of the individuals who have been designated as Authorized Representatives of Realty Capital Securities, LLC and are authorized to initiate and approve transactions of all types for the above-mentioned account on behalf of Realty Capital Securities, LLC

 

	
Name/Title

	
Specimen Signature

	 	 
	
Louisa Quarto

	
/s/ Louisa Quarto

	
President

	
Signature

	  	  
	
Kamal Jafarnia

	
/s/ Kamal Jafarnia

	
Executive Vice President and Chief Compliance Officer

	
Signature

 

  

16

  

 

Exhibit D

ESCROW FEES AND EXPENSES

	
Acceptance Fee

	  
	  	
Review escrow agreement, establish account

	
$3,000

	  	
DST Agency Engagement (if applicable)

	
$250

	  	  	  
	
Annual Fees

	  
	  	
Annual Escrow Agent

	
$2,500

	  	
BAI Files

	
$50 per month

	  	
Outgoing Wire Transfer

	
$15 each

	  	
Daily Recon File to Transfer Agent

	
$2.50 per Bus Day

	  	
Web Exchange Access

	
$15 per month

	  	
Overnight Delivery/Mailings

	
$16.50 each

	  	
IRS Tax Reporting

	
$10 per 1099

Fees specified are for the regular, routine services contemplated by the Escrow Agreement, and any additional or extraordinary services, including, but not limited to disbursements involving a dispute or arbitration, or administration while a dispute, controversy or adverse claim is in existence, will be charged based upon time required at the then standard hourly rate. In addition to the specified fees, all expenses related to the administration of the Escrow Agreement (other than normal overhead expenses of the regular staff) such as, but not limited to, travel, postage, shipping, courier, telephone, facsimile, supplies, legal fees, accounting fees, etc., will be reimbursable.

 

Acceptance fee and first year Annual Escrow Agent fee will be payable at the initiation of the escrow. Thereafter, the Annual Escrow Agent fees will be billed in advance and transactional fees will be billed in arrears. Other fees and expenses will be billed as incurred.

 

  

17

  

 

Exhibit E

Agency and Custody Account Direction

For Cash Balances

UMB Bank Money Market Deposit Accounts

Direction to use the following UMB BANK Money Market Deposit Accounts for Cash Balances for the escrow account (the “ Account ”) created under the Escrow Agreement to which this Exhibit E is attached.

You are hereby directed to deposit, as indicated below, or as we shall direct further in writing from time to time, all cash in the Account in the following money market deposit account of UMB BANK, NA (“ Bank ”):

UMB Bank Money Market Deposit Account (“MMDA”)

[.]

We acknowledge that we have full power to direct investments in the Account.

We understand that we may change this direction at any time and that it shall continue in effect until revoked or modified by us by written notice to you.

	  	
American Realty Capital Trust III, Inc.

	  	  	  
	  	
By:

	  
	  	  	
Signature

	  	  	  
	  	  	  
	  	  	
Date

  

18

  

 

Exhibit F

[Form of Notice to Pennsylvania Investors]

You have tendered a subscription to purchase shares of common stock of American Realty Capital Trust III, Inc. (the “ Company ”). Your subscription is currently being held in escrow.  The guidelines of the Pennsylvania Securities Commission do not permit the Company to accept subscriptions from Pennsylvania residents until an aggregate of $75,000,000 of gross offering proceeds have been received by the Company. The Pennsylvania guidelines provide that until this minimum amount of offering proceeds is received by the Company, every 120 days during the offering period Pennsylvania Investors may request that their subscription be returned.  If you wish to continue your subscription in escrow until the Pennsylvania minimum subscription amount is received, nothing further is required.

If you wish to terminate your subscription for the Company’s common stock and have your subscription returned please so indicate below, sign, date, and return to the Escrow Agent, UMB BANK, 1010 Grand Blvd., 4th Floor, Mail Stop: 1020409

Kansas City, Missouri 64106 Attention: Lara Stevens, Corporate Trust

I hereby terminate my prior subscription to purchase shares of common stock of American Realty Capital Trust III, Inc. and request the return of my subscription funds.  I certify to American Realty Capital Trust III, Inc. that I am a resident of Pennsylvania.

