UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): January 6, 2015 (December 30, 2014)

 

ARC Realty Finance Trust, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland   000-55188   46-1406086

(State or other jurisdiction

of incorporation or organization)

  (Commission File Number)  

(I.R.S. Employer

Identification No.)

 

405 Park Avenue

New York, New York 10022

 

(Address, including zip code, of Principal Executive Offices)

Registrant's telephone number, including area code: (212) 415-6500

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

£  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

£  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

£  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

£  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

   

 
 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On December 31, 2014, ARC Realty Finance Trust, Inc. (the “Company”) entered into an indemnification agreement (the “Indemnification Agreement”) with certain current and former directors, officers and service providers of the Company. The Company also expects to enter into a similar indemnification agreement with its future directors and officers.

 

The indemnitees party to the Indemnification Agreement are William M. Kahane, Dr. Robert J. Froehlich, Elizabeth K. Tuppeny, Peter M. Budko, Donald MacKinnon, Andrew Winer, Nicholas Radesca, Boris Korotkin, Nicholas S. Schorsch, ARC Realty Finance Advisors, LLC (the “Advisor”), AR Capital, LLC and RCS Capital Corporation (each, an “Indemnitee”). The Indemnification Agreement provides that the Company will indemnify each Indemnitee, to the fullest extent permitted by Maryland law and the Company’s Articles of Amendment and Restatement (the “Charter”) and subject to the limitations set forth in the Indemnification Agreement, from and against all judgments, penalties, fines and amounts paid in settlement and expenses reasonably incurred by such Indemnitee that may result or arise in connection with such Indemnitee serving in his or her capacity as a present or former director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company. The Indemnification Agreement further provides that, subject to the limitations set forth in the Indemnification Agreement, the Company will, without requiring a preliminary determination of each Indemnitee’s ultimate entitlement of indemnification under the Indemnification Agreement, advance all reasonable expenses to each Indemnitee incurred by or on behalf of such Indemnitee in connection with any proceeding the Indemnitee is or is threatened to be made a party to.

 

The Indemnification Agreement provides that each Indemnitee is entitled to indemnification unless it is established by clear and convincing evidence that (a) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) the Indemnitee actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that his or her conduct was unlawful. The Indemnification Agreement further limits each Indemnitee’s entitlement to indemnification in cases where (a) the Indemnitee’s gross negligence or willful misconduct (if the Indemnitee is an independent director of the Company) or negligence or misconduct (if the Indemnitee is not an independent director of the Company) caused loss or liability to the Company, (b) loss or liability arose from an alleged violation of federal or state securities laws unless certain conditions were met, (c) the proceeding was one by or in the right of the Company and the Indemnitee was adjudged to be liable to the Company, (d) the Indemnitee was adjudged to be liable on the basis that personal benefit was improperly received in any proceeding charging improper personal benefit to the Indemnitee or (e) the proceeding was brought by the Indemnitee, except in certain circumstances.

 

The Indemnification Agreement also provides that, except for a proceeding brought by the Indemnitee, the Company has the right to defend the Indemnitee in any proceeding which may give rise to indemnification under the Indemnification Agreement. The Indemnification Agreement grants each Indemnitee the right to separate counsel in certain proceedings involving separate defenses, counterclaims or other conflicts of interest and in proceedings in which the Company fails to assume the defense of the Indemnitee in a timely manner. The Indemnification Agreement further provides that the Company will use its reasonable best efforts to acquire directors and officers liability insurance covering each Indemnitee or any claim made against each Indemnitee by reason of his or her service to the Company.

 

In addition, the information required by Item 1.01 related to the Amended and Restated Agreement of Limited Partnership of ARC Realty Finance Operating Partnership, L.P. is included in Item 8.01 and is incorporated by reference herein.

 

 
 

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information required by Item 3.02 is included in Item 5.03 and is incorporated by reference herein.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

On December 30, 2014, the Company filed with the Maryland State Department of Assessments and Taxation articles supplementary (the “Articles Supplementary”) to the Charter that reclassified 1,000 authorized but unissued shares of common stock of the Company (the “Common Shares”) as shares of convertible stock (the “Convertible Shares”) and set the terms of the Convertible Shares. Except as otherwise detailed in the Articles Supplementary, the Convertible Shares are non-voting and holders of the Convertible Shares are not entitled to receive dividends or other distributions. The Convertible Shares will automatically convert to Common Shares upon the occurrence of the first to occur of any of the Triggering Events (as defined below). In general, but with exceptions, the Convertible Shares will convert into a number of Common Shares equal to 1/1000 of the quotient of (i) the conversion product (as defined in the Articles Supplementary) divided by (ii) the quotient of the enterprise value (also as defined in the Articles Supplementary) divided by the number of outstanding Common Shares (on an as-converted basis) on the date of the Triggering Event. The Company issued 1,000 Convertible Shares to the Advisor for $1.00 per share.

 

The foregoing summary of the Articles Supplementary does not purport to be complete and is qualified in its entirety by reference to the Articles Supplementary, a copy of which is attached as Exhibit 3.1.

 

Item 8.01 Other Events.

 

Change to the Structure of the Incentive Compensation to Generate Tax Savings for the Company

 

The Company changed the structure of its incentive compensation in order to eliminate the susceptibility of ARC Realty Finance Operating Partnership, L.P., the Company’s operating partnership (the “Operating Partnership”), to certain taxes and, therefore, benefit the Company’s stockholders. While the transactions described herein reflect a change to the structure of the incentive compensation payable to the Company’s sponsor, American Realty Capital VIII, LLC, or certain of its subsidiaries (the “Sponsor”), the transactions are not expected to change the amount of compensation payable to the Sponsor, and therefore, will have no economic impact to the Company’s stockholders other than the tax savings that will result from the restructuring. As described herein, compensation to the Sponsor will continue to be subject to various performance metrics to maintain the alignment of the interests of the Sponsor and the Company’s stockholders.

 

 
 

 

 

On December 31, 2014, the Operating Partnership redeemed all of the special limited partnership interests (the “Special Limited Partner Interests”) held by ARC Realty Finance Special Limited Partnership, LLC (the “Special Limited Partner”), an affiliate of the Sponsor and the Advisor, for no consideration. The Special Limited Partner Interests previously entitled the Special Limited Partner to receive subordinated distributions in connection with the following events (each, a “Triggering Event”): (i) the sale disposition, maturity, prepayment or settlement of any investment after the Company has paid total distributions on the then-outstanding Common Shares in an amount equal to or in excess of the sum of the invested capital (as defined in the Charter) plus an aggregate 6.0% cumulative, pre-tax, non-compounded, annual return on such invested capital, (ii) a listing of the Common Shares on a national securities exchange and (iii) the termination of the advisory agreement by and among the Company, the Operating Partnership and the Advisor under certain circumstances. In addition, the Special Limited Partner transferred all of its common limited partnership interests (the “Common Limited Partner Interests”) in the Operating Partnership to ARC Realty Finance Trust LP, LLC (“ARC LP”), a new wholly-owned subsidiary of the Company, for $2,020. As a result of these transactions, the Operating Partnership will no longer be recognized as a partnership for tax purposes.

 

The Company and ARC LP entered into that certain Amended and Restated Agreement of Limited Partnership of ARC Realty Finance Operating Partnership, L.P., filed herewith as Exhibit 4.1, which reflects the redemption of the Special Limited Partner Interests and the assignment of the Common Limited Partner Interests.

 

Extension of the Initial Public Offering

 

On January 5, 2015, the Company’s board of directors approved the extension of the Company’s initial public offering (the “IPO”) to February 12, 2016, as provided in the Company’s prospectus dated April 22, 2014 (the “Prospectus”), provided that the IPO will be terminated if all 80.0 million shares of the Company’s common stock offered under the Prospectus are sold before such date (subject to the Company’s right to reallocate shares offered pursuant to its distribution reinvestment plan for sale in the primary offering).

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No. Exhibit Description
   
3.1 Articles Supplementary of ARC Realty Finance Trust, Inc., dated as of December 30, 2014.
4.1 Amended and Restated Agreement of Limited Partnership of ARC Realty Finance Operating Partnership, L.P., dated as of December 31, 2014.

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ARC REALTY FINANCE TRUST, INC.
     
Date: January 6, 2015 By:   /s/ Peter M. Budko
  Peter M. Budko
  Chief Executive Officer

 

 

 

 

Exhibit 3.1

 

ARC REALTY FINANCE TRUST, INC.

 

ARTICLES SUPPLEMENTARY

 

 

ARC Realty Finance Trust, Inc., a Maryland corporation (the “Company”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

 

FIRST : Under a power contained in Section 5.2(ii) of Article V of the charter of the Company (the “Charter”), the Board of Directors of the Company (the “Board”), by duly adopted resolutions reclassified and designated 1,000 authorized but unissued shares of common stock, $0.01 par value per share, as shares of convertible stock, $0.01 par value per share (the “Convertible Shares”), with the following preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption, which, upon any restatement of the Charter, shall become part of Article V of the Charter, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof. Unless otherwise defined below, capitalized terms used below have the meanings given to them in the Charter.

 

Convertible Shares

 

(1) Designation and Number . A class of Shares, designated as shares of convertible stock (the “Convertible Shares”), is hereby established. The number of Convertible Shares shall be 1,000.