 

	  	  	
Signature:

	  
	  	  	  	  
	  	  	
Name:

	  
	  	  	  	
(please print)

	  	  	  	  
	  	  	
Date:

	  
	  	  	  	  
	
Please send the subscription refund to:

	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

  

19Exhibit 10.2

 

ADVISORY AGREEMENT

BY AND AMONG

AMERICAN REALTY CAPITAL TRUST III, INC.,

AMERICAN REALTY CAPITAL OPERATING PARTNERSHIP III, L.P.,

AND

AMERICAN REALTY CAPITAL ADVISORS III, LLC

Dated as of March 31, 2011

  

  

  

TABLE OF CONTENTS

 

	  	  	  	
Page

	
1.

	  	
DEFINITIONS

	
1

	  	  	  	  
	
2.

	  	
APPOINTMENT

	
6

	  	  	  	  
	
3.

	  	
DUTIES OF THE ADVISOR

	
6

	  	  	  	  
	
4.

	  	
AUTHORITY OF ADVISOR

	
8

	  	  	  	  
	
5.

	  	
FIDUCIARY RELATIONSHIP

	
8

	  	  	  	  
	
6.

	  	
NO PARTNERSHIP OR JOINT VENTURE

	
8

	  	  	  	  
	
7.

	  	
BANK ACCOUNTS

	
8

	  	  	  	  
	
8.

	  	
RECORDS; ACCESS

	
8

	  	  	  	  
	
9.

	  	
LIMITATIONS ON ACTIVITIES

	
9

	  	  	  	  
	
10.

	  	
FEES

	
9

	  	  	  	  
	
11.

	  	
EXPENSES

	
10

	  	  	  	  
	
12.

	  	
OTHER SERVICES

	
11

	  	  	  	  
	
13.

	  	
REIMBURSEMENT TO THE ADVISOR

	
12

	  	  	  	  
	
14.

	  	
OTHER ACTIVITIES OF THE ADVISOR

	
12

	  	  	  	  
	
15.

	  	
THE AMERICAN REALTY CAPITAL NAME

	
13

	  	  	  	  
	
16.

	  	
TERM OF AGREEMENT

	
13

	  	  	  	  
	
17.

	  	
TERMINATION BY THE PARTIES

	
13

	  	  	  	  
	
18.

	  	
ASSIGNMENT TO AN AFFILIATE

	
13

	  	  	  	  
	
19.

	  	
PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION

	
13

	  	  	  	  
	
20.

	  	
INCORPORATION OF THE ARTICLES OF INCORPORATION AND THE OPERATING PARTNERSHIP AGREEMENT

	
14

	  	  	  	  
	
21.

	  	
INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP

	
14

	  	  	  	  
	
22.

	  	
INDEMNIFICATION BY ADVISOR

	
15

	  	  	  	  
	
23.

	  	
NOTICES

	
15

	  	  	  	  
	
24.

	  	
MODIFICATION

	
16

	  	  	  	  
	
25.

	  	
SEVERABILITY

	
16

	  	  	  	  
	
26.

	  	
GOVERNING LAW

	
16

  

  

  

 

	
27.

	  	
ENTIRE AGREEMENT

	
16

	  	  	  	  
	
28.

	  	
NO WAIVER

	
16

	  	  	  	  
	
29.

	  	
PRONOUNS AND PLURALS

	
16

	  	  	  	  
	
30.

	  	
HEADINGS

	
17

	  	  	  	  
	
31.

	  	
EXECUTION IN COUNTERPARTS

	
17

 

  

  

  

 

ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT (this “Agreement”) dated as of March 31, 2011, is entered into among American Realty Capital Trust III, Inc., a Maryland corporation (the “Company”), American Realty Capital Operating Partnership III, L.P., a Delaware limited partnership (the “Operating Partnership”), and American Realty Capital Advisors III, LLC, a Delaware limited liability company.