 

(2) Definitions .

 

(a) “Advisory Agreement Termination” means a termination or expiration without renewal (except to the extent of a termination or expiration with the Company followed by the adoption of the same or substantially similar Advisory Agreement with a successor, whether by merger, consolidation, sale of all or substantially all of the Assets, or otherwise) of the Company’s Advisory Agreement with ARC Realty Finance Advisors, LLC for any reason except for a termination or expiration without renewal due to (i) fraud, criminal conduct, willful misconduct, gross negligence or negligent breach of a fiduciary duty by ARC Realty Finance Advisors, LLC or (ii) a material breach by ARC Realty Finance Advisors, LLC of the Advisory Agreement.

 

(b) “Change of Control” means any (i) event (including, without limitation, issuance, transfer or other disposition of Shares, merger, share exchange or consolidation) after which any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of Securities representing greater than 50% of the combined voting power of the Company’s then outstanding Securities; provided , that a Change of Control shall not be deemed to occur as a result of any Offering of the Common Shares, or (ii) direct or indirect sale, transfer, conveyance or other disposition (other than pursuant to clause (i)) of all or substantially all of the Properties or Assets to any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act).

 

 
 

 

(c) “Closing Price” on any date means, with respect to any class or series of outstanding Shares, the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if such Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board or, in the event that no trading price is available for such Shares, the fair market value of Shares, as determined by the Board.

 

(d) “Conversion Product” means the product of 0.15 times the amount, if any, by which (i) the sum of the Enterprise Value as of the date of the Triggering Event plus total Distributions paid to holders of Common Shares through the date of the Triggering Event exceeds (ii) the sum of Invested Capital plus the Stockholders’ 6% Return as of the date of the Triggering Event; provided , however , that the Conversion Product shall be reduced by an amount equal to the total Annual Subordinated Performance Fees (as defined in the Advisory Agreement) paid by the Company to ARC Realty Finance Advisors, LLC or any Affiliate of ARC Realty Finance Advisors, LLC pursuant to the Advisory Agreement.

 

(e) “Enterprise Value” means the actual value of the Company as a going concern based on the difference between (i) the actual value of all of its assets as determined by the Board, including a majority of the Independent Directors, and (ii) all of its liabilities as set forth on its balance sheet for the period ended immediately prior to the determination date; provided that (A) if the Enterprise Value is being determined in connection with a Change of Control that establishes the Company’s net worth, then the Enterprise Value shall be the net worth established thereby and (B) if the Enterprise Value is being determined in connection with a Listing, then the Enterprise Value shall be equal to the number of outstanding Common Shares multiplied by the Closing Price of a single Common Share averaged over a period of 30 trading days during which the Common Shares are listed or quoted for trading after the date of Listing. Such period of 30 trading days shall be mutually agreed upon by the Board, including a majority of the Independent Directors, and the Advisor. For purposes hereof, a “trading day” shall be any day on which the NYSE is open for trading whether or not the Common Shares are then listed on the NYSE and whether or not there is an actual trade of Common Shares on any such day. If the holder of Convertible Shares disagrees as to the Enterprise Value as determined by the Board, then each of the holder of Convertible Shares and the Company shall name one appraiser and the two named appraisers shall promptly agree in good faith to the appointment of one other appraiser whose determination of the Enterprise Value shall be final and binding on the parties as to Enterprise Value. The cost of any appraisal shall be split evenly between the Company and the Advisor.

 

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(f) “NYSE” means the New York Stock Exchange.

 

(g) “Stockholders’ 6% Return” means, as of any date, an amount equal to an aggregated 6% cumulative, pre-tax, non-compounded, annual return on Invested Capital.

 

(3) Distribution Rights . The holders of any outstanding Convertible Shares shall not be entitled to receive dividends or other Distributions on the Convertible Shares.

 

(4) Voting Rights .

 

(a) Except for the voting rights expressly conferred by Section 4(b) herein, the holders of the outstanding Convertible Shares shall not be entitled to (i) vote on any matter or (ii) receive notice of, or to participate in, any meeting of Stockholders at which they are not entitled to vote.

 

(b) The affirmative vote of the holders of more than two-thirds of the outstanding Convertible Shares, voting together as a single class for such purposes with each share entitled to vote, shall be required to (i) adopt any amendment, alteration or repeal of any provision of the Charter that materially and adversely changes the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other Distributions, qualifications or terms and conditions of redemption of the Convertible Shares (it being understood that an increase in the number of Directors is not a material and adverse change) and (ii) effect or validate a consolidation with or merger of the Company into another entity, or a consolidation with or merger of another entity into the Company, unless in each such case each Convertible Share (A) shall remain outstanding without a material and adverse change to its terms and rights or (B) shall be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption thereof identical to that of a Convertible Share (except for changes that do not materially and adversely affect the holders of the Convertible Share); provided , however , that this vote shall be in addition to any other vote or consent of Stockholders required by law or by the Charter.