 

WITNESSETH

 

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

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

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

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

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

 

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

 

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

 

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

 

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

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

 

  

1

  

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

 

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

  

“ Average Invested Assets ” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Investments before deducting depreciation, bad debts or other non-cash reserves, computed by taking the average of such values at the end of each month during such period.  For an equity interest owned in a Joint Venture, the calculation of Average Invested Assets shall take into consideration the underlying Joint Venture’s aggregate book value for the equity interest.

 

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

 

“By-laws” means the by-laws of the Company, as amended and as the same are in effect from time to time.

 

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

“ Change of Control ” means a change of control of the Company of a nature that would be required to be reported in response to the disclosure requirements of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), as enacted and in force on the date hereof, whether or not the Company is then subject to such reporting requirements; provided, however , that, without limitation, a Change of Control shall be deemed to have occurred if:  (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing 9.8% or more of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.

 

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

 

  

2

  

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

 

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

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

 

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

 

“Dealer Manager Fee” means three percent (3.0%) of Gross Proceeds from the sale of Shares in a Primary Offering, payable to the Dealer Manager for serving as the dealer manager of such Primary Offering.

 

“Director” means a member of the Board of Directors.

 

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

 

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

 

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

 

“FFO” means funds from operations, as defined by the National Association of Real Estate Investment Trusts.

 

“Financing Coordination Fee” means the fees payable to the Advisor pursuant to Section 10(e).

 

“GAAP” means United States generally accepted accounting principles, consistently applied.

 

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

 

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

 

“Included Assets” has the meaning set forth in Section 19(b)(ii).

 

“Indemnitee” has the meaning set forth in Section 21.

 

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

 

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

 

  

3

  

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

 

“Listing” means (i) the listing of the Shares on a national securities exchange, or (ii) the receipt by the Stockholders of securities that are listed on a national securities exchange in exchange for Shares in a merger or any other type of transaction.

 

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

 

“Management Agreement” means the Property Management Agreement, dated as of              , 2011, among the Company, the Operating Partnership and American Realty Capital Properties III, LLC, as the same may be amended from time to time.

  

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

 

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

  

“Notice” has the meaning set forth in Section 23.

 

“Offering” means the public offering of Shares pursuant to a Prospectus.

 

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

 

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

 

“Organization and Offering Expenses” means all expenses (other than the Selling Commission and the Dealer Manager Fee) to be paid by the Company in connection with an Offering, including legal, accounting, printing, mailing and filing fees, charges of the escrow holder and transfer agent, charges of the Advisor for administrative services related to the issuance of Shares in an Offering, reimbursement of the Advisor for costs in connection with preparing supplemental sales materials, the cost of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of the registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement for employees of the Company’s Affiliates to attend retail seminars conducted by broker-dealers and, in special cases, reimbursement to soliciting broker-dealers for technology costs associated with an Offering, costs and expenses related to such technology costs, and costs and expenses associated with facilitation of the marketing of the Shares and the ownership of Shares by such broker-dealer’s customers.

 

“Other Liquidity Event” means a liquidation or the sale of all or substantially all the Investments (regardless of the form in which such sale shall occur).  For clarification purposes, a transaction of the type described in clause (ii) of the definition of Listing shall not be an Other Liquidity Event.

 

“Person” means an individual, corporation, partnership, joint venture, association, company (whether of limited liability or otherwise), trust, bank or other entity, or any government or any agency or political subdivision of a government.

  

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

  

  

4

  

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

 

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

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

 

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

 

“Real Property” means real property owned from time to time by the Company or the Operating Partnership, directly, through one or more subsidiaries or through a Joint Venture, which consists of (i) land only, (ii) land, including the buildings located thereon, (iii) buildings only, or (iv) such investments the Board or the Advisor designate as Real Property to the extent such investments could be classified as Real Property.

 

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

 

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

 

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

“Selling Commission” means seven percent (7.0%) of Gross Proceeds from the sale of Shares in a Primary Offering payable to the Dealer Manager and reallowable to Soliciting Dealers with respect to Shares sold by them.

 

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

 

  

5

  

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

 

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

 

“Stockholders” means the registered holders of the Shares.

  

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

 

“ Total Operating Expenses” of a Person means the aggregate of all costs and expenses paid or incurred by such Person, but excluding Organization and Offering Expenses, interest payments, taxes, non-cash expenditures, any Acquisitions Fees, Acquisition Expenses or Financing Coordination Fees.  The definition of “Total Operating Expenses” set forth above is intended to encompass only those expenses which are required to be treated as Total Operating Expenses under the NASAA REIT Guidelines.  As a result, and notwithstanding the definition set forth above, any expense of the Company which is not part of Total Operating Expenses under the NASAA REIT Guidelines shall not be treated as part of Total Operating Expenses for purposes hereof.

 

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

 

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

 

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

(a)           serve as the Company’s and the Operating Partnership’s investment and financial advisor;

 

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

 

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

 

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

 

  

6

  

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(m)           notify the Board of all proposed material transactions before they are completed;

 

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

 

  

7

  

(o)           perform investor-relations and Stockholder communications functions for the Company;

  

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

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

 

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

 

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

 

4.            AUTHORITY OF ADVISOR.

 

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

 

(b)           Notwithstanding anything herein to the contrary, all Investments will require the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board specified by the Board, as the case may be.

 

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

 

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

 

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

 

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

 

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

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

 

  

8

  

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

 

10.         FEES.

 

(a)            Acquisition Fees.  The Company shall pay an Acquisition Fee to the Advisor or its assignees as compensation for services rendered in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of Investments. If the Advisor is terminated without cause pursuant to Section 17(a), the Advisor or its assignees shall be entitled to an Acquisition Fee for any Investments acquired after the Termination Date for which a contract to acquire any such Investment had been entered into at or prior to the Termination Date. The total Acquisition Fee payable to the Advisor or its assignees shall equal one percent (1.0%) of the purchase price of Real Estate Assets and one percent (1.0%) of the amount advanced for Real Estate Related Loans or other Investments (other than Real Estate Assets), along with reimbursement of acquisition expenses.  The purchase price of the Real Estate Assets shall equal the amount paid or allocated to the purchase, development or improvement of the Real Estate Assets inclusive of expenses related thereto and the amount of debt associated with such Investment.  The purchase price allocable for an Investment held through a Joint Venture shall equal the product of (i) the purchase price of, or the amount advanced for, the Investment, as applicable, and (ii) the direct or indirect ownership percentage in the Joint Venture held directly or indirectly by the Company or the Operating Partnership.  For purposes of this section, “ownership percentage” shall be the percentage of capital stock, membership interests, partnership interests or other equity interests held by the Company or the Operating Partnership, without regard to classification of such equity interests.  The Company shall pay to the Advisor or its assignees the Acquisition Fee promptly upon the closing of the Investment.  In addition, if during the period ending two years after the close of the initial Offering, the Company sells an Investment and then reinvests in other Investments, the Company will pay to American Realty Capital Advisors III, LLC one percent (1.0%) of the purchase price of Real Estate Assets and one percent (1.0%) of the amount advanced for Real Estate Related Loans or other Investments (other than Real Estate Assets), along with reimbursement of acquisition expenses. 

(b)            Limitation on Total Acquisition Fees, Financing Coordination Fees and Acquisition Expenses.  The total of all Acquisition Fees, Financing Coordination Fees and Acquisition Expenses payable in connection with any Investment or any reinvestment shall not exceed four and one-half percent (4.5%) of the Contract Purchase Price of the Investment acquired or four and one-half percent (4.5%) of the amount advanced for an Investment; provided, however, that once all the proceeds from the initial Offering have been fully invested, the total of all Acquisition Fees and Financing Coordination Fees shall not exceed one and one-half percent (1.5%) of the Contract Purchase Price of all the Investments acquired.

 

(c)            Property Disposition Fee.  In connection with a Sale of a Real Estate Asset in which the Advisor or any Affiliate of the Advisor provides a substantial amount of services, as determined by the Independent Directors, the Company shall pay to the Advisor or its assignees a Property Disposition Fee up to the lesser of (i) two percent (2.0%) of the Contract Sales Price of such Real Estate Asset or (ii) one-half of the total brokerage commission paid if a brokerage commission or other disposition fee is paid to a non-Affiliate broker in addition to the Property Disposition Fee paid to the Advisor or its assignees; provided, however, that in no event may the Property Disposition Fee paid to the Advisor, its Affiliates and non-Affiliates exceed the lesser of six percent (6.0%) of the Contract Sales Price and a Competitive Real Estate Commission.