 

(5) Conversion .

 

(a) Each outstanding Convertible Share shall become convertible into a number of Common Shares as and at the time set forth in paragraph (b) of this Section 5, automatically and without any further action required, upon the occurrence of the first to occur of any of the following events (the “Triggering Event”): (i) the date when the Company shall have paid total Distributions in an amount equal to or in excess of the sum of Invested Capital and the Stockholders’ 6% Return; (ii) a Listing; or (iii) an Advisory Agreement Termination.

 

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(b) Upon a Triggering Event, each Convertible Share shall be converted into a number of Common Shares equal to 1/1000 of the quotient of (i) the Conversion Product divided by (ii) the quotient of the Enterprise Value divided by the number of outstanding Common Shares (on an as converted basis) on the date of the Triggering Event. The conversion, in the case of conversion upon Listing, shall occur once the Board has determined the Enterprise Value. In the event of a termination or expiration without renewal of the Advisory Agreement with the Advisor due to (x) fraud, criminal conduct, willful misconduct, gross negligence or negligent breach of a fiduciary duty by the Advisor or (y) a material breach by the Advisor of the Advisory Agreement, the Convertible Shares will be redeemed for $1.00.

 

(c) If, in the judgment of the Board, full conversion of the Convertible Shares would cause (i) a Stockholder (other than an Excepted Holder) to Beneficially Own or Constructively Own Shares in excess of the Share Ownership Limit, (ii) an Excepted Holder to Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder, (iii) Shares to be beneficially owned by fewer than 100 Persons or (iv) the Company otherwise to fail to qualify as a REIT, then only such number of Convertible Shares (or fraction thereof) shall be converted into Common Shares such that (A) a Stockholder (other than an Excepted Holder) would not Beneficially Own or Constructively Own Shares in excess of the Share Ownership Limit, (B) an Excepted Holder would not Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder, (C) Shares will not be beneficially owned by fewer than 100 Persons or (D) the Company will not otherwise fail to qualify as a REIT. Each remaining Convertible Share shall convert as provided herein when the Board determines that conversion of the Convertible Share would not cause (w) a Stockholder (other than an Excepted Holder) to Beneficially Own or Constructively Own Shares in excess of the Share Ownership Limit, (x) an Excepted Holder to Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder, (y) Shares to be beneficially owned by fewer than 100 Persons or (z) the Company otherwise to fail to qualify as a REIT. The Board shall consider whether it can make this determination at least once per quarter following a Triggering Event.

 

(d) As promptly as practicable after a Triggering Event, the Company shall issue and deliver to each holder of Convertible Shares a certificate or certificates representing the number of Common Shares into which his, her or its Convertible Shares were converted (or shall cause the issuance of the Common Shares to be reflected in the Company’s stock ledger, if the Common Shares are uncertificated). The person in whose name the Common Shares are issued shall be deemed to have become a Stockholder of record on the date of conversion.

 

(e) The issuance of Common Shares on conversion of outstanding Convertible Shares shall be made by the Company without charge for expenses or for any tax in respect of the issuance of the Common Shares.

 

(f) In the event of any reclassification or recapitalization of the outstanding Common Shares (except a change in par value, or from no par value to par value, or subdivision or other split or combination of Shares), or in case of any consolidation or merger to which the Company is a party, except a merger in which the Company is the surviving corporation and which does not result in any reclassification or recapitalization, the Company or the successor or purchasing business entity shall provide that the holder of each Convertible Share then outstanding shall thereafter continue to have the right, with as nearly the same economic rights and effects as possible, to convert, upon a Triggering Event, the Convertible Shares into the kind and amount of stock and other securities and property received by holders of the Common Shares in connection with the reclassification, recapitalization, consolidation or merger. The provisions of this Section 5(f) shall similarly apply to successive reclassifications, recapitalizations, consolidations or mergers.

 

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(g) Common Shares issued on conversion of Convertible Shares shall be issued as fully paid Shares and shall be nonassessable by the Company. The Company shall, at all times, reserve and keep available, for the purpose of effecting the conversion of the outstanding Convertible Shares, the number of its duly authorized Common Shares as shall be sufficient to effect the conversion of all of the outstanding Convertible Shares.

 

(h) Convertible Shares converted as provided herein shall become authorized but unissued Common Shares.

 

SECOND : The Convertible Shares have been classified and designated by the Board under the authority contained in the Charter.

 

THIRD : These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.

 

FOURTH : The undersigned acknowledges these Articles Supplementary to be the corporate act of the Company and, as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

 

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Secretary on this 30th day of December, 2014.

 

ATTEST: ARC REALTY FINANCE TRUST, INC.
   
   
   
By:   ___/s/ Nicholas Radesca ________ By: ___ /s/ Peter M. Budko __________ (SEAL)
        Name:  Nicholas Radesca        Name:  Peter M. Budko
        Title:  Secretary        Title:  Chief Executive Officer

 

 

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Exhibit 4.1

 

 

 

 

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

ARC REALTY FINANCE OPERATING PARTNERSHIP, L.P.

 

 

Dated as of December 31, 2014

 

 

 
 

 

 

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

ARC REALTY FINANCE OPERATING PARTNERSHIP, L.P.

 

This Limited Partnership Agreement is entered into as of December 31, 2014, between ARC Realty Finance Trust, Inc., a Maryland corporation, as the General Partner, and ARC Realty Finance Trust LP, LLC, a Delaware limited liability company (the “ ARC Limited Partner ”). Capitalized terms used herein but not otherwise defined shall have the meanings given to them in Article 1.

 

AGREEMENT

 

WHEREAS, the General Partner intends to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended;

 

WHEREAS, ARC Realty Finance Operating Partnership, L.P. (the “ Partnership ”) was formed on November 13, 2012 as a limited partnership under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware on November 13, 2012;

 

WHEREAS, the General Partner desires to conduct its current and future business through the Partnership;

 

WHEREAS, the General Partner and ARC Realty Finance Special Limited Partner, LLC (the “ Initial Limited Partner ”) entered into that certain Agreement of Limited Partnership of ARC Realty Finance Operating Partnership, L.P. dated February 12, 2013 (the “ Original Agreement ”);

 

WHEREAS, the General Partner and the Initial Limited Partner amended the Original Agreement pursuant to that First Amendment to Agreement of Limited Partnership of ARC Realty Finance Operating Partnership, L.P. dated as of December 31, 2013;

 

WHEREAS, the Initial Limited Partner has transferred its common limited partnership interests to the Limited Partner, and the Partnership has redeemed the Initial Limited Partner’s special limited partnership interests; and

 

WHEREAS the General Partner and the ARC Limited Partner wish to amend and restate the Original Agreement, as previously amended, pursuant to this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1
DEFINED TERMS

 

The following defined terms used in this Agreement shall have the meanings specified below:

 

Act ” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.

 

 
 

 

Administrative Expenses ” means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner, including any salaries or other payments to directors, officers or employees of the General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses of the Partnership and not the General Partner, and (iii) to the extent not included in clause (ii) above, REIT Expenses; provided , however , that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to a Property or partnership interests in a Subsidiary Partnership that are owned by the General Partner directly.

 

Advisor ” or “ Advisors ” means the Person or Persons, if any, appointed, employed or contracted by the General Partner and responsible for directing or performing the day-to-day business affairs of the General Partner, including any Person to whom such Advisor subcontracts substantially all of such functions.

 

Affiliate ” means, with respect to any Person, (i) any Person directly or indirectly, owning, controlling or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (ii) any Person with 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts an executive officer, director, trustee or general partner.

 

Agreement ” means this Amended and Restated Agreement of Limited Partnership, as amended, modified supplemented or restated from time to time, as the context requires.

 

Articles of Incorporation ” means the Articles of Incorporation of the General Partner, as amended or restated from time to time, as filed with the Maryland State Department of Assessments and Taxation.

 

Capital Contribution ” means, with respect to any Partner, any cash, cash equivalents or the fair market value of other property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1 or 4.2 hereof. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.

 

Certificate ” means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

 

Code ” means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.

 

Commission ” means the U.S. Securities and Exchange Commission.

 

2
 

 

Event of Bankruptcy ”, as to any Person, means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.

 

General Partner ” means ARC Realty Finance Trust, Inc. and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner, until such Person ceases to be a General Partner pursuant to the terms of this Agreement.

 

General Partnership Interest ” means a Partnership Interest held by the General Partner that is a general partnership interest.

 

Indemnitee ” means (i) any Person made a party to a proceeding by reason of its status as the General Partner or a director, officer or employee of the General Partner or the Partnership, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.

 

Limited Partner ” means the ARC Limited Partner and any Person who becomes an additional Limited Partner or a Substitute Limited Partner pursuant to the terms of this Agreement, until such Person ceases to be a Limited Partner pursuant to the terms of this Agreement.

 

Limited Partnership Interest ” means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act.

 

Partner ” means any General Partner or Limited Partner.

 

Partnership ” means ARC Realty Finance Operating Partnership, L.P., a Delaware limited partnership.