 

  

9

  

(d)            Asset Management Fee.   The Company shall pay an Asset Management Fee to the Advisor or its assignees as compensation for services rendered in connection with the management of the Company’s assets in an amount equal to 0.75% per annum of Average Invested Assets; provided, however, that the Asset Management Fee Shall be reduced by any amounts payable as an Oversight Fee (as defined in the Management Agreement), such that the aggregate of the Asset Management Fee and the Oversight Fee does not exceed 0.75% per annum of Average Invested Assets. The Asset Management Fee is payable semiannually in advance, on January 1 and July 1, in the amount of 0.375% of Average Invested Assets for the preceding semiannual period. The Asset Management Fee will be reduced to the extent that funds from operations FFO, as adjusted, during the six months ending on the last day of the calendar quarter immediately preceding the date that such Asset Management Fee is payable, is less than the Distributions declared with respect to such six month period. For purposes of this determination, FFO, as adjusted, is FFO adjusted to (i) include acquisition fees and related expenses which is deducted in computing FFO; (ii) include non-cash restricted stock grant amortization, if any, which is deducted in computing FFO; and (iii) include impairments of real estate related investments, if any (including properties, loans receivable and equity and debt investments) which is deducted in computing FFO.

 

(e)            Financing Coordination Fee.   The Company shall pay a Financing Coordination Fee to the Advisor or its assignees in connection with the financing of any Investment, assumption of any Loans with respect to any Investment or refinancing of any Loan in an amount equal to one percent (1.0%) of the amount made available and/or outstanding under any such Loan, including any assumed Loan.  The Advisor may reallow some of or all this Financing Coordination Fee to reimburse third parties with whom it may subcontract to procure any such Loan.

  

(f)            Payment of Fees.   In connection with the Acquisition Fee, Property Disposition Fee, Asset Management Fee and Financing Coordination Fee, the Company shall pay such fees to the Advisor or its assignees in cash or in Shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor. For the purposes of the payment of such fees in Shares, each Share shall be valued at the per share offering price of our Shares in the initial Offering minus the maximum selling commissions and dealer manager fee allowed in the initial Offering.

  

(g)             Exclusion of Certain Transactions. 

 

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

 

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

 

11.           EXPENSES.

 

(a)           In addition to the compensation paid to the Advisor pursuant to Section 10, the Company or the Operating Partnership shall pay directly or reimburse the Advisor for all the expenses paid or incurred by the Advisor or its Affiliates in connection with the services it provides to the Company and the Operating Partnership pursuant to this Agreement, including, the following:

 

(i)             Organization and Offering Expenses, including third-party due diligence fees related to the Primary Offering, as set forth in detailed and itemized invoices; provided, however, that the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount of Organization and Offering Expenses paid by the Company and the Operating Partnership to exceed one and one-half percent (1.5%) of the Gross Proceeds raised in all Primary Offerings;

 

  

10

  

(ii)           Acquisition Expenses incurred in connection with the selection and acquisition of Investments, subject to the aggregate four and one-half percent (4.5%) cap on Acquisition Fees, Financing Coordination Fees and Acquisition Expenses set forth in Section 10(b) ;

 

(iii)           the actual cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

 

(iv)           interest and other costs for Loans, including discounts, points and other similar fees; 

(v)           taxes and assessments on income of the Company or Investments;

 

(vi)          costs associated with insurance required in connection with the business of the Company or by the Board;

 

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

 

(viii)         all expenses in connection with payments to the Directors for attending meetings of the Board and Stockholders;

 

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

 

(x)            expenses connected with payments of Distributions;

 

(xi)           expenses of organizing, revising, amending, converting, modifying or terminating the Company, the Operating Partnership or any subsidiary thereof or the Articles of Incorporation, By-laws or governing documents of the Operating Partnership or any subsidiary of the Company or the Operating Partnership;

 

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

 

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

 

(xiv)         audit, accounting and legal fees.