 

Partnership Interest ” means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.

 

Partnership Record Date ” means the record date established by the General Partner for the distribution of cash pursuant to Section 5.2 hereof.

 

Percentage Interest ” means the percentage determined by dividing the Capital Contributions of a Partner by the sum of the Capital Contributions of all Partners.

 

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Person ” means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.

 

Property ” means any real or personal property owned by the Partnership.

 

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

 

REIT Expenses ” means (i) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of the General Partner, (ii) costs and expenses relating to any public offering and registration of securities by the General Partner and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the General Partner, (iv) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the Commission, (v) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (vi) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating to any issuing or redemption of Partnership Interests, and (viii) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership.

 

Subsidiary ” means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

 

Subsidiary Partnership ” means any partnership of which the partnership interests therein are owned by the General Partner or a direct or indirect subsidiary of the General Partner.

 

Substitute Limited Partner ” means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.2 hereof.

 

ARTICLE 2
PARTNERSHIP CONTINUATION AND IDENTIFICATION

 

2.1     Continuation of Limited Partnership.

 

The parties to this Agreement hereby agree to continue a limited partnership pursuant to the provisions of the Act and in accordance with the further terms and provisions of this Agreement. This Agreement amends and restates in its entirety the Original Agreement, as previously amended.

 

2.2     Name, Office and Registered Agent.

 

The name of the Partnership is ARC Realty Finance Operating Partnership, L.P. The address of the registered office of the Partnership in the State of Delaware and the name and address of the registered agent for service of process on the Partnership in the State of Delaware is the Corporation Service Company, 2711 Centerville Road Suite 400, Wilmington, Delaware 19808. The principal office of the Partnership shall be 405 Park Avenue, New York, New York 10022, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.

 

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2.3     Term and Dissolution.

 

(a) The term of the Partnership shall continue in full force and effect until dissolved upon the first to occur of any of the following events:

 

(i) the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof; provided that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership shall not be an event of dissolution of the Partnership if the business of such General Partner is continued by the remaining partner or partners, either alone or with additional partners, and such General Partner and such partners comply with any other applicable requirements of this Agreement;

 

(ii) the passage of 90 days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such note or notes are paid in full);

 

(iii) the election by the General Partner that the Partnership should be dissolved; or

 

(iv) December 31, 2099.

 

(b) Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel any Certificate(s) and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section 5.3 hereof. Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the Partners in kind.

 

2.4     Filing of Certificate and Perfection of Limited Partnership.

 

The General Partner shall execute, acknowledge, record and file at the expense of the Partnership, any and all amendments to the Certificate(s) and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.

 

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ARTICLE 3
BUSINESS OF THE PARTNERSHIP

 

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner determines that it no longer intends to qualify as a REIT, and in a manner such that the General Partner will not be subject to any taxes under Section 857 or 4981 of the Code, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to qualify or cease qualifying as a REIT, the Partners acknowledge that the General Partner intends to qualify as a REIT for federal income tax purposes and that such qualification and the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the General Partner. Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under the Articles of Incorporation. The General Partner on behalf of the Partnership shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” that is taxable as a corporation under Section 7704 of the Code.

 

ARTICLE 4
CAPITAL CONTRIBUTIONS AND ACCOUNTS

 

4.1     Capital Contributions.

 

The General Partner and the ARC Limited Partner have made Capital Contributions to the Partnership in the amounts set forth opposite their names on Exhibit A , as such Exhibit may be amended from time to time.

 

4.2     Additional Capital Contributions and Issuances of Additional Partnership Interests.

 

Except as provided in this Section 4.2, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership.

 

(a) The General Partner is hereby authorized to cause the Partnership to issue additional Partnership Interests for any Partnership purpose at any time or from time to time, including but not limited to Partnership Interests issued in connection with acquisitions of properties, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partner. Any additional Partnership Interests issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Interests for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership. In the event that the Partnership issues additional Partnership Interests pursuant to this Section 4.2(a), the General Partner shall make such revisions to this Agreement as it deems necessary to reflect the issuance of such additional Partnership Interests.

 

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(b) The General Partner shall contribute the proceeds of any issuance of common stock of the General Partner to the Partnership as additional Capital Contributions to the Partnership from time to time.

 

4.3     No Third-Party Beneficiary.

 

No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of the foregoing, a deficit capital account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership.

 

ARTICLE 5
DISTRIBUTIONS

 

5.1     Distributions.

 

(a) The Partnership shall make distributions at such times and in such amounts as the General Partner shall determine in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such distribution period in accordance with Section 5.2(b).

 

(b) Except for distributions pursuant to Section 5.1(c) or 5.3 of this Agreement in connection with the dissolution and liquidation of the Partnership, distributions shall be made to the Partners in accordance with their respective Percentage Interests on the Partnership Record Date.

 

(c) If the General Partner shall elect to purchase from its stockholders common stock of the General Partner for any purpose, the Partnership shall distribute to the General Partner in reduction of its Capital Contributions the purchase price paid by the General Partner for such common stock and any other expenses incurred by the General Partner in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursed to the General Partner

 

(d) In the event that the Partnership issues additional Partnership Interests to the General Partner or any additional Limited Partner pursuant to Article 4 hereof, the General Partner shall make such revisions to this Article 5 as it deems necessary to reflect the issuance of such additional Partnership Interests.

 

5.2     REIT Distribution Requirements .

 

The General Partner shall use its commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to make stockholder distributions that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code.

 

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5.3     Distributions Upon Liquidation.

 

Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, any remaining assets of the Partnership shall be distributed to all Partners in accordance with their Percentage Interests. To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations.

 

ARTICLE 6
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER

 

6.1     Management of the Partnership .

 

(a) Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership.

 

(b) Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

 

6.2     Delegation of Authority.

 

The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.

 

6.3     Indemnification and Exculpation of Indemnitees .

 

(a) The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, Property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Any indemnification pursuant to this Section 6.3 shall be made only out of the assets of the Partnership.

 

(b) The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.3 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

 

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(c) The indemnification provided by this Section 6.3 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

 

(d) The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

 

(e) For purposes of this Section 6.3, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

 

(f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

 

(g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.3 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

 

(h) The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

 

(i) Notwithstanding the foregoing, the Partnership may not indemnify or hold harmless an Indemnitee for any liability or loss unless all of 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 interests of the Partnership; (ii) the Indemnitee was acting on behalf of or performing services for the Partnership; (iii) the liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnitee is a director of the General Partner (other than an Independent Director), the Advisor or an Affiliate of the Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an Independent Director; and (iv) the indemnification or agreement to hold harmless is recoverable only out of net assets of the Partnership. In addition, the Partnership shall not provide indemnification for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party 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 material securities law violations as to the Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Commission and of the published position of any state securities regulatory authority in which securities of the General Partner or the Partnership were offered or sold as to indemnification for violations of securities laws.

 

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6.4     Liability of the General Partner.

 

(a) Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith. The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement.

 

(b) The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders on one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partner shall be resolved in favor of the stockholders. The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.

 

(c) Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

 

(d) Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

 

(e) Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

 

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6.5     Reimbursement of General Partner.

 

(a) Except as provided in this Section 6.5 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as general partner of the Partnership.

 

(b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all Administrative Expenses incurred by the General Partner. Reimbursement of Administrative Expenses shall be treated as an expense of the Partnership and not as allocations of Partnership income or gain.

 

6.6     Outside Activities.

 

Subject to the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer, director, employee, agent, trustee, Affiliate or stockholder of the General Partner, the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. None of the Partnership, Limited Partners or any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which, if presented to the Partnership or any Limited Partner, could be taken by such Person.

 

6.7     Employment or Retention of Affiliates.

 

(a) Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.

 

(b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

 

(c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner deems are consistent with this Agreement, applicable law and the REIT status of the General Partner.

 

(d) Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any Property to, or purchase any Property from, the Partnership, directly or indirectly, except pursuant to transactions that are, in the General Partner’s sole discretion, on terms that are fair and reasonable to the Partnership.

 

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6.8     Title to Partnership Assets.

 

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the Property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

 

ARTICLE 7
CHANGES IN GENERAL PARTNER

 

7.1     Transfer of the General Partner’s Partnership Interest.

 

(a) The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in, or in connection with a transaction contemplated by, Section 7.1(c).

 

(b) Except as otherwise provided in Section 7.1(c) hereof, the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or the sale of all or substantially all of its assets (other than in connection with a change in the General Partner’s state of incorporation or organizational form), in each case which results in a change of control of the General Partner (a “ Transaction ”), unless the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners is obtained.

 

(c) Notwithstanding Section 7.1(a) or (b),

 

(i) a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and

 

(ii) the General Partner may engage in a transaction not required by law or by the rules of any national securities exchange on which the General Partner’s shares are listed to be submitted to the vote of the holders of the General Partner’s shares.

 

7.2     Admission of a Substitute or Additional General Partner.

 

A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:

 

(a) the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.4 hereof in connection with such admission shall have been performed;

 

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(b) if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and

 

(c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel as may be necessary) that (i) the admission of the Person to be admitted as a substitute or additional General Partner is in conformity with the Act and (ii) none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (x) the Partnership to be classified other than as a partnership for federal tax purposes, or (y) the loss of any Limited Partner’s limited liability.

 

7.3     Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.