 

 (b)           Commencing upon the earlier to occur of (i) the fifth fiscal quarter after the Company makes its first Investment or (ii) six (6) months after the commencement of the initial Offering, expenses incurred by the Advisor on behalf of the Company and the Operating Partnership or in connection with the services provided by the Advisor hereunder and payable pursuant to this Section 11 shall be reimbursed, no less than monthly, to the Advisor.

 

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

 

  

11

  

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

 

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

 

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

 

  

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

 

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

 

17.          TERMINATION BY THE PARTIES.   This Agreement may be terminated upon sixty (60) days’ written notice (a) by the Independent Directors of the Company or the Advisor, without Cause and without penalty, (b) by the Advisor for Good Reason, or (c) by the Advisor upon a Change of Control.  The provisions of Sections 19 through 31 of this Agreement shall survive termination of this Agreement. 

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

 

19.          PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

 

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

  

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

 

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

 

  

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

 

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

 

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

 

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

 

21.          INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP. 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

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

 

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

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

 

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

 

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

 

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

 

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

 

	
To the Company:

	  	
American Realty Capital Trust III, Inc.

	  	  	
405 Park Avenue

	  	  	
New York, New York 10022

	  	  	
Attention:  William M. Kahane,

	  	  	
                   President

	  	  	  
	  	  	
with a copy to:

	  	  	  
	  	  	
Proskauer Rose LLP

	  	  	
Eleven Times Square

	  	  	
New York, New York 10036

	  	  	
Attention:  Peter M. Fass, Esq.

	
To the Operating Partnership:

	  	
American Realty Capital Operating Partnership III, L.P.

	  	  	
405 Park Avenue

	  	  	
New York, New York 10022

	  	  	
Attention:  William M. Kahane

	  	  	  
	  	  	
with a copy to:

	  	  	  
	  	  	
Proskauer Rose LLP

	  	  	
Eleven Times Square

	  	  	
New York, New York 10036

	  	  	
Attention:  Peter M. Fass, Esq.

 

  

15

  

	
To the Advisor:

	  	
American Realty Capital Advisors III, LLC

	  	  	
405 Park Avenue

	  	  	
New York, New York 10022

	  	  	
Attention:  William M. Kahane

	  	  	  
	  	  	
with a copy to:

	  	  	  
	  	  	
Proskauer Rose LLP

	  	  	
Eleven Times Square

	  	  	
New York, New York 10036

	  	  	
Attention:  Peter M. Fass, Esq.

 

Any party may at any time give Notice in writing to the other parties of a change in its address for the purposes of this Section 23 .

 

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

 

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

 

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

 

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

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

 

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

 

  

16

  

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

 

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

 

[Remainder of page intentionally left blank]

  

17

  

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

 

	  	
AMERICAN REALTY CAPITAL TRUST III, INC.

	  	  	  	  
	  	
By:

	
/s/ Nicholas S. Schorsch

	  
	  	  	
Name: Nicholas S. Schorsch

	  
	  	  	
Title: Chief Executive Officer

	  
	  	  	  	  
	  	
AMERICAN REALTY CAPITAL OPERATING

PARTNERSHIP III, L.P.

	  	  	  	  
	  	
By:

	
American Realty Capital Trust III, Inc.

	  
	  	  	  	  
	  	  	
its General Partner

	  
	  	  	  	  
	  	
By:

	
/s/ William M. Kahane

	  
	  	  	
Name: William M. Kahane

	  
	  	  	
Title: President

	  
	  	  	  	  
	  	
AMERICAN REALTY CAPITAL ADVISORS III, LLC

	  	  	  	  
	  	
By:

	
American Realty Capital Trust III Special Limited Partner,

LLC

	  	  	  	  
	  	  	
its Member

	  
	  	  	  	  
	  	
By:

	
American Realty Capital II, LLC

	  
	  	  	  	  
	  	  	
its Managing Member

	  
	  	  	  	  
	  	
By:

	
/s/ William M. Kahane

	  
	  	  	
Name: William M. Kahane

	  
	  	  	
Title: President

	  

 

  

18

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