 

(a) Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof. The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal, dissolution or removal of the General Partner.

 

(b) Following the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is, on the date of such occurrence, a partnership, the withdrawal of, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Limited Partners, within 90 days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.3 hereof by selecting, subject to Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by consent of a majority in interest of the Limited Partners. If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.

 

7.4     Removal of a General Partner.

 

(a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death or dissolution of, Event of Bankruptcy as to, or removal of, a partner in, such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners. The Limited Partners may not remove the General Partner, with or without cause.

 

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(b) If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership to the substitute General Partner approved by a majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise be admitted to the Partnership in accordance with Section 7.2 hereof. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner. Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a majority in interest of the Limited Partners within ten (10) days following the removal of the General Partner. In the event that the parties are unable to agree upon an appraiser, the removed General Partner and a majority in interest of the Limited Partners each shall select an appraiser. Each such appraiser shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than forty (40) days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest no later than sixty (60) days after the removal of the General Partner. In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.

 

(c) The General Partnership Interest of a removed General Partner, during the time after default until transfer under Section 7.4(b), shall be converted to that of a Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and be entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.4(b).

 

(d) All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary, desirable and sufficient to effect all the foregoing provisions of this Section.

 

ARTICLE 8
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

 

8.1     Management of the Partnership .

 

The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.

 

8.2     Power of Attorney.

 

Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest, unless otherwise stated in this Agreement.

 

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8.3     Limitation on Liability of Limited Partners .

 

No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.

 

ARTICLE 9
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

 

9.1     Restrictions on Transfer of Limited Partnership Interests.

 

(a) No Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of his Limited Partnership Interest, or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “ Transfer ”) without the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion. Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be given effect.

 

(b) No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer of all of its Partnership Interest pursuant to this Article 9. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest, such Limited Partner shall cease to be a Limited Partner.

 

9.2     Admission of Substitute Limited Partner.

 

(a) Subject to the other provisions of this Article 9, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner.

 

9.3     Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.

 

The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.

 

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ARTICLE 10
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

 

10.1     Books and Records.

 

At all times during the continuance of the Partnership, the Partners shall keep or cause to be kept at the Partnership’s specified office all documents and information required under the Act.

 

10.2     Custody of Partnership Funds; Bank Accounts.

 

All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.

 

10.3     Fiscal Year.

 

The fiscal year of the Partnership shall be the calendar year.

 

ARTICLE 11
AMENDMENT OF AGREEMENT

 

The General Partner’s consent shall be required for any amendment to this Agreement. The General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect; provided, however, that any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Interests pursuant to Section 4.2 hereof or any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership shall require the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners.

 

ARTICLE 12
GENERAL PROVISIONS

 

12.1     Notices.

 

All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally, electronically or upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth herein; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address.

 

To the General Partner:

ARC Realty Finance Trust, Inc.

405 Park Avenue, 14 th Floor

New York, New York 10022

 

To the Partnership:

ARC Realty Finance Operating Partnership, L.P.

405 Park Avenue, 14 th Floor

New York, New York 10022

 

To the ARC Limited Partner:

ARC Realty Finance Trust LP, LLC

405 Park Avenue, 14 th Floor

New York, New York 10022

 

 

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12.2     Survival of Rights.

 

Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.

 

12.3     Additional Documents.

 

Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.

 

12.4     Severability.

 

If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.

 

12.5     Entire Agreement.

 

This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

 

12.6     Pronouns and Plurals/Headings.

 

When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require. The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article.

 

12.7     Counterparts.

 

This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

 

12.8     Governing Law .

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that any cause of action for violation of federal or state securities laws shall not be governed by this Section 12.8.

 

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IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Agreement, all as of December 31, 2014.

 

GENERAL PARTNER:

 

ARC Realty Finance Trust, Inc.

 

 

By: /s/ Peter M. Budko

 

Name: Peter M. Budko

 

Title: Chief Executive Officer

 

 

 

 

ARC LIMITED PARTNER:

 

ARC Realty Finance Trust LP, LLC

By: ARC Realty Finance Trust, Inc., its Member

 

 

By: /s/ Peter M. Budko

 

Name: Peter M. Budko

 

Title: Chief Executive Officer

 

 
 

 

 

EXHIBIT A

CONTRIBUTIONS & INTEREST

 

Partner Address Cash
Contribution

 

GENERAL PARTNER: 

   

ARC Realty Finance Trust, Inc.

405 Park Avenue, 15 th Floor

New York, New York 10022

$200,000

ARC LIMITED PARTNER: 

   

ARC Realty Finance Trust LP, LLC 

405 Park Avenue, 15 th Floor

New York, New York 10022 

$2,020
Totals  

$202,